Teaching Kids About FI

[totoro]

I often wish I had had the knowledge I have gained about how money and employment and investments all work together much earlier.

Yesterday I gave my older son (13) the Wealthy Barber to Read.  He is very good with math and pretty good with money but he is into brand name clothing and gadgets (albeit he buys used online).  I know that if he can master the concepts early he will put them to good use if he sees the benefits.  I promised him $20 when he finishes the book.... we will see what he does with it :)

Anyway, I tried to explain some of the concepts to him briefly and did ok with some (compound interest was very exciting for him) but others I found were too convoluted without hands-on experience with them - or more time.  He does not yet have the mastery of the relationships between earning money, passive income, impact of spending, impact of investing, good debt (leveraged cash flow positive appreciating asset backed), bad debt, investment strategies, business ...  oh, I could go on.   

I realized a lot of what I know (which is not enough on some topics) came from real life experience over time.  It is hard to teach at an early age when you don't have to worry about paying your way through life on a daily basis. 

If anyone has any tips on how to do this successfully and inspire his interest in the topic I would appreciate it!

[RoseRelish]

Talking about it is great stuff. To be honest, my parents never really talked about how to treat/manage money when I was growing up....but they did set a great example - which is probably more important and long-lasting than trying to teach concepts that need experiences to make sense. My parents drove cars until they didn't run, paid off the mortgage in 8 years, cooked almost every meal at home, etc, etc. The example they set makes me run to them with financial questions when they arise and has helped me get my financial life off to a pretty solid start.

[Mrs MM]

I know your son is 13, so it's probably a bit more complicated, but with our 6.5 year old we lead by example for the most part.  Rather than having full blown talks, we use things that come up in everyday life to have relevant conversations.  Rather than talking about interest, show him how it works by having him open an account.  That might make it a bit more interesting for him. 

You could have challenges at home that the whole family participates in (that are fun!) that help him see the good side of financial independence (rather than having him feel deprived).  Also, at that age, kids can be responsible for their own stuff.  If he wants brand name things, then I hope he's paying for them himself!  If he's working and earning money, then I suppose he can buy what he wants.  :) 

I think that when our son is around that age, we'll try working on a project together like buying a house and fixing it up for rent or sale.  Hopefully he's interested in such things.  You could also post some items for sale on craigslist and then put the money he earns somewhere where he can earn more.  There's so much you guys could do together! 

[totoro]

Thanks for the replies.

He has not finished the book yet but we are doing things together each day now.  We are using rental property analyzers to run numbers of places we are looking to buy and I am getting him to identify the risks and controls for the risks.  It works way better with a real life example.  I am going to turn over his education savings plan to self-manage.   That should make it more interesting.  We are also talking about the impact of taxation and he could maybe double his savings every seven years through investments.  I like the idea of starting an investment account for him right now and having him sell things on craigslist to put money into.   Talking about the impact of compound interest and growth is making an impression.

I showed him your post on the buying clothes himself... (not currently happening).  He does not have a job yet but is looking to get one part-time in the fall.  Until then, I am going to set an overall dollar limit and let him make the decisions and live with them - he is fairly practical but we will see what happens.  Many of his friends are from very wealthy families because of the neighbourhood we live in which makes it more challenging.  That said, personality plays into it and my son who is one year younger could not care less and I get all his clothes second-hand except shoes, socks and underwear.  This year it cost less than $100 for all his new to him second-hand stylish school clothes which were in great condition (ten t-shirts, six long-sleeved shirts, four pants, two shorts, five hoodies, winter jacket).

[totoro]

And a new addition to the plan.  I took my son to work with me yesterday.  We toured a big environmentally integrated land development project in and I introduced him to some developers and landowners.  It sparked a lot of good questions from him and really got him thinking. 

I've decided to start to introduce him to folks that I work with who are doing things in an interesting way.  I'm going to see if a fellow I know who was entrepreneur of the year in my province will sit down with my son and let him know what he wished he had known at his age :)

[Mrs MM]

And a new addition to the plan.  I took my son to work with me yesterday.  We toured a big environmentally integrated land development project in and I introduced him to some developers and landowners.  It sparked a lot of good questions from him and really got him thinking. 

I've decided to start to introduce him to folks that I work with who are doing things in an interesting way.  I'm going to see if a fellow I know who was entrepreneur of the year in my province will sit down with my son and let him know what he wished he had known at his age :)

WOW!  Very cool!

[totoro]

So the meeting with the entrepreneur friend had a bigger impact on my son than my words could ever have.  I'll call the entrepreneur "David" as I don't want to publicize someone who has not given me permission.   

We met two days ago at David's vineyard overlooking the lake.  His son had built a beautiful house on the property and we sat on the deck overlooking the lake until the mid-day sun drove us inside to the beautiful living area.  David came prepared.  He had a one-sheet hand-out for my son of all the things he wished he had known at his age and all of the possible career paths in business he could think of.  David went through the sheet with my son in a very business-like way.  Touching on the pros and cons of a university education, the ideas of working your way up, how saving and investing could get you where you want to go faster.  He talked about the power of compound interest and the real need to find what it is that you are passionate about so that work doesn't feel like work.

At the end of the meeting he recommended that my son read the Seven Habits, that he get a job and do a detailed budget to see where his money was going, and that he join junior achievement.  Both David and I started with paper routes at 13: my son's age.  He also recommended that my son keep meeting folks that were doing things that he might like to do.  The power of connection.

So what has happened over the past two days?

1.  My son joined me and his grandma in cleaning our vacation rental property the past week.  He decided to save all of this money for his investment fund and learn about investing going forward.
2.  He has decided to get an ongoing job, a paper route or anything else he can find.  We own a business he can work in but I prefer him to start working for non-family first.
3.  He is reading the Wealthy Barber right now as I type and will move onto the Seven Habits next.
4.  We have decided to do a vision board together as to what he wants to have happen in his life.  Having a beautiful house overlooking the lake like David's son is one goal right now.
5.  He is going to self manage his RESP in one month or as soon as he comes up with a parent-approved plan for it.

I really feel a lot of satisfaction from this.  It is good to know that your child might find their direction early with a little help.  I'm waiting to see if there is an impact on his views on brand name clothing next :) 

[totoro]

This project has sparked a few realizations for me too as to how I am teaching my kids.  I have been a bit confused about encouraging kids to work and contribute vs giving them experiences and opportunities.  My kids have chores and an allowance but I do many of the things they could to because I enjoy doing it for them (shopping/cooking/cleaning).

I grew up in a very poor family and had to work from a really early age to buy things like clothes.  I did not want that for my kids.  I find it gratifying to be able to provide them with lessons and clothes and things I never had, but I realized that I have not been teaching them some of the skills that will really help them because I have been worried about them having to do too much without help and because it requires conscious effort to involve them.   

This realization led to me understanding that perhaps the kids need to be doing everything they can for the family as well.  That this is an opportunity to give as well as receive and that learning better work habits at home before they are tested in the workplace. 

I sat down with the kid and they agreed with me knowing they would not receive any more allowance for it.  So I guess this means I have to spend some time devising a good system for the whole family to get more involved in the things I do around the house.  More work for me initially but better for us all in the long run.