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Ten Things I Will Teach My Children About Money

This article was written by in Best Of, Personal Finance. 27 comments.


I do not currently have children, but I have not ruled out starting a family some day. If and when I do have children, I hope I will be able to help them become smart and capable adults over time. I believe this is what my parents have done for me, and I’d like to believe I’m in a position to pass on good attitudes about money.

Here are a few concepts I’d like to teach these future children about money as they become old enough to understand them.

I intend to teach as much by example as by conversation with the understanding that no person is perfect.

1. Money is neither good nor evil. Money is simply a tool, with no quality that defines it as good or evil. It can, however, be used to do good things or evil things. Money does help reveal the nature of a person. There is nothing inherently bad about not having little wealth or having great wealth. The value of a person is not defined by how much money he or she has, so you cannot judge a person by looking at the bank account statements.

2. Money is not a goal. There is no point in wanting to have one million dollars, or any sum of wealth that might make a good milestone, if it servers no purpose other than to sit in a bank account or at the bottom of a balance sheet. Focus on real goals, not net worth. Don’t be the boy who, when asked what he wants to be when he grows up, answers, “Rich.” It’s not the number that counts, it’s what you do with it.

3. Money will not make you happy. Money is not correlated to happiness. Rich people aren’t necessarily happier than poor people. In fact, wealthy people are more stressed. The happiest people are those who are satisfied with what they have; if you always want more, you will always be struggling. Now, there will be people who will tell you that you must constantly strive for more in order to be successful, but these are people who equate success with things like job title, wealth, and seeing their name on seminar advertisement posters. They’re probably not happy. It’s okay not to settle, but only if your goals are worthwhile.

4. Don’t be jealous of other people’s money. There will always be people who have more money than you, but there will always be many more people who have less. If you learn to handle your money properly, you will find that you’re more financially secure than others who try hard to flaunt their wealth; those with fancy cars and houses may owe money to other people and to banks. Jealousy is a distracting emotion, so it’s better for your own sanity to worry about yourself than it is to look at other people, especially when you can only see what they are showing on the surface.

5. If you are in a position to help, you have an obligation to help. As I mentioned above, at any one time it is more likely you’ll be in a better financial position than most of the other people who live on this planet. You are lucky to be born in a rich country in a very prosperous time. Though it is no fault of your own, these circumstances present the responsibility of helping to make this world a better place in whatever way you see fit.

6. Companies want your money. Corporations spend lots of their own money trying to develop ways to get you to give your money to them. Don’t believe what you see in commercials, on television shows, in movies, on the internet, or even on the news. Everyone has an angle and that angle is often to try to get you to part with your money. It’s a cynical view of media and of the world, but turn off the commercials and think for yourself. Increase the signal-to-noise ratio.

7. Pay attention to your money. Once you start receiving an allowance, create a budget. Save part of the money and spend the rest as you see fit, but write out a budget and track everything you buy. This is a good habit to start early. If you’re paying attention, you’ll soon realize that the only situation that results in building your wealth is spending less than you have.

8. Don’t expect a free lunch. I will do everything in my power to ensure that lots of opportunities are available to you, but our culture within the “middle class” is defined by trading your time and effort for money. In other words, you get paid for working and you get paid better for working harder. You’re not a Bush, so you won’t get to be President of the United States because it runs in our family. There is no trust fund.

9. Save as much as you can for later. Even though Albert Einstein never really said that compound interest is the strongest force in the universe, he probably would suggest saving as much money as possible. It is true that the sooner you can control your actions to delay gratification, the better you can plan for the future. But it is also true that spending money shouldn’t always illicit a feeling of gratification. Feel good about saving, then you can feel gratified when you put money in the bank, not when you take it out.

10. Avoid borrowing money. Just like money is inherently neither good nor evil, owing money to other people is inherently neither good nor evil. Borrowing money has its drawbacks. Any purchase you finance with interest will end up costing more than it should. However, within the “middle class,” it will be difficult to avoid some borrowing. Not all debt has to be bad. You may need a loan for college and you almost definitely will need a mortgage to buy a house. Make smart choices about these purchases and you’ll be in a good position even if you do have debt.

11 (bonus). It’s not about the money. While money gives you flexibility and eventually independence, don’t spend too much of your time focusing on it. Realize that money should not be the sole driver for your decisions. Many smart people will tell you about “return on investment” (ROI), but sometimes you can’t measure the validity of a decision by how much money you receive. Think about all factors when making decisions. Some decisions, like those pertaining to investments, should be based on financial considerations as much as possible. But for other decisions pertaining to your life, money should be only one consideration of many.

Do you disagree with any of the above lessons? What do or will you teach your children about money? Is there anything else you wish your parents had taught you?

Updated February 27, 2010 and originally published September 28, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 27 comments… read them below or add one }

avatar nickel

I think you covered it pretty well. Nice job. Regarding #3, our (then) eight year old (currently nine) once told me that he might want to be a millionaire “someday,” but not right now because then all he’d do is worry about his money. :)

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avatar Jason @ Redeeming Riches

Great post! I think you hit it on the head with these.

I’ve got 2 small children, but as they grow I want to stress the importance of #5. I’d like them to understand that we should be conduits with our money. If we are blessed with money we should be a blessing to others as much as we can.

If they get that being generous will bring them more joy than hoarding it, that will be a great lesson learned!

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avatar ZFarls

Cute article, Even got a Bush Jab in there. Start brainwashing your kids young. Funny, didn’t make an obama reference when saying don’t be jealous of other peoples money or no such thing as a free lunch. Not if the gov’t has anything to say about it.

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avatar PT

Good stuff, Flexo. Your kids will be lucky to have such a financially responsible and knowledgable parent. I agree with your points about borrowing and about how to view money. For my kids, I’d change the language a bit on #5 from obligation to opportunity.

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avatar Jen @ After The Alter

Great points! I believe in all of these. My parents taught me the value of a dollar and I think it’s very important to be debt free, and to have savings. My husband (my journey to millions) and I worked very hard to be debt fee, and now that we are we are working very hard at our savings. Our frugality now will help us in the future. (PS he had a great time meeting you on Saturday)

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avatar David@DINKS Finance

I’m not sure how I feel about your first point. Money IS NOT evil in any way. You have to remember what money represents, and that is what you should teach your children. It is a means of trade – instead of trading an apple for an orange it represents value that can be traded. I just finished “Atlas Shrugged” a few weeks ago and I have to say Francisco D’Anconia’s “money speech” is one of the best explanations of money I have ever heard. Google it, reflect on it, and teach your kids money is NOT the root of all evil!

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avatar Apex

I regularily see this reference to money being the root of all evil or not being so.

Who says this (other than a reference in Atlas Shrugged)?

If you are referring to the Biblical reference it’s worth noting that is the LOVE of money being the root of all evil, not money itself. And those are two very different things.

The LOVE of money is being addressed more by point #2 where money is not a goal. Don’t love money, if you do, it will probably make you do some stupid and crazy things, maybe even some evil things.

But I don’t see much of a belief in the world today that money itself is the root of evil (I am sure you can find a fringe minority who think anything).

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avatar Luke Landes ♦127,485 (Platinum)

David: I’m confused by your comment. I said money is neither good nor evil. We agree.

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avatar Kelly

Great post. So many of these things are taught by the actions of parents. I find a lot of my own ‘baggage’ and emotional issues with money and what it means were learned by watching my parent’s actions. Some of those lessons were very good, and have served me well, while others, well not so much.

If you do have children they will certainly reap the rewards of your hard work, and thought beforehand.

ZFarls, I don’t think that’s a jab at the Bushes at all. They DO have a lot of money. Change the name to Rockefeller, or Kennedy, and you still have the same conclusion. We elect the president, and his term is only 4 years, so our kids will have plenty of time to see changes in the government, and their policies/laws. These lessons are bigger than any 4 year term.

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avatar Apex

You aren’t paying attention if you don’t think that was a jab.

The Bush reference wasn’t about money. It was about him getting his position on family name only. Note: “so you won’t get to be President of the United States because it runs in our family.”

And you are correct that could be applied to Kennedy’s as much as Bush. In fact even more so as the concept of being elected running in the family is much more prevalent there. Yet it was Bush who was used, and that was by design.

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avatar Luke Landes ♦127,485 (Platinum)

Yes it was a jab at Bush. He’s definitely the best recent example of significant political power flowing through family lines, regardless of party affiliation. This surely happens with Democrats as well as Republicans, but naming Kennedy or Rockefeller wouldn’t have made the point as crisply in my opinion.

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avatar Craig

I like your tip that money is not a goal, it’s a tool to help you do more things you would like. Money can make you happy but doesn’t have to. Follow your passions, work hard and you will see the results.

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avatar Jason @ MyMoneyMinute

A co-worker & I were just talking about parents and “preparing” them for Kindergarten. He wanted his kids to be reading and be able to adjust well to being in school every day. So he & his wife intentionally made time to read and train their twin daughters almost on a nightly basis.

I think the overall theme is to be ‘intentional’ in training your children, and teach them to be ‘intentional’ with their actions. Being pro-active, rather than reactive, will squash many money problems before they start. Most of your ideas above speak directly to this creed of being ‘intentional’.

I also love your line, “Money does help reveal the nature of a person.” The intentionality of managing your finances is coupled with developing character in your child. Money is an amplifier of their character, and you did an awesome job of pointing that out.

The only thing I would caution my kids on more extensively is the bondage of debt. While you posted an article on when debt might be an okay thing to do, I think a heavy education on the perils of debt should be focused on, rather than focusing on what MIGHT be an okay thing to do. Humans, let alone kids, are almost ingrained to take the easy way out. By focusing on the enslavement qualities of debt, it forces them to come up with alternative solutions to their lack of money FIRST, rather than relying on debt to take care of it. This is especially true with loaning money for cars and education — something I wasn’t well-educated on in years gone by, and am now learning my lesson one student loan payment at a time for the next 3 decades!

Nice article, keep up the great work Flexo!

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avatar Luke Landes ♦127,485 (Platinum)

Thanks, Jason!

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avatar Financial Samurai

Well said. We don’t need any more Bank of Mom & Dad’s! It makes me sick the entitlement of some kids out there.

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avatar Peter

I couldn’t agree with you more. Sometimes we lose track of what we are here for in this earth in the first place, and your article serves as a prompt for adults too. Thanks for the reminder!

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avatar Daniel

This is an insightful post, thank you for sharing. I’m always saddened to hear how so many people think money will solve their problems. It just doesn’t work like that. Money solves *some* problems and yet it creates others. And it doesn’t solve the problems in life that really matter.

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avatar Gwen

I think it’s important to be careful with this one.

If you are in a position to help, you have an obligation to help.

It took me a while to learn that as a rule of thumb giving money to people doesn’t actually help them. Helping people out of holes they dig themselves into seems to just make them call you next time they dig themselves into a hole. I had a roommate once I needed to get rid of. She couldn’t afford to leave. I coughed up the money for her first month’s rent and security deposit–and I got her out of my house. A month later she called me up. “I got a checking account for the first time in years and I’m overdrawn. Can you help?” That time I flat out said no.

I’ve had many experiences like that, so I just don’t give money to people anymore.

I’m totally game for helping with money other ways, when there’s a surplus. Donating to certain charities seems safe. Volunteering seems safe. Giving food to the food drive seems safe. Teaching the kids to save part of their allowance in the “give to others” box so they can adopt endangered animals seems safe.

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avatar Luke Landes ♦127,485 (Platinum)

Gwen: I think from “If you are in a position to help, you have an obligation to help,” you can take away a wide variety of ways to “help.” It’s not necessarily by giving your money freely to your kids, friends who are in dire straits, or strangers, but there are ways to give back without giving people the idea that they can count on you for some dough whenever they ask.

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avatar Stu

Maybe this suggestion is not exactly in the “teach children” category and is more in the “teach parents” category. Hey parents, let your kids make mistakes early. It will actually save you money because the mistakes get more costly as they grow up. One of the best things my daughter learned was when she bought a toy with her own money. My wife and I thought it was a dumb toy, but we kept our mouths shut. My daughter came to the conclusion on her own that “it is not as much fun as it looks like on TV”. What appeared to be a waste of money was really an investment in her financial education.

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avatar SimplyForties

This is an excellent post. I was all ready to give you my great wisdom on the subject and found I couldn’t think of one thing to add. If you are able to teach your children these lessons they will not only be able to handle their money, they will be good citizens as well; an equally important lesson. Very well done!

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avatar Luke Landes ♦127,485 (Platinum)

Thanks, SimplyForties!

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avatar Roger

An excellent list of advice, and certainly good pieces of advice to pass onto the next generation. I’ll have to pass this advice down to my future children, as well.

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avatar Pat Chiappa

Just having the conversation about money is a great thing to do with kids. Talking about it alone shows a kid that money isn’t scary, evil, good or bad. I am happy to see so many blogs talking about money, budgeting, saving, planning and frugality. An awareness around money, which in my mind was previously an obsession, is a healthy move for us collectively. If we all work on getting out financial acts together – then maybe our government will follow suit.

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avatar Darren

There are so many ways to teach your children about money, but I believe the earlier you start them, the better they will be in the furutre.

The most simplest way to start teaching your child is giving them an allowance. This will enable them to start budgeting, saving and planning for the future.

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avatar Urban Daddy

My oldest boy, now 5 years old, gets a weekly allowance – $5.00. He must divide the money in 3 ways;

At least $1.00 for charity (we have a tin in the kitchen just for that)
Some for his piggy bank for lonh-term savings
The rest in his wallet so he can buy something.

I believe this falls in line with this great post, which I will be sharing with my wife.

Thanks!

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avatar Greg Miliates

These are great lessons, since it’s not really about money, but leading a meaningful life and contributing positively to the world around us.

However, one thing that’s missing is to teach your children entrepreneurship. Building a business involves all the lessons mentioned above, but having your children understand that they can build a business or see you do it yourself is extremely powerful. Successful businesses provide value, and entreprenuership at its best is about improving people’s lives.

I’m self-employed and have 2 children (my son is 10 and my daughter is 7), and it’s extremely important to me to show my kids that building businesses is something that they can do. It’s important to me because having your own business can give you financial freedom, greater flexibility, and the skills to be financially independent, rather than relying on a job for income.

I started my consulting business over 4 years ago, and it’s truly changed my life as well as my family’s. I’ve seen my kids shift their thinking about what they want to be when they grow up, and now they’re talking more about what kinds of businesses they want to have. That perspective is an amazing gift to be able to give my children.

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