(Note: if you’d rather listen this than read it, click here.)
If you have kids, you more than likely want to make sure they grow up knowing what to do with money.
And you’d probably prefer that they know what to do THRIVE financially and not just SURVIVE tough economic times like we’re having now. (My son Andrew, at 26 years old, is happily living on his own, in his own apartment with a great job, no debt, a nice used car he bought himself and saving money…makes his mother proud.)
One fact about the economy that many people don’t realize is that more millionaires are made during a DOWN economic cycle than during an UP economic cycle. And the people who are thriving are the ones who understand how the economy and money work together. These people spot opportunities at every turn, have cash to take advantage of these opportunities and get rich doing so.
After reading this article, you’ll have some simple, but not necessarily always easy, things you can do to recession proof YOUR kids. Isn’t growing happy, healthy, wealthy adults who do good in the world worth whatever it takes?
Glad you think so. And since, as is often said…time is money, so let’s get going.
The Financially Savvy Adult Parenting Plan
How many of you have a plan to make sure your kids get the very best in life there is to offer?
How many of you realize that whatever they choose to do in life, they’re probably going to need a little money to create it?
Responsibility…the end result.
Years ago, I was a personal trainer and fitness instructor. Back then I realized that the way I taught and approached training my clients was with the philosophy that it wasn’t my job to just lead them through an aerobic class or walk them through a workout with weights. It was my purpose, which became my passion, to empower them to take care of themselves in a larger, more expressive way; without the club and without me at their side counting reps.
I have always enjoyed inspiring people to think differently about things. First fitness and nutrition and now money, personal finance, investing, and living in general. I love it when something I teach or say causes someone else to stop, stumble in their tracks and have thoughts that completely turn their world into a more joyous place to live. Gives me goosepimples just thinking about it!
At Creative Wealth, we’ve been teaching kids, teens and adults about money and investing since 2002 and we approach financial literacy the exact same way. When we can empower someone to take better care of themselves, and others, it just seems like the world is a better place for all of us.
Our mission statement…”Empowering people to take care of themselves and the world.” might also be a great mission that you could embrace while raising your children.
This article is for those of you who don’t have a plan or have a plan but don’t know where to start.
Winning The Money Game
Before we talk about how you can empower YOUR children, imagine this scenario..
Your child comes to you one day and says, “Mom, Dad, I want to grow up and be a major league ball player.” You say, “Wow, that’s cool. Good for you.” Then you go back to doing what you were doing.
Your child taps you on the shoulder and asks, “Um, would it be possible for you to get me a ball so I could learn how to throw it?” You say, “Maybe later.”
He says, “Well, how about a glove and a bat so I can learn to catch the ball and hit the ball?” You respond, “Nah, I don’t think so.” He’s a bit frustrated at this point and asks, “OK, but will you at least teach me the rules?”
You say, “Oh, you can learn the rules later.” Now he is angry, fuming inside and feels completely stuck.
His face turns bright red, he inhales threw his nose like a bull and yells, “But how am I ever going to become a great ball player and win the game, if I don’t have a ball, a bat or a glove to practice with and I don’t know the rules?”
This is what parents do, most unknowingly, to their children in regard to money. We raise them, help them survive to age 18 (where we then call them ADULTS) and we send them out into THEIR show, unprepared to play or win their own person Money Game.
We rarely give them the EQUIPMENT they need to practice with, the TIME to practice or the RULES they need to win THE MONEY GAME.
A little story…
When I was little girl, the main thing I remember learning about The Money Game was that MEN weren’t very good at it. I remember my mom always getting mad at my dad when he bought stuff she didn’t think we needed.
I realized when I was in my 20’s that the reason she loved garage sales was because it allowed her to have many of the things she wanted but couldn’t afford to pay for full price for.
It wasn’t until I was in my mid 30’s that I figured out that the only reason I didn’t know about money, and have a bunch saved up, was that now one had taught me about it.
I remember about that time, calling my mother and asking her WHY I didn’t know what to do with money. After all, I was a straight A student all through high school and college. How did I not learn about MONEY?
When I called her, after a long, silent pause, she simply said, “Honey, how could I teach you something I didn’t know myself?”
I was in shock and when I recovered, I set about to teach myself about this green stuff we need to live our lives and experience all that life has to offer. Then, I decided I didn’t want other children the same way I did…not knowing about money. That was what led to the creation of the original Money Camp for Kids and what is now called Camp Millionaire.
Lessons from Parents
While teaching our camps over the years, I found that most parents think it’s important that their children learn how to use money while they are young.
Only problem with this situation is that many parents don’t realize it’s up the THEM to teach their kids about money because for the most part, they just aren’t going to learn this critical life-skill in school.
They MAY learn a bit about budgets or writing checks, but they probably won’t learn about investing in assets and passive income and avoiding debt, i.e., all the really important stuff.
The saddest thing is that they rarely learn how to start businesses…but I’ll get to that point in a bit.
You see, after years of teaching kids about money, it became clear to me that kids needed to have some very specific experiences and learn a few very specific tools in order to grow up financially savvy.
And over the years, I distilled this stuff down into three simple things that I now call The Three Keys to Raising Money Savvy Adults. This information is so important, I give it away on my homepage as a report for anyone who wants it.
I share these three things often because they are the backbone for creating financially literate human beings. I want to share these three keys with you again so you can make sure your own kids get the experiences and tools they need to grow up financially savvy!
So let’s get right to those three keys!
Key Number One is illustrated by one of my favorite quotes from the wonderful Albert Einstein. He once said, “Setting an example is not the main means of influencing another; it is the only means.”
Many of you have probably heard the saying, “Do as I say, not as I do.” Lots of parents think that the “Do As I Say” method of parenting works, but we all know that it doesn’t.
You see, your children are constantly learning from you, and others in their world, by example and they’re learning by example in three distinct ways:
- By what they SEE you, and others, doing with money.
- By what they HEAR you, and others, saying about money.
- And by the experiences they have with money as a child.
Much of what they learn shows up in their belief systems later in life and literally controls their thoughts, beliefs and attitudes about money at an unconscious level. And many of those thoughts, beliefs and attitudes about money aren’t supportive in the leastest bit.
You might not think that a little fight here or there about money in front of your child is a big deal. But what if that child decides that having money leads to disharmony or causes people to fight and not love each other anymore. In many ways, money can end up being a very negative substance when they grow up. This is NOT the way you raise financially savvy adults.
Discussing all of the ramifications of what you may be teaching your children through your examples is covered in great detail in The Ultimate Allowance book that I wrote. For now, just know that you might want to be mindful of what your children are seeing, hearing and experiencing around money.
So, the first key is to set the very best example you can.
Key Number Two has to do with getting your kids used to the idea that money is a natural part of life and it’s something they’re going to have to learn to do well if they want to do well in life.
In order to do this, I suggest you start talking to your kids about all aspects of money and get them involved with the family’s finances as young as possible so they know what the financial aspects of life look like.
I’ve read that parents often say they’d rather talk to their kids about sex and drugs than money.
This is because, as human beings, we tend to make money mean more that it really means. In all of our programs, we teach the idea that money is simply a tool to reach your dreams and help others reach theirs.
For some reason, we make money mean something about us. We equate it to our success, our popularity, our happiness. We equate our self-worth with our net-worth, but in truth, it doesn’t mean any of those things.
Money buys freedom and experiences and nothing more.
So, what exactly does it look like to involve your kids in the family’s finances? Here are some ideas…
- Let them help you pay bills by writing checks and paying bills online.
- Go over credit card statements with them. Teach them how to read the statements and help them understand about charges, interest and late fees.
- If you have a financial advisor, take them with you.
- If you have an insurance person, let them sit in on the meetings.
- If you actively plan the family’s finances with a budget or some other planning system, let the kids help and see what it actually entrails to run the entire household.
The important thing is to let your kids see you dealing with all the different financial aspects of life so they know what being responsible with money looks like. This way it’s not such a surprise when they move out on their own with just a backpack and a checkbook and their entire life in front of them!
Key Number Three is to give your children the opportunity to practice with money as often as possible while they are young, so they get really good with it by the time they move out. This way they will move out and stay out, except for visiting you to do their laundry, of course!
The next question is usually…
HOW do I give my child the opportunity to practice with money? I’m so glad you asked!
The fact is…if you want them to practice with money, they have to have money in their hands on a regular basis. The key, however, is that it’s critical that they have guidance from you in how to use that money wisely.
What I have realized over the years is that kids who get a lot of practice with money are much better with it than kids who don’t. And, kids would rather spend YOUR money than THEIR money so putting them in charge of their own money is critical step.
Studies have shown that it takes as little as ten hours of financial education to influence a child’s financial decisions later in life. All things being equal, ten hours doesn’t seem like much of a commitment over a period of 18 years. The critical piece to the financial literacy puzzle, however, is the practice they get must have with money.
So here’s a question…aren’t you spending a large chuck on money on your kids already…just to raise them? I thought so.
To give them the practice they need, simply take a portion of this money and run it THROUGH them instead. Remember, I said it was simple; I did not say it would be easy.
Financial practice leads to financial skill
The idea is to start small, when the child is young, by giving him or her the responsibility to start paying for the little things, like hair accessories or socks or pencils and paper for school.
As your child gets older, you keep adding onto to this amount, so that by the time your child is 18, he or she is 100% in charge of everything in life that involves money!
This is where I want to throw in the piece about growing children’s natural entrepreneurial talents, i.e., introducing them to the wonderful world of owning their own businesses and calling their own shots in life.
As your children grow up, encourage them to MAKE extra money by creating little businesses where they will learn to buy and sell products or services to others by offering solutions that solve people’s problem. Teach them the difference between ‘earning’ money (trading their time and energy for it) vs. ‘making’ money (creating it themselves by being an entrepreneur). It’s the greatest of all money lessons you can provide for your children.
So let’s review the three keys…
First, set the best example you can for your child. If you don’t understand how money works, learn with your child. Kids love learning stuff right along with their parents. Admit that you never learned about money while you were young and do your best not to feel embarrassed or ashamed. There are more adults who didn’t learn about money than did learn when they were young…constantly remind yourself you’re not alone in this situation. Use this time to empower the entire family.
Shameless plug…if you have kids who still color (I still color, don’t you?), order our new Financial Wisdom Coloring Book for Kids and Parents. It’s a great way to start exposing your kids to the world of money and it teaches you right along with them if you need to learn the basics. (If I didn’t think it was the best tool for your kids I wouldn’t suggest it;-)
Second, talk to your kids about money every chance you get. Bring them into the family finances. Let them help you with YOUR money and let them see that it’s just another aspect of life they have to know and get good at… and please remember to explain why they must know this stuff.
Better yet, ASK them why it might be a great idea to understand how money works and how to use it wisely. Ask, don’t tell is one of the best teaching techniques on the face of the planet so use it often!
Third, whatever you do, give them as many opportunities as you can with money so they get plenty of practice with before they move out. And not just ‘spending’ practice. They need practice making decisions, purchasing wisely, donating and doing good with money, saving to buy something at a later date, investing and watching their money accumulate and grow.
Your kids need to be given the tools they need and have a huge field to get plenty of practice on if you want them to Win The Money Game when they grow up.
What are you waiting for? You have financially savvy adults to raise. Get out there and help them practice!
As always…just something to think about.