Top Tips for Raising Financially Responsible Kids

October 26, 2023

In this episode of FIN-LYT by EWA, Matt Blocki and Stephanie Bogden share their top 10 tips for raising financially responsible kids and shaping their perspective on money and success. Communication about money is key as you teaching children about earning, saving, and spending wisely. Matt and Stephanie’s tips include creating an environment where kids feel comfortable asking questions about financial matters, beginning to save early for future goals and encouraging parents to brainstorm ways for their children to earn what they desire. This includes discussing the value of tasks around the home and how they can contribute to what they want. This episode will help parents and children openly discuss the journey to financial success and the benefits it brings.

Episode Transcript

Welcome to EWA’s FinLit podcast. EWA is a fee -only RIA based at Pittsburgh, Pennsylvania. We hope all listeners of this podcast will benefit as we deep dive into complex financial topics that we will make simplified for you.

And we hope that this really serves as a catalyst so that you can make the best financial planning decisions for your family and also save time. Welcome, everybody, to this week on FinLit by EWA. Stephanie and I are going to be discussing how to help kids be financially responsible.

So we have a list of 10 pointers today. And excited, I’ll get right into it. So first tip is just open communication about money. Introducing topics at an early age can obviously be a catalyst to many good discussions.

I found that a lot of interviews with potential clients, their early memories of money really shaped good and bad belief systems, which we see come up in 30s, 40s, 50s, and beyond, gonna really shape how you think about money and your relationship with money.

So the earlier you have to communicate about it, I think it’s a very sometimes a taboo subject that you don’t talk about. Here’s how much I make. Here’s how much this person makes. Here’s what this costs.

Sometimes it’s just a very stressful thing that people never discuss. So our point of number one is just to reverse this and to openly discuss as much as you’re comfortable with with your kids at an early age.

Cause it’s going to come up. And if it comes up under your roof, you’ll have a lot much more control about their first memory versus if it does happen after they’ve left for college as an example. Absolutely, you get the opportunity to field those questions first.

Cause there’s nothing information out there that they could get bad information versus you know, you’re informed information. So absolutely. All right, so number two, I love this one. And I actually did this with my kids.

when they were young is to involve them with your spending habit. So whether it’s grocery store, back to school shopping, things of that nature. Keep it very, very basic. But kids, I think, obviously when they’re very, very little, they don’t have any concept of where things come from.

But as they start to understand that you go to a store or Amazon’s kids’ favorite thing, the goods and services and such come from somewhere, just teaching them the basic that there’s a trade -off of earning, to spending, and then receiving said product or service, starts to help them connect the dots to things just don’t magically appear and they’re not free.

So a very, very simple, easy lesson. Take your kids to the grocery store with them. Allow them to see you selecting things, let them ask questions, answer their questions, and then let them be involved in the checkout process and any questions afterwards.

So simple, simple. I think that tip number two really falls into number three. Just open up an account for them as early as possible. So save his account. I’m going to just talk briefly about what I do for my daughter, Rory, so she has a savings account already.

I also have a whole life policy that builds cash value on her. It’s based upon a young age, and that’ll give her an insurability option in the future to add to that, but that’s something I’ll give to her potentially once she’s graduated college if she decides to go to college.

Then I also, she’s on EWA, a very small payroll. Just feel we have the ability to then fund her Roth IRA. To fund a Roth, you can’t just open up a Roth IRA for your kid. They actually have to have earned income to fund it.

She does some modeling for us. Have you ever seen our Instagram? It’s Rory Rory Rory everywhere. Cutest one. Just as an example, and then she’s turning five in October, but as far as discussions that we’re starting to have is, I’ve already made her aware of these accounts, and the conversations are sometimes hilarious, but there’ll be continued conversations.

She’s really like shopping on Amazon now, so it’s like, I want this dress, and this dress, and this dress, and now we’re talking about how much it cost. The next steps will actually be for the savings account is potentially paying her, giving her a list of some duties or chores, and then paying her an allowance and showing her how that money can go directly in will be the next steps.

As much education as possible, I remember when I was young, I literally had a cup, and I remember having three, I think it was three cups, so one was for charity, which makes sense, or tithing, which makes sense by dabbing a pastor.

I think he had his own agenda there, and I’m just kidding. We’ll get into that one next. Then secondly was for future savings, and then third was for spending. I remember these three cups, but it was really appreciative of my parents doing that because it forced me to start thinking about charitable endeavors, it forced me to start thinking about savings, and that just taught me in general how money worked, and eventually those cups, jeez, that was over 30 years ago.

Eventually those cups became bank accounts, but the concepts and the intention of starting to think about finances started at a really, really young age. Yeah, absolutely. I mean, I agree with everything that you just said.

My kids are a little bit older than that. They’re actually all their birthdays of this month. They’re older. Everyone’s like, what should we get them for their birthdays? They don’t need more stuff. Usually, it’s like, hey, here’s some money in your birthday card.

We sit down after that, and I have a conversation with them very similarly. Everything’s online anymore. I actually sit down with them and log into their accounts, and I let them watch me make the deposit, and then I also show them the balance six months later.

Just them watching things accumulate, even if it’s little pieces by little pieces, really starts getting the wheels turning in their thought process. I love that. Awesome. Love it. What’s tip number four?

I might have stolen the thunder a little bit. No, that’s okay. Number four is modeling philanthropic behavior, if you’re so inclined. So if you have a cause that’s near and dear to your heart, whether it’s that the charity, whether it’s your church, whether it’s a system and a contribution.

Letting your kids know that there are ways to financially support those organizations and that comes out of a payroll or their budget, your budget, I think is awesome. And it gets them into a good habit of, if they feel strongly about something, also supporting that financially and knowing that that’s something that’s out there.

No question. I think that’s so important too, because I found a lot of problems occur generationally. So just as an example, like if a kid didn’t grow up with money, that and many other reasons could cause them to go and go to school and become a doctor and then make tons of money because they felt like they never had it.

And maybe that was an overcompensation for not having it. And then the vice versa, we’ve seen kids that have families that are uber successful. The parents are just, we’ll use the doctor example as a, and then that kid potentially saw their parents run around, they didn’t have the time, they kind of despise money.

So then they go into a job where it’s like very philanthropic, throughout is they can’t even afford a rent because they’re making, you know, whatever it is they make per year. So I think it’s really important to talk about money and charity as well, so that those overcalibrations don’t happen.

Right. Because again, our childhood experiences really shape us for the rest of our life, but having those discussions allows, you know, someone to make a decision to be a doctor because they really are passionate about being a doctor not because they see that as a, I grew up poor, I don’t want that to ever happen or vice versa.

Well, by the way over here. I grew up without parents that were present. So I’m gonna go, I don’t care about money anymore. And it’s, don’t let those childhood experiences necessarily shape you. You should still be able to chase your passions and live a balanced life.

But the conversation you have with your parents early on could really shape and make sure those calibrations are healthy and not too crazy one way or the other. Yeah, absolutely. So yeah, get your kids, you know, if they want to donate, actually donate money or, you know, holidays and such are coming up, you know, kids go out and they purchase, you know, gifts for kids that maybe don’t have those and then they get to actually be part of that process.

And so I think that’s, it’s awesome for them to see the end of that process too. So what about number five, Matt? Yeah, so number five, brainstorm ways to earn versus simply giving the kids money. I was blessed for kudos to my parents for not giving me really anything.

I was selling, I was hustling selling dandelions with my brother, I think when I was like three, we looked like these haircuts. I mean, I don’t know if my parents were just torturing us or wanted to laugh at us for the next timeless.

So we looked like Amish, like with these bull haircuts, the pictures are still out there somewhere. But anyways, we sold out these dandelions because I think people just felt so sorry for this three and this five year old sitting on the street with Daniel.

So ever since I was three years old, and selling something, trying to hustle and so everything. Those were discussions and I remember my brother started a lawn care service because he wanted a computer And so he was just hustling mowing lawns and I remember from you know jobs like cleaning Carpets to waiting tables to being a host to I mean the list goes on and on But I wouldn’t change anything because if I was there’s so many skill sets I’ve learned from knocking doors and sales from selling cable to wait You know being a waiter at tables to selling dandelions And the ability the number one is the ability to handle adversity because those interactions That are different every day and if my parents didn’t give me the gift of being able to handle adversity Then I would you know expect everything and that’s not how the real world works.

So Teaching your kids how to earn money at a young age allows them to you know Calibrate what their relationship is with money and it allows them to really handle adversity at a young age Which will stick for life.

Yeah, absolutely. I mean I agree with that completely We do that with our kids often I mean we all know everything’s expensive these days that the kids want because it’s all like electronics You know designer clothing, you know, whatever it may be.

It’s not $20 anymore. It could be $100 or more So I think you know having that discussion with your kids up front where we usually say well, how much do you think X? Costs well if it’s $100, okay, well, do you have $100?

No, I don’t okay Well, let’s talk about a way that you could earn that and what if we split that with you? What are things that you think you could help with? I mean and don’t be afraid I mean we’re not afraid to ask our kids to do things that it are physically related You know if they walk the dogs they clean the room You know, there’s a variety of things that the kids can do that not only allows them to like get the concept of work equals money But it also You know, they start to understand that oh, okay Like I actually have to like put some effort forth and actually think then the reward is like that much sweeter So certainly they come up with it themselves having a little bit of input you’d be surprised what your kids would be willing or wanting to do as a trade -off, so like don’t discount their willingness or ability to earn what they want.

No question. Well, so speaking of, let’s talk about spending choices. So tip number six. Yeah. So I think this is really important because I know some adults who still have to go through this exercise frequently, which is, I want X, Y, and Z, but I need X, Y, and Z.

So prioritizing it is that you actually need and what you want. And having a very realistic conversation with yourself as to can I afford all three of these? Can I afford two of these? Can I really only afford one of these?

So looking at the trade -off of if I purchase something that I need or want, what am I sacrificing? So in our world, we call it like opportunity costs. So if I do X, what else am I giving up? Or what am I gaining in the process?

So having these conversations with your kids as to, okay, well, which is most important to you, why is it most important to you? And then prioritizing those things, I think is a good thought process.

not only in their small microcosm of a world as a child, but also in the grand scheme of life, is being able to prioritize things. No question. Couldn’t agree more. Well, one of the most often talked about financial, this is like if you’ve ignored money with your kids your whole life, it’s gonna come smack you right in the face when college comes, if they do decide to go to college or a trade school, I mean, it’s expensive.

So our tip number seven is discuss how college financials work, discuss how you’re paying for it, discuss what you expect from them, et cetera. And so there’s not a one size fits all, but I do wanna point out a couple of things.

Those that think, oh, my kids, I’ll let my kids handle this. You’re with a rise in cost of college right now, the kid, no matter what they do after college, it’s gonna be extremely crippling for them to be able to afford any kind of lifestyle with the amount of school loans they would need to pay for it themselves.

And so tip number one is as part of college definitely start saving at a young age if you want your kids to go to college because economically it may not make sense. If it’s all on them, then the trade off of what they’re gonna earn after is so lopsided right now.

So definitely save in advance. On the flip side, we have a lot of clients say, I wanna pay for everything no matter what. And sometimes this works out great because if you rave your kids well, they’re not gonna be very rigorous in their studies, they’re gonna get good grades, et cetera, but also as part of that, it could become kind of a paradox is you save all this money, put your kids through college and then they take it for granted, they don’t take it seriously and now they’re suddenly doing victory laps, fourth year, fifth year, sixth year, seventh year.

And you’re really just setting up bad habits and that’s where this boomerang nation has really started where then they’re gonna end up in scenario one or scenario two, probably still living with you after because they haven’t really been taught to fend for themselves or helped along the way with really big decisions that have the cause and effect relationship.

If you’re gonna go become a… a social worker, which is one of the most commendable careers there is, and take out $150 ,000 of school debt to become a social worker and then make $40 ,000. Even after taxes, you’re going to be netting like $2 ,000 something a month.

You can’t afford a rent or a car payment, let alone touching those school loans. Yeah, those payments could be $800 a month on something of that sort. For college, I think the more you have the ability to talk about different career paths, which can be great open discussions, and then you also have the ability to then talk about and research, or have your kid research, what are the corresponding salaries or earnings potentials as those career paths, and then what are the best colleges that could go to their career path.

The more unsure you are if you’re just going to college for the sake of going to college, statistically, kids switch majors all the time, and there’s going to be some… relatively silly influence that directs them in a way that maybe is not as intentional as it should be for the rest of their life.

So I think, you know, if a kid’s gonna decide what they’re gonna do, wouldn’t that be good to do by themselves, but under the guise of like their parents’ help? And not saying you have to have everything figured out because I didn’t have anything figured out till well after college, but these kind of conversations earlier on and just experiencing and chatteling and just looking at what the consequences are, I promise you the only good will come from them.

Absolutely. Yeah, I agree completely. There’s no one -size -fits -all solution to, you know, future planning, college planning, education planning in general. You could have one kid who goes through med school, another kid who goes to trade school, another kid who starts a business.

Different paths look different, so one foot in front of the other, regardless of where that is, just moving in a direction I think is key. Absolutely. Alright, Matt, so that’s the number eight, which is introducing your kids to investing early.

And you talked a little bit about, you know, a fair use of accounts that you know you have for your daughter and whatnot, and, you know, starting investment accounts for your kids when they’re young and talking to them about the stock market is awesome because they’re getting that out there somewhere anyhow.

You know, my 10 -year -old asked me, mom, like, do you own Apple stock? Do you know, I heard Amazon stock and I’m like, you don’t know where they’re getting this, but you know, everything’s on Google, everything’s on the internet.

So giving them good guidance and information, like about what investing actually is, is the key there. So whether you’re putting $100 into an account and buying a couple of shares of stock and allowing your kid to pick a stock that they like and then watching that value, you know, go up and down with the economy, that gives them a very good lesson.

A, it helps them put like something that’s conceptual, you know, into reality and it helps them kind of see how investments can change, like, over time. It’s a pretty cool exercise for them to look at a statement, you know, year over year.

No question. I think another, like, with, as far as investing in the stock market, the power of compounding interest, I just did a quick calculation, but like a 25 -year -old who saves $300 a month and earns 8% a year, just like an index fund investing, when they turn 65, they’d have 1 .054 million.

But then the same person who starts five years later, so a 30 -year -old at $300 a month, 8% by 65, they’d have $692 ,000. Just five years of $300 a month, that’s $3 ,600 times five, and that’s quick math.

That’s $18 ,000 less that the 30 -year -old has invested over the 25 -year -old, but the back end is a $350 ,000, now I’m behind $350 ,000. That not only will help your child in just starting up the accounts and showing them that this is why I set the account up for you as early as I did.

That will also help with the college discussion going back for a minute because then they’ll figure out, well, I want money, so I can keep investing. I want to have the right career path. Oh, wait, this works in the opposite direction.

If I take school loans, compounding interest can work in the opposite direction. Great. That just really opens up the door for… you know, many conversations as if you start talking about investing and compounding interest as always possible.

So thanks for sharing that. Well, I know one of the things I was really impressed that you do, and I think Rory is not, you know, old enough yet to do this, but you give your kids, this is tip nine, you give your kids, I’m literally a match.

So explain this and this, I, the first thing I think of how this replicates, like a lot of people don’t even have their 401k set up and they’re losing free money. So what do you do for your kids? Definitely.

So this kind of was born out of, out of COVID actually, because I was at home working, trading, you know, talking about the market, markets going crazy. And you know, kids absorb like everything that they hear.

So being home with them, they’re doing, doing homeschool, I’m working. We got around about conversations about, well, what does mom do? And, you know, various topics. So one of these was a 401k and retirement plans.

And I said to the kids, I said, well, basically you save up, let’s say it’s over a month or a quarter, and you save up a certain amount of money. And then your employer matches you a certain percent.

And they put that in the account also. And I think like the light bulb went off. They said, wait, so if you have a hundred dollars, your employer is going to give you $50, so you have $150. I’m like, exactly.

So I don’t know how this actually came to fruition, but like toward the end of the year, I said, okay, guys, like you’ve had birthday money this year. You’ve had gifts, we’ve had allowances and everything was shut down.

So they had no opportunity to spend it. So I said to them, well, all right, let’s have an experiment and mom’s going to match you 50% on every single dollar that you have on December 15th. Now, my kids loved to buy gifts for other people.

So this was like, okay, they wanted to buy Christmas gifts and whatnot. So I said, all right, this is a way that I can, you know, help them get this, you know, very sweet gesture, but also teaching them how to save and not spend.

So I was out a lot of money that year because I didn’t have an opportunity to spend it, but every year we do this now and we sit down and they bring their piggy banks and their cash and we sit and we count and I match them.

And then what I do though is I take my 50% and I put that into their call. So again, have them kind of watch me make that deposit. They get to keep what they have. They go by gifts. They can roll it over to next year.

But what they’re doing is really like getting that example of, okay, I’m saving and then someone else is helping me save on my behalf and it’s kind of snowball effect into like a bigger pot every year.

So they love it. They think it’s fun. They never let me forget, you know, middle of the month of December, mom, it’s time to go Christmas shopping. What’s my match? So that’s a pretty cute concept. But hopefully they’re going to carry that into their career and know that, hey, if I get in my employer’s plan soon, I’m going to take advantage of a match.

And that’s, as we just said, exponential benefit from doing that. So that’s a muscle. Saving is a muscle. And the earlier you can develop that, it’ll stick for life. Exactly. It’s harder with the older kids.

So like starting like really, really young when they get in that process, my son was not even seven years old when we started this and now he’s going to be 10. So no question. All right, Matt, what’s the last one on our list?

I love this. So sharing your financial journey with your kids in a positive light. So, um, Having, not having conversations, kids are just gonna probably pick up on the negatives when you come home stressed.

So having a positive conversation though, and sharing the pros and cons can lead to a lot of good long -term impact. So, you know, kids, first of all, they typically mirror the environment that they’re brought up in, especially when they’re young.

Their research has shown the number one reason parents wanna make a lot of money is to buy back their freedom. Kids often think being successful is so you can look cool or have things that make you look rich.

This is the wrong message. Emphasize the benefits and freedoms that being financially successful can do. So, but this is a lot harder said, it’s a lot easier said than done because what we found is a lot of default financial plans is make a lot of money, buy stuff so you can impress people that you don’t even like.

And then this stuff is so expensive and there’s so much upkeep that you have to make even more money to keep up with the lifestyle that continues to creep up. And then you don’t have the time to spend with your kids.

So this is a balancing act and a good financial plan for the parents can set the tone to have the time to have the good conversation with the kids and to realize it’s not nothing’s black or white. Just cause your parent wasn’t there, it doesn’t mean you need to go the opposite direction.

Money can support a good life by design. It’s not an evil thing if it’s utilized correctly. And then vice versa, it can also free up time so you can have present parents. So there’s so many lessons and also paradoxes and I think it can help to talk through financial plans.

We found the kids of our clients are the most important thing that the center of every financial plan sometimes even too much where it’s overwhelming. It’s like we can’t even talk about retirement planning all we care about is our kids.

All of these conversations we believe are really tools cause what can pass on forever is the values and lessons and responsibilities you can teach your kids. Money without those will last days. Absolutely.

With those that can last generations. I mean, and you quoted a statistic actually back in one of our other podcasts, which is like 80% of the time that you have with your kids in their lifetime is already gone by the time they’re 18 years old.

So I mean, that just really tells you like what a commodity like the actual time is that you have with your kids. So one of the things I would echo is that, you know, it’s not the actual like the dollars that you’re talking about.

You’re talking about the value of those dollars in terms of life experiences and opportunities and things like that, you know, you can actually do with your children. So it’s like money’s not the good or the evil.

You know, it’s the gateway to hopefully, you know, cultivating experience and opportunities with your kids. And I would piggyback on that by saying that, you know, anymore you’re going to hear kids at school talk about, you know, having money is bad, not having money is bad.

And they’re just going to get this whole mixture of thoughts. And the most important thing is to tell your kids that, you know, when you provide value to the world, to the universe, you’re doing a great service.

You have a unique skill set. that a lot of times you are compensated very well for that and that’s not a negative. It’s how you choose then to utilize that to again, create your life by design and hopefully affect your life and the positive and the lives of others.

And I think those conversations, the one that is viewed negatively can snowball in other conversations like the importance of keeping your money private. You don’t share how much you make while you don’t necessarily need to be overstated but instead of being understated with what car you drive, what house you live in, all these kinds of things that can lead into such healthy conversations.

So Stephanie, thank you for joining us. And thank you everybody. We look forward to seeing you on next week’s Finlet by EWA podcast. Thanks for tuning in to our podcast. Hopefully you found this helpful.

Really hope this is as beneficial and impactful to as many people across the nation as possible. So hit the follow button, make sure to rate the podcast and please share with any friends or family members that would also find this beneficial.

Thank you very much.

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