The tween years (10-13) is the most exciting time to teach a kid about money. It is perfect for four reasons:
Tweens have enough math skills to handle some difficult concepts.
Tweens are old enough to want more expensive things. This means they’ll need to save money.
Tweens are old enough to make money on their own through side hustles.
Tweens still look up to you and don’t have the freedom to ditch you for their friends just yet. In other words, you can still influence them.
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Tween math and money skills
When I was a kid, the concept of compound interest got me hooked on personal finance. Back then banks were paying interest rates between 6-8%. The act of saving money was the same as investing it. Banks aren’t paying that kind of interest nowadays, but you can open up your own bank and subsidize those great interest rates.
When I introduced my 8-year-old to MoneyTime Kids it was a little cruel. It’s designed for tweens between the ages of 10-14. While he could understand many of the concepts the math was difficult and he wasn’t able to take full advantage of it. He’s nine and a half now and I think that 18 months has made a big difference. He went from only knowing half of his multiplication tables to multiplying 3 digit numbers and long division.
Tweens want more expensive things
There are still some times that my 8 and 9-year old boys are fine with a cheap knick-knack. However, more and more they are becoming more interested in expensive things. It started with the Switch and now it is games for the Switch. Fortunately, the Pokemon games they like tend to have a lot of replay value.
Soon my kids will be hanging out with friends more and spending money with them. I’m sure they’ll want to fit in with the latest shoes and clothes. While we’ll always get them certain shoes, if they want the best designer brands, they’ll have to cover some of the cost. That’s an opportunity for them to learn about saving and budgeting.
Tweens and side hustles
Tweens aren’t old enough to work “in the real world.” I had to wait until I was 16 before I could work at a fast-food restaurant. I saw that Mcdonald’s was advertising for kids age 14 to work there.
Fortunately, tweens can do some side hustles. Babysitting and mowing lawns is perfect for many 12 and 13-year-olds. This is a good way for them to earn significant money.
Tweens will still listen to parents – some times.
I know that when my kids are teens they’ll have better things to do than listen to me give them money lessons. They may not agree with me, but at least there’s a chance that they pay some attention.
Final thoughts about tweens and money
There are so many different directions you can go to teach your tween about money. Beyond what I already included in the article, this is a great age to give them insight into the family finances.
Note: This article may sound like an advertisement, but it isn’t. I’m simply a fan of the Cartoon Network show Teen Titans Go!
I’ve worked from home before my kids were born. It was easy for me to watch television with my kids. When we discovered Teen Titans Go! it was simple self-preservation for me. I was desperate for a new show. I had enough of watching the “Fat Controller” berate Thomas the Tank Engine and his friends for not doing their job, while ignoring the employees who are on the train.
While we’ve tried a variety of other shows, one of the first ones that stuck was Teen Titans Go!
For those who don’t know the Teen Titans Go! characters, they are five teenage superheroes. However, instead of saving the day, they are usually doing something silly. For example, they find out what the Tooth Fairy is really doing with all our teeth. (Spoiler: He eats them!)
Each of the episodes below, I’ve watched at least 3 times. Some of them are probably in the double digits by now. Kids love reruns, right?
There are over 300 episodes of Teen Titans Go! The episodes cover a lot of mundane adult topics. For example, the episode tonight is about trademark law. There’s an episode tomorrow about health insurance. Clearly, these are the kinds of topics that weigh deeply on your 9-year-old’s mind. Don’t worry, kids love it because it is so silly. You’ll love it as you nod and say, “It’s so true!”
At least one of the writers is a big fan of personal finance. The Teen Titans have about a dozen episodes that center on personal finance topics. Let’s dig in and see what money lessons we can learn from them.
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Top Personal Finance Lessons from the Teen Titans
Money is Whatever Currency We Choose
In the episode Two Bumble Bees and a Wasp, Robin (of Batman fame) tries to teach the rest of the gang about money:
“Money is not to be wasted on things that bring you happiness and joy! Money is to be hoarded until you have enough money that your money makes more money.”
I’m not sure too many children are going to pick up on that last point, but it certainly caught my attention.
Turning to a cartoon representation of money we get this lesson:
“I am paper, but I am also money. All I am is an agreed-upon representative of credit. Something you trade for goods and services! So I can be anything.
They go on to ask whether money can be a pineapple. (Actually, pineapples have historically been used as money.)
After Beast Boy insists that money is evil and rips up a dollar bill, Robin decides not to pay anyone until they respect money.
Flash forward to a day later and Beast Boy has a pizza. Robin would like a slice and offers to buy one with a dollar. He soon learns that the rest of the team has agreed that the new currency is bees.
Yes, bees. I told you it was a silly show.
It’s a good episode to build a foundation about how money works. It’s also useful to start a conversation about cryptocurrency.
In the episode, Think About Your Future, Robin announces that he’s buying all the Teen Titans expensive jackets.
Raven has an epiphany:
Raven: Aren’t you guys worried about wasting money?… So we have some later? Starfire: But the later is not until the later. Currently, it is the now. Raven: I know, but aren’t we going to get old one day? Beast Boy: Yeah, but later. Cyborg: And it’s the “now” right now. Raven: Oh, okay, that makes sense.
So they buy the jackets. And then they celebrate with pizza, but not just any pizza it’s “extra-large, extra-extra cheese extra-extra-extra pepperoni, plus “large jugs of the soda” and “a gallon of ranch dip.”
Raven once again warns that perhaps they should eat healthier to avoid health problems later. Again, the rest of the gang doesn’t care about “later.”
The scene ends and we jump ahead to 70 years later.
The gang is old with many health problems. They can’t afford their medications because they don’t have any money.
They suddenly realize that Raven was right. So they do what anyone would do. They build a time machine and send their old selves back to talk to their teen selves into making more sensible choices.
That brings us to this clip about learning how to eat healthy, starting a 401k plan, and an explanation of compound interest.
Everything goes perfectly… too perfectly. The rest of the episode isn’t educational, but it is entertaining.
No cartoon is dumb enough to create an episode around a boring topic such as building equity from rental properties. No cartoon except for Teen Titans Go!
With episode after episode about silliness, the writers created, Finally a Lesson.
The best part of the episode is Robin explaining rental property and how to build equity:
If you can’t watch it, here’s Robin’s explanation:
“Equity is the amount of a property you truly own. It’s the difference between your loan balance and your property’s market value. If you sold your property and paid off the bank, the value of your equity is what you’d walk away with. When you build equity, you increase the net value of your asset. One way to do this is by paying off your mortgage.”
The episode takes them through all the steps. First, they find the right property – a run-down apartment building. Then they get to the financing, which involves getting 20% for a down payment. They do it the way that “everyone else does” ask someone else for that 20%.
Then we get to the other fun parts of securing a rental property… the loan process. There’s an explanation of credit scores, securing the right lender, filling out the paperwork, and getting a good faith estimate.
The gang is starting to get very bored, but Robin assures them they’ll be very satisfied in the end. For now, they have to turn their attention toward fixing all the problems with the building.
There’s a fun twist, but finally, Robin gets us to the satisfying end, “It takes decades to actually build equity, but in 30 years, it will provide a modest cash flow to pay for our numerous old people medications.”
For a cartoon geared towards kids, it’s as good of an overview that you’ll get. As my kids have gotten older and started to ask why we have rental properties, I just cue up the episode on the DVR (or Hulu) and ask if they have any specific questions.
In the episode Who’s Laughing Now Beast Boy gets underarm hair, signaling that he is becoming a man. That means finding his spirit animal, which is “like college for dudes who turn into animals.”
With that, we are off on a Teen Titans Go! tangent questioning the value of college.
Raven: Uh, isn’t higher education usually really expensive? Robin: Yes, but if he chooses the right spirit animal it will open a lot of doors for him. Beast Boy: That’s right, Robin, my man. And then me and my hairy pits will be on easy street. Cyborg: Whoa, whoa, whoa. While spirit animals are great, they aren’t necessarily for everyone. I’d hate to see you saddled with so much debt and in this economy, whoo! Personally, I think spirit animals have just become big business. Focus more on sports and partying, than education. Now with the money you’d spent on a spirit animal have you instead considered investing in, say, a rental property? Or what about looking into a training school?
Beast Boy: Whoa, check out those bears. Nice. That’s what I want my spirit animal to be! Cyborg: But the cost of being a bear is astronomical. Maybe you should find a two-year community spirit animal, like that old donkey. Then transfer to the bears. In the end, you get the same spirit animal.
Beast Boy gets accepted by the bears and talks to his friends.
Robin: But how are you going to pay for this? I got some government loan of salmon and honey. Raven: Whoa, that’s a lot of salmon and honey. It will take forever to pay that back. Beast Boy: Once I’m a bear, I’ll be rich. Cyborg: While data shows having a good spirit animal leads to a better paying job, there’s no guarantee those spirit animals are going to give you the experience you need to make it in the real world.
When things don’t go well with the bears, Beast Boy realizes that he made a mistake.
Beast Boy: I think you’re right, Cyborg. I should have bought a rental property. Cyborg: Booyah. Told ya. Raven: Well, consider it a lesson learned.
The last line is a reference to the rental property episode, Finally a Lesson that I covered above.
The episode goes off on a silly tangent, like all the episodes, before circling around to one last wise thought.
Cyborg gives a last shaming to the bears after defeating them:
That’s what you get for convincing people to spend thousands of dollars just to learn things they could figure out for free. Leave them with an amount of debt and a useless piece of paper that reads, “Diploma.” They’re pedaling a dream that doesn’t exist anymore.
In the episode Teen Titans Vroom, we get another lesson about college debt and career choice. This time it comes from villain Dr. Military. Dr. Military isn’t really a bad guy though, he’s a victim of the student loan system. Let’s start with this witty banter about his career choice:
Dr. Military: Actually, I’m a… veterinarian.
Titan: Everyone knows that’s not a real doctor.
Dr. Military: That may be the perception, but it took me ten years to earn my veterinarian degree. And statistically, it’s more difficult to get into veterinarian school than med school, which means I had to work twice as hard for half the respect and money of a so-called “real doctor.”
Titan: Sounds like you should’ve been a people doctor, bro.
Dr. Military: Enough. If I wanted to listen to someone criticize my career choice, I would have called my parents.
Now let’s get to the root of Dr. Military’s evil doings:
Titan: Please, give up the evil scheme, Dr. Military. You do not have to do this.
Dr. Military: Actually, I do. I need the ransom money to pay off my massive school loan. The high cost of veterinary school combined with my low salary as an animal doctor has put me in quite the financial bind. My evil plan is the only way out of this crushing debt.
My 8 and 9-year-old boys don’t know much about college yet, but this will be something we can revisit as they get older.
How Taxes and the IRS Work
In Fat Cats (Season 7, Episode 22), the Titans win a big cash prize, but then learn that they have to pay taxes on it. This allows the writers to explore what a tax-free world looks like. It isn’t pretty:
It’s a great introduction to kids about why we have taxes.
Pyramid Schemes Will Make You Broke
I almost didn’t include this episode, but my wife mentioned that I should. I know quite a bit about MLM/Pyramid schemes and I didn’t feel this episode addressed the topic very well. However, many adults can’t understand pyramid schemes, so I can’t expect the Teen Titans to teach kids this complex topic well. As usual, my wife is correct and it’s just my own extensive writing that artificially raised expectations.
The Teen Titans Go actually have a very good description of a pyramid scheme in this 2 minute clip:
The key money quotes almost always come from Robin and this is no different:
Robin: This is a pyramid scheme!… Not that kind of pyramid! A pyramid scheme is an unsustainable business model, that promises payments to participants, based on the amount of additional people they enroll in the business, instead of focusing on the sale of goods or services to the public… As you can see here, the exponential growth of the “business”, will eventually cause the entire operation to collapse, leaving the participants at the bottom of the pyramid bankrupt, while those at the top walk away rich…
Starfire: I do have the question. Did the mummies build the pyramids?
Robin: There are no mummies! It’s not a literal pyramid!
Almost everyone in MLM doesn’t understand this concept and still go meetings to learn how to show the plan or enroll people in the business. In fact, the people who make the most money in every MLM are the people who have the largest downlines of enrolled people, not sales of goods or services to the public.
Beast Boy joins and makes Pyramid Scheme money which leads to this awesome song:
Of course, the rest of the gang (sans Robin) want all the money, so Beast Boy enrolls them as “money deputies” with himself as a “money sheriff.” Robin warns them, “You are participating in a fraudulent business” and “This pyramid scheme is going to leave you broke, Titans.”
Everything spins out of control and gets mixed in with mummies wanting their money back and the Teen Titans not being able to deliver. They get out of it with some silly stuff that doesn’t make sense, but by this point, they’ve addressed the topic fairly well.
I really don’t know how much financial information my kids are absorbing from this, but I know that they remember nearly everything they see.
I’ve watched my share of cartoons and I can’t think of any other general cartoon that covers half of the financial topics in Teen Titans Go! There are still a lot of episodes that I haven’t seen, so I might have missed a few money lessons.
Recently, I wrote about how to teach your preschooler about money. It included a lot of basic things like recognizing coins have different values. Once they get to elementary school, they can start to tackle bigger money issues.
Before I get into the money part, I need to address one elephant in the room. There doesn’t seem to be a good name for children ages 6-10. They aren’t preschoolers and they aren’t tweens. I found a couple of places calling them grade-schoolers, so I’ll go with it.
One of the great things about this age is that you can do so many things that you couldn’t for a preschooler. Let’s look at some of the things:
Savings and Spending
By grade school, kids often have an allowance. That means they can make more of their spending decisions than a preschooler. My kids started to want more complicated things. Sadly, the days of decorating a big cardboard box like a rocketship and flying to the moon isn’t enough. They wanted to save up for a Nintendo Switch and the latest Pokemon games. Now I spend most of my time trying to pry them off of video games. That’s a topic for a different blog or article.
Unfortunately, with the example of the Nintendo Switch and Pokemon games, we couldn’t shop around and try to stretch a dollar. We got one a few months before COVID hit and considered ourselves lucky that we got one at all.
Grade schoolers can do extra chores around the house to make some extra money. My kids help out with the dog boarding business that I run at home. It’s only fair that I give them some money. Unfortunately, it’s uncommon that kids can reasonably help in your professional life.
There are other things that kids at the upper end of this age range can do. They may be able to babysit a younger sibling for a short time. They may be able to bake some pastries for a bake sale.
A lemonade stand may sound antiquated but it can work. Our area has limited the places where lemonade stands can be. I guess they didn’t want kids pestering the tourists. We run a virtual lemonade stand using a version of a lemonade stand game I played as a kid. This is a great way for kids to about supply and demand.
Other Financial Education
This age group is a great time to teach kids money with televsion. Some episodes of Teen Titans Go make learning about real estate investing fun. Other shows like Warren Buffett’s Secret Millionaire Club are greatly focused on personal finance.
Additionally, you can start to share the family finances with your kids. You don’t need to share everything, but you can share some of the necessary expenses that the family has.
Some people think you shouldn’t teach preschoolers about money. I can understand that perspective. They are busy learning numbers, letters, shapes, colors, music, and, well, just about everything. (The great thing about a young mind is that it is super spongy.) There’s a place for learning about money on that list.
“Children ages 3 to 5 are usually too young to understand abstract financial concepts. Still, they are building a foundation that can serve them well in the future.”
Specifically, the CFPB suggests that preschoolers can learn about earning, saving, planning, and spending.
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Preschoolers and Earning Money
You can begin a conversation about earning money by explaining the various jobs that people do. At this age, kids know a lot of community helpers such as firefighters, police, doctors, and carpenters. Kids at this age can learn about running a store as a start to entrepreneurship.
My favorite thing to do with my kids was to take them to the grocery store and the dollar store. At the grocery store, we could go over the prices of various food. Then, at the dollar store, they would get a dollar to pick out anything they wanted. It’s a great combination because they can see what a dollar buys. Unfortunately, some dollar stores now charge $1.25. It makes the numbers a little more difficult, but they’ll still get the concept.
Preschoolers and Saving/Planning Money
At some point, your preschooler will want something that costs more than a dollar. It may come from an advertisement on television or a trip down a toy aisle. This is a good time to hone in on an item that a kid wants. If your child gets an allowance, he/she can learn to save for that special item.
Another great way to teach saving is to use the ticket system at an arcade. Usually, you can spend 5 or 10 tickets for a very cheap plastic ring with a spider on it. For 25 tickets you may get a super ball. For 100 tickets you could get some super sugary Fun Dip. Finally, for 10,000 tickets you may be able to get a remote control car. I usually tried to get my kids to find something at the 25 to 50 ticket level that they liked and save the rest for something great. They have enough tickets now to get something that would normally cost about $20.
Preschoolers and Spending Money
At this age it’s too early to teach kids family finances. However, you can explain how simple spending works. My kids gained an idea of how to spend from the arcade ticket example and the dollar store scenarios above.
My kids also have made some mistakes with money. One time my older child paid my younger one five dollars to go upstairs and get him a toy. It wasn’t a good use of five dollars – he was just being lazy. The tooth fairy had recently come and he felt rich. I thought it was interesting and I learned a lot from that exchange. I hadn’t been doing a very good job of teaching them the value of money. At this age, it’s okay for kids to make mistakes – that’s how they’ll learn.
Other Things to Teach Preschoolers about Money
Beyond the main concepts of earning, saving, and spending there are a few other things you may want to teach your preschooler.
The Value of Free
At a very early age, my oldest asked if we could go to the bookstore and buy a Pokemon book. His grandmother always takes our kids to the bookstore and buys them books. I said, “I think I have a better idea.” He said, “Are you going to buy it on Amazon?” I didn’t realize that he knew what Amazon was. “No”, I said, “I’ve got a better idea.”
We got in the car and I drove to the library. I explained that all the books here are free. The only catch was that we have to bring them back when we are done with them. He picked out a couple of Pokemon books and worked through them the best he could. They weren’t written for five-year-olds. He had the most success with the Pokemon dictionary/manual which had short descriptions of nearly a thousand Pokemon.
When we went to playgrounds or dog parks, I’d occasionally mention that they were free. While one could argue that we pay for these things with our tax dollars, it’s best for kids at this age to think of it as free.
One of the great things about preschoolers is that free stuff goes a long way. You can make a great boat out of a large cardboard box from Amazon. We’ve made Blaze and Monster Machine toys out of cardboard that we had lying around the house. Take advantage of all the free stuff you can at this age, because there will be a time when they’ll want the coolest clothes or gadgets to fit in with their friends.
Introduction to Coins
Preschool is the perfect time for kids to learn about coins. I know there’s a big backlash against screentime for kids, but I’m a firm believer in educational screentime in moderation. I grew up on Sesame Street, Mr. Rogers, and Electric Company and I turned out okay (for the most part).
Here’s a great example of a 3-minute song that teaches kids about the four basic coins (penny, nickel, dime, quarter) that we use in the United States:
It’s a catchy song, right? You could probably sing this to your kids yourself and avoid the screentime, but I think it’s more effective to have the visual of the penny with the entertainment of the song.
Another way to introduce kids to coins is to use the best book to teach kids about money. It starts with introductions to coins and what you can buy with them. It’s a bit of an older book, so you could buy penny candy back then. The book does get more complicated, so you may lose your preschooler’s attention before the end.
Final Thoughts on Teaching Preschoolers About Money
There are many ways to teach young children about how money works. The important thing is that you make an effort to explain how it works. It’s not any different than how you’d explain any number of non-money topics to kids. It helps to keep it as simple as possible at first. You can always build to the more complex topics.
Don’t hesitate to use this time to build a strong foundation of very basic money skills.
American Girl is a strange brand to put out a guide to money. Some of their dolls cost hundreds of dollars. That’s before you get into the extra clothes and accessories. My wife sold five of her niece’s American Girl dolls for around $500. They were used, without the boxes, and in some cases not even in the original clothes. Back when the nieces were in their American Girl phase my wife saw the prices on the accessories in a catalog and quipped, “I hope you get an American job that pays American money for this stuff.”
I have to admit that when we found out that we having were boys, a part of me was relieved to not have to get drawn into that consumerism. Instead of American Girl stuff, my kids got drawn into Pokemon consumerism. I don’t know if that’s any better.
When my wife saw the book, American Girl: A Smart Girl’s Guide to Money by Nancy Holyoke, we joked that it must be one page long with only four words, “Don’t buy our products!” However, it was used and only a couple of dollars. Curiosity got the best of me, so I bought it. The copy I have is the original version from 2006 and that link is to the revised version that’s in print today. It has a different illustrator, but the same author. Using Amazon’s “Look Inside” feature, it seems like the content itself is the same and the illustrations are just as good – it’s just a different style.
So, with two boys and no daughters, I’m going to attempt to review a personal finance book for teenage girls by a company that sells outlandishly priced products. None of this makes any sense, but this is where we are.
To start, the book isn’t one page and four words long. It’s 95 pages, with colorful illustrations on every page. It’s the perfect presentation for a teenage audience. I can’t emphasize that enough, because getting kids to choose to read about personal finance is not easy. A teenager will plow through this book quickly. I’m tempted to ask my 9-year-old son to read it, but I know it would have be a big bribe – teenage girl books are weird for 9-year-old boys. I’ll give it a try anyway – chocolate usually works. Also, it would give me a chance to put a few dollars in his how to teach kids about money. Finally, there is a page about the power of compound interest.
The book closes out with a few pages on donating to charity. It also included one page about how $20 can mean different things to different people and even different things to you based on how you acquired it and what the expectations were. This particularly resonated with me. I can spend hours writing an article for this site. A dollar earned here means much more than a dollar earned in salary.
American Girl: A Smart Girl’s Guide to Money isn’t a complete guide. For its intended audience, it is close to perfect. It teaches just enough without getting too long and complicated that teenage girls would simply not read it.
The First National Bank of Dad is perhaps the best personal finance book for parents. If it’s not the best, it’s the one I’ve enjoyed the most. It’s also certainly one of the best-kept secret books about how to teach kids about money. For some reason, it only has 35 Amazon reviews – not a lot for a book that is nearly 20 years old.
What makes it so good? I keep coming back to two things:
All the advice makes sense when you think of it from the perspective of the child.
It’s an easy, quick, entertaining read.
You’ll get the most out of it if your kids are around age 5 or 6. It’s perfect for that time when kids are starting to get an allowance. It covers personal finance for kids until about the early teen years – around age 13 and 14. There’s some mid-late teen advice such as who should pay for driver’s insurance and whether a teen should get a summer job, but that’s not the main focus. Author David Owen isn’t afraid to share his strong, often contrarian, opinions, but he brilliantly backs them up.
The First National Bank of Dad is divided into four main parts:
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How to Get Your Kid Interested in Saving Money
This section is the biggest concept – it’s right in the title of the book. The idea is to open up a virtual account (a spreadsheet will work fine) where your kid(s) can deposit money and receive 3% interest monthly. You, the parent, is going to pay this interest. That’s why you are the First National Bank of Dad.
Why open up your bank for your kids?
Bank savings accounts fail kids. They pay almost no interest. Kids can’t easily access their money. Kids have nothing to gain by putting their money in a bank. It isn’t interesting or useful from their point of view.
However, The Bank of Dad, paying out 3% interest each month makes a big difference. For example, $100 grows to $142.57 in a year. A child can see how $42+ in free money is useful. Personally, I’m thinking of implementing this at 1% compounded weekly. On a $100 deposit, that amounts to $167.77 in a year, but I get to show it growing every week, which might be more interesting to my boys. After the first year, I will reduce it to 3% monthly (42% annually). For the third year, maybe I would do 5% every two months (34% annually) and finally, the last year I could do 7% every quarter (31% annually).
David Owen acknowledges that the Bank of Dad can’t exist forever – paying a guaranteed 42% annual interest over the long term just doesn’t work. He says that around age 12, the kids wanted real checking accounts and independence, which effectively shut down the Bank of Dad. Since this book is twenty years old, I’m not sure kids are interested in real checking accounts like he claims. However, I could see them wanting access to money without asking for a withdrawal from their parents.
The Bank of Dad on Allowances
Author David Owen is a big believer in allowances. I am too. It’s hard for kids to learn about money when they don’t have any. He recommends not being to stingy with allowances – kids have to have enough money that they can make mistakes to learn from.
He gives some other great tips on how to do allowances right:
Ask kids how much they want – include them in the process.
If they want an allowance raise, have them “apply” for it in writing justifying why they need or deserve more.
He also offers some things that you shouldn’t do with an allowance:
He recommends that you don’t encourage the kids to save, let the awesome compound interest get them excited so it’s their idea
Chores are a family obligation. We all need to pitch in. It’s best not to link money to doing chores. Pay for doing extra work.
Grades are an obligation. It’s the kids’ job. Don’t link money to getting good grades.
There’s one more that I wanted to address specifically.
Don’t force kids to give.
This is a unique concept as almost all the advice on teaching kids about money has giving included. The reasoning behind this is that it doesn’t give kids the ability to control their money. They can control where to give, but not the act of giving itself. If you force kids to give away one-third of their money (as many recommend), kids will see it only getting two-thirds of their allowance.
This makes sense to me. However, I still want them to give. So what do I do about it? I think the best plan is to give an even higher interest rate for money designated for giving. That might not encourage saving for the purpose of giving – after all, the money would all be going away. However, recently my kids have started to want to give each other presents at Christmas and birthdays. If we count this as giving, then they can scheme up a system to multiply their money faster if they cooperate. Most of the time, my kids don’t work well together, but if they have a shared interest, it might bring them closer together.
The Dad Stock Exchange
When the kids have graduated from the Bank of Dad, they are introduced to The Dad Stock Exchange. The Dad Stock Exchange is just like any regular stock exchange, except that the prices of stock are reduced by 100. If a stock trades at $12.45 it would trade at $0.1245 on the Dad Stock Exchange. Kids wouldn’t buy real stock, but Dad would keep track of the value.
Dealing with smaller numbers is easier. Also, kids can diversify more than they normally would be able to with a small amount of money.
One of the difficulties with the Dad Stock Exchange is dealing with dividends. The author didn’t want to keep up with them. I wouldn’t want to either.
The Dad Stock Exchange may have made a lot of sense in 2003 when the book was written. It may even make some sense today. However, many brokerages allow buying fractional shares and have commission-free trades. As I write this, kids could buy a half-share of Roblox for a little more than $25.
I think it’s better to invest in the stock market for real nowadays. In fact, once the kids were about three, I squirreled away a lot of their birthday money and invested it. At ages 8 and 9 now, they have nearly $5,000 a piece. The stock market has done really well over the last 5-6 years. Also Robinhood had a promotion where they were giving out free stock. Maybe they’ll use this money for their first car someday.
True Net Worth
This section is about understanding that money isn’t everything. There are things that money can’t buy. Essentially David Owen is making the case that quality of life is important. Owens goes through some exercises to show that the most valuable things are memories, not stuff bought with money. It’s an important point to make, but this isn’t any new and/or revolutionary. There’s a reason why I went with Kid Wealth and not Kid Money. Wealth encompasses more than money.
There’s some things in the book that I didn’t find much value in. There was a lot about eBay and Beanie Babies. I think that was more relatable in 2003. It’s good in a historic context. Also, selling stuff on eBay is something that is valuable today. I’m not sure it would make an update edition of the book.
There was also a lot written about the value of reading and reading to your kids. In some ways, I liked how it branched out from more than just a discussion of money. However, I could see many people looking for a book that stays more laser-focused on personal finance and kids. If you are like that, then this book may not be for you.
The True Value of Teaching Your Kids About Money
The author’s father was a life-long money manager. That was his career. However, when the father got older and had some health problems, it became clear to the author that the father shouldn’t actively manage his money anymore. So he tells his father that he has an older friend that needs help managing his money and asks if his dad would do it. His dad says something like “Of course now! Are you crazy? I’m too old and I don’t want to do that anymore.”
Then the author says, “Dad, you are that older friend.”
We help our children learn money today. Tomorrow they’ll be the ones helping us with our money.
Do your kids have a Kid Roth IRA? If you can manage it, I highly recommend getting one. A Roth Individual Retirement Account (IRA) is an incredible savings vehicle – perhaps the best deal in all of personal finance.
My kids each have one. That’s very rare – I bet none of their classmates have one. They’ve had one since they were around five years old. They’re 8 and 9 now and they have around $2,000 and $3,000 respectively in retirement savings. They didn’t have to pay income tax on the income because they don’t make much money. They’ll be able to make withdrawals completely tax-free and penalty-free at age 59.5. By starting now, they’ve got the most valuable thing on their side – time.
It’s not easy to get a kid a Roth IRA account. The IRS has an annoying rule that the kids have to have earned income to put money into a Roth IRA. Unfortunately, you have pesky labor laws that make it difficult for kids to earn wages. Ideally, you’d have a kid who has earnings from a baby modeling career, but there aren’t enough of those to go around. It would be nice if people lined up to buy art from children, but I’m not holding my breath on that one.
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Kid Roth IRAs and Self-Employment Income
How do my kids earn this money to comply with the IRS demands? I pay them to help with my dog sitting business. I typically make around $15,000 a year boarding dogs. It’s a very good side hustle while I’m freelancing from home and writing blog articles. After COVID vaccines became available, I made over $30,000 as everyone got pandemic dogs and every wanted to travel.
I’ve been dog sitting for more than seven years now, so the kids have grown up with a couple of extra dogs around. They’ve become naturally curious about feeding dogs and they love to play fetch with them. We’ve taught them how to pick up the dog droppings, but that’s not something they like. Some of their peers do that chore for their allowance. However, for the family dog sitting business, it’s part of the job.
Feeding dogs, playing with dogs, keeping the water bowl filled, and picking up after the dogs is most of the dog sitting job. These are all things that my kids can do. Occasionally I have to give them medicine. That’s about the only thing that I need to do 100% myself. The IRS should have no issue with me subcontracting out some of the work to them. A professional pooper scooper company costs a couple of thousand dollars a year for the number of dogs we have and how often they’d have to come. My kids aren’t professionals, but the service doesn’t fill the water bowls or play with the dogs, so I think it averages out.
Kid Roth IRAs: Powerful Stuff
A Roth IRA contribution at this age is very, very powerful. Money grows quite a bit over 55-60 years of compounding until they reach ages 65 and 66.
Before we get to my kids’ Roth IRA numbers, here’s a helpful CNBC video about how kid Roth IRAs works. Who wouldn’t want 3.4 million in one of their accounts?
My kids won’t have 3.4 million like the example in the video. If they were to earn 7% interest over that long period, a single dollar would be nearly $58. So $1000 in a Roth IRA would be worth $58,000. Of course, at 3.5% inflation over that time, you’d need $7,878 to have the buying power of $1,000 today.
When you crunch those numbers, it gives them a real post-inflation gain of 7x their money. Theoretically, if they could earn the $6000 Roth IRA limit, they’d set themselves up with $42,000 in retirement. Of course, that would be an extreme amount of dog care and that wouldn’t be reasonable.
In addition to the Roth IRA, we pay them some real spending money. They saved up for a Nintendo Switch before the pandemic. That was great timing because they were hard to find once COVID hit.
The first year, I settled on paying the younger one $400 and the older $600. In the next year, the younger got $600 and the older got $750. Last year, they got $750 and $1000 for each. The dog sitting business is going well with everyone traveling now that they are vaccinated.
My oldest would have an inflation-adjusted amount of $13,443.70 in his nest egg at age 65. My youngest would have to settle for “only” $10,066.02. He should catch up because he’ll have an extra year when my old son moves on.
Investing My Kids’ Roth IRA
You need to open a kid Roth IRA with a brokerage firm. I chose Fidelity because I already had my SEP-IRA with them. They allow you to buy many mutual funds, bonds, and ETFs with no trading fees. However, a lot of brokers have many investment options to manage the Roth IRA assets.
I normally believe in investing in only index funds for them. However, they always have some money left over. With VTI trading at $222, I buy a couple of shares with $600 and have over $150 leftover. That’s when I look at foreign ETFs such as VEU and VWO.
The Future of My Kids’ Roth IRA
In the next few years, I’m hoping they can participate in some of my blogging work. I need to think a little more about how this would work. Of course, I’d pay them for their time and insight, which would be taxable income.
After that maybe they can do babysitting or lifeguard work. I noticed that McDonald’s is hiring 14-year-olds now. There will be more opportunities for them to earn money as they get older. While all this is nice, their core “job” now is to get good grades in school.
Kid Roth IRAs FAQ
I thought I’d add an FAQ because I know that a lot of people have questions about Kid Roth IRAs. Some of these can get difficult, so I urge you to contact your tax specialist. I’m not a tax specialist and I didn’t even stay at a Holiday Inn last night.
Can I open a Roth IRA for my child?
Yes, as long as the kid has earned income. Some popular self-employment gigs for young people are mowing lawns, babysitting, and dog-walking.
How much can a child put in a Roth IRA? Are there IRA contribution limits?
A child can put the same amount into a Roth IRA as an adult. Right now, in 2022, it is $6,000. There are no minimums to what a kid can put in a Roth IRA.
Can a parent contribute to a child’s IRA?
Technically, yes. I am my kids’ parent. With our dog sitting business, I pay them income for the work that they do. I’m acting as a business owner. As a parent, I put some of that money into their Roth IRA.
Do I get a tax deduction for contributing to a Roth IRA?
Unfortunately, you do not get a tax deduction, but don’t let that stop you. If you’ve learned nothing else in this article, you should realize the Roth IRA is an incredibly good deal.
Can my child use a Roth IRA for college?
Yes, there is no early withdrawal penalty for qualified education expenses such as college tuition. However, most financial experts agree that it’s better to let the Roth IRA to compound interest for retirement and save in a 529 Plan for college. 529 Plans are more flexible and don’t have the earned income requirement.
Can my kids cash out the Roth IRA at age 18?
Yes, when they become adults they’ll be able to take control of the Roth IRA. It’s important to teach your kids about money, so they understand that the penalties for withdrawing the money are severe.
I have a question that’s not listed here. How can I ask it?
When I was growing up, I didn’t know anything about the family finances. It was simply my job to do well in school and my best everywhere else. My father died when I was 13 and my mother invested the insurance money. I started to learn a little more about the family finances, but I still didn’t know much. Even today, I couldn’t tell you when my parents paid off the mortgage on the house.
I didn’t need to know the family finances, but I feel like I would have been more prepared if I had that information. I might not have taken for granted all the things that seemingly magically happened. In college, I might have understood the value of a dollar a little better.
I think it’s a good idea for kids to know some basics about the family money. They certainly don’t need to know the details.
I was trying to think of a way to show the kids roughly how we spend our money. My kids are 8 and 9 and they have a fairly good handle on place value. However, whenever possible, I feel like younger kids work better with smaller numbers.
That’s when I came up with an idea. What if I took our rough finances and deleted three zeros? Yes, I’m dividing everything by one thousand.
Here’s an example of what a conversation of what our family’s numbers might look like:
“Mom and I make about $200 a year. We actually make more than this and things cost more than this, but this is an example of where we spend money.
We spend about $40 in taxes. Taxes pay for libraries, roads, police, firefighters, and schools – many things that we share as a community. Many adults don’t like paying taxes, but everyone I know enjoys having these things.
We spend $40 to buy and maintain this house. We’ve been paying money to buy this house for ten years now. We have five years left. Then we won’t have to may so much.
We spend $25 to send both of you to the best school around. It’s so good it costs most people $50 to send two kids and they happily pay it. We get a discount because mom is in the military. Everyone has the choice to pay $0 for the public school – it is paid for by the taxes above. Those public schools are good here too. Some of your good friends go to public schools and they are great kids. It’s always important to try your best to do well at school, but it feels more important to us because we pay so much money.
We spend another $13 on cars and trains. Much of that was for when mom was in the office. Remember she’d spend the night in Boston so that she didn’t have to drive so much. Those hotels add up, but it gives her hours more of free time. With COVID, she’s been at home a lot more, so we don’t have to pay this much. We also own our cars just like we plan to own our house in five years. Most people make payments every month to buy their cars. There’s a lot more to car costs than the cars themselves. We have to pay for gas and to maintain them in case they break down. We also have to pay for insurance in case we, or someone else, get in an accident. Insurance is something we can talk about later.
We spend $14 on food. Half of that is food that we eat at home. The other half is food that we eat at restaurants. We don’t eat out at restaurants very often, but it costs a lot more. We get you those cooking classes so that maybe someday you can make restaurant-quality food from your kitchen at home. That would save a lot of money.
We spend another $5 on utilities. These are things like heat, electricity, water, internet, and phones. I’ve done a few things to save money on these things. The solar panels saved a lot of money. The new heater in the basement works a lot better than the ones they made 25 years ago.
We spend another $5 on other random stuff that we buy. Things like shampoo, toothpaste, shirts, pants, and shoes.
When you add up all these costs of things we get to $137. That leaves us with $63 left.
We spend money on a lot of other fun things. We have that zoo membership. We are going to do those bumper boats on ice. I don’t add up how much these things cost. They aren’t free, but they are fun. We spend another $10 on vacations. We spend another $5 on summer camps and another $3 on activities like karate and snow sports.
That’s $155 of the $200 spent, so we have about $45 left. We still have some other expenses here and there and the rest we save.
We’re making this simple for you and some of these numbers are estimates, but it gives you an idea of where our money goes and the decisions we make when spending it.
I haven’t had this conversation with them yet. Maybe they won’t care. Maybe they’ll find some of the stuff interesting. In any case, I feel it’s good to be prepared to cover that conversation if it comes up.
The only downside to this that I can see is if my kids think they can give me $3 and pay for a year of karate and snow sports. I don’t think it will too bad though. They have had some school exercises where one icon is equal to a hundred units, so five icons are equal to five hundred units. This is a similar exercise except that one dollar is equal to one thousand dollars.
I am passionate about several things, but two of them are teaching kids and money. Teaching kids comes with the territory of being a stay-at-home dad. I couldn’t have gotten through 15 years of money blogging if I found financial literacy a chore.
There are so many ways to teach kids about money… perhaps too many. I started outlining this article and found more and more ways to teach valuable money lessons. It’s easy to go overboard, remember that young children need to just be children. Money management should be near the bottom of their priority list. That’s why many of the suggestions below focus on things that kids find fun.
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Set a Good Example
Whether you like it or not, your kids are watching you all the time. They see a lot of the everyday ways that you use money. I know my frugal and investing habits came from my mother. As a young child, I remember rare triple coupon shopping at the grocery store. As a teen, I would also read the copy of Kiplinger’s Personal Finance magazine that came to the house. That was a good way to learn about financial topics such as corporate earnings and interest rates.
There are two main ways to teach kids about money with books, give them one or read one yourself. I recommend doing both.
The best book to give a kid to teach them about money was written in 1989. It’s If You Made a Million. It’s written for kids and introduces them to coins, saving, spending, investing, compound interest, mortgages, and even financial independence. It does it with excellent illustrations. I wrote a review of If You Made a Million here.
If you are looking for a second book, I helped fund one on Kickstarter. I got my copy recently and it is very good. It is M is for Money by Rob Phelan. You can pre-order it now.
This is mostly for very young kids, such as kindergartners. It covers the basics of how to save, being mindful about your spending, and giving. Anisa Kurji and her two sons take you through a money journey in about 10 minutes (or less). It’s perfect for the ride to school. There are only about 10 episodes, but that might be enough to mix in to change the routine every couple of weeks.
This podcast tackles interesting questions like why we need money and how it came about. Most of the episodes tackle one question. Each episode is about 22 minutes long, so you could plan for this on long car rides. This is a good speed for my 9-year-old.
It’s sponsored by Greenlight, which is a debit card for kids. I haven’t heard too much about it, so if you have experience with that, let me know in the comments below.
I know, kids watch too much television these days. It’s good to have limits. However, if they are going to watch television anyway, you can use it to advance their financial education. There are two shows that I think you should focus on.
That link goes to a list of about a half-dozen episodes that focus on personal finance. There are more than 325 episodes of Teen Titans Go! so it’s usually not about personal finance. However, there’s an episode about building wealth with rental properties. That covers the importance of good credit history and credit score. Another episode teaches the value of money with a weird analogy of bees being the currency.
Did you know that Warren Buffett’s entrepreneurial lessons are available as a cartoon for kids? Yep. You can watch over twenty episodes of his group of young teens learn money lessons. It’s free to stream, with no subscription service to buy. Usually, I mix this in as a treat on days that I’ve had to homeschool as a break.
Every reader has to be familiar with Monopoly, so I won’t waste words covering it. You are also probably familiar with the game of Life. It wasn’t until playing that with my kids recently that I realized it can teach the importance of having a high-earning career at an early age. Perhaps the best of the mainstream money games is Pay Day.
The best board game to teach your kids about money is The Allowance Game. You earn money for doing things like mowing the lawn, but you can lose money if you break a window. Like all the other board games you use play money which is good for learning math concepts like addition and subtraction. This one adds coins to the mix which is great for learning decimals.
When COVID-19 hit, parents and kids turned to online learning. It wasn’t as good as being in the classroom, but many kids now have improved computer skills. That makes online courses for teaching kids about money a perfect fit.
I reviewed MoneyTime at the link above. It’s designed for kids ages 10 to 14, but my oldest battled through it when he was 8 and it went okay. He’s 9 now and his math skills have improved a lot in the last year. Unless you’re an evil parent writing about kid money, I would stick with those recommended ages. If I were to build a personal finance curriculum for kids MoneyTime would be a core component.
Choose FI Foundation
The Choose FI Foundation has another money course for kids designed for kids in the 3rd to 5th grade. I haven’t gotten the opportunity to review this yet, but I have a 3rd grader now, so hopefully, we get a chance over one of the school vacations this year.
Both of these courses cover important topics like the danger of credit cards and bad debt.
Video games can teach kids about money
One of my earliest memories of learning about money comes from the classic video game Lemonade Stand. There are ad-supported free versions online and versions in your mobile app store of choice. It’s a great way to learn about supply and demand, but it will probably get old after a few hours.
If you are looking for a 2021 version of Lemonade Stand, I suggest Pizza Company by Osmo. Osmo makes video games come alive in the real world. You set the tablet in a stand and a mirror redirects the camera in front of the tablet. Kids build things in front of the tablet and the Osmo game interprets it on the screen. It sounds complicated but it’s so easy a 4-year-old can get it. The Pizza Company game is better for kids age 7 or 8 though. If you are curious about the Osmo learning system, I wrote a review here
When I was in high school my graphic calculator had a game called Dope Wars (it also goes by Drug Wars). Due to the content (i.e. illegal drug trafficking), it’s best for older kids. Essentially the game taught you how to buy low and sell high. Wired has a history of the game which is 40 years old this year. You can get a version on the Google Play store here.
Research shows that kids develop their money behavior from a young age. Unfortunately, financial literacy is not taught in many schools. That leaves it up to parents to fill in the gap. With the above resources, you can mix and match the education necessary to build a foundation for a great financial future.
Today’s article is something a little different – something light to send you into the weekend. Yes, it’s another example of teaching your kids about money with television. What if we could take a kids’ song and make it into a money lesson? I didn’t set out to make this happen. However, spending a lot of time with kids and thinking about personal finance often leads to odd combinations.
Or to put it another way, “Something weird might just be something familiar viewed from a different angle.”
My kids love Adventure Time and it’s good for adults to watch as well. Somewhere along the line, I couldn’t follow the story (it’s very weird). However, I enjoyed the songs, particularly the ones from Marceline (Olivia Olson), so I got the soundtrack for the kids. That’s when one song caught my attention in the car. I would later find out that it made the an LA Times list of top songs that make you cry.
Watch this short 90-second “Everything Stays” from the Cartoon Network show Adventure Time:
In case you aren’t able to watch here are some of the lyrics: (It’s much more meaningful in the full context with the music.)
“Everything stays right where you left it Everything stays But it still changes Ever so slightly, daily and nightly In little ways, when everything stays”
Isn’t that a tremendous description of buy-and-hold investing? Your shares stay, but there are slight daily changes to the value of the shares.
“Go down to the ocean The crystal tide is raising waters’ gotten higher as the shore washes out Keep your eyes wide open, even when the sun is blazin’ The moon controls the tide, it can cause you to drown”
This quote reminds me of watching the warning signs when you own a stock. The last line about the moon controlling the tide is a reminder that the fate of a stock is often out of your hands once you’ve made the decision to buy.
Index funds don’t require you to keep your eyes open. The moon rarely can cause few diversified portfolios to drown.
What did you think? Was this something too weird or familiar when looked at from a different angle? Let me know in the comments.
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I am not a financial adviser. Kid Wealth content is for educational purposes only and the information should not be construed as professional financial advice.