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Even though we are doing fine from a financial perspective, in many areas of life, we try to live frugally to set a good example… Target for clothes, much second-hand furniture (we buy nice used stuff from our affluent neighbors on Next Door), we just stopped using a landscaping service and now mow our own lawn, we got a rescue Covid puppy instead of a designer dog, we use a lot of You Tube videos so we can do-it-our-selves (dog training, dryer repair). I feel so proud when she exclaims how over-priced something is.
Our neighborhood is too affluent for my comfort – my daughter has no idea of what normal is, but the schools are excellent and managed to stay open through most of Covid. I try to use the surrounding affluence as motivation. One of our cars just died and she wants a Tesla like her friend’s family has. I tell her to study hard, work hard and save a lot and then she can buy herself a Tesla someday. My hope is that by then she’ll have learned enough to buy a Toyota.
I think children need to have money to learn about it. Start small. Let them make mistakes. Let them have the autonomy to spend wisely or misspend it in small amounts. (Eat too much candy? Get a stomach ache.)
As children get older and can trade labor for money, let them experiment with what their labor is worth, depending on what they are doing.
I once overheard two young people at a neighborhood ice cream parlor talking about jobs they had so far. Each job had its own perks, such as discounts on shoes in a sneaker shop. One had tried a “real” job briefly with UPS, with benefits, and talked about how hard the work was. He was too young to value medical insurance and a retirement plan, maybe that job will be a more preferred choice in 5-10 years.
I also encourage my children to ask friends and families about their early jobs, and about what they like or don’t like about their current work. “School of hard knocks” is not preferred to simpler interviewing and learning from others.
I think it depends largely on the kids. We have two diligent savers who listen to their dad pontificate (bloviate?) on personal finance. They are easy because they listen. We also have one profligate spender in our midst. That child is competitive, so I showed her compounding tables for what her siblings investments will return over time. Magically, she approached me recently with money she had saved and wanted to open a Roth IRA.
Preface: I have no kids and am ‘only’ 33 years old. Not much life experience relative to many Humble Dollar readers and contributors.
That said, I think of the Marshmallow Experiment in which children are presented with one small treat now or two later. The idea is that the kids who can hold off consuming in the present might turn out to be better long-term investors. There are many holes in that study that have been revealed.
Still, I think teaching kids about preparing for tomorrow and delaying gratification is a worthwhile strategy. Encouraging kids to save a portion of their allowance, birthday money, tooth fairy treasures, and proceeds from a lemonade stand is always a good idea.
For older kids, consider “matching” their wages earned at a part-time job by way of Roth IRA contributions. If he or she saves part of a paycheck, plop some money into a Roth for them to show just how valuable saving and investing is.
Like the matching idea