ļ»æPFFAP-PYP-21-0701-Teach Kids Money
[00:00:00] Ben Utley: [00:00:00] Welcome to the physician, family financial advisors podcast, where we turn to worries about taxes, investing, and extra money into a comfortable feeling of financial security to last a lifetime. I'm Ben
Nate Reineke: [00:00:15] and I'm Nate rednecky. Today we have listener question from Margie in Texas. She called and asked a question on our answer line at 5 0 3 3 0 8 8 7 3 3.
Let's have a listen to her question. Hi is this, this
Caller 1: [00:00:30] Margie I'm practicing internal medicine in Texas. I have a question regarding my kids. I have two teams, one in high school and one in middle school. When is the proper time or age to start talking to them about college planning and finances. Thank
Nate Reineke: [00:00:47] you.
That's really a great question. Uh, but before we get to Margie's question about when is the right time to start teaching our kids about money? I think we should start with why we should teach them about money at all. [00:01:00] So. Why should you teach kids about money in the first
Ben Utley: [00:01:03] place? Well, it's kind of like, why should you teach kids?
Anything in the first place, why should you teach them to get dressed in the morning? Why should you teach them to brush their teeth? You know, why should you teach them to, uh, get along and work and play well with others? It's simple. It, money is a life skill, just like any other life skills. Uh, if money is not your first language, it may not seem like a life skill, but, uh, but it truly is.
And I think more than the fact that it is, uh, is important. Is that the only place that your kids are likely to learn, this is in your home. So, you know, when they, they don't get this lesson in school, you know, they're, they don't have a money class in school. They might take E econ, which is in my case was taught by the high school basketball coaches, boring.
I didn't learn anything. But outside schools, there's just no place to learn this in worse than that. It's good out of a predatory environment. And I mean, the bankers want them to borrow as much as they can. So it'd be buried in interest. The insurance companies [00:02:00] want to keep them dumb. So they'll buy policies that they don't need.
Uh, you know, the financial services industry is stacked against humanity here in the United States, capitalist country. Uh, you know, Biggest capital of this nation in the world. And yet we have a, an alarming rate of financial literacy. And I think it's because we don't have an institution that teaches that.
So the institution must be you and your household and your family. That's where they're going to learn this. That's why we should teach kids about money or in our own household. Hmm. So I guess the, the next question you want to ask yourself is how will, you know, when your child is ready to start learning about money and, uh, Nate, you have young kids, uh, you know, my kids are headed off to college and yours are just, you know, just starting, not even preschool kids.
So when do you think what? We should start teaching kids about money?
Nate Reineke: [00:02:52] Yeah. Um, and, and my, my answer has to do with something that you said, which is the skill. And so it's kind of like asking when should I start teaching? Like, [00:03:00] And so, um, the short answer is now right away. No matter what age are your kids are, but, um, it's kind of difficult for, for people with young children.
Margie's kids are a little bit older, but, um, you know, my, my kids are not even one in three. So, um, I've heard you give this example before, and I've done this in, in with my infant children and you can give them choices. And so helping them make choices, helping them make decisions in life. You could give them red ball, blue ball, and they get to decide which ball to play.
Right. And, um, that's a good example because it's very fitting for a, you know, an infant child. That's really about the extent of the choices that they'll get. Um, but the reason it's important to start as early as possible. And what I've noticed with, with, uh, people I've talked to about their children is that as life goes on, [00:04:00] the choices become, uh, ha have a lot bigger of consequences as they get older.
Right. And so the red ball, blue ball, there's really no consequence there. And maybe the next choice in life is like skip to allowance. What do I spend my allowance on there? There's a little bit of a consequence there. If you don't like what you chose to spend your 10 bucks on, uh, you feel some pain, right?
And then after that, it's what car do I buy? And, you know, that's, that has big implications for me. I bought a Jeep, which was probably a terrible choice cause I had fixed it all the time. It should've bought a Honda and uh, I had spent all my lunch money on gas and I learned to buy, uh, economical vehicle until I could afford the one that I wanted.
Right. And the next choice after that, uh, might be college. And when you're looking at a bill for college, That's you know, state school and every all included, maybe it's 25, [00:05:00] $30,000 a year, or, you know, private school, uh, Ivy league school at $70,000 a year. How can you expect a child to help make a good decision in that, in that scenario, when they're only playing right there, they're 18, right.
Is 30,000 for 70,000. But, but they haven't had any chances to make a choice. Let's say between $3 and 70.
Ben Utley: [00:05:24] And Nate, those are all after tax dollars, right? So for tax it's more like 50 or a hundred thousand
Nate Reineke: [00:05:31] on your top three kids, right? Yeah. And you want them, I am to make this big choice and they've never been given the choices along, you know, throughout their life to just make a choice at all.
And so while it seems inconsequential to give them these small choices, I think it's big. And so I have a, my three year old. Right. And he just turned three. So we just had a three-year-old birthday party. Um, and he's really into [00:06:00] dinosaurs right now. So we had a dinosaur themed birthday party. We were at my parents' house who were having the party there's dinosaurs everywhere.
And I made a terrible mistake, um, not to try to limit the gifts that came in the door that were a dynasty. So he has all friends and family coming in with gift after gift of just dinosaurs. He already has a bunch of dinosaurs at home. Um, so we're, we're coming home with even more. And so one of the problems at any birthday party is you, you start opening the gifts and then you have the stack of cards next to it.
The three-year-old could care less about the cards, but we all know that incite those cards a little bit of money. Okay. We, we get home from the birthday and Mateo, my three-year-old son, uh, has some money and we decide we want to go to the store and help him spend the money. Okay. So, uh, the whole family goes to the store Mateo.
I think we brought $10, brought $10 and he is immediately introduced to this wall of [00:07:00] choice. Toys high to low there's board games, water, guns, uh, dinosaurs, and you bet, uh, he goes straight for the dinosaurs and with choices in life, as a parent, I've kind of realized that that life is filled with these choices that you can help your child make.
And in this moment I realized I could kind of, I kind of had three options. I could let the world, uh, have an impact on his life without my interfere. It's kind of that hands-off approach. Right. Um, I could make the choice for him. No Mattel, you don't need any damn dinosaurs. You, you just got a hundred of them.
No lesson, no lesson, right? Yeah. And so my third option is, is present the choices in a way that makes sense to him. Not that makes sense to me. Of course. I know he shouldn't get any dinosaurs and I think that's, um, one of the issues that we see a lot is. Um, the obvious choice [00:08:00] is obvious to you because of your stage in life, as an adult, it's not obvious to your child, you make it obvious you let them choose.
Right. Right. And so,
Ben Utley: [00:08:09] and part of our job is to, is to help them frame those decisions by framing the decisions for them at an early age. Right. Giving them appropriate choices.
Nate Reineke: [00:08:17] That's right. They're appropriate choices. Red ball, blue ball, right. We're right now it's dinosaur first water gun. And we're right in the middle of the store.
I'm eye-to-eye with Mateo and he's crying. Cause he can't make the. Right. It's $10 choice. And my choice as a parent is to solve his problems by both toys, choose for him, no lesson and probably would choose wrong, no matter which one I chose for him, or sit there for an extra hour in the store and let him decide.
And in that moment, I think I realized that this is a huge opportunity and life's full of them with kids. You just have to be present enough. To realize what's going on. And so, [00:09:00] um, we almost went home with the dinosaurs to, to give you the ending, almost my home with the dinosaurs. He ended up picking the water guns, which I did not push, but was really happy about because it's summer.
And I think he'll have fun with them. Um, and he got to make a good choice that day, you know, and it was tough for him. And he was by the way, very proud of his choice. He chose. I didn't choose. Nice. Yeah. And so that was a really big moment for me. And I realized that without that there's no building block.
And so I think you should start teaching your kids to make decisions in life, uh, as early as possible. And that's kind of painful as a person.
Ben Utley: [00:09:40] So, yeah. And, and back to Marty's question, you know, she has teenagers, right? So I think, I think the answer for, for her is like teach them now. Right? That's one, that's one of the things that, uh, that I'm drawing from what you just said, start where you're at.
Don't wait until they're X age, you know, again, today with whatever material is in front of you look [00:10:00] for the teachable teachable moment, let it evolve, frame some choices, and I'll let them make the choice and live with their constant.
Nate Reineke: [00:10:07] Exactly live with their consequences, which is really hard as a, uh, as parents, but that's, what's gonna get them prepared.
Right. So, um, you know, living with th there's a balance, right? Cause there's, you live with consequences, but there's still some things you should avoid as, uh, as parents with teaching kids money. Ben you you've gone through the full spectrum, I guess not, uh, your, your children are becoming adults, so we haven't been to that part yet, but, um, from zero to, uh, what is it?
20 years old? Uh, what are the things you've found that you should avoid when it comes to teaching kids about money? Right.
Ben Utley: [00:10:46] W well, going back to the question, Margie dropped on our, on our answer line. Um, she said something about college and I will say is, as a guy, who's got one kid who's ready to go to college and other college aged kid that I started talking [00:11:00] about college way, way, way too early.
Um, I think that I, I freaked my kids out with college. And as I've spoken with parents about, you know, about this particular issue, uh, they're surprised to hear that, like I should introduce my kids to college. I think, I think the best way to do that is to talk about, uh, your college stories, the ones you want, your kids actually here, uh, you know, talk about the good stuff that happened to you in college without talking about.
The academics of college, you know, give them a, give them a vision of a happy future in college and, you know, growth or whatever it happens to be and leave out all the details about, you know, how difficult the exams are. I mean, it's not a lie, but they will figure that out. Uh, the time to really start talking about college and earnings.
To look into maybe getting a college admissions counselor, uh, you know, that kind of thing is in their junior year. That's when you get down to the brass tax, that's when you start to talk about the money and all that good stuff. Uh, but before that, you just want to talk about the good stuff of college and, you know, [00:12:00] maybe, maybe drive through a college campus on your way someplace without taking a tour, just to be like, oh, look, it's a college.
You know, that kind of thing. So don't, you know, it's easy. Cause we went to college, you know, Most of our clients are physicians. So they've got lots of college education, but don't burn them out on college. So that'd be one thing I would avoid with teenagers and, uh, you know, middle schoolers and kids like that.
I started talking to my, when they're, you know, uh, elementary school. So big mistake. Don't do that. But here's the thing that I would avoid with children of all ages when it comes to teaching them about money, don't do stuff with your kids that won't fly in the real world. What we're trying to do is we're trying to build a microcosm in our homes, a microcosm of how money works in the real world.
So here's an example of how money doesn't work. We don't expect to do work without getting. Now you say, what about volunteering? You know, well, I feel good about volunteering. I'm doing that for my own reasons, but don't expect them to do grunt work, like emptying the dishwasher for, for not getting [00:13:00] paid.
You know, if it's something that you'd pay someone else to do and see about paying your kids. You know, um, don't bribe them. Don't extort them. Don't say, if you do this, I'll give you that, you know, don't pay them for grades because grades are something that we do for ourselves, you know, uh, be careful about how you use money.
Don't bribe your children, uh, never, ever, ever use money as a form of punishment where you take money away from them for doing something that is, that is wrong. They're, uh, you know, going back to the decisions based model, if you frame up choices, And there are consequences for each one of those choices and you frame it correctly.
The choice they make will lead to a negative outcome if they choose the wrong choice and there will be a consequence that you don't have to enforce. So you don't have to be the bad actor in the situation. So again, you know, don't, don't use money as a form of discipline. Those are, those are kind of the, the, some of the mistakes that I have made and some of the, some of the temptations.
Are there around parenting with money. I
Nate Reineke: [00:13:58] love that word that you said temptation [00:14:00] because I've fallen into that trap before. It's very easy. You know, there's a reason people extort other people it's quick gets the job done, but it's long lasting has negative effects. And I really like that. The idea of not talking about college too soon, because in a way red ball blue ball is about college.
It's a building block. Right. And they're just not prepared for that yet. So it's not little decision on our
Ben Utley: [00:14:23] way to a big decision. You know, kindergarten is a, is, uh, you know, the predecessor of first grade. And so we, you know, all of our education builds on it. And so why shouldn't our decision framework built on it until we get to a natural decision about money,
Nate Reineke: [00:14:35] right?
Mm. Yeah. Well, so what can. What can parents actually do? Like, I think for, for me and you, this, this may seem straightforward because we think about money in our daily lives. It's at work. So we see these opportunities. What are some opportunities that maybe for someone who wasn't taught about money as at a young age, or it [00:15:00] doesn't talk about money with their family whole lot.
What can parents actually do to teach their kids about money day to day? Yeah.
Ben Utley: [00:15:08] I think the thing to do is just to involve your kids and stuff. You know, imagine that it's a, a thousand years ago, we're, uh, you know, we're weaving baskets and we're hunting. We wouldn't leave our kids at home for the lions to eat.
We take them with us, we'd teach them the hunt. We'd teach them weave baskets. Right. So we'd teach them all that stuff. We would involve them on a daily basis in those tasks of daily living those life skills, money is a life skill just like that. So when you go to the store and you're S you're staring at the, uh, At the breakfast cereal shelf.
And you've got, you know, uh, the televised version of the CEO right in front of you. And then you've got the off-brand down below on the, on the shelves, you know, what's going on, you know, they're, they're working you at the grocery store, show your kid what they're doing, show them the price per unit. Uh, show them the difference in, you know, what you get, show them how thin the box is and how wide the picture is so that they can see that, oh, there's advertising at play here.
Show them [00:16:00] stuff like that. If they walk in and you're paying bills. Show them what it looks like to pay bills, give them a tour of the inside of your bank account. Um, uh, not too long ago, I was, I was freezing my credit and reviewing my credit history. My daughter comes in and she's like, what are you doing?
I'm like, well, I'm reviewing my credit history. She said, what's that? And I said, well, believe it or not, there's a file that these companies keep on everything that I've done with my card. She's like really? And I said, yeah, I said, it's kind of like a report card and I've never gotten to read it. They just keep it on me.
She's like, that's creepy. I'm like, absolutely that's creepy. And so I told her, you know, about what it means to pay your bills on time. And if you don't pay your bills on time that, you know, these people would a bad note in your file. And you know, it really made a lot of sense to her. And before that she had no idea about credit history.
And so this is a discussion we have. I guess it was a couple of years ago, uh, when she was about 15 and you can teach a 15 year old about credit and credit history. You can teach a kid who's, you know, a fourth grader or a third grader. You can teach them a little bit about budgeting. You can teach [00:17:00] them about spending a kid who's in high school.
You can start to teach them about getting a job and what a wages and, uh, you know, when they're, when they're 17, 18 years old, you can teach them to follow their own tax return. I, my, my kid's father owned taxes because we sat down and walked them through it. Uh, y'all need to teach them to write a check.
If you're opening a bank account for them, have them go to the bank with you, like have them be with you. As you touch money and use it as an opportunity to exert leadership in your household, because the way that you handle money, the things that you do with it are going to be a election of the values that you have inside.
If thrift is a value, then you'll spend money. One way. If status is value, then you'll spend money another way and being aware of those values. And teaching them to your children is very important. It's going to be part of how they're going to interact with the world. So as you're doing things, become aware of what you're doing, become aware of the messages that you're giving your children [00:18:00] implicitly, and, and think on this as a moment of leadership where you can train them and show them the way that you hope that they will show up in the way.
So, you know, it was great to get Margie's question. Um, I would love to hear questions from other listeners. It's really easy to drop us a line. You can visit physician, family.com, click on podcasts, and there you can actually record a question live on our website. You can, uh, email us a question. If you like, that'd be podcasts at physician, family.com.
Nate we'll, we'll read it in as best voice to sound like you, uh, or you can call our answer line, which is 5 0 3 3 0 8 8 7 3 3. Thank you very much, Margie. Once again, that is 5 0 3 3 0 8 8 7 3 3.
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