Financial responsibility is a trait that can be taught from an early age. Setting positive examples is critical to help your children begin to develop a mindset of financial responsibility that can set them up for life.
I spend a lot of words on this blog discussing how my wife and I are pursuing FI. Whether we make it to FI or not remains to be seen, but it occurred to me that the example we are setting for our kids means that we are stacking the odds of them reaching FI heavily in their favor.
I am not talking about stuffing a bunch of cash into mutual fund so they can live care-free lives. I am talking about instilling concepts and discipline that give them a solid financial footing.
We Discuss the Price of Things With Them
When we are shopping with our kids we point out to them how much things cost and how the prices vary by location. As an example, we were shopping for Halloween costumes and pointed out to them that the costumes they wanted were cheaper at another store.
This benefits them twofold. 1) they gain an understanding of scale. “This LOL Surprise is $10, which is twice as much as this smaller one for $5. 2) They see that a little extra effort, like going to another store, or looking for a coupon, can save money.
We Discuss That “Just Because We Can Afford It, Doesn’t Mean We Buy It”
When we are shopping, our oldest often asks “Do you have $20?” Meaning, she’s spotted a toy she wants. We let her know that “Yes, we have $20, but we are not going to spend it on a toy today.” We go on to discuss that we have needs and wants, and that the $20 could be used for a need like food, housing costs, or to save up so we don’t have to work so long. The latter is me dropping hints to them about Financial Independence.
And sometimes, she gets the toy… because balance is important and she is only young once.
We Show Them How Money “Grows”
Our children have custodial investment accounts. Periodically, I use one of my favorite financial tools, Personal Capital, to show them how their money is growing. A picture is worth a thousand words, and even at a young age they can understand a chart that keeps going up and to the right. I use these instances to discuss interest with them in a basic sense. I discuss that when we put our money into the accounts that someone pays us to borrow that money.
We Openly Discuss Savings
One or twice a month, we budget. Now, the kids aren’t participating in the budgeting process. I mean, could you imagine? “I vote for establishing a line item for Barbies! Candy spending is WAAAY too low!” Not a chance. However, they are able to hear our discussion. We walk through spending for the month so far, what we anticipate spending will be for the remainder of the month, and how much we plan to put into savings and opportunities for cost cutting.
We do this to show them that budgeting is a normal occurrence. We also focus on how we discuss the budget as well. No accusations, no “the sky is falling” dramatics. This shows the kids that we can discuss money in a transparent and healthy way.
We Embrace the DIY Spirit
Whether it is cutting our grass, fixing a faucet, or making a home cooked meal. When we “DIY it” we are rewarded with significant savings when compared with just calling someone to fix this, or going to a restaurant for that. I firmly believe our kids benefit from watching their parents try to tackle these projects first. They learn a bit about each specific task, but more importantly, they pick up on the self sufficient attitude.
How are we doing so far?
As young as our kids are, it is surely too soon to tell. But the early returns have been encouraging. During our oldest’s recent school break, we took them to the Magic House (for those not from St. Louis, it is an old house that has been converted to a fun and educational place for kids… an iconic St. Louis destination).
One area of the place is set up as a bank with an interactive budgeting exercise. The kids are presented monthly income of $4,000 then asked to make choices for housing, food, car, clothing and entertainment. The choices are low, medium, and high cost options. Our oldest (with no help from us, and without doing the math) consistently picked the low and medium cost options and ended up saving over 50% of her income at the end of the month! It seems she’s well on her way to FI!
I can’t express enough how impressed I am with my girls. Whether they pick and internalize all these money lessons remains to be seen. But we will continue to try and set positive money examples wherever we can.
