Raising Financially-Literate Children

Oh would love this especially with teens – who have no job (nor need one) and yet think that money is ever coming.

This is a bit dated, and Canadian – but for a mid-teen I’d have them read “The Wealthy Paper Carrier”.  (and later, by a different author, “The Wealthy Barber” – which is more for adults….)

The Wealthy Paper Carrier features a couple of teens (about 15 and 16 I think?) that start to get to know their uncle who retired “rich” and learn about finances from him.  It goes through about 20 years (with some speculation on the future a bit…) – I don’t agree with everything…. especially the speculation part – but it has great advice otherwise.  Some of the things the teens find out about (in the early part of the book) is not to waste money with bad habits like smoking or junk food.  They get a job (paper carriers) and learn about deductions, and how to save/spend their money.  (One thing with that is that they stop taking an allowance from their parents….)  I think the formula for while they don’t have any responsibilities is 33% long term saving, 33% short term saving for something they would like to buy in a few months, and 33% they can spend.  Now that said, I modify it to 10% tithing, and 30% for the others.  They do learn that that formula changes when they are adults and have more expenses to live.

After a while, they get tired of their jobs, and they are taught how to be an entreprenuer and start a small business.  (The one, who was good with computers did tutoring I think – something like that….   The other, who had a pet bird, started a business cleaning cages etc.)   Later one goes to university, and the other works for a while….  they eventually both have their own business…  There was stuff on buying their first house, and other things.

The Weathy Barber (Which was written by a different author (before, I think)) has 3 friends (well, 2 of them are related) visiting a barber once a month whom is wealthy.   He teaches them various concepts of becoming rich, including things like Wills, RRSP’s, Pay Yourself First, Dollar Cost Averaging, etc.    I like the principles – but find it almost impossible to follow in my life.  (I could and did when I was single….)

I don’t know of any particular resources, although Dave Ramsey’s Junior course looks good for future use. Our kids are still pretty young, but we have tried to be intentional about teaching them money management. They have Spend, Save, and Give jars. We do give them an allowance (a dollar amount that is half their age), plus they have opportunities to earn extra money if they like. I was opposed to giving an allowance at first, but then realized that my children were never going to learn how to handle money if they never had their hands on it! We do not tie their allowance to chores, but rather have a list of what we call “Paid Chores” hanging in the kitchen. They can choose to do these or not, but if they complete them and place their initial next to the job, I’ll pay them the extra money on top of their allowance. They receive their allowance regardless of behavior, choosing to do extra, etc. I can go into more detail about this if you’re interested.

Since they don’t know about percentages yet, we instruct them on the amount they need to put in their Give jar each week, 10%; and they are responsible for taking it to church and placing it in the offering. For now, we allow them to decide how much to put in Spend and Save. They usually opt to put all of their money into Save, as they rarely have anything they need to buy. We did require them to buy their own iPods, and it took them several months to save for that. We did a lot of teaching during that saving period, so you might consider something your son could begin to save for to give yourself opportunities to instruct him along the way.

I think a lot of financial instruction can be taught to them in normal life situations. For example, I often point out to my children the various prices of name brand vs. store brand items at the store and show them the difference in savings if we buy the store brand instead of the name brand. Many times our children will see a sign advertising the price of something and ask us, “Mommy, do we have $99?” And I’ll reply, “Yes, we have $99, but we haven’t set aside our $99 to buy that item. If we used $99 of our money for that, we wouldn’t have what we need for groceries or gas or other things we might need.” For their ages, I think this is a good way of illustrating that everyone has a finite amount of money, and once it’s gone, it’s gone. They also got this principle a lot when they were saving for those iPods. “If you spend $5 on that toy, that’s $5 less you’ll have for your iPod, so you should be certain that’s something you want or need before you decide to spend that money.”

We’ve also had to have discussions with them regarding wise vs. unwise purchases. They learned this the hard way when we went to Mexico last year, and they chose to spend some of their own money on cheap Mexican toys. Within a couple of months the toys were broken, and they were sad. It was a good teaching opportunity to discuss trying to find quality items to spend our money on rather than buying what’s cheapest. That just because we can afford something doesn’t mean we should, etc. 

I’m sure we will invest in a curriculum for financial responsibility in the future, but I truly believe that a lot of good principles can be passed along through daily life and common situations we find ourselves in everyday. My mother never taught me to balance a checkbook. That’s a skill she could’ve given me had she just taken the time to sit down and show me with her own checkbook. She needn’t have bought a textbook about it. I’m just using that as an example, of course.

We have also discussed with our children the importance of not using credit cards, although they still don’t understand what those are yet. Dh and I are debt-free and the financial freedom we have is so incredible. Our parents did not teach us this, however. We financed cars, used credit cards, had loans, etc. because our parents did the same. Like you, we want something different for our kids, so we are striving to be living examples to our kids. It doesn’t do much good to preach to them about being debt-free if we’re up to our ears in debt! 

Anyway, I just think there are some principles that don’t require an outside resource. All that needs to be learned about money can be passed on to our kids by us or someone who is living responsibly with their money. My husband has an uncle who is very wealthy, and it’s completely because of his hard work–no inheritance or anything like that. He pays cash for his homes, cars, and travel and has a large retirement to last him well past his death. We frequently ask him for financial advice when it comes to investing, retirement, etc. because he’s lived it. He’s not a financial planner or stock broker, but he knows what to do and helps us make sound decisions. He’s a living example to us, and one of our goals is to be like him in a financial aspect someday. He’s helping us get there…

I hope that helps!

Lindsey