How do we teach our kids about money? (Part 1)

As a financial planner, I’ve been approached by clients (and friends and family) who want advice about talking to their kids about money. But answering the question, “How do we teach our kids about money?” is not as simple as, “Follow these 3 steps, and your kids will be great with money and learn everything they need to know about it.”

I used to find myself flustered trying to answer this question with any level of brevity, and perhaps I still am. After all, this is the beginning of a series of posts on this topic. We’ve all heard the investment guy out there just telling folks to open their kid an investment account, or the random uncle suggesting that you get them into savings bonds, or just some schmuck on the internet convinced that he’s touting silver bullet advice for financial freedom in adulthood. But really, if any of this advice is sound (and let’s not start with the assumption that it is), it’s at best, incomplete. It’s a disjointed, haphazard approach to kids learning about money which might give them a few useful tools, but threatens to leave them without a base of understanding and values to attach those tools to.

Just like teaching anything, teaching kids about money involves a lot of forethought and attention, not just about how to teach them, but also about what you want them to learn.

And the reality is that whether you have any interest in wanting to teach your kids about money or not, if you have kids, you ARE teaching them something about money, not only each and every time they interact with money, but also each and every time you interact with money or talk about money, and they watch and listen.

And just because the question isn’t simple to answer, doesn’t mean we’re not going to try. So, over the next few months we’ll be bringing you a series of posts designed to help those searching for some guidance on how to talk to and teach their kids about money, and we’ll start with that most important of questions:

What do you want them to learn?

One of the basic principles of good instructional design is that you design “what” and “how” you teach with the end in mind. A teacher who teaches a lesson daily without a coherent idea of what end goal they are trying to achieve is unlikely to have much impact imparting concepts that are substantial or lasting on students.

So, when we design lessons as educators, we start at the end and take a 10,000-foot view of the situation.

  1. If our students need to be able to learn these key mathematical concepts by the time they graduate from high school, what do they need to learn by the end of a year in my class?
  2. Then, what are the units I need to teach them these core concepts?
  3. Within each unit, what are the individual lessons that will develop that understanding, and how do we connect these back to the bigger picture?

As you design and teach each lesson, it’s not just about the lesson, it’s always about tying it back to the learning objectives of the unit, the major learning goals for the year, and ideally, if you’re a good teacher, to the things they’ve learned in previous grades and the concepts they will develop in the next ones. 

So, naturally, the first question I ask parents who ask questions like, “how do we teach our kids about money?” is, “what do you want your kids to learn about money?” And for many, this can be a harder question to answer than it at first seems. But if you don’t answer it, you risk a lifetime of money lessons that may be, at best, disconnected and hard to hold on to, and at worst, contradictory.

For anyone who is trying to answer the question “what do we want our kids to learn about money?” the exercises below are a great place to start. Even if you think you have a good idea of what you want your kids to learn about money, you may want to do these exercises anyways, because sometimes they can yield unexpected results that may lead you to reframe your major objectives.

Start with what YOU know, believe, and feel about money.

Basic, sound money management is actually pretty simple, but our complex beliefs, feelings, and histories around it can make it feel extraordinarily complex. So, a good place to start when you’re thinking about what you want your kids to grow up learning about money is, what do you believe, feel, and know about money? How do you interact with your money? How did you learn this, and if you had it to do over again, what would you keep as part of your money story, and what would you change?

This list should include everything from ideas and values to behaviors; there is really no idea too big or too small, no thought too fleeting. You don’t even have to sort them into a ‘keep’ and ‘change’ list at first. Just a stream of consciousness exercise where you write down whatever comes to mind when you think about money is a good place to start. Then take a week or two to add to that list every time you catch yourself having a money-related thought.

Some examples of the types of things people write down are:

The point here is that there’s nothing wrong to add to this list. Nothing too big or too small. And I encourage you to take a week or two, observing yourself as you are making a purchase, going to work, getting paid, paying bills, etc., to get as complete of a list as you can. This is a critical place to start. It will help you identify which of these ideas you hope to pass on and which you hope to change in how your kids think about money, but it’s also important because, if you’re not intentionally teaching kids about money, it’s very likely that they’re just picking up on these ideas and feelings and using them to formulate ideas and feelings of their own, possibly perpetuating things that you don’t really want to see passed on to them.

Once you’ve gotten a good-sized list, start to sort it into things you would like to keep, and things you wish were different. This will give you a sense of some of the things you might want to raise your kids to think or feel about money, and some of the things you might not want to be inadvertently teaching them.

Imagine your kids living their best lives as adults.

Once you’ve started to develop a sense of what types of things you would like them to learn about money from exercise 1, take some time to envision them as your definition of a successful adult.

  • What is their financial status?
  • What is their relationship to money?
  • What is their relationship to you and money?

It’s not uncommon for things that come up in this exercise to contradict some of the ideas you put forth in the first exercise. And it’s important to note and resolve these as you work through them. Otherwise, you risk sending a lot of mixed messages about money to your kids.

For example, I’ve often heard parents say that they don’t want their children to grow up thinking about or stressed about money, or to choose a college because of what it costs or a job because of what it pays. But, when asked to imagine an ideal image of their kid as an adult, it involves the child’s financial independence, a reasonable level of comfort, and an adult not overly burdened with debt or bills they cannot pay. And for children that are taught not to think about money or concern themselves with how much things cost or how much they will earn, it may be a lot harder for them to achieve the financial independence or comfort you hope they’ll find, because most people who feel financially confident, independent, and comfortable as adults didn’t get there on accident. Something, intentional or not, told them that money was important to be mindful of and pay attention to, and so they did.

Recognizing these potential contradictions and working through the nuances of money messaging is important, because one of the things that makes money so hard to navigate for many of us is what we WANT to believe about it (for example, that it can’t buy happiness), might be directly at odds with the reality of money and how it works in our society (which is that an excess of it may not buy more happiness, but having too little of it can certainly be a major contributor to unhappiness.) Grounding your lessons in a real-world image of how you hope to see your kids navigating their adulthood is an important part of this process. It is, in fact, the end that you have in mind when you’re asking the question, “how do we teach our kids about money?”

Distill down to between one and three big money values or concepts.

Money is a BIG topic. And there are a million lessons that you may want to teach your kids about it. But without some clear connecting threads, the conversations and the lessons will probably just go in one ear and out the other.

Just because you’re teaching your kids a million things about money, if you don’t help them develop a deep underlying connection to a few central ideas, you risk leaving them feeling similarly adrift in their understanding of how money works, and how to navigate it in life. And that leaves them with no way for their curiosity to continue to develop, and certainly no way for them to continue learning on their own after they leave a structured environment.

Money is everywhere, and you won’t have a chance to plan each lesson or opportunity to talk about it with your kids. So, it’s important to have just a few, big, important ideas to connect those smaller lessons to, not just to help their learning be cohesive, but also because when your kids ask you a question on the fly…

  • Can I have $30 to go out with my friends?
  • Can I have a new toy?
  • How come we can’t go to Disneyland?

…these core values will be important to connect back to, to help frame up each conversation and each opportunity in a way that supports the big underlying ideas you hope your kids will learn. These core values will help you structure their lessons and help you make connections spontaneously as opportunities arise. And eventually, when you are no longer there to guide them, these core values will help them think through their own money decisions and begin to solve their own money problems.

It may not be possible for your kids to have a single financial North Star, but a few key ideas to navigate by are crucial.

  1. A great place to start is with the hope you have for your kids in part 2. Start with the end in mind, what are the key overarching values/beliefs that your adult children have about money? Try to distill it down to 1-3 core beliefs.
  2. Then, move back to part 1. Where do the smaller ideas, actions, and beliefs (that you hope to keep or change as you work with your kids) fit within the overarching value systems you are trying to build in your adult children? Are any of them contradictory or undermining and how can you resolve that?

Try to make these broad and values-based, rather than specific.

For example, if you hope your child will grow up to be a wealthy doctor, try to unpack that a little more. What are the aspects of a wealthy doctor’s life that you’re really hoping for your child to have? Ideally, you’re not using this exercise to create specific avatars of exactly who you want your kids to be when they grow up, but rather trying to get more at values and overarching beliefs about money that you want them to have.

An overarching belief might be:

Money is a tool that can be used to care for ourselves, our families, and our communities, and it’s our responsibility to engage with it intentionally and responsibly.

Then, underneath that big value might be a whole series of smaller conceptual ideas we hope to teach:

  • Just like with any tool, there are nuances in how we use it and what we’re trying to accomplish with it, but also some basic ideas we can always return to, like not using or spending more than we have, or not taking it unfairly from other people.
  • It’s advised to think about how much money we need or are willing to spend before making big and small decisions (because, after all, we wouldn’t start a construction project without first knowing what tools we need).
  • Our choices related to how we care for (or choose not to care for) our money impact not only ourselves but can also impact other people.
  • Just like with all tools, it’s important to learn how to use money safely, and eventually, skillfully.
  • We will make mistakes, and we should try to learn from them, but there are also big mistakes we might want to be extra careful about not making with money. (If we follow the tool analogy a bit farther on this one, the difference between a cut that requires you to buy more material and a cut that takes off a finger is an important distinction to make.)

And under each of these sub points, that’s where our lessons fit, each tying back to just this key, overarching idea.

Having the structure above will help you start noticing scenarios and times in your day with your kids that you can bring up a quick lesson that ties back to these bigger beliefs. It will help you answer their casual, daily money questions with more certainty.

The example above is not in any way designed to instruct your ideas about what you “should” want your kids to learn about money, but rather to give you a sense of how to distill what seems like a fragmented series of ideas you might have and things you hope your kids might learn, into a smaller number of central ideas that can guide how you form all of the opportunities you have to teach your kids.

Without these guiding principles that you decide on, there’s no real point in talking about the types of lessons we might use to teach our kids about money. So really take some time with this first exercise. For now, focus on the overall general money-persona you want to develop in your adult children.

And next time, we’ll throw these ideas out of the vacuum and talk about the fact that kids are not, in fact, blank vessels ready to all learn the exact same lesson from you, no matter how well you teach it.