Financial Friday #59: Making Money-Smart Kids
| Making Money-Smart Kids Enriched Academy founders Kevin Cochran and Jay Seabrook have always been passionate about teaching children and young adults the basics of personal finance. If you don’t believe us, check out Jay and Kevin visiting an elementary school way back in 2016. Their passion has never waned, and we now work with school boards and colleges across the country. Over the years, we have continuously refined our school programs and compiled a long list of dos and don’ts. Our experience shows the don'ts seem to resonate more with parents, so we asked Kevin and Jay to come up with their all-time best five. 1. Don’t call it an allowance A weekly allowance starting around age seven is a good idea but be careful –it’s not something that’s received, it’s earned - and children need to know the difference. A checklist of weekly tasks and some "pay" for doing each one is a great way to instill this idea. Reinforce the concept by designating a regular "payday" each week. 2. Don’t assume it’s too difficult Should you buy stock for a 10-year-old… absolutely! There are plenty of kids whose parents took the time and effort to explain shareholding and how it works. Kids are very familiar with many publicly traded companies like Disney, Roblox, Mattel and McDonalds. Holding a few shares may not return enough to put them through college, but it will teach them the basics of investing, risk and return for managing their finances in the future. 3. Don’t stop them from buying junk Rather than prohibiting younger kids from buying something that doesn’t meet your threshold for play value or quality – let them buy it once in a while and learn a lesson about value (see #5). A mood ring is usually interesting for about a day-and-a-half, and $5 won’t break the bank. If someone learns to better evaluate their purchases in the future 4. Don’t give an advance on their allowance The number one financial problem from young adults to retirees is spending money they don’t have – usually with a high-interest credit card. The need for instant gratification is a never-ending struggle, but building up resistance while still young will help keep it in check during later life. For big-ticket items, set up a savings goal and create a tracking chart together with your kids to help visualize 5. Don’t talk about cost, talk about value and need "How much better is an iPhone 12 than an iPhone 10… well, 2 of course!" If your tween wants that latest and greatest must-have item, challenge them to explain the value beyond being new, trendy or fashionable. A 30-speed MTB may impress his friends, but does your 12-year-old need thirty gears to get around the neighbourhood? There is a reason lots of millionaires (and billionaires like Warren Buffett) drive plain cars – it’s all they really need.
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