Kids & Money
by Ben Ganson on Jul 23, 2021
One of the most rewarding investments I have made over the years has been helping kids understand how money works. I periodically teach a finance class to local high school students and I also love seeing my own three children grow in their financial understanding and wisdom. As many of my clients can attest, while leaving a financial inheritance is nice, giving our descendants the tools to manage wealth wisely is critical!
Here are three things I have learned as I have walked alongside young people in their financial stewardship journey:
- Kids need to experience earning money, not just receiving money. Handing a child $100 is a lot easier than helping them learn how to earn $100, but the end result is vastly different. Earning money gives kids dignity, confidence and motivation to work hard. My oldest son started mowing lawns when he was ten. My investment was letting him use my lawn mower and transporting him to work. My second son started baking cookies to sell when he was nine (Carroll Financial being his first regular client). My investment was helping him create efficient systems. He now pays his younger sister to do the clean-up, so the lessons are trickling down. Whether we hire our kids to do work for us or we help them brainstorm and implement business ideas in their context, giving them the tools to create wealth on their own is one of the greatest gifts we can offer the next generation.
- Kids need to learn what it feels like to make purchases with their own money. My kids have no problem spending my money. But when they make and spend their own money, it becomes a totally different ballgame. They automatically begin thinking about how many hours of work it will take to pay for that thing they desperately want. Not only does this teach them delayed gratification, but spending their own hard-earned cash is the first step toward becoming a wise consumer.
- Kids need to experience compounding interest. I have yet to find a better way to teach the power of compounding interest to kids than helping them invest their own money and letting them watch it grow. Early on I opened investment accounts for all of my kids and told them I would partially match any money they invested. Over time we have talked about companies they like and exciting trends happening in the world. Every once in a while, I pull out their account statements and show them how their money is working for them and how they are participating in the success of great companies.
It doesn’t take a degree in finance to teach kids about money. We just need to be willing to think creatively and help generate opportunities for them to experience firsthand how money works.