Teaching Your Kids Good Money Habits – Podcast

In today’s episode Nicholas Olesen, CFP®, CPWA® shares what he has found to be some of the best ways to teach your kids, no matter their age, good money habits. 

“I wish I had talked to my kids more about money and how to best use and save it.”  Through a common but effective framework, the three bucket approach to money: Spend; Save; and Give, Nicholas covers how to teach each. He uses real life stories and examples to help you raise moneywise adults.

You can find a transcript of today’s show below.

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Transcript from today’s show:

Hi, thanks for tuning into A Wealth of Advice. My name is Nicholas Olesen, Director of Private Wealth at Kathmere Capital.
“I wish I had talked to my kids more about money and how best to use it and save it.” Uh, that’s a comment that I got the other day, and it just reminded me of kind of all the stories I’ve heard over the years as clients explained kind of one of their regrets or wishes is that they had talked more about raising great kids who have good money habits.
And I think last year we did an episode on raising happy and healthy kids. So go back and listen to that. If you want to talk on the psychological side, that that was a great one, um, from a psychologist.
But today I want to touch on kind of an area that I have, quote, unquote, expertise in. You know, raising kids that are good with money and have good money habits is one of the things my wife and I constantly talk about and a goal that we have. Now, this does come second to raising them, to love God, be kind, understanding, considerate, and respectful people who care about others and have integrity. Now I know that’s a big list, but these are really daily topics and the subject of many conversations that we have with our kids and one of them is money and it’s a constant one. And so I want to share my point of view on money.
Unfortunately, parenting overall, it does not come with a handbook. And so I’m not here to try and give you a handbook. I’m not here to try and give you kind of the one way, because there frankly is not one way that works. Depending on your personal relationship with money and what joy or stress it brings to your life, you’re going to teach your kids differently. And this is whether you realize it or not. Look, they see everything, they hear everything. They are legit sponges. And I’m not just talking about the four year old who sits there listening to everything, the teenagers, they notice what we do. They notice our habits, they pay attention to it.
So they start to form ideas and opinions about money just from watching how we treat it and how we talk about it. I say that word treat it intentionally, um, because it really is. It’s, it’s the way that we treat money, the way we act about money has a drastic impact on how our kids view it.
And I’m using the term kids very loosely, there’s not an age dependent here. This can be your, you know, 30 year old kids, quote unquote, cause they’re your kids, or this can be the four year old or the three-year-old that you have. One thing with all of this is this what I talk about today? It has to come from a point of you as parents being open and honest with your kids.
Kids are incredibly curious, especially the young ones, but teenagers and adult kids are curious about an opinion. If they respect your opinion, they respect you. They’re going to. So when they ask a question or they want to know more about money or frankly, any subject as hard as it is. And that, especially when it’s the 9000th question that hour, when they ask a question, ask them back in a really kind patient and trying to understand voice.
Why do you ask or what do you think. Now this will help. You know, what angle to take that question. It’ll help you understand what they actually are trying to learn in that moment. So it’s incredibly helpful to them and to us to put frameworks around these topics and a big part of life is our relationship, our interactions with money.
So instead of a handbook or some steps, I just want to share a few great ways that I’ve seen others raise what I’ll call financially wise kids and adults, I’m going to frame this around a very common money teaching tool, which is spend, save, and give. And I’m going to use stories kind of around each, with how I’ve seen others, teach their kids.
Many have actually gone out and bought three jars or piggy banks and labeled them, especially for young kids. So they can truly see each category. And when they receive money, they can put it into each category. This is a very simple, but really, really effective concept for us to talk to kids of any age and adult children, kind of about the three options they have with their money or the three uses of their money.
And it’s also helpful because you can stay as high level or as detailed as, as appropriate, and as we’ll help them crystallize kind of where they are in thinking about. So let’s first start with spend, uh, it sounds obvious, but I would say it’s actually probably the most complex category teaching kids and especially young teenagers and young adults about what responsible spending is, can be one of the most difficult things to teach it hits at a core question that all of us are constantly asking ourselves, what does it want versus.
Now teaching them to ask this same question with just about every purchase will greatly change their attitude towards spending. So a few tricks along the way that I’ve, I’ve learned from others. And I think has really helped their kids and, and grown adults to have a good relationship with money and spending.
The first is one that you can start really young and, and it can actually be used later in life too, but have them put a chart together. You know, line right down the middle of page, one section of wants one section of needs and then talk through broad categories of things and have them decide which section it goes into.
I’d also recommend making your own list and then walking through where you have different opinions than them and why it really creates a great conversation. Another great framing for this kind of wants versus needs concept is, is thinking about relationship to brands. Now, this is incredibly important as kids continue to get older.
To talk about things as a function and what is the use of it? Now, when I say that, you know, think about the $30 pairs of shoes that you can go buy, or the $50 jacket versus the hundred and 50 pair or $300 pair of shoes or $500 jacket talking about the function of it. And the need for a new jacket is very different from the want of a specific brand or style.
I only have kids that are five, seven and nine. So for me in today’s world, especially social media, our kids aren’t on it. They don’t have phones, they don’t have iPads or technology they can use. So they don’t see it as much as those that I experienced and talk to and interact with older kids. This is an incredibly, incredibly difficult concept and, and topic to cover with your kids.
Social media today, I don’t mean to rip on it but you can see everyone around the world on what they have. You can see when they go on the great vacations, you can see the new stuff they bought. You’re not just saying what your neighbor next door is. It’s not keeping up with the Joneses next door. It’s keeping up with Joe who lives across the country and, you know, has an insane amount of stuff and throws it all online and talks about it.
So teaching these material concepts of wants versus needs and the desire to kind of impress or look, the part is becoming harder and harder for us as parents to teach and harder and harder for us as parents and as kids to feel content or happy with what you have. So I would try and teach that skill, try and teach that topic.
I think it’s just a really key part of a, of teaching kind of this want versus need is the function. You know, if you, if you need a new pair of shoes, that’s different than wanting a new pair of Jordans. When you look at it, part of teaching this, this want versus need. I look at it from teaching delayed gratification when they ask for something or they really, really, really, really want it.
As I hear all the time for my own kids, tell them that they need to talk about it again in two days, say, well, we’ll address this. We’ll talk about this, but I want you to think about it for two days. And if you really want it, then we can talk about. That’s simple delay tactic, especially in the immediate delivery world that we live in today is going to do wonders for you.
When you’re walking down the aisle and kids see something at the checkout thing, and they say, I really, really want this, or, oh, I really want to spend my allowance on this. Okay. Let’s table that. We’ll talk about it in two days. Now you will need to talk about needs versus once again, don’t think that this two day window is some miracle tool.
It’s, it’s not, but use this as kind of the first step in teaching them about delayed gratification. And speaking about delayed gratification and kind of wants versus needs. I had a client share with me years ago about their child who had really done incredibly well in soccer and was asked to go overseas with their club team for an entire week long tournament.
Now, this was obviously a very expensive tournament and was far off in the future. And the parents had a really long conversation about the costs. Now that the teenager was able to understand and kind of grasp how much money this. And so they talked through it, they talked about different ways of paying for it and what that meant and what they would have to give up or do different because of this.
So they came to an agreement that I thought was, was a really great one. And they said that from now until the tournament, 50% of everything that the child made, whether that was allowance or a part-time job, or given as a gift, you know, a cash gift for birthdays or Christmas or, or what have you from now until that tournament was going to get.
Now this gave that teenager a real sense of just how much they had to sacrifice to go on this trip. And then once they were there, the parents shared with me just how much the child seemed to appreciate the trip. And they always are talking about just how incredible this trip was and how much do you remember how much I had to give up to do it?
And so they got this sense. I don’t know if it would, you know, if they would have appreciated it as much, if they hadn’t had to spend their own money on it. But I can tell you that it is a lasting tool or, or example that this teenager has learned of. Okay. If I save and put away, I can do bigger. Now in talking about delayed gratification, we’re also talking about saving, you know, we’re just talking about it for a longer period of time.
Typically, if you have really young kids, delayed gratification is basically savings for them. It’s really hard for them to understand a concept, you know, of months or years of saving for something. So for our young kids, when we talk about savings, we do have savings and piggy banks and savings accounts, and they are for very long periods of time.
Uh, but I’ll be honest with you. I don’t think that they really understand it when it’s been longer than a few weeks. I think that it’s oh, that’s that piggy bank. I don’t really think about it. I don’t, I don’t know what it’s there for. So when they are young saving and having them save for things for days or weeks, or then showing how much they can get, if they save multiple amounts over time, it’s going to allow them to understand that money can be used, not for immediate, but for something bigger by delay.
The right now wants or I’m sorry. Yeah, the right now wants not the needs side of it. And this is going to help them continue to learn that kind of savings over time. You can’t afford something today because you don’t have enough for it, but if you save and wait, you can then afford something later. Now, as your child gets older, you can extend this time.
And around 10 years old is kind of what I’ve seen. And this is really a depending on, on kind of their love or hate of math. You can start to talk about investing and growing money. Uh, I was talking about a parent of a teenager just the other week, and they said that it’s been fun actually, to talk about investing with.
They share that they started talking about them when they were younger, just about owning parts of companies that they liked. That was, that was the broadest sense and the start of the conversation. And they talked about how they wanted to instill this desire to own things, companies that they like or that they think are going to get bigger.
That really simple explanation when their child was nine started conversations and questions from the. To get to understand this and asking questions about, you know, what do you really mean by that? What do you mean you own a company? You know, how do you go about doing that? Like interesting questions in the brain of a nine year old, trying to kind of conceptualize this and put a playbook, if you will, together in their mind of how this.
Now, these parents were honest and open. They actually shared with their child, literally statements and walked through things online about how they decided to buy things. And they actually took on three companies as kind of the ones that they talked most about with their child. And three of them make a lot of sense to me as a, as a parent of a nine-year-old, it was Disney, Nike and Starbucks.
They’re all places that the child loved. And they said that they explained that each time the company earned money and sold more things and became a bigger. Other people wanted to buy a small part of it like they had. And so their savings, their hundred dollars became worth more. To me, it’s a really simple way of starting this really basic concept and allowing the child’s curiosity to lead that conversation, they did not get into, Hey, you know, we bought the stocks versus bonds, or we use savings accounts or IRAs or, or what have you.
They didn’t talk about percentage returns. In doing so they taught their child that saving money and investing is an important start and that it can help your money become worth more. Now, the fun part of talking to this parent as their child has grown, this was, uh, they were telling me about when they were nine, six years ago.
Now, As a 15 year old and they can have really deeper conversations about different companies to invest in and how to think about it. And the child feels very comfortable asking her parents how their investments are doing, uh, the best part of starting this conversation early. It’s led her to have this desire to make money, earn money, invest money, and, and kind of the long-term side of her.
You know, she right now, 15 year old has a part-time job. You know, she started saving her money. She’s investing it. They actually upon a recommendation for me, uh, when they first started the part-time. They actually open up a Roth IRA and they told her we are going to, and they have the means to do this.
We’re going to match every dollar you put in the Roth IRA. We will match you dollar for dollar into the Roth on your behalf, and they can do it. You know, there’s a bunch of limits and stuff. You can do it up to it’s, um, up to what they earn in a year or a $6,000, whichever one is less. But to me, I didn’t want them to get hung up in that.
And thankfully they didn’t, uh, it was, this was a way for them to help teach their child. And for their child to learn how money grows, they could talk about taxes and why the Roth IRA is interesting. They can talk about, long-term thinking of kind of how long this money can grow. And the child now 15 can use concepts of compounding and how quickly money will double over time for them.
That is all kind of the, the spend into save category. And I want to wrap up talking about, about giving and not because to me it’s kind of the last one or, or anything, but it’s just such a personal choice on how you want to talk about this with your child. So I’m going to give you my opinion on this, my take on it, but like a ton of money decisions and, and concepts.
Know that this is just my opinion. There’s no right or wrong way of this. There’s no kind of judgment. If you will, of anyone’s opinions on. But I’ll tell you, I’m gonna start with a story. So I was talking to my son about this when he was three. So he’s five now. Um, he’ll tell you he’s six, but that’s not true.
We still got, uh, six months ago on that one, but five years old. Now, when he was three, he was sharing how he had just been given $5 for his birthday. Uh, it was from a relative and he was probably gonna, you know, in my mind, uh, he was going to go spend it. So. No, you just got this. Um, there’s, there’s a couple things you can do with this.
Like $5 is a lot of money. You can go buy something at target. He loves shopping there. You can put it into a savings account and spend it on something later. Or you can give it to someone who doesn’t have something that they actually need. And that was really the end of our conversation. That was all the detail we went into.
I didn’t really talk about what percentage or, Hey, let’s divide that up and you know, you can put this dollar here and this, we didn’t talk about that. We didn’t have three piggy banks to go into. We didn’t do any of that. I just said, think about it. Let me know when you want to talk about it more. A few days later, he came to me and he said he wanted to give the money to someone who doesn’t have water.
And I was like, wow. Okay. Wow. What that then led to and then I went back to the question that I, I started off in here. I said, you know, why, why do you want to do that? Why, like the why question that we get all the time I started asking him and what he said was, you know, mom had just read me a book. It’s called the water princess.
It’s this, this young girl in Africa. She walks all day to get a bucket of water, to bring to her family and they boil it. And that’s how they get clean water. They daddy, they can’t just turn on a tap and drink water. So like, I, I want to give them money so they can somehow figure that out. And I like the pride in me that just.
Amazing to see the conversation from days ago, and then having something happen in his life where he then remembered it and said, oh, I can give this. I can, I can do this. And so we found, we looked online. We now are a monthly supporter of an organization that, that brings clean water. It’s called charity water.
It’s a fantastic organization and they are trying to create Wells for families. My point here is not to brag or do anything like that. I have 9 million stories of the exact opposite behavior, where we tried to get them to give or talk about those in need. And they said, but I want this, uh, this is he and his sisters.
I could have a thousand of them, but my point here is that starting with basics understandings of what money can be used for is really what the whole goal of starting out and teaching your kids about it. Depending on your ages will depend on what stories reflect or make sense for you now, as they get older, uh, I’ve shared, and, and I recommend to clients and individuals like once they’re 10 or so talk about what type of impact that giving can be. Talk about different organizations. Talk about what your view or, or range of view, kind of a percentage of savings or income, or however you want to view it, it should go towards giving.
Another a family shared with me that each year, and we’ve actually started doing this as a family, but I got this from another one so I don’t want to take credit for this. They started to sit down as a family and they, they put a bunch of coins on the table. I think it was pennies. And they said, “Hey, if we had $100” and they did it on a percentage, but “if we have a hundred dollars to give towards organizations, which ones are we going to do?” And each of the kids could write down a group or a cause that they wanted to, and then they would shuffle the pennies around and figure out what percentage of each.
This allowed them to talk about causes that they care about, have deeper conversations. Now we’ve done this with just kids that are five, seven, and nine, and they come up with these great ideas and they get excited to know what the groups are doing for both our local community that we support and then the world organizations, like charity water. We watch videos, we read letters that have these groups that they put together so that our kids know the impact that they’re having and how that $5 that my son decided to give what that actually leads to and what it can do.
It’s also led to really, deeper conversations way beyond money. These conversations range any from, from equality to living wages, to different levels of wealth, to what like rich means on a, on a money side versus a life side.
It’s also led our kids to be more mindful of how they talk about money and gifts and material things around friends and classmates. My daughter shared with me that her frustration and some of her kids who are kids in her class about the same age, how they, all they talk about is the stuff, the iPhones, the iPads, that kind of stuff.
Now they constantly also say, “I need this dad. I need that. Or that’s not fair”. But they’re understanding they’re getting the concepts and it allows us to have these conversations.
So know that all of this in I’m right alongside all of you, please don’t take any of my thoughts or kind of the thoughts throughout here, or stories I’ve shared as me saying, “Hey, this person has figured out or I figured out or anything.” With these I’m just trying to give you some tangible ways of teaching your kids about money. I really appreciate your time today. I know how valuable time is. I hope you found this informative and beneficial. Please share this with anyone that you think could benefit and reach out with any questions you have for future episodes.
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