Ep 312 | 17 Financial Lessons to Teach Your Kids - Part 1

Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. If you're like me, you probably have some kids that are on summer break at this very moment and are spending a little bit more time around the house. If you don't have kids hanging out around the house, you probably know of some kids that have a lot more free time at this very moment because it is summertime. For me, the opportunity to spend more time with the kids is great. And at this very moment, I have my older daughter Avery, who's 13, working in my office every morning from, from 8 to 12. Doing all sorts of things. She's actually a hell of an assistant right now. And she is, you know, at 13, she can, she can do an awful lot. And she's doing great. But I have an opportunity to spend more time with her. And Katie, my younger one, I'm just seeing her more frequently because while they're still dancing, and if you followed the podcast, you know, I'm a dance dad. While they're still dancing, they are still around right now a lot more because they're not going to school from 7 to 2 or 7 to 3. That being the case, I think that with this— with more time to spend together, there are opportunities to teach the kids more about finance. There are 17 essential financial lessons that I think we could be teaching our kids, and I'm not going to cover all 17. We're going to make this a few-part series, probably spread it out. But today I want to give you the first 6, the first 6 essential financial lessons for children, things that I think we could be teaching our kids, or if you don't have kids, teaching the young people in your life, teaching them about so that when they are of age, they have some sort of foundational knowledge from which to build. I think too many kids enter this world today financially illiterate. And it's our job as adults, as parents, as aunts and uncles, to educate, to educate those that are coming after us. We may have not been raised that way, but that doesn't mean we don't, we don't owe it to the next generation behind us. So on that note, let's go through the 6 lessons that I want to discuss today. And like I said, we'll save the remaining 11 for future, future episodes. So number 1, lesson number 1: kids need to understand— children need to understand the difference between assets and liabilities. Assets are things you own that are worth something. Liabilities are promises to give someone something in the future. So we have to teach them between assets, the difference between assets and liabilities. How do you maybe teach this lesson? What I would recommend is quizzing your kids whenever you come across an asset or a liability. For example, see that house over there? Is that an asset or a liability? Let them answer. How about the bill that's sitting on the counter, the kitchen counter right now? Asset or liability? Let them answer. So teach them what an asset is, teach them what a liability is, and then quiz them as you go about operating in the real world. One idea for you, there's a game called Cash Flow for Kids. Just Google it. You can buy it. It's a Rich Dad Poor Dad game, Cash Flow for Kids. Also, I think Monopoly is a good game just to let them see what money and buying properties and putting houses on those properties and having bills. I think it's just a good way to play that asset liability game and have that conversation. So lesson number 1, assets and liabilities. Lesson number 2, income versus expensive— expenses. Income is the money that you receive or earn. Expenses are the things you spend money on. So we want to teach them what income looks like. We want to teach them what expenses looks like. Now, one way to teach this lesson is to pay your kid say $10 or $20 or whatever it may be to do their chores. Then take them shopping to spend a portion of that $10 or that $20. Now you could explain the income versus expense process. One way to demonstrate, I think, income versus expenses in like a real fire live play sort of way is to consider using cash more often, like you personally use cash more often, to demonstrate the outflow of money. I think we use cards or even our phone to pay and it, we can explain it, sure, but I think the exchange of physical dollar bills is a better, better demonstration. So, teach them income versus expenses. Number 3, Number 3 lesson, there are many ways to earn income. That's the lesson. We got to teach them that there's many ways to earn income. Most people earn money as an employee working for a company or working for the government or working for the military, and you're trading your time for money. So before you spend, say, $30 at a store, ask yourself, how long does it take me to make $30? Do I really want to trade that amount of time on this? This is the lesson that you're in fact teaching. How do you teach this lesson to your kids? Open a lemonade stand or pay your kids to do some sort of real work for your personal business. Show them the time for money trade-off. The action item here, bring your kid to work with you one day and explain how income is being earned. So, teach them about income and that there is in fact many ways to earn income. Now, next lesson, spend less now. Spend less right now to have a bigger life later. Spend less money now to have a bigger life later. The less money you spend, the more you can save and invest, and that's the lesson. The phrase live below your means, it, you know, it means don't spend every dollar that you make, and you need to explain this to kids. As a lesson. So, a way to teach this lesson, next time you have to make a personal decision to save instead of spend, share this story, share this experience with the child. Explain the situation, explain the options available to you, the feelings you had, and the decision that was in fact made. Now, an action item for you, after having dinner at a restaurant, have your kids take note of the cost of the meal, and then head to the grocery store, Have them shop for the ingredients that was in their meal. Have them calculate the cost of the ingredients and compare it to what you were charged at the restaurant. Really, really valuable lesson. Maybe one that we should all experience as well. It might be a pretty sobering lesson for us as well. So, that's lesson number 4. Lesson number 5, teach them about compound interest. Teach them about compound interest. Have $100 in your piggy bank. It earns 10% interest every year. Year 1, you now have $110,000, so on and so forth. Year 2, you have $121,000. You can do the math, but teach them about compound interest. How do you teach this lesson? I would tell you, go to a compound interest calculator like Dave Ramsey's calculator or the one at investor.gov and just plug numbers in there and let them see what compound interest looks like. An action item for you, do that doubling the penny exercise. Ask if they'd rather have $1 million today or the total that you'd have after doubling a penny, um, in, in 30 days. So doubling it, doubling that money every day, that, that comes out to about $5.4 million. So if you ask how much would you have if you saved that money in a piggy bank instead of investing it, that's the difference between saving and investing. That's the question to ask. Lesson number 5, again, compound interest. A couple more lessons here in part 1. I want to go to lesson number 6. Lesson number 6 is that bad health habits will wreck your money situation. This is not one that usually shows up, but I think it's an important one for us to teach. So financial lesson number 6 for the kids: bad health habits will wreck your money situation. Say no to cigarettes, to vaping, the alcohol, fast food, delivery pizza, daily trips to the coffee shop, so that you can say yes to buying things that are more important later. How do you teach this? Next time you go to Starbucks, point to your daily coffee order and ask your child to calculate how much you'd save if you stopped drinking that pumpkin spice latte with cold foam and all those things for, say, the next 30 days. So if I didn't spend money on this coffee for the next 30 days, how much money would I save? It's a great way to teach the lesson. Lesson number 7, the last one we're going to be discussing for today. Lesson number 7 is that you're not too good for coupons and buying things on sale. You're not too good for coupons and buying things on sale. This is a financial lesson I think the kids need to hear. They shouldn't be embarrassed by using coupons and sales. They should, they should shop for discounts on everything they buy. They should ask for discounts even if they think they'll say no. Saving money is as important as making money. So how do you teach this lesson? Show them a coupon that you're using and show them how much you're saving. Ask them how much time it takes to earn that much money. So the action item might be to install RetailMeNot or any of those other coupon companies on your browser and, and start making a habit out of using coupons. So that they can see you bargain shopping. So 7 lessons, there's 17 total. We will discuss others in future episodes, but I think this summer you have some more time with the kids. Teach them some financial lessons in addition to having fun. I think it is fun talking finances if in fact they're engaged, but don't overwhelm them. Let's bring them along, maybe make this dinner table conversation or breakfast conversation or whatever it may be, I think is a really, really great way to separate your kids from the pack and to set them up foundationally with respect to their financial knowledge. That's all I have for you today, the No Days Off Podcast. Thank you so much for listening. And remember, every single day brings a new opportunity to get better. So let's get after it.