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Teaching Kids About Money – Part 2

This week is part two of teaching kids about money. So last week was talking about the three principles of early, often, and now.  So, on to Part 2. the conversation gets into a little bit more of the “what” this week. Why do I teach kids about money, and what do I teach kids about money? What are the most important principles that I need to teach them? There are three things today. 

  • One is the value of money. 
  • Two is how to manage money. 
  • Three is what success looks like—how do people get wealthy? How do they get rich?
  • Check out the examples that host Josh Nelson shares.


Hi, Everyone. Welcome to the Wiser Financial Advisor with Josh Nelson, where we get real, we get honest, and we get clear about the financial world and your money.   


This is Josh Nelson, Certified Financial Planner and founder and CEO of Keystone Financial Services. We love feedback and we’d love it if you would pass it on to me directly at . Also, please stay plugged in with us and get updates on episodes and help us promote the podcast. You can subscribe to us at Apple podcasts, Google, Spotify, or your favorite podcast service. Let the financial fun begin!  

This week is part two of teaching kids about money. If you didn’t get a chance to listen to part one, I highly recommend that you go back and listen to it, but I will give you a really quick recap just to set the stage for today.

I did the podcast on teaching kids about money part one because that’s one of the most common questions I’ve gotten throughout my 20 plus years of being a financial planner. “How do I teach my kids about money? When do I teach my kids, and what do I teach them?”

So last week was talking about the three principles of early, often, and now.

Early referred to teaching kids as early as possible. They can pick up on this stuff a lot earlier than we think. Obviously there are age appropriate levels of what we’re teaching them, but start as early as possible.

Often is about teaching them consistently. This isn’t one of those conversations where you just sit down when they’re 12 or 13 years old and teach them the facts of life. This is something that should be happening as often as possible in your household.

The principle of now is that we need to start right away—wherever we are, even if our kids are adults at this point and we feel like we didn’t do the best job teaching them about money. There’s nothing wrong with starting those conversations now. Especially if they’re adults, it may be that you’re starting the conversation by telling them about what you are doing. You’re not nosing around their stuff because at that point it may not be appropriate. They’re adults and they may not want that conversation related to them.

This series is called teaching kids about money. I didn’t call it teaching your kids about money because it may not necessarily be your kids. It could be your grandkids or your neighbor kids. If you’re a teacher, it could be kids in the classroom. And it also could be in the workplace. There are a lot of people that I’ve visited with over the years who point back to a manager or a senior coworker that got them on the right track from an early point in their company. It could have been just someone saying, “Hey, make sure you sign up for the 401K. Make sure you get your free money. Make sure that you’re sitting down with a financial planner so he can help you figure out what your long term plan is.”

These things can get instilled from a variety of sources. It could be kids that are maybe just younger than you. But bottom line is that you may be in a position where you can instill these things with other people.

There are all kinds of organizations like Junior Achievement that would love to have you go into the classroom. I’ve done that. Sherry and Jeremy from our workplace have done it too, and that’s been a lot of fun and very rewarding to go in and have those conversations with kids at various ages.

So, on to Part 2. We’re going to get into a little bit more of the “what” this week. Why do I teach kids about money, and what do I teach kids about money? What are the most important principles that I need to teach them? There are three things today.

One is the value of money.
Two is how to manage money.
Three is what success looks like—how do people get wealthy? How do they get rich?

The whole line of thinking here at the Wiser Financial Advisor is that we’re trying to emulate people who have been successful and avoid mistakes that other people have made. So really, it’s learning from each other so we’re not having to do this by trial and error. The problem with trial and error is that it can be very expensive and time-consuming. We only have so much time, and so the whole idea here is to use wisdom, use other people’s experiences so we can make better decisions going forward.

So, principle number one today is the value of money, teaching kids about what money is. I know that can be a little bit mind-boggling when you start to think, “Gosh, you know, I have these pieces of paper and these coins and I have this money on this balance. What is that all about? Who’s backing that up? And who says what it’s actually worth?”

Well, the Oxford Dictionary says money is a medium of exchange in the form of coins and banknotes. And though it didn’t include physical and electronic means in the definition, today the reality is that most of our spending is done electronically, either by a debit card or credit card.

You might also be thinking about how some of these things don’t exist at all in paper form, things like crypto currency. And I’m not recommending you go out and invest in cryptocurrency or put your money there, but the world is kind of moving in that direction where money is not as physical as it used to be.

The whole idea here is to instill the point that money is really a medium of exchange, and from a practical standpoint, it’s how I get stuff. It’s how I am able to do stuff. Somebody had to buy that bicycle or that skateboard you’re riding, somebody had to buy the clothes on your back. If you’re walking, someone had to buy your shoes and things like that. So the principles you want to instill here are about the fact that money exists.

Early on in the kid’s life you want to be actually using some physical money. There’s toy money too, things like little cash register toys. Early in my life, my mom bought me a little cash register and typewriter. I probably told you this before, but I had some toy money, and it’s kind of funny that I ended up doing this for a living, which is about money.

Teach how to get money as well. If I’m creative and hardworking and I just don’t give up, ultimately, I’m going to get compensated. By creative, I mean that you need to be creative enough to figure out what will get you money. What things do you need to be able to do?

We’ve got a one-year-old and we don’t have her run chores quite yet, but it’s not going to be long before we’ll have her helping with the dog food and things like that, right? Little teeny chores that are age appropriate. Are we going to pay her for that? Yes, we are. Is it going to be a lot? No. The principle here is not the dollar amount. The principle is that when you do something—when you do a chore, when you do a job, when you work, then you get compensated for it. The principle you want to start instilling is the fact that money exists and you’ve got to do something to get it. In most cases, people don’t just hand you money for no reason, so I think it’s pretty important that kids get paid for what they do, and that they’re contributing instead of getting handed money all the time. Otherwise, they’re not going to learn that lesson for a long time, maybe not until they get into the actual workforce.

What money isn’t is also important to talk about. It doesn’t buy happiness. It really comes down to a lot more than that. It’s important to instill the fact that not having money doesn’t buy happiness either, right? Ultimately we do need to have money from somewhere. We’ve got to have money in some form, to eat and put a roof over our heads and go to the doctor and the dentist. So it’s important to be having these conversations, that money doesn’t grow on trees; that Mom and Dad go to work. And we have to work hard, whether we’re in a business or working for somebody else. Somebody had to work for that money. So having those conversations, even though they might seem very basic, is important to instill in kids early on why money exists, what the purpose is.

You’ve probably heard me say this before, but they’ve done various studies on this and discovered that once people get to a household income of about $75,000 per year, then more money doesn’t buy happiness. By polling people and asking different questions on this, what they found is that people’s happiness level actually does go up until about that $75,000 mark and then it levels off and never goes up after that. It doesn’t matter how many zeros you add on the end of somebody’s wealth or income really, the happiness never ends up increasing. It’s not that money doesn’t buy happiness to the extent of being able to do stuff, but it’s not really giving us more life satisfaction over all. Getting more money beyond $75,000 doesn’t result in a negative amount of happiness, but it doesn’t go up either.

Number two of teaching kids about money is how to manage money. Now we’re talking about budgeting, saving, spending, investing, giving. It’s about making decisions with money, not just acquiring it or understanding what it does. Managing money can start from a very early age. It can start with a piggy bank. Could be as simple as that, or a little toy cash register like I had as a kid. There are all kinds of games you can use as well to understand how to manage money. SIM City games are often a good way to teach kids if they’re into gaming. There’s a game that will help you manage the city budget, as far as being able to build buildings and water towers and things like that. Find some way that connects with the kids. They can start to understand managing money in a game, but ultimately it is going to come down to their own money, real money.

One thing I always recommend is that people open up a bank account for the kid as early as you can. Most banks and credit unions will do this. Kids can’t do it on their own. They have to have a parent or grandparent or somebody else involved, but opening up ta kid’s bank account allows them to be able to start to experience managing their own money before it really counts. Another tool for this that we’ve used as a family is called Busy Kid. It’s a service. There is a fee for it, so there’s some cost involved, but it’s really convenient because there’s a little debit card as part of it. You can pay kids for their chores into the debit card, and they get a payday, right? So there’s a weekly paycheck that hits their bank account. That way they can start to experience what it will be like even before they can get a part time job at a restaurant or something like that.

By using Busy Kid, when it hits their account you can start to talk about things such as, “Where is that money going to go? How much are we going to spend? How much are we going to save? And how much are we going to give?” It’s so, so important to help the kids understand that they just can’t spend all the money. And if they do spend all the money, then that will not result in building wealth over time. It’s also going to put them in a position where they’re not going to have the money to be able to make bigger purchases down the road.

You can see how these patterns are going to play themselves out in people’s lives, right? People need to plan ahead and budget and save to buy things like a vehicle or something smaller like a trip or maybe a new phone. If people don’t budget for those things, then what do they do? Either they have to forgo getting the thing they want or they have to borrow. If you look at the wealthiest people in the world, they did not get wealthy because they borrowed money. That’s just something we want to avoid as much as possible.

It’s important to teach kids that if they have to borrow money someday to buy a house—because in most cases people can’t write a check for a house–that’s one thing they’ll have to look at doing in the future and it would be best to try to pay the mortgage down early. But as far as borrowing money to get little stuff, you don’t want to go down that path. That’s how people get into big trouble with having way too much debt, way too many monthly obligations paying the bank or some form of the bank or someone else who they might owe money.

Regarding saving, some kids are good at this; they just kind of dial in with it right away. If they’re a natural saver, there won’t be a whole lot needed from you other than just basic monitoring. Other kids might be inclined to spend every dollar that goes in their account. Then it might require some more course correction to help them understand the principles of saving up money.

Our third point is to focus on how people get wealthy. How do people get rich? You can talk about how do people get poorer, too, right, which is the corollary, because it’s just the opposite. You can talk about famous people—and that’s a good way to teach kids, by talking about some famous people they’ve heard of and using them as examples, both good and bad. Talk to them about people that have made a gazillion dollars and then lost it all, and how they lost it all.

Here are examples of that:

Johnny Depp, the actor, has made over $750 million—probably more than that now—from his films over the years. He went dead broke. Maybe he’s recovered from it by now; it’s been a couple of years ago, but he was dead broke, spent it all, was on the verge of bankruptcy. It’s kind of interesting to look it up and see some of the things he was spending money on, just insane amounts of money on wine and things like that.

The principle we’re teaching here is that if you live below your means, regardless of your income level, whether you make $30,000 a year or $30 million a year, it doesn’t matter how many zeros you add or subtract. It’s the same principle: If you don’t take the money and put it someplace else; if you just spend it, you will end up being broke. Especially if you’re borrowing more than what you’re earning, it’s not going to work eventually.

Another example. Floyd Mayweather, the boxer, has earned over $500 million from fighting over the years and has won and lost it all at least a couple times now. He’s built up to obscene amounts of money and then spent every single last dime of it. That’s why he’s kind of come out of retirement, right? Because he needs to earn more money. Obviously he hasn’t learned yet. Maybe he will.

Those are examples of people that kids may recognize, and they’re going to look at you with these big, wide eyes and shake their heads and say, “How did they go broke? How did they possibly go broke when they had that level of earnings?” So you can talk about that. Talk about the famous people, but say, “You know what, the same thing happens with a lot of people that have a lot less money.”

And if you flip it to the opposite, think about other people that they might have heard of, like Jeff Bezos or Elon Musk or Warren Buffett. Maybe not Warren Buffett. You will probably have to tell them who Warren Buffett is because at this point, Berkshire Hathaway isn’t as sexy of a company as some of the others. But use Bezos and Musk, talk about how they got rich. These are some of the richest people in the world. How did they get there? Well, some of it is luck. Yes, good fortune and blessings have a part in this, but usually those things don’t just show up on their own. There was probably some hard work that went into it. All three of those people, Bezos, Musk and Buffett, are very hardworking people. Warren Buffett, who’s 90 plus now, still works his butt off, goes to the office every day and works hard. He isn’t giving up just because of his age or his wealth.

Another thing to focus on is that all these people are very creative and they’re not willing to give up. Determination is really important to recognize. Not giving up easily is a core value. Also, there is taking risks and being willing to fail. All three of those guys I mentioned have failed over and over and over and over. In fact, when you talk to famous rich people, oftentimes they’ll say that it was their willingness to fail over and over and over again that ultimately brought them success. They were basically willing to fail more than anybody else, and that’s why they got to where they did. Something else to teach kids: Make it safe for them to fail and help them understand that there can be value in failure as long as we’re learning from it. We develop some thick skin from that, which is one of the values of participating in school activities and sports, things where there are winners and losers. It sounds kind of harsh, but that’s the real world. You’ve got to develop some thick skin, because otherwise you’re going to give up. You’ll give up and settle back and go with the least you possibly have to do to get by.

So being a hard worker, being creative, being determined to just not give up; these are all core values you can teach.

Make it real. Use examples of people you know. Use some business owners, possibly in the area, people you understand are not just buying stuff with all of their money, they’re also putting money away into investments and building their wealth by making other investments. I know we’ve talked about this over and over, but ultimately it it does come down to living below your means and taking the difference, taking that money and doing something reasonably smart with it, whether it be investing back into a business, buying stock, or building money up in savings to have some cash.

Here’s a book I highly recommend. I’ve read this one a couple times now. It’s called Smart Money, Smart Kids by Rachel Cruz. Great book. It talks about all these age groups from little teen tiny kids to college age kids. Great principles. Very quick read. I think you’ll find it valuable to read through.

Why do we talk about this topic? Because it comes up so much in conversations that I have as an advisor. It also comes up with a lot of people having regrets and having some pain because they wish that somebody had taught them about money early on, so they didn’t have to make so many mistakes and didn’t have to wait so long to start following smart financial principles. There are regrets and pain on the other end too, from parents and grandparents wishing that they had done more early on to teach their kids about money, because they see their kids making some mistakes. They might regret it because they wish they would have had the conversations. That’s why it comes back to those principles we talked about last time, which is early, often and now.

The “now” key here, is to take some action based on what we’ve talked about today. Maybe it’s picking up a copy of that book. These days Amazon can get it to you overnight, or you can run over to a bookstore. I’m sure you can get that at Barnes and Noble. There are all kinds of action items in there that you can start to take. I hope you’ll take at least one action based on what we’ve talked about today so you don’t have to look back and say, “I wish I had.” You’ll be glad you did.

I hope this was helpful. I hope you have a wonderful week and God bless.

The opinions voiced in this episode of the Wiser Financial Advisor with host Josh Nelson are for general information only and not intended to provide specific advice or recommendations for any individual. Investment advisory services offered through Keystone Financial Services, an SEC Registered Investment Advisor.