How do we talk to kids about money?
How do we talk about the taboo topic of money with our children?
How do we make sure that the kids are not rotten spoiled?
Both Ron Lieber in The Opposite of Spoiled and Robert Kiyosaki in A students work for C students and B students work for the Government explore strategies when it comes to talking to your kids about money and keeping them grounded.
Today's educational system prepares children for specialized careers, but not for financial freedom or building wealth. Kiyosaki argues that the imperative is on parents to do the teaching. Leiber argues that two deficits and two surpluses create a spoiled child: Lack of a) chores and b) schedules and too much c) attention from parents and d) material possessions.
Kiyosaki says a good time to talk to kids about money is when they are able to differentiate between and a 1 and 5 dollar bill. Talking to children early about money takes advantage of quantum learning, the period in their lives where learning requires minimal or no effort.
When children reach young adulthood and need to make a decision about what to do with their life, it is equally valuable to discuss what kind of cashflow quadrant they want to play in. Kiyosaki describes that a steady paycheck, in which you trade time for money, is what the school system prepares your children for.
As a result, students are typically in the "E" quadrant, which is an employee. Most people are here. Say your child is type A and an A student. They are likely to fall into the "S" quadrant which is a small business which includes specialists like physicians and lawyers. "B" students are ones that go towards entreprenuership and "I" students are investors who make it big like Warren Buffet.
Kiyosaki supports playing games like Monopoly in order to teach children about passive income, the only type of income that will give you financial freedom. If kids don't buy the houses in the game to provide a steady source of cash, they cannot win.
We know that play is essential in learning for children. Consider making discussions about money more fun by pairing it with another pleasurable activity for a child, like an ice cream cone, traveling to a new place, or right before you allow some screen time.
Once a week you could also incorporate a financial education night. Protected time on the topic ensures it gets done.
Sharing your own financial concerns at even the highest level could prove beneficial. One of the key tenets of a financial education is to be honest with your children about how much money the household makes. A taboo, uncomfortable, and embarrassing situation for most. Often times, it is the child that brings up the question. As discussed in The Opposite of Spoiled, children often have an ulterior motive in asking about the family's finances that may stem from fear (e.g. are we poor may mean do we have to move houses) or even altruism (do we have enough money to help someone).
There is a difference between financial advice and a financial education. Financial advice leaves you helpless to the insights of people who are as clueless about the economic future as you are. Financial education, however, is where children study how things work in capitalist economies and figure out what they want to do from their experiences.
One way to expose children to this is by encouraging them to take up a free internship or emailing various start-ups of interest to do free work. The learning is more valuable than any money that could be offered by working at a more traditional summer side gig.
"A salary monetizes once. Knowledge monetizes for life." -Tom Bilyeu, entrepreneur
But not every place in this world has opportunities. If that's your child's case, then even taking that traditional summer side gig (like working in a restaurant) and deciding to level up the experience by understanding how that business works is also equally valuable.
Teaching children about the differences between what they want and what they need is important in learning how to value money. Lieber suggests using the Dewey rule, where your child will be in the 30th percentile of getting any kind of stuff. If she wants a new gadget, she will be 7th in a line of 10 amongst her friends to receive it. This is one strategy in teaching children about delayed gratification, patience, and knowing that stuff is just stuff. By the time they wait for that item, a new thing might have caught their fancy or they forget about it altogether.
Kiyosaki argues that "E" and "S" students are made into specialists, while "B" and "I" students have more generalist skills and knowledge. As mentioned, the "B" and "I" students ultimately win out in the capitalist economy despite having lower grades in school, a system designed to reward specialization and linear progress.
"B" and "I" students succeed due to broad-based, experiential knowledge. They learn by practicing and doing, and ultimately have a tacit set of cognitive tools they rely on in order to outsmart the competitor and the system.
I would argue that in our children's world, you will need a combination of skills in order to succeed in our rigid educational model to an extent and then have the confidence to unconventionally pursue the areas that spark interest.
One way to get your children involved in broader knowledge processing is to encourage them to think about investing as an intellectual exercise. Putting some money in the stock market and watching it go up and down is gambling.
But having your child really understand the business of a publicly-traded corporation which makes its metrics and business values public, she or he can put some money into that stock with real knowledge to back them up.