Money 403: Passing The Wisdom On

Back To Main
Money 402: Insurance

As a parent, you must teach your children about money before they come of age

You are responsible for their spending lifestyle

Children learn more from money about how you live than what you say

Age 3-5

Teach them that money is needed to buy things

  • The easiest method is to have them buy things with it

Show them that they earn money through working

Enforce that we often have to wait to get what we want

Teach them the difference between a want and a need

Age 6-10

Pay commissions for jobs they do instead of an allowance

  • Allowances show that money is always available
  • Commissions demonstrate that money is limited and they can earn it

Teach the importance of keeping personal information private, especially with online vendors

Show them how to split their money into three groups

  1. Giving
  • Stress the importance of giving by making them give
  • The most significant sign of generosity is in how much money is donated
  1. Saving
  • At least a dime for every dollar
  • Use a clear jar to make it more visually appealing
  1. Spending

Age 11-13

Teach them about money’s opportunity cost (you can only spend it once)

Show them how price-comparison shopping works

Open few accounts for them and give them monthly reviews

  1. A checking account for their spending
  2. A savings account to show what interest does and how compound interest works

Teach them about the dangers of debt

  • Inform them how not paying it off every month will charge them more than they spent

Age 14-15

Teach them how to budget

Invest in creative ideas they have to make money

  • Expect them to return that investment somehow

Show them how buying with credit cards instead of cash can be expensive

  • They need to know that they can only have a credit card if they fully pay it off every month

Tell them the importance of paying for health insurance

Age 16-18

If they haven’t gotten a job, help them to get one

  • Show them how they will have a smaller paycheck from withheld taxes

Once they have a job, they need to contribute to the household’s costs

  • While some of them may voluntarily buy what the house needs, you may need to charge others for room and board

Require them to pay expenses like driving school, cars, and gas

Teach them about investment vehicles

  • Roth IRAs are great for building wealth
  • Risk and expenses are necessary for investing and investing is necessary for retiring well

Push them to save 3-6 months’ worth of expenses for emergencies

When they’re looking for a college or future career, keep the following in mind

  • College is a purchase, not a right
  • Pedigree and prestige are nowhere near as important as hard work ethic and determination
  • Cosigning a loan is assuming just as much risk as they are throughout the life of the loan (i.e., decades of their adult life)
Next: Money 404: Coming To The End