Like respecting your elders or covering your mouth when you sneeze, understanding how money works is a skill best learned when young. Because no one wants to raise a kid who’s a jerk to grandma, sprays boogers all over strangers, or believes that money is fun paper with faces born from Daddy’s back pocket. A well-rounded member of society this does not make.
Jonathan DeYoe came from a family that “had no money” but his parents instilled in him the value of a dollar. Now a successful wealth management expert and the author of Mindful Money: Simple Practices for Reaching Your Financial Goals and Increasing Your Happiness Dividend, DeYoe has some tips for not only teaching children the hard work making money entails but also how to invest, save, and — most of all — understand it.
READ MORE: The Fatherly Guide to Allowances
Grow A Garden
You can start talking to your kids about money about as soon as your kids learn how to walk. “Preschool is probably too young to learn money lessons,” DeYoe admits, “but you can learn life lessons.”
His advice? Grow a garden. And no, this isn’t some wishy-washy metaphor: he suggests growing an actual garden. The act of raising plants, DeYoe says, is a lot like investing money: “It’s a lot of work, and you don’t get anything from it for a long time,” he says. But it teaches patience, hard work, and how to deal with the smell of manure.
If possible, DeYoe says your kids should keep gardening while in high school. Because when they start learning about economics and stocks, they’ll start connecting it to how those little seeds they planted grew into something bigger. Plus, you get free labor. So it’s a win-win.
Make Their Allowance Work Overtime
When should kids first experience cold hard cash? “As start as they learn how to make change,” says DeYoe. For him, that meant giving his kids an allowance when they were 7. But that doesn’t mean he just shoved a crumpled $5 bill in their hands. DeYoe taught them how to save.
His kids split their money into “spend”, “save” and “gift” pots. When they want something big, he talks to them about why they really want it. If they do, they have to save to get it – which means they have to decide if it’s worth delaying impulse purchases or if true happiness comes from shoving every piece of candy you can find into your mouth the second you get your allowance.
No, this doesn’t mean DeYoe never buys them anything. But if they want something big, they at least have to practice saving up to contribute. So, if you kids want iPhones, DeYoe says you don’t make them save up their $5 allowances for the next 4 years. Instead, you make them save up for part of it and cover the rest. In the process, your kids start to understand what saving money entails.
Break Out The Board Games
Yes, spending an afternoon learning the ins and outs of free parking from Rich Uncle Pennybags teaches money skills (and how to buy your way out of jail). But DeYoe says the lessons are best learned if you get your kids to play a resource management game such as Puerto Rico.
Why? Such games provide them with a more diverse skillset. When they decide whether to use their coins to farms or refineries, they’re learning how to invest. When they decide between quick payouts and gradual ones, they’re learning to compare income returns to time costs. And when their dad flips the board and says this game is stupid anyway, they learn a valuable negotiating tactic.
Put Them To Work
DeYoe credits his success to the fact that he had his first job at the age of 12. And he made his son follow in his footsteps. No, that doesn’t mean he got his son a sewing kit and the Children’s Guide to Making Air Jordans. Rather, he let his son sweep the neighbors’ pool for a couple bucks.
Such small jobs teach kids a lot about expenses and profits – especially if you talk about it with them. For instance, DeYoe’s son has learned to calculate how long it takes him to sweep a pool and compare it to the return he gets, which is helping him understand how to judge work contracts. And that’s the idea: it’s not just about getting your kid to understand that money comes from labor. It’s about talking to them and helping them understand how money works as they experience it first-hand.
Make Them Invest Their Money
DeYoe’s son earned $400 the first year he worked and his son contributed his entire earnings to his Roth IRA. He also made his son do his taxes, register as an independent contractor, and pay every expense he owed to the government.
Now, DeYoe paid his son back every cent he gave to the government and his son still had $400 to blow on Magic the Gathering cards. But now he knows how to do all of this — and sees how well-invested money get larger. “He sees the growth relative to his savings account,” DeYoe told us, “and the growth is incredible.”
Talk To Them About It
At the end of the day (or close of the market), DeYoe says the most important thing is just to be open about money. This doesn’t mean your toddler should be playing with a “My First Wall-Street” playset. But your kids should understand what decisions you’re making and why you’re making them. Especially the hard times, and especially your mistakes.
DeYoe says that the best thing he’s done for his kids is telling them about his failures. “I’ve made some really stupid mistakes,” he admits. And when he does, his kids pay more attention – because now it’s a vulnerable confession instead of a criticism, and kids are more open to that. Or, as DeYoe puts it, “He starts to get it because his dad is an idiot.”
“They will laugh at you. They might actually bring it up,” he says. “But maybe they’ll avoid that when they’re in high school. They’ll learn from them.”