What do you teach your children about money, wealth, and personal finances?

In My Humble Opinion
1

In this thread @Spice_Weasel made the following comment on how they teach their child about money…

Similarly, there is this thread asking “What should schools be teaching” that focuses heavily on personal finances and the parent’s role in teaching that.

Personally I think most parents do not teach good lessons about money and personal finances. They often pass on bad habits or inject their own weird ideological views about money and wealth that are ultimately harmful to their financial future. I also think many parents leave discussions about money, finances, even career as an afterthought, expecting kids to just “get a college degree” and figure it out. Then they wonder why the kids are still living at home at 26.

My take (having two small kids of my own) is that my wife and I want our children to understand how money works and why it’s important in society. That the relatively affluent lifestyle they enjoy is due to the fact that both their parents work hard at lucrative jobs and made good financial decisions.

Money may not be “the most important thing” in that you probably don’t want to spend your entire life just pursuing wealth to the exclusion of everything else. But I think it is important to understand that every aspect of your life - where you live, where your kids go to school, who your circle of friends are, the quality of everything from health care to education to the food you eat - will largely depend on what you can actually afford and that it should be a factor in deciding what career you want to pursue.

So what do you teach your kids about money and personal finance?

2

IMHO it doesn’t much matter what you try to teach them. I have three children. One is inherently stingy, and despite being the lowest earner of the three, has more stashed away in savings and a 401K. One pretty much spent everything he earned but managed to put away something every month. He’s making more money now and ready to buy a house. The third is very undisciplined, got himself in debt to the IRS and is way behind on his student loans. He tries to stick to a budget but it seems something always comes up.

Same family, same lessons. Go figure.

3

I don’t know if I would go quite THIS far - but close. We always tried to be open with our kids on all manner of things, including money. Had them open bank accounts at an early age, get jobs at 16, explained how we were able to maintain a pretty decent lifestyle on my govt salary by budgeting carefully, the importance of of buying quality and maintaining what you own, the need to consider your desired lifestyle when deciding upon education/career paths…

Yet we have ceased being surprised when our kids make (in our opinion) boneheaded and/or wasteful decisions. express clueless financial opinions. (Acknowledging our good fortune - all 3 are college grads, employed, married, home owners - so things are fine through a combination of effort and luck.)

As with pretty much everything you try to teach your kids, you try to explain and model what you think important, repeat a zillion or so times, and hope that some of it sticks. One thing that is challenging is when they fail to seek advice as adults, and make easily avoidable and costly mistakes. Understandable, but disappointing nevertheless.

4

What did I teach my kids about money? It’s hard to say, because to a certain extent it wasn’t a matter of explicitly teaching them about money . Some was, like when I told my son to open a deferred compensation account when he got a full time job but a lot of it was more explaining our decisions and teaching by example. For example, at various points my kids wanted/wished that we would do various things- buy a bigger house in a nicer neighborhood, buy more expensive cars, take more expensive vacations. And we never just flatly said we couldn’t afford it and expected that to be the end of it as some people do. We explained that there would be trade-offs - we could buy the bigger house, but maybe we would have to work until 70 if we did. We could take the expensive vacations- but maybe we wouldn’t be able to pay much toward their college tuitions if we did. I think I explained it to them once as " You can have anything you want but you can’t have everything you want " and that they would always have to make choices - you can work 70-80 hours a week and make a lot of money (which my son did for a few years ) but you won’t have much of a life outside of work. You can rent a studio apartment in Manhattan, but then you won’t be able to afford much of anything else. You can decide you want to go to an expensive private college, but then you will have to prepare for a career than will enable you to pay off the loans.You can have an expensive wedding, but you might have to skip vacations for a couple of years to afford it.

They didn’t always make the choices I would have.They will turn 36 and 37 (OMG, I don’t fully believe it) this year. One is married, has 2 kids and owns a house. The other is single , has no kids and through a combination of a lot of luck and effort has a co-op in Manhattan. (Penn South, for anyone who has heard of it.)

5

This is not about the nuts-n-bolts of finances, but about the bigger picture of children being taught to earn enough money to attain a halfway decent lifestyle.

I grew up poor, in a broken home. Against the odds I somehow climbed my way out of it and now have a decent standard of living. I have learned that, while having money is not the most important thing in life, it certainly helps. Money can solve a lot of problems.

I’ve never had to sit down with our children and explain how earning enough money to support a middle class (or better) lifestyle will make life a lot easier and more comfortable for them. They learned this on their own. We live in a very rural area of Ohio, and most of the folks around here are blue collar and would probably best be described as lower-middle class. By contrast, my wife and I are both college-educated and have fairly high-paying jobs, so our children were somewhat privileged when gowning up. They began to notice that their friends were less-privileged than them; they rarely went on nice vacations, and hardly ever ate at nice restaurants. They each came to the same conclusion: “I don’t want to end up like most of my friends’ parents, i.e. having little disposable income and living paycheck-to-paycheck. I want a comfortable lifestyle.” So each wanted to go to college, and each chose a STEM major that is in high demand.

6

We approached it in stages based on their age. When they were little they asked why I had to leave them and go to work, rather than stay home and play with them all day long. I explained regularly that by going to my job, my work paid me money so we can pay for the house we live in, the food we buy at the store, the clothes we wear, and the toys they play with (they would go quiet and wide-eyed so I knew it sunk-in and the gears were turning).

When they were old enuf to start doing chores for pay, we explained they could do whatever with that money - spend it on treats and toys, save it, or whatever, but then relating the value of saving as well as enjoying life a little by purchasing things they want. This stage gives you an indication how they are going to be later - my son saved to buy a computer game, while my daughter spent the money about as fast as she earned it.

Next stage when they were old enough to want more money than allowance provided, they went and got part-time jobs, with actual paychecks. They lamented the idea of committing time to a job, but once the paychecks started coming in, I could see the lightbulb illuminate over their heads. They saved and spent in the same pattern as the previous allowance stage, but now we started discussion long-term saving and investing - that spending and saving need to be balanced, and the risks of credit cards and debt.

As high schoolers we impressed on them the importance of deciding a vocation or profession they “want” to do above all else, but then also consider what it takes to get there (college, trade school, and how to pay for that, and is it worth it?). They both elected to go to college, of course my daughter went away to a school while my more pragmatic son stayed home and went to the local state school. We helped them avoid the dangers of college debt.

Now they are both out of school and working their first big girl/big boy jobs and we still are providing guidance - my daughter struggled to understand the importance of long-term savings and 401k contributions, while I have to remind my son to spend some money and enjoy his 20s more.

Anyway, we’ve always been transparent and open about money and finances with them, as well as discussing risks and dangers, by giving them plenty of examples along the way (age appropriate) of what to do and not to do. It’s an ongoing conversation, even now.

7

Probably applies more as teens, but we made the kids pay to replace things that were lost or damaged thru their neglect. My son broke 2 lawnmowers (in a way either intentional or careless) - he paid for the 2d. And he left his bike at HS where it was stolen. When my daughter was driving, she knocked a side mirror off the car. She got to buy the replacement.

8

We were (still are, but it’s less pertinent) strong believers that “children learn what they live” (anybody remember that poem?). My wife and I grew up in modest homes that were solidly middle class. We had food and shelter, but we never had extravagant vacations, cars, toys, or luxuries. Our parents scrimped and saved their whole lives, buying off-brand food and clothing. School clothes were expected to last the entire school year unless we seriously outgrew them. As our parents’ relative wealth grew, their tendencies toward frugality remained.

Our married life has been much the same. Two modest incomes, suburban tract home, and after the mortgage and utilities were paid, $$ went into savings before anything else. Our kids never saw us go on a spending spree because they never happened. What they saw was us being careful with our money.

Beyond establishing a home environment that is based in fiscal prudence, as they got older, we had them put money aside from their jobs. If they coveted a major purchase, they were expected to contribute to the purchase - for example, they both wanted really nice road bikes, but when they priced them out, they found used ones in great condition for less than half what new ones would have cost, and they paid for half of them, each. When they finished their schooling, we helped them set up investment/retirement accounts. Older one is in a job with regular pay bumps, and the majority of those pay bumps now go into retirement accounts. Younger one mostly works volunteer or other low-paying jobs, but probably hasn’t bought new clothes in at least 10 years, shopping at the cheapest of thrift stores or from their local freecycle programs.

They’re both set to receive high 7-figure inheritances at some point (ours plus grandparents combined), unless the unthinkable happens, but I’m pretty sure they don’t know that. We have talked about inheritances in general terms, but not specific numbers, so they’re living their lives well within their means.

9

That’s largely our position as well. We try and model good financial decision making- avoiding spur of the moment purchases, explaining the thought processes behind choosing one or the other for things, explaining that we’ve got to actually make sure we can afford things, and so forth. And we’ve pointed out what are likely poor choices on our part or on the part of other people.

And probably most importantly, starting early with the notion that their money that they earn or are gifted is theirs, both to save or to lose. Neither one is something we’re likely to interfere with, except if one decides that nine pounds of candy is the way to go; we might shut that down, or implement rules that limit candy consumption and let them buy it anyway. And we generally aren’t buying them large fun gifts anymore, so they can save their cash and buy those themselves. They actually saved up money and pooled it together to get themselves a Nintendo Switch.

My wife pays them to work in our church’s community garden, because she has a lot of tasks, and she wants the help, and they want the money. They’ve got a bonus scheme where if they work hard, don’t complain, etc… they get more or they get ice cream afterward or something like that.

The important part is to get them to save money and see the value of deferred gratification. I’m not doing much with the idea of finance yet; I mean, I’ve explained how interest works (you pay to borrow money) and how investments work, at least in broad strokes. But they’re a long time from actually being in a position to do anything like that, so I’m not in a huge hurry.

10

I didn’t teach our kids anything explicitly, but they had our example and seemed to have learned reasonable money management skills that way. They got allowances to do with as they pleased. They have done well in their lives.

11

So I don’t want our kid to be a pathological billionaire who ruins the world. And I don’t want him to be one of the “angry white guys” everyone is decrying in that thread, wondering why the hell his corporate job is not the key to happiness he was promised. So yes, I will continue to tell him people are more important than money.

Today I took him to work with me and we talked in an age-appropriate way about what I do. He was very interested in the donor wall (a bunch of leaves on a giant tree) so we talked about how this great big $11 million building that is needed to keep people safe was funded by a whole bunch of people pooling their resources together to build the place.

Forget summering in Europe; that’s what money can do.

Most of the people in my husband’s extended family are fabulously wealthy and they have some really cool stuff. But I don’t think they are one iota happier for it. It really takes the shine off.

Basically our plan, though we haven’t yet hashed out the details. We keep a budget in YNAB and we plan to go over it with him eventually, and to give him his own budget category to track his savings and see how he spends. I want him to see the process and understand how most of our money is already allocated for some specific purpose, and we make our financial decisions accordingly.

I think he will love it. He loves numbers, and I expect he’ll be more of a saver than spender. We’ve talked about giving him a small allowance to start this process.

College will be a long process. Knowing my son, he’s probably going into engineering, computer science, astrophysics or some other STEM field. But if he wants to major in art history, fine. As long as he double majors, and the other thing will actually get him a job.

We both secretly hope he will go to our alma mater but he won’t have any real pressure, there.

12

I think one of the challenges is that as your income and standard of living grows, the habits and behaviors for building wealth can be somewhat invisible to your children. Even my wife who has an MBA from NYC and works in finance has all these weird penny pinching habits that she picked up from her weirdo parents. In her mind you save money by running around turning off light switches and turning off the icemaker in the freezer. In reality the energy consumed by modern energy efficient lightbulbs does not move the energy needle when compared to running two refrigerator/freezers, central air, a swimming pool pump, and all the various computers and HDTVs in the house.

13

There’s thinking about being frugal, emoting about being frugal, and being OCD towards frugal.

Three very different behaviors ostensibly in service of the same goal. But only the first is actually useful.

14

It’s hard not to carry the mentality of your parents. We did not have a lot growing up, and I was expected to be financially independent at the age of 18 (it ended up happening earlier.) We weren’t like starving to death poor, but I grew up in a very small summer cottage in the middle of a trailer park. My Mom taught me that all student loan debt is good debt, and all other debt is bad.

My husband and I have most clashed financially, I think, over the role debt ought to play in our lives - namely, whether to prioritize paying down loans over investments. He has told me I have a very middle class mentality about debt. His financial arguments were sound, but the psychological burden of having that much debt has to be a factor.

We’ve ended up doing a little of both, and now our debt is at a level where I’m not worried about it anymore.

But it’s hard for me to shake the sort of foundation of my life.

My son’s experience is going to be a mixed bag. He’s going to have a modest upbringing in some ways and crazy luxury in other ways - which was similar to how my husband grew up, I guess. He was more upper middle to middle class, but benefited greatly from his grandparents’ wealth. My son lives in a manufactured home but has never swum in an unheated pool. And he’d have a lot more luxury than he does if we didn’t have such high medical bills.

We’ve reached a point as a society where that $5 daily latte cannot come close to the level of financial burden imposed by every day living expenses. There are a lot of little lifestyle things we enjoy that some families don’t get to have, but when looking to cut back when I actually examine how much we’re spending on all these extras it is absolutely nothing in comparison to the expense of food, childcare, medical bills, rent, etc. That’s a very different situation than when I was growing up.

15

I feel that. I have to maintain our unheated inground pool at our second home myself like some kind of hobo. :smiley:

16

Sounds like your husband tries to apply upper-middle/upper class views on wealth to what I assume based on your comments is a more middle-class income. That can be a recipe for frustration.

Similarly I get frustrated by my wife’s incoherent spending patterns that seem largely based on whim, emotion, and her ancestral inability to properly assess risk.

She can donate $400 to her alma mater’s yard sale for pillows, blankets, and clothes we don’t need but suddenly $20 for ice cream is too expensive.

End of summer vacations with the kids is fine even though I have no job but suddenly a trip to my nephew’s bar mitzvah is a bit pricey.

Last time I was out of a job she bought a second home. In her mind it’s an “investment” and gives us options. In my mind, it locks us in to maintaining two homes - one that is too small near where we work and a second too far away in the middle of nowhere while tying up financial assets that could have been used to buy a single home within commuting distance in a town I actually want to live in.

17

Decisions are often reasonably made for emotional and psychological reasons. As noted in the post you responded to:

To her twenty bucks for ice cream seems like a frivolous self indulgence but donating to her Alma a core value. Depending on the market real estate may indeed be a good investment. Vacations with the kids are important to her; your nephew’s Bar Mitzvah not. The problem ISTM isn’t her “incoherent spending patterns” but how major investment and commitments are decided upon. It sounds like she has more, and more consistent, income, but IMHO that translating to her values and wants always mattering above yours, as it seems from your description so is at least your apparent lived reality, is a problem.

To the OP. My wife and I probably didn’t do a great job explicitly teaching about finances. And values wise we tried to inculcate that once basic needs are met doing good is of higher priority than doing well. Our own spending decisions often were impacted by my wife coming from a wealthier family that spent more than mine did. Compromising is an ongoing work in progress!

18

Our kid is at college now and compared with her classmates she’s very financially responsible. Many of these habits she got directly from us by example.

She’s been saving since age 9 a fund for “eating out when I’m in college” after a mentor at an elite university nearby told her that she was tired of the dining hall food but it was paid for and more economical than eating out. Now that she has a kitchen, she is cooking breakfast every day (a meal at the dining hall is $14, so she saves her swipes for dinner when there are better offerings). She’s a foodie, so the meals she prepares are generally better than the dining hall or food court offerings.

She shops at Uniqlo rather than Lululemon, she doesn’t drink $8 or $10 smoothies on the regular, she takes the school shuttle instead of uber, and goes to the grocery store every week instead of Instacart or DoorDash. But she’s cooking using quality ingredients. And has high quality, durable and comfortable footwear for every weather and occasion. She was happy to get a 4 year old Subaru as her first car while her classmates were getting $80k new cars. She’s more proud of her charitable giving than expensive clothes, cars and travel.

She’s putting $4500 from her internship earnings into a Roth IRA. She has an account at Fidelity with an index fund with most of her savings and a savings account with her ready cash (a few thousand) at Capital One with a high interest rate which she watches like a hawk. They once changed the interest rate from 3% to 0.5%. She noticed that, and saw that they were still offering a 2.75% savings account with a slightly different name. My wife and I didn’t notice for many months.

Now she appreciates that her college is 100% paid for, while her high school classmates are taking out loans, and had to choose schools based on scholarship offers.

She learned all this by observing us and by us explaining choices we were making from the time when she was little.

19

I’m sure they seem incoherent to you - but that doesn’t mean they really are. “Too expensive” doesn’t necessarily mean “We can’t afford to spend $20 on ice cream” . It might just mean she doesn’t want to spend $20 on ice cream in that situation - I have never been to Coldstone because I don’t think I’m going to prefer the ice cream to Baskin Robbins enough to be worth the difference in price and convenience. Maybe I feel we can afford either the bar mitzvah party or the vacation, not both. Or maybe the situation is one where I would never choose the party - I don’t particularly like my BIL or his wife, we aren’t close to their kids and they live 8 hours away. Unless they schedule the party for a time we are in that area anyway, I’m not inclined to make a special trip for anything short of a wedding and a more accurate way to express my feelings is “too pricy for something I don’t want to attend”. But I’ve done/bought plenty of things that I think are more expensive than they are worth - because my husband did think they were worth the price.

I agree with @DSeid , it seems like the problem is really that your wife’s wants always take precedence - maybe because she has more money than you do, maybe not.

20

For all intents and purposes we have about the same amount of money (my current joblessness not withstanding). But big purchases shouldn’t be her (or my) unilateral decision.

But yes, it is a problem is that her wants always seem to take precedence. I get that she wants certain things for the children and we generally can afford it. But whether something is “too expensive” seems to depend on her mood rather than any sort of coherent budget plan. Like it’s a passive-aggressive way to try avoid having to do something she doesn’t want to do.

Anyhow, I go to all her family functions whenever she asks. She can suck it up and do this one trip for my family as I don’t get to see them all that often.

Also she’s the one who buys the expensive ice cream from the fancy gourmet ice cream truck that pulls up to our building. No one’s holding a gun to her head.

Obsessive, passive-aggressive behavior, often with an economic element to it, seems to run in her family. Like her mom will see some good deal on placemats or some other junk at a thrift store or yard sale or a sale on fruit at the supermarket or whatever and buy it to bring to our house. She means well and thinks she is getting a good deal, but the problem is a) we usually don’t need whatever it is she bought and b) my wife or I have asked her repeatedly not to bring that sort of stuff to us unless we agreed to it first. To me that demonstrates either a lack of self control or an obsessive desire to control. You were asked not to do something repeatedly, but continue to do it anyway.

As it relates to the OP, I think the takeaway is to make sure you and your partner have compatible views and behaviors around money. Feeling like you sacrificed your standard of living to be with someone or finding their spending habits weird and incomprehensible is a recipe for frustration.