10 Financial Lessons to Teach Your Kids

Speaker 1 – 00:00
Welcome to EWA’s FinLit podcast. EWA is a fee only RIA based out of Pittsburgh, Pennsylvania. We hope all listeners
of this podcast will beneft as we deep dive into complex fnancial topics that we will make simplifed for you. And
we hope that this really serves as a catalyst so that you can make the best fnancial planning decisions for your
family and also save time. All right, welcome everybody. Excited to be joined by Devin and Ben Ewa team. Today
we’re talking about 10 lessons that we plan on teaching our kids or future kids for Ben. Ben doesn’t have any kids
yet, but Devin and I do. So, yeah, excited.
Speaker 1 – 00:42
I think this is one of the most valuable things that if you’re, if you have kids and you’re in the fnancial planning
process with a fnancial advisor, being able to carry that through with your kids is going to be more important than
what wealth you leave behind is teaching them the skills, skill set of how to earn it, how to keep it, and how to make
decisions around it to support your life by design versus a lot of people. Money can be a power that’s used against
you or it can be something that you accumulate for the wrong reason. So these discussions, I think are one of the
most important things.
Speaker 2 – 01:12
So one thing I would add, we always talk about helping kids versus enabling kids. And I think the more lessons you
can teach them at the earliest age possible, the more you’re helping kids and the more you’re, like you said, getting
them to understand the value of money and hard work and all the things that we’ll be talking about. So this is a really
good balance between helping and enabling and something we talk with clients about all the time.
Speaker 1 – 01:34
It sometimes could be a taboo topic too because, I mean, my daughter’s six and a half and so, you know, done a lot
of things. She already has like a bank card that’s attached to a separate account. I set up that through Chase bank,
allows you to do this. And we’ll go grocery shopping and I’ll make her have a cart, this little cart, and she’ll like pick it
out and then like teach her the price of things and what she wants. Like, oh, you don’t have enough money for that.
So just starting that process. But what I found is she’ll start sharing that with everybody. And so, you know, I think it’s
a really important conversation but has to be done artfully as well.
Speaker 1 – 02:12
And so it’s something that I think if you can tell when you’re interacting with like new adults how they’ve been
brought up and how if they came from an enablement or, you know, if they had to grind it out by themselves. So.
Speaker 3 – 02:29
Well, for context, I’ve got a teenager a little bit older, which is eight years older than Rory, something like that. So I
have a little bit more time and just, you know, as they get older, they. They understand more things. I remember doing
the. You go to the store, like, what does this cost? What does that cost? But yeah, we’ll defnitely throw in some
things for when they’re a little bit older than elementary school.
Speaker 1 – 02:49
All right, so frst lesson, we’re gonna go through 10 lessons that we’d advise. Have these conversations with your
kids before they turn 18. So, Ben, you wanna start out number one?
Speaker 2 – 02:58
Yeah, frst one. And this is gonna kind of dovetail into a couple others. But the fact that money comes from work, you
know, you don’t just snap your fngers and money appears hard work, money earned is very valuable. So explain the
value of earning through chores, lemonade stands. Giving them an allowance based on certain tasks they complete
can help introduce the idea of. Of. Of work. And as they get older, I think, you know, as kids are, you know, in their
teen years and they’re actually, you know, working at jobs, then this can. Can kind of lead into a conversation about
funding a Roth ira, things with active income. But just getting the idea of making them understand that money does
come from work. It doesn’t just appear.
Speaker 1 – 03:42
No question. Couldn’t agree more. I like the lemonade stand. I sold dandelions when I was a kid for like a cent. One
cent per dandelion.
Speaker 3 – 03:50
Big margins in dandelions.
Speaker 1 – 03:51
Big margin. Yeah. Me and my brother, we. We sold out. I mean, some person felt sorry for us and just bought them
all, I think. But anyways, genius idea. All right, well, Devin, let’s go into number two.
Speaker 3 – 04:04
Number two, this is a big one. Spend less than you earn. So whatever money’s coming in, just try to keep the money
going out. Less than that. Sounds simple, but can be. Can be complex, especially for. For kids depending on the age.
Speaker 1 – 04:15
Yes. I think the. The concept. I’m. I’ve. I was brought up with this and I’m. I’m passing it down to Rory is like three
kind of three departments or three segments. So actually gave her three big piggy banks, but now we have it broken
out electronically. But, you know, one to save, one to spend, one to give. So the spend is, you know, when Target or
the grocery store, she has that cart. The saving is, you know, how A third. A third. A third right now. And then a, you
know, a third would be giving it away to charity.
Speaker 3 – 04:43
How is she with. With saving? It’s hard.
Speaker 1 – 04:47
I mean, she doesn’t have a joy. It just kind of like, here’s what’s happening. But yeah, no, having the conversations has
been really great. She’s like, why do I need to say, why can’t I buy the Barbie doll dream house? I’m like, well, you
know, then it dovetails right in that conversation.
Speaker 3 – 05:01
Yep. So.
Speaker 1 – 05:03
Okay. And then, so lesson number three is just the power of saving. So, importance of delayed gratifcation. How to
set savings goals and track progress. And then so there’s, I think, two, you know, two lessons learned. The simple
one would be like a big purchase allowing them to save for that, whether it’s like a bike or. I remember as a kid I had
to save up for. It was actually my brother saved up for a lawnmower and then started a lawn mowing business from
that, which is pretty cool. And then I use that to buy a laptop. So I thought that was pretty cool. But for. I think there’s
two, you know, two lessons. So it’s a big. If it’s a big purchase, let’s say of like a couple hundred dollars more, letting
them save up for that.
Speaker 1 – 05:42
Or the second lesson would be, depending on their age or their interest levels as quickly as possible, teaching about
compound interest and showing it. If you look at a Roth IRA, start at age 1 or 5, let’s say even 10, versus if you start
that at 25, I mean, it is massively different. I’ll do some math real quick. But I mean, it’s. So if they. You. The lesson
number one from Ben, which was money comes from work. If you know, teach that and then let’s just say they start
working at a young age, earning some income, and then if they’re even able to, you know, put $500 a month into Roth
and they do that age 10 and then let’s say till 60, that’s 50 years of compounding. So 600 months and then we earn
7% on that. That’s $2.7 million at age 60.
Speaker 1 – 06:31
And then at age 70, that’s fve and a half million dollars, $5.59 million. So versus, you know, let’s say we start that at
30. And 30 years later, you do the same thing. You have 600 grand. So almost nine times the amount of money
starting 20 years earlier. So I think sharing the importance of the compound interest, that wonder of the world, 8th
wonder of the world is super important. So. All right, just going around Ben, real quick.
Speaker 2 – 07:00
One more. One more note on that. I remember I really wanted the game Guitar Hero when I was a kid.
Speaker 1 – 07:05
Kind of dating yourself. That was a long time ago.
Speaker 2 – 07:07
Well, yeah, you know, I. I gotta. I’m with the. I’m with the old guys in this podcast room. I gotta. I gotta act like an old
guy here. But I asked my parents for it. They said no, but a. They gave me an idea of what it cost. And then with my
allowance and chores and kind of working up to it, I was able to save enough money to buy it. And I just. It’s so vivid
in my head. If my parents had said, yeah, sure, we’ll get it for you know, would I have learned that lesson? Would I
have, you know, fgured out how important it is to actually work for something and the power of saving? So it’s kind
of a random example, and no, I’m not. That didn’t translate to any. I have no guitar talent.
Speaker 1 – 07:44
But did you eventually get it?
Speaker 2 – 07:46
I did get it. Yeah.
Speaker 1 – 07:47
Okay.
Speaker 2 – 07:47
And I kind of got sick of it after, like, two weeks, but that’s.
Speaker 1 – 07:50
How it always works.
Speaker 2 – 07:50
Yeah. Kind of a less important footnote of that story, but yeah. So power saving, super important. Other lesson
number four, how banks work. Matt, you mentioned your daughter has an account for her name. You know, that’s
helpful for her to learn the value of a bank. Where is your money held? You know, it’s not. You know, adults don’t have
money sitting in a. In a piggy bank, you know, so it’s just good to know at a young age, difference between a
checking account, a savings account, you know, where that money sits and how you can access it, things like that.
Speaker 1 – 08:21
Yeah. Six years old was pretty aggressive. She put it in this little purse and lost it. Second day. So I had to, like, call
them and replace it. But it was a good lesson. You know, this is really important. You can’t lose it. And then I. We
have some recurring chores for her, and then she gets $6 a week. If she. So then we log into her iPad, she can see it
transfer, and if she doesn’t do the chores and she doesn’t get it.
Speaker 3 – 08:40
So this is all done on the app?
Speaker 1 – 08:42
Yeah.
Speaker 3 – 08:42
Interesting.
Speaker 2 – 08:43
Yeah.
Speaker 1 – 08:44
Yeah. So pretty cool.
Speaker 3 – 08:45
Check that out.
Speaker 1 – 08:46
Okay. So, Devin. Yeah. Just going around. What’s number fve?
Speaker 3 – 08:50
Lesson fve is credit. It’s a big one, especially for older kids and especially for kids that are looking into go to college
and potentially get out Student loans potentially. But this is the big credit and debt. Just understanding how it works,
right? You borrow money, you have to pay it back at some point. Maybe it’s along the way, but there’s going to be an
interest. Everything has a cost like we said, including money itself. So it’s not going to be free. And fguring out how
much is that going to cost at the end of the day? Well, at the end of the day fguring out how much that’s going to
cost in total. So you might borrow Whatever is 10,000, 100,000, a million dollars, what’s that actually going to, what
do you end up going to be paying after all is said and done?
Speaker 1 – 09:29
No question. And a quick tip or trick, you can add your kids as an authorized user with their Social Security number
to your credit card. Doesn’t mean they’re getting a credit card, but like I just did that for my daughter and so she’s six
and a half. So she’ll have 12 years entering college of so she gets credit for those on time payments and so she’ll
have a excellent credit score going. So it will enable her to get, you know, the best school loans or if you know, car
loan, whatever best deals with the best credit at any rate.
Speaker 3 – 09:57
Well, I remember back in college like they used to give out credit cards, remember with like a blanket or a towel. Like
I don’t think they can do that anymore. So it’s maybe not as, I don’t know, as important of a concept given that they’re
about to like enter school and then like kind of going to be like thrown to the wolves. But it’s still very important to
make sure that you had a good credit score, you understand how credit works and debt works and that you don’t put
yourself in a big hole.
Speaker 2 – 10:19
Yeah. I would follow this lesson under things you think you will learn in school but you probably won’t. So things like
using credit, how taxes work, how insurance works. I’m not saying 8 year olds need to know how taxes work, but 18
year olds should probably have an idea of how taxes work, health insurance, things like that, things that you’re not
really taught in school but expected to know as an adult. So the more lessons that you can teach your kids as they
get older about this, the more value that they’ll have moving forward.
Speaker 1 – 10:47
Absolutely. Well, lesson number six, I’d hit on a little bit with magic compounding interest. So you know, just teaching
investment early and just illustrating most kids have iPads now and try to limit the screen time but you know, just
getting them used to how a compound calculator can work and just having these conversations. I gave a high
school talk to a local high school here in the inner city and it was, you know, it was mind boggling to see how
interested the kids were. We talked about real life examples and how a little bit of investing and you put it in the right
account how that can, you know, really grow over time. And so I think earlier the better you can start having those
conversations. And also teach your kids while you do this, you know, money should be very private.
Speaker 1 – 11:28
I’m not going to disclose any of my, you know, personal information to my 6 year old. But just teaching the concept,
teaching the. And why are you saving a third of the money of chores that you make versus just, you know, spending it
all on the Barbie dolls? Super important.
Speaker 3 – 11:43
Well, compound interest is, it is a difcult concept to grasp for even for adults. Do you have any like go to examples
to teach?
Speaker 1 – 11:51
I haven’t yet. I haven’t gotten that. But I have, I’m going to for sure. I’m sending a show. I mean the, you know,
remember the.
Speaker 3 – 11:58
Classic one from like yeah, would you.
Speaker 2 – 11:59
Rather like a thousand dollars now or like a penny every day for the next 30 days? And that blew my, I was in like
third grade when I learned that like literally blew my mind. Like I could not believe that a penny a day for 30 days
would outweigh, you know, whatever large lump sum. The, the other option was. So quicker you can get that lesson
learned. And again you mentioned with the Roth IRA and the example of just hey, starting it as early as possible,
that’s going to create huge value for you moving forward. And the quicker you can learn that lesson, the better, no
question.
Speaker 1 – 12:31
Well, so number seven, Ben.
Speaker 2 – 12:35
Yeah. Giving back. You mentioned you have your daughter kind of save money in three categories. Spending, saving
and giving. You know, encouraging charitable giving or at the, you know, volunteering. I think for kids is a huge value
add. Let’s say your kid is super interested in animals. Having them donate to animal shelter or volunteer at animal
shelter just so they can see the value of where their money is going. I think that’s a huge, you know, it’s a hard lesson
to teach a kid that you know you’re giving money away but they don’t really know where it’s going. So if they can get
some real world experience volunteering or learning where their money is going for causes that they are passionate
about, that’s a super important lesson that the earlier you learn it.
Speaker 1 – 13:18
The better, no question, I think. And they can touch and feel that charity as much as possible. So see an example of
one, you know, with Roar that we decided to do, and it’s actually a former colleague from A4 company to develop the
school and with his son in Kenya. And it’s for, you know, the community and make sure they have good education
resources. And so I’m going to be taking Rory there, I think at age 8 is what I agree with her mom, to go volunteer at
that school. And it’s just to see and interact with the kids and. But that’s something we decided to start giving to
monthly. And so I think that it’s important not just to teach the concept of the charity, but show the impact, let them
touch and feel it and be involved with this possible.
Speaker 1 – 13:56
So for sure. Okay, well, we’re moving along. Devin, what’s number eight?
Speaker 3 – 14:01
Yeah, we touched upon this a little bit earlier, but this idea of being a smart consumer, understanding how much
different things cost from a banana to a house and everything in between, and just making sure that they’re not
overspending, whatever that means for you and for the kids. So, yeah, I think that covers it.
Speaker 1 – 14:20
All right, well, lesson number nine, you know, setting fnancial goals. So short, mid and long term is what we always
talk about for clients. I think that conversation can be an easy conversation for, you know, kids. Okay. In high school,
what do we want to do in college and after college. And that. That really springboards into how a student loan works
and how much debt you should take on versus, not, you know, the skin in the game conversation versus just giving
them like a free ride and then career paths and, you know, it makes sense. So the. I think that kind of short, mid and
long term conversation is very. It springboards into all these different conversations. Imagination come into play
and. And reality can come into play in the same sense.
Speaker 3 – 15:00
And obviously a lot of our clients already are upended. A lot of our clients typically have college taken care of for
their kids. So it’s less about how does student loans work and it’s more about the sacrifces that we made as your
parents that you made with the money that maybe you didn’t get for your birthday to buy on shoes or a Guitar Hero
or something like that. Just understanding that just walking through like this is what college actually costs. And
rather than you having to pay it out of your take loans or get a summer job or whatever, like, we made those
sacrifces for you. So just a conversation to have about. About those things.
Speaker 1 – 15:29
Absolutely. Well, Ben, number 10, close out strong.
Speaker 2 – 15:34
Yeah. And I think mistakes are a part of learning. That’s lesson number 10. Going back to the goals for a quick
second. I mean, one of my goals in when I was 6 or 7 was to make it to the NBA. So you know, the jury’s still out on
that. But you know, hey, let your kids make mistakes. Let your kids dream a little bit. For those listening, I am not yet
in the NBA. I think I had a bad shoulder that one year. But let them make small fnancial mistakes, let them
overspend on something once or twice and let them learn that lesson. Because we work with people all the time that
mistakes happen. Financial mistakes happen as they’re in their 40s, 50s, 60s, and so it’s.
Speaker 1 – 16:22
It’S.
Speaker 2 – 16:22
Something that’s going to happen as you grow up, but it’s something you’ll learn from. And I think allowing your kids
to make mistakes but also making sure that they learn from it is one of the most important things you can teach
them.
Speaker 1 – 16:34
Absolutely. Any rapid fre, miscellaneous ones that you would weren’t included in the 10. Just general advice that
you’d want to close with Devin or Ben.
Speaker 3 – 16:42
Maybe just a follow up to the mistakes. One is that feel free to share with your kids some of the mistakes that you’ve
made, you know, in your adult life. And rather than them having to experience themselves, they can just, they can
learn from your specifc mistakes and how you overcame it.
Speaker 1 – 16:55
Absolutely.
Speaker 3 – 16:56
Just a thought. Yeah.
Speaker 1 – 16:57
I think the other thing too is like, is just teaching that money is.
Speaker 2 – 17:00
Not.
Speaker 1 – 17:02
It’S, it’s not a, it doesn’t make you more valuable or less valuable if you have it or not have it. You know, some, a lot of
times it could be a private conversation. Here’s why you don’t want to share, you know, every detail you know with
your friends. And so there are a lot of like the, as the kids get older, I think the artwork behind the money and the
fnancial plans of how to navigate in the real life can be really important. They say like 80% of your time with your
kids is done by the age of 18. I hope that’s not the case, but just the reality for most people.
Speaker 1 – 17:28
And so the more you can teach them your values, your philosophy while they’re under your roof, I think the better
success they’ll have on the back end and the less mistakes the, that they’ll make. And the goal I think for everyone is
the have your kids be more successful than you are at every stage of life. So. But doing so in a good citizen, making
sure they’re doing good in the world and providing value.
Speaker 2 – 17:51
One thing I would add is as your kids get older, middle school, high school, if they’re starting to work summer jobs,
help them understand the things that you wish you knew at their age. So like if they get a pay stub, help them break it
down, help them understand what taxes are, where theirs are going, how insurance works, you know how to read a
pay stub, things like that, you know, I kind of mentioned it before, but things that maybe you’re not taught in school
that you’re expected to know, those would be a really good lesson to have with your kids as they get older and start
working and start earning income.
Speaker 1 – 18:22
No question. Well, thanks for joining and we’ll catch everyone next week. Thanks for tuning in to our podcast.
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