Powerful Tips for Teaching Kids Financial Fitness

Ep 9: Powerful Tips for Teaching Kids Financial Fitness

Show Notes

Today’s episode of the Dr. Momma Says Podcast is going to be a discussion about teaching your kids about money or more specifically, helping them improve their financial fitness.

In one of my previous podcasts, I discussed the need to create your own mini me. That’s the process of sharing with your kids the things that you want them to know to give them a foundation. You are instilling in them your core essence and giving them an important part of who they are, which will help them to become who they are going to be in the future.

I also highlighted that we tend to focus on things that we feel are important and usually these are the things that were always emphasized to us by our parents.

I had no financial fitness as a young child

One topic that was not emphasized to me or my husband when we were growing up: MONEY. We both came from working-class families where work ethic was king. My husband’s dad owned his own business, so there was an entrepreneurial thread in the family.

My parents were dedicated lifers to their jobs of 20 & 30 years in one company, with full retirement benefits. That’s right, a pension! That’s not such a common thing these days.

Work hard and then retire. That’s what my husband and I learned from our parents. There was no meaningful discussion about the value of money, methods of saving or retirement planning. That may sound like a concept that kids don’t need to know about yet. But I disagree.

Because finances were not a big part of our lives when we were growing up, it was low on the list of things to teach our kids. We dealt with each financial issue when it was time. We both figured out how to pay for college when we were about to go, and for me, to pay for medical school after I got accepted.

Our adult financial fitness started pretty slow

A big thank you to Uncle Sam for allowing the United States Army to become part of my financial strategy to avoid going into severe debt during my journey to become a physician! It would have been nice if I had planned it, but of course not! I borrowed money for one year of medical school but soon was drowning in bills. I simply felt like I could not do 3 more years that way. My solution?  Join the Army! It worked for me, and I have never regretted it.

But then, being coddled in the government system allowed us to continue to avoid the need to improve our financial fitness. I bought a house with a (VA) Veterans Administration loan, I had health insurance covered with no out of pocket costs. Had 4 weeks vacation and 3 months maternity leave. What else could young parents ask for? We were too busy surviving to think about the future.

Eventually, our planning for retirement and teaching kids about money all kinda occurred at the same time. When I left the military and joined a private practice, this is when we realized how expensive the world was.

Once we started planning for retirement (yes very late bloomers to the IRA and 401K game for me. Thankfully Clay had these accounts because he did not always work for the government, but I had none).

The decision to improve our kids’ financial fitness

As our kids got a bit older we noticed a trend with their thoughts about money. They clearly thought it grew on trees and was unlimited. But isn’t that kinda what we had taught them?

They were frequently surrounded by friends who were wealthier than we were. So they would come home asking for things… cuz you know… peer pressure.

Some of the things they wanted were not expensive, so it was not ALWAYS about the money. But I feel strongly that just because you can afford something doesn’t mean you should get it.

We ended up entering the money conversation by using the back door. I never had allowances or got paid for good grades when I was young, so neither did my kids. But at the point in our lives when our kids started asking for more and more things, I felt that was a good time to introduce allowances. Kids get funny about their money.

Over time, we began to teach about having jars of money for spending, savings and “taxes”. The taxes jar was my favorite and was used to fund family dinners and movie nights. Taxes are used to help the community, in our case, our family! Understanding about taxes is important so that kids will learn that every penny earned is not available to spend.

We had to play catch up with our kids’ financial fitness

Looking back at our parenting journey, this is definitely an area I do wish I had put more effort into. But as I always say, better late than never!

Over the past 3 years, hubby and I have been in overdrive mode teaching financial fitness to our girls. I suggest you start earlier. Make it part of that process that I discussed in a blog post where I said I think every parent should be a homeschool parent.  By that I mean, parents should have an agenda about what they want their kids to learn and to be actively involved in teaching it and assessing if they are learning what they should.

Right now, this is the first year where both daughters are starting a year where neither of them is in school, and they have fulltime jobs. WooHoo! The ultimate transition into adulthood.  They are self-sufficient and OFF the Parent Payroll! That should absolutely be your goal. We will always be here to help our kids but the goal needs to be a smooth transition where they pay their own bills.

Which of course means that you need to say what you want. Do not assume they understand your plan! You should not let kids just think “things will work out”. Even if you have generational money…meaning your kids have a trust fund or you know that an inheritance is coming from grandparents. I believe kids should plan to take care of themselves and not rely on others.  The other money should be extra bonus money.

Tips for teaching kids financial fitness

These tips can start at any age, so jump in wherever you are! (More details in the podcast)

1. Do not buy whatever kids ask for while you are out (even if inexpensive).

2. Start an allowance system and separate spending, savings and tax money.

3. Allow kids to earn extra money for chores or outstanding achievements.

4. As spending money increases, require kids to contribute more to buy things

5. As their savings grow, open an official bank account.

6. Initially discuss taxes in terms of the family community.

7. Talk about going to your accountant and filing tax returns.

8. Expand savings discussion to include short-term and long-term plans.

9. Teach the need for making and sticking to budgets.

10. Discuss the importance of several types of insurances.

11.  Help your kids develop good credit.

As you can tell, I share tips for parents with young kids AND parents with young adults. They may seem accomplished and self-sufficient, but have you had discussions about their saving plans, retirement accounts, and budgets? What about helping them understand healthcare costs before going to college?

We are parents forever. The information we have will be valuable as our kids enter each phase of life. We have been there and done that, so even if they don’t ask, you want to share information that they may choose to use or not. Just share your financial planning knowledge, and let them do with it what they want. Kids will always benefit from having your information as a base.

Even though I was not the best at teaching my kids a good financial fitness background early in their lives, I hope this information may help you avoid the same mistake. Or use the information with your older kids to help them catch up!

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