Personal finance should be taught in high school! At least that’s what I hear on a regular basis. I’m totally against that idea. Why? Teachers are not equipped to add another subject to their workload. Few teachers have the requisite skills to teach personal finance. Teachers, in many districts, are untrustworthy. It’s my belief that this subject should be taught by parents. Here are fourteen things parents should teach their kids about money before they move out.
There are many things parents should teach their kids about money. Faith and values are often filtered through money. Parents are best equipped to instruct their children in that manner. Money has a spiritual component. Teachers are ill-equipped to reach every student in a manner that is appropriate to each family.
What about The Ramsey Group? Don’t they have an available curriculum that a teacher can simply facilitate? It’s better than tossing the entire thing on the teacher. However, it’s still inferior to a parent teaching and modeling personal financial concepts.
Here are fourteen things that parents should teach their children about money.
#1 Hard Work Is Rewarded
Work is a four-letter word in modern times. It seems as though laziness is being rewarded — at least by our government.
Government is not God.
Proverbs 14:23 There is profit in all hard work, but endless talk leads only to poverty.
Hard work might seem to be out of style right now but it’s not. Teach your children to work hard because even if the U.S. government doesn’t recognize it as a virtue, God does.
#2 Debt Can Be Dangerous
A famous talking head indicates that “debt is dumb” when returning from every commercial break. Debt is not dumb but it can be dangerous.
Debt should be avoided in the majority of situations. There are some times when it’s understandable.
Train your children to resist carrying a credit card balance. Paying cash for depreciating assets (vehicles) is superior to taking out a loan.
The Bible mentions debt on several occasions. You might be surprised at what it says, though. Here’s an article that I wrote about debt and in the Bible.
#3 Money Is A Great Servant But a Terrible Master
Many people paint themselves into a financial corner. Their salary climbs and lifestyle creep takes up permanent residence. Many years later they are trapped in a job or career that they hate. However, they must stay because it pays the bills.
Spend time talking to your children about keeping money in its proper context.
#4 Generosity Is Important
We were all created to be generous. Our sinful nature is resistant to lavish and radical generosity. Sure, we might tip 25% on occasion and drop a $20 into the red kettle at Christmas but are we practicing radical generosity on a regular basis?
Generosity is a learned behavior. If we begin practicing it at an early age it’s easier to blow the roof off later in life.
Encourage generosity from a young age. The sad truth is your children will not want to give away birthday money. It requires discipline.
Model generosity to your children. When you’re making a contribution to your church or to mission work let them know. Tell them how it helps and explain how you budget for giving.
Resist making generosity a legalistic mandate. Make it fun. Be joyful and celebrate God’s goodness in giving.
#5 Spend Less Than You Earn
If your children learn this one key they will be light-years ahead of their friends. We all must make trade-offs in life. Few of us (maybe Elon Musk) have more money than we can spend.
If they get $100 for a birthday they can’t spend $150. Resist the urge to become a bank or a lender to them.
#6 Index Funds Are Boring But Beneficial
This is a lesson designed more for your kids nearing high-school graduation. Most kids will want to spend 120% of their money. Some will want to invest in stocks or crypto.
Encourage your eager investor children to stick with index funds. Yes, they are extremely boring. They will impress no one their age but this is the safest and surest way to becoming a future millionaire.
Here’s an idea. When your kid turns eighteen help them open an online brokerage account with Fidelity, Vanguard, or another similar company. If you’re able, give them the money, conditionally, to invest in a total market index fund.
The one linked above from Fidelity is filled with companies like Apple, Tesla, Amazon, Google, and more. Over the past ten years, it had an average market return of 13.38%, which is fantastic.
#7 Budgets Are Brilliant
Budgeting should be learned as soon as your children get any money. If grandma gives them $5.00 for their birthday a basic budget should be done.
Budgeted money goes further than unbudgeted money.
If your kids are creating budgets for birthdays and chore money when they are older it will be a breeze.
#8 Take Calculated Risks When Appropriate
Risks are only bad when they’ve not been evaluated. We all assume a certain amount of risk every day.
We all will fail at something in our lives. Help them navigate failure and rejection when it happens.
Encourage them to try out for the team, or club, or apply for that summer job. Teach them how to make “pros and cons” lists and how to consider risks versus rewards.
#9 Develop Multiple Streams Of Income
Financial diversity is the name of the game when it comes to income. Those of us on the “other” side of fifty are challenged in this area. Many of us grew up thinking that by working one job for our life we’d be set.
The world has changed and it’s getting more drastically different each day.
Those who have one source of income are in a world of hurt when they get a pink slip.
Encourage your children to get a job and to do it well. Then help them launch into something else as well. Now they have two sources of income.
Could they do something one time and earn passive income? If so, now they have three streams of income.
Here’s an example of a college student with a few streams of income. The primary responsibility is school. Schedules are hectic and difficult to navigate for a traditional employer.
Jesse decides to create his own plan.
A few days per week he Ubers from the campus to the airport. He’s aware of an extremely busy and high-end office community a few miles from school. He adds Uber eats to his income stream. A few hours per week Jesse writes eBooks and sells them via Kindle. He began blogging in high school. His blog earns advertising dollars and he is an Amazon affiliate.
Jesse’s parents encouraged him to think beyond one job.
#10 Always Ask For More Money
The easiest way one will ever make money is to ask for more. Teach your children to overcome shyness and embarrassment when negotiating salary.
If your child is offered a job bagging groceries and is offered $x they should counter and ask for $y.
Always ask for more money.
Always!
#11 Mind Your Own Business
Inspire your kids to treat their personal finances like a business. Their salary is revenue and their bills are expenses. If there is more revenue than expenses then their enterprise is profitable.
Encourage them to invest in revenue-generating assets (index funds)and to keep liabilities (debts) to a minimum.
The difference between their assets and liabilities is their personal financial net worth. That amount should grow each year.
Not everyone is built to be a business owner or entrepreneur. If you recognize that in your kids encourage it and help them as much as you are able.
#12 Real Estate Can Be Lucrative
Approximately 90% of the world’s millionaires have done it through real estate. There is a different type of risk when investing in real estate compared to the stock market. It’s not worse, just different.
Real estate investing is a legitimate way to grow financially. It’s also a valid career path.
Resist the urge to pooh-pooh a legitimate idea.
Many young people are house hacking. They find a duplex and buy it with a minimal amount down. They live on one side and rent the other. Eventually, they get another and repeat the process.
Is this risky? It could be. Millions could be made as well.
#13 There Are Many Ways To Pay For College
There is a student loan crisis in our country. The president believes that he cured it by “canceling” a big portion of it. He’s simply pulling the leaves from a tree full of poison and misery.
Taking out a student loan should be the very last option for paying for college. I doubt there will be debt cancelation in the future because the current one is going to wreak havoc on our economy.
Borrowing money for college is okay in some instances. In most, it can and should be avoided, however.
Don’t hamstring your retirement to send Junior to his favorite college so he can play beer pong.
Develop a family plan and stick with it.
#14 Make Saving Normal Again
Debt is quicker than saving. Saving, rather than depending on debt, is more financially savvy.
As Christians, we’re encouraged to be content with our place in life. If your salary can afford a Toyota Camry but you demand a Lexus you are probably dealing with discontent. Financing the difference is not a great option for a person of faith.
During these times of discontent, God is working in our hearts.
Show your children how to open a savings account. Teach them to put money towards something they want. Encourage them to make regular contributions towards their savings goals.
Teach them about sinking funds and help them prioritize the most important things.
Proverbs 21:20 The wise have wealth and luxury, but fools spend whatever they get.
Bonus — Continue To Learn
Financial information is coming at us quickly. Roth IRAs are a relatively new way to invest money. Health savings accounts (HSAs) are becoming increasingly popular (one of my favorites). Crypto continues to make its presence known.
There’s always something new to learn or something established to refresh.
Inspire your children to read books on financial management and to become life-long learners.
Don’t leave this important task up to the teacher’s union. They don’t and can’t love your children as much as you do.
What would you add or subtract from this list?