Four Key Money Lessons I Learned as a Child

There is a lot written about how to teach children about money. A Google search on “money lessons children kids” returned 144 million hits! I would like to tell you some of the lessons I was taught as a child that I am passing down to my own children.

The importance of hard work: As a typical teenager, I wanted to be independent and have my own money to go out with friends (this was in the pre-Internet days; Pacman had just come out). I was expected to work in the family business with no pay. I still remember, when I complained about this cruelty at the dinner table, how my father used to point at my plate and tell me, “This is your paycheck.” One day he encouraged me to find a job to see how money gets earned, so I did, at a Del Monte factory assembly line working eight hours straight. I was so tired and sore after work I could barely move. And then I had to do it again the next morning. My father smiled when I dozed off at the dinner table before I headed to bed. But I understood then that he was right: I had to do great in school so I could avoid doing this type of work the rest of my life. It worked. Looking back, I believe that was one of the most formative experiences of my childhood. I made my 16-year old son go flip burgers and he had the same epiphany. I am sure my father was smiling from up above at us.

The importance of saving: At every opportunity as a child, I was drilled with the mantras, “You have to save because you just don’t know what the future holds and you need to be ready,” and “You make the bank pay you interest; you never pay the bank interest,” and “Debt is evil.” These beliefs have been ingrained in me and I find myself repeating them to my own children. I took them by the hand and opened accounts at a local credit union where they deposit a chunk of the money they receive from grandparents, and for birthday and Christmas presents. I show them the interest they earn (not very much these days) from the bank because they saved!

The importance of budgeting: While I was growing up, my parents paid for everything in cash. They always made sure to tell me how much something cost and related that to how long they had to work to pay for it. I have repeated the process with my own children numerous times so they can grasp that nothing is free and if they want to get something they better have the money to pay for it. As I am a big fan of using travel rewards credit cards (never ever carry a credit-card balance!), I always made sure to tell my children when I pulled out the credit card that I would still be paying for it when I received the monthly credit-card bill. When my teenage son requests something, I tell him it will cost him X hours flipping burgers and then ask, “Is it worth it?”

The importance of compounding; I keep reinforcing how important it is to start investing early. I love the saying, “The more you invest, the earlier, the better.” My teenage son will open a Roth IRA in a few weeks with the maximum allowed for the 2014 tax year. There will be a time when you can no longer work or be able to earn money so how are you going to live when that happens? This is why it is so important to save a portion of everything you earn. Make it a habit and you will be fine later in life and have more choices than people who live paycheck to paycheck.

I guess there may be some advantages of children having a financial planner for a father and establishing good money habits early. I can’t wait to tell them, after they are independent, that their parents plan to spend or donate every dollar and they should expect nothing from us! By then, they will already have learned that they better not goof around too much and instead should work hard, save, and invest early and often.

 

 

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TBB
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