How to Teach Kids About Money, Saving & Investing: Lesson 2

Welcome back to Lesson 2 of the series “How to Teach Kids About Money, Saving & Investing.” If you haven’t read lesson 1 yet I recommend you check that out first.

If you are up to speed, then with no further adieu, I give you lesson 2. This lesson is about how to engage your child in money, saving, and investing in a way that makes it their idea so they are fully bought in and take accountability for themselves.

Teachable Moments Are Worth Waiting For

When my son was four years old he began asking for all the candy, bubble gum, trading cards, and other goodies located in the checkout aisle. I knew I didn’t want to buy him candy or other things that were not good for his health. I knew that I didn’t want to spend money on trinkets that would capture his attention for a day only to be forgotten at the bottom of a toy chest. I saw this as the beginning of an opportunity to teach my son about money. I thought about it for some time, then I patiently waited for a teachable moment.

Candy Bars and Debt

As we were checking out in the grocery store later that week, my son saw the buffet of tantalizing candies teasing his mind’s taste buds. His impressionable mind was flooded with sensory overload as he imagined each candy melting on his tongue. Sweet sensations overwhelmed by a sour punch that finally gave way again to more sweetness.  All this played out through the expressions on his face as his eyes moved from one alluring candy wrapper to the next. Each wrapper was seemingly more colorful and appealing than the last one. It was like watching a kid first walk into Willy Wonka’s Chocolate Factory.

Listening to the slurry of salivation being slurped back into his mouth. And observing the excitement in his voice as he tried to appeal to me to buy him a small sample of this salivatory seduction. I knew his desire has risen to the necessary level of engagement to deliver my simple lesson.

My Son Drake emphatically exclaimed, “Dad! Dad! Can I have a candy bar!”

I asked him, “Let’s see, how much money does it cost?

He ran back to the shelf scanning for prices when his eyes locked in on the label under the big box of his favorite candy bars he returned to report, “$1.50!”

“Well son, how much money do you have?” I asked, knowing full well he didn’t have any.

“None.” he replied.

“I see, that’s too bad because if you have a $1.50 you could have bought it.”

Expecting that he would there would be a follow up question…nothing…crickets.

So I continued to check out as he returned the candy bar then we head home.

Next Week at the Store

Next week at the store we rehearsed the same conversation again. My son asked if he could have a candy bar and I asked how much money he had. I said he needed $1.50 if he wanted the candy bar.

He asked if I could give him $1.50 and I said no that is not how money works. It is not given, it is earned.

That ended the conversation and he went home empty-handed again.

The third week we were in the grocery any the same old conversation unfolded. My son asked if he could get the candy bar. I asked for the price and how much money he had. He said none. Then the conversation escalated.

“Dad, how can I earn $1.50?” he asked.

BOOM! Now I knew I had his engagement. Now he felt this was his idea. Now he was bought in. I knew I had to wait for it to feel like his idea or he would never be truly engaged.

We spent the entire car ride home coming up with chores around the house and business venture that he could conduct to earn money and be ready to finally buy that candy bar in the store next week.

He started with chores. I wanted to strike when the iron was hot so after I put away the groceries I showed him how to do each of the chores he was interested in. I set paid day for the next weekend immediately before we went to the store.

I did this to develop the concept that the work must be done in advance of the paycheck. I also wanted to ensure he would not have a chance to lose the money before we were going to the store again.

Victory Lap

The next weekend at the store he got to buy his first candy bar with the money he had earned. I praised him for doing a good job on his chores and raised the stakes by saying if he wanted two candy bars next week he could do two chores around the house. Or if he wanted a box of candy bars he could start a business such as a lemonade stand.

I wanted to show him the concept that with more work came more reward. I also wanted to show him that building a business can provide a stream of income, and usually far more income. But that story will come a little later on.

The Value of Money

“Never give someone money, give them the opportunity to earn money.”

If you give someone money you satisfy them for a day if you give them the skill set and training to earn and save money they can provide for themselves for a lifetime.

Money is not something you get, it is not something you have, rather it is something that you use as a tool to get what it is that you really want. For me, that is time, freedom, and experiences. You use money to design a lifestyle. You use it to create future opportunities. You use it to parlay your current situation to greater opportunities in the future. Those that use it wisely grow to be wildly successful. Those that use it poorly will depend on a continuous supply of it from others in exchange for their precious remaining life energy. They will earn their daily bread only to be feed for that day having to return again tomorrow to exchange their daily strength and energy in the form of labor for that day’s handout.

69% of Americans have less than $1000 in savings, 34% have no savings at all. Most Americans are living one paycheck from the edge.

Jonathan Mendoza, Playing with FIRE documentary

If you think about it, most people are trading their health, energy, and precious awake hours for money. Most people are trading away their most precious resource, the one thing that they can’t get more of is time.

You can trade time for money but rarely can you trade money for time. Think about it this way, the young trade their time, health, and energy for more money. The wise and silver hair people trade their money for more time, health, and energy.

Stay tuned for next the next article in a couple of days where I am going to reveal how I taught my 5-year-old son the lesson of debt that he still talks about to this day, 4 years later.

Keep the FIRE burning my friends.