How to Teach Kids About Money, Saving & Investing: Lesson 4

Short Cuts Leave You Getting Short-Changed

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Financial Accountability

One thing that used to annoy me about being a frugal parent is when the kids waste energy and resources like leaving the door open when the AC is on or like leaving the hose on overnight.

The Root of all Anger

I have a working theory that all anger comes from someone else undervaluing what you hold in higher regard. So to understand my anger I simply ask what are my kids undervaluing? I realized that the kids didn’t value my desire to conserve resources or energy and therefore my money.

And why would they value those concepts? I had never taught them. To them, resources like energy and money are unlimited resources that cost nothing just turn up the dial or open up the faucet and “Wall-la!” An endless supply of more. Yet the reality was that I was paying for it.

Rewards and Consequences

I almost never have to get angry at my kids and I almost never have to yell at them unless it is an emergency. Much like my finance, and almost every other aspect of life, I just set up a system and let my system manage the task. This set it and forget it approach really only takes small occasional tweaks to manage. As a single parent and foster father, I need an autonomous system because I have so much else I have to manage. Give me a problem once and I will solve it. Give me a problem twice and I will devise a system to never have to solve the same problem myself again.

When I see behaviors in my kids I don’t like, I simply institute a system of rewards and consequences. Rewards for the good behavior I wish to encourage and consequences for the bad behavior I want to squash out. When I do this correctly I don’t get frustrated with my kids. I simply let them experience the consequence. If I undershoot and my kids don’t mind the consequence or don’t listen and correct their behavior I simply increase consequences (for bad behaviors) and rewards (for good behaviors.) 

Short Cuts Leave You Getting Short-Changed

For example, if my beautiful daughter forgets to take out the trash, now she has to clean my bathroom counter and take out the trash. And if she does not do both by the next day I add on another chore for example taking out the recycling too. This system incentivizes her to do the right this the first time without me asking. If she doesn’t I don’t have to get angry with her or raise my voice. Instead, I get a clean counter and get the trash taken out while I lean back in my second-hand leather chair, sip an ice-cold German hefeweizen beer, and watch her learn that the long way in life is the easy way in life. Short cuts leave you getting short-changed.

The Man Behind the Curtin

Behind the scenes, your net wealth (I say net wealth because your wealth has no bearing on your worth) has been playing out this same system of rewards and consequences on your finances your whole life.

If you don’t track your spending and net wealth you might not have noticed it. Yet the reality is dozens of five-dollar lattes and hundred dollars cell phone bills add up over time and have set in motion consequences that force you to return to your place of work just to cover your daily needs.

Likewise, good saving and investing habits build up an ever-strengthening position of financial freedom over the years so that you will have total control of your money and expenses so you can decide the best use of the time you have left as you move toward fulfilling your purpose in life with the freedom that only comes from not having to go to work to pay your living expenses in life.

Correcting Behaviors

To correct my kids’ behavior I simply sat them down and explained the ways that they were wasting resources, energy, and money. Whether it was leaving lights on or leaving the fridge open while they made PB&Js. I explained that the reason I can’t play dolls with my daughter or go fishing with my son when they asked was because I have to work and the more energy they waste the more hours I have to work to pay for it. That means less time fishing with them and more “no’s” when they ask to set up a doll family.

I picked recent examples of things they asked me to do with them to make in more empathetic for them. They could remember how much they wanted to play dolls and go fishing just a few days before when I had to say no. If you have a similar conversation with your kids pick real examples from your recent past. Pick the things that you know your kids are passionate about love to do the most. You need to show them how their actions affect the family’s outcome.

Join me next week for a really cool approach to Teaching Kids Money Management Skills.

Keep the FIRE burning my friends.