Teaching kids about finances

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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vas
Posts: 86
Joined: Thu Mar 06, 2014 12:51 pm

Teaching kids about finances

Post by vas » Wed Aug 06, 2014 9:58 pm

I just read Silver Spoon Kids. Any recommendations for other good books on teaching kids about finances?

gtmn
Posts: 63
Joined: Thu Dec 27, 2012 12:41 pm

Re: Teaching kids about finances

Post by gtmn » Thu Aug 07, 2014 9:32 am

I don't know of any good books, but here's some of what we've done to help our kids learn about money.

1. They get an allowance and save a good portion of Christmas and birthday gift money. This goes into a savings account at a bank. We explain that their money doesn't sit there, but is pooled with other deposits to make loans to people and businesses. Because other people use their money, they get paid interest. They learned that they can make their money work for them.

2. We charged a small portion of their allowance to pay "taxes" to teach them that not everything they earn is theirs to keep. Their "taxes" went to the charity of their choice.

3. We bought them iBonds. With the amount stamped on the front, they knew they would get at least that much returned to them, plus interest. This showed them a conservative way to build savings.

4. We bought them stocks and index funds to teach them that money can work for you, but you have to endure many ups and downs along the way. This lesson may have been better done using index funds only because my kids' mini portfolios of 3-4 stocks are clobbering the index and they feel like little Buffets. (Under Armour, Apple, Google, Wells Fargo) I try to point out the really bad days for them so they can feel the temporary loss, and their first response is whether they should buy more. I like that they hold during declines, but I wish I would've just had them buy and hold index funds so they don't become active investors.

rogermexico
Posts: 161
Joined: Tue Jan 08, 2008 5:58 pm

Re: Teaching kids about finances

Post by rogermexico » Thu Aug 07, 2014 1:05 pm

I have an account for them in which they are required to deposit some of their weekly allowance. It's not an actual account but rather just an Excel spreadsheet (backed up by the full faith and credit of the Bank of Dad). I've artificially boosted the interest rate (to 8%) in order to emphasize the effects of compounding interest. Embedded in the excel file is a plot of its projected value going forward based on continued deposits and same interest rate.

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