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10 Tips for Teaching Kids About Money

Children learn the basics in grade school: reading, writing, and arithmetic. They learn a whole lot more, as well. However, most schools do not require any instruction about money. If they do offer a class, it may be an elective in high school, long after kids form their habits.

Financial professionals widely agree that it’s important to start talking about finances early, when kids are young. You can begin to share your values and help them shape their views on money in a culture that places a premium on “things” rather than savings.

While we can’t shelter our children, we can teach them. Here is a guide of practical tips that could help you put your kids on the right path.

1. Teach delayed gratification. This is the hard part. Some of us are better at it than others, but few have truly mastered the art of patience.

Look at it another way for kids: Anticipation can be half the fun! It’s the journey. Think about it – your kids await the arrival of Santa, or the excitement that precedes going to an amusement park, or an upcoming family outing.

If they want to buy an expensive item, help them save for it. You can lend support by setting up various methods for savings. We all remember the piggy bank. Money goes in, but never really comes out. Instead, you might set up three jars: one for savings, one for giving, and one for spending.

2. Incorporate giving it away. The “giving jar” may be as important, if not more important, than the “savings jar.”

Do your children have a cause that resonates in their hearts? Do they want to give to their church? Is there a local food bank or animal shelter your daughter or son can assist with donations?

Learning to let go and help those who are in need creates a stronger sense of altruism and selflessness that, if taught early, will blossom in them as adults.

When it comes to charity, let their treasure follow their heart.

3. Kids need money. Theory without practice won’t work. Kids need a hands-on lesson. You may start with an allowance – you may pay kids for various chores, for example – or simply provide them a regular sum. That’s a parenting preference, and there are advantages to both.

What is an appropriate allowance? According to a study by T. Rowe Price and referenced by author Rebecca Lake on the website The Balance, the average weekly allowance for a 4-year-old is $3.76. At 8 years of age, an allowance averages $7.27 per week. At 12, the allowance is $9.85. At 14, $12.26. [Source:]

The study offers reasonable guidelines, but you may adjust at your discretion.

What about birthday gifts, Christmas gifts, etc.? Set goals with your children, but lean toward their savings with these larger gifts. The annual gifts will add up over the years. Your kids could graduate from high school with a tidy sum of cash if they develop the discipline to save.

4. Teach by example. You may remember a time that you paid for your purchase at the gasoline pump, got back into your car, and drove away.

Your young daughter may have accused you of stealing! This is a teachable moment.

She understands the idea that “what’s not ours isn’t ours,” but she doesn’t yet grasp the concept of “plastic money.”

Explain how you paid without going into the store. Discuss the concept of a credit card. Emphasize you always pay for these purchases at the end of each month. Impart both the benefits and dangers of credit cards. This will be a lifetime lesson.

In addition, consider using lists when shopping. Your children will see that it helps avoid impulse buying. And as kids grow older and the discussions are age-appropriate, explain why you try to avoid impulse purchases.

Use various examples from your life when you teach your kids about the importance of money and savings.

5. Encourage summer and after-school jobs. Trading time for cash via a job helps kids learn the invaluable lesson of hard work. It also supplements savings and provides spending money.

Cutting the neighbor’s grass, shoveling their snow, doing yard work, operating a lemonade stand, babysitting, helping in the family business, working retail, doing household chores, or acting as a lifeguard are options.

Besides the extra cash, they will learn a strong sense of pride and responsibility that will carry over into adulthood.

6. Open a savings account. Not too many years ago, a savings account earned a respectable interest rate. Although that’s currently not the case, a savings account helps kids learn.

A 5-year-old may not need a savings account, but adulthood isn’t far away for a pre-teen or teen. As young adults, they will have a checking account, debit card, and eventually a credit card. Small steps in the right direction will ease the transition.

As they grow older, discuss the benefits of investing with your kids. Outside of a college savings account, you may open an account in their name and teach them about investing. You could start it with seed money and have them contribute on a regular basis. More importantly, help them buy into a savings goal. That way, they will take ownership.

If you’re unsure about how to start the process, speak with your financial advisor.

7. There’s an app for that. Today, mobile apps that can help kids. Apps like Bankaroo, iAllowance, and PiggyBot are just a few. Feel free to look online for one you feel is most appropriate for your child.

8. Guide them with goal setting. Are they trying to save for something? Help them come up with a plan and incentivize with matching funds. Companies do this with 401(k) plans – parents can, too.

Discuss the importance of needs versus wants. A teenager may need a bicycle. But do they need one with all the bells and whistles? Or are there reasonably priced bikes that won’t bust the savings account?

9. Money isn’t everything. Yes, it’s important. It gives us choices. But by itself, money can’t buy happiness.

10. Let them make mistakes. Alessandra Malito, a reporter for the website MarketWatch, refers to a paper by Ashley LeBaron, a graduate student at the University of Arizona. LeBaron said, “Let them make mistakes so you can help them learn from them, and help them develop habits before they’re on their own, when the consequences are a lot bigger and they’re dealing with larger amounts of money.” [Source:]

Not surprisingly, LeBaron’s research showed those who had practical experience with money while young learned how to work hard, better manage money, and spend it wisely.

That may be the most important desired outcome.

Navigating global headlines

Last month’s letter included the following sentence: “Investors remain optimistic that U.S. and Chinese trade negotiators will come to terms on an ever-elusive trade agreement.” Unfortunately, “ever-elusive” continues to be the operative term.

On May 5, 2019, President Trump surprised investors by tweeting that tariffs on some Chinese imports would rise from 10%-25%. Why? According to several news reports, China had backed away from previously agreed-upon terms.

Not surprisingly, China retaliated and there has been no shortage of incendiary rhetoric between the two economic powers.

At month’s end, President Trump surprised everyone by levying new tariffs on Mexico. His stated plan is that all goods will be subject to a 5% duty, rising to 25% in October unless Mexico gets a handle on the surge in migrants coming into the U.S.

The announcement of a new barrier between Mexico, which is the 2nd largest U.S. trading partner behind Canada (Source: U.S. BEA), was nothing short of a bombshell that further exacerbated economic uncertainty.

Still, selling in the stock market has been relatively subdued, with the broad-based S&P 500 Index down less than 7% from the April 30, 2019 high. Placed in a historical context, the average maximum annual peak-to-trough drop in the S&P 500 Index from 1980–2018 has been nearly 14% (Source: St. Louis Federal Reserve).

Today, investors unsure how to address uncertain economic activity going forward may have the short-term reaction to move away from stocks and into the relative safety of Treasury bonds.

The situation is fluid right now. Best case Chinese scenario appears to be an enforceable deal that helps level the playing field and protects U.S. technology and intellectual property. More likely, negotiations will drag on for months, and investors will be forced to adjust to a new normal. It’s not optimal, but it is reality.

Additionally, the threat of tariffs on Mexico seems sub-optimal from an investing and economic perspective.

What to do

Control what you can control.

You can’t control the stock market, you can’t control headlines, and timing the market isn’t a realistic approach. But, you can control your portfolio with your investment advisor’s guidance.

Your plan should consider your time horizon, risk tolerance, and financial goals. There is always risk when investing, but your advisor should tailor recommendations with your financial goals in mind.

Your financial plan should be designed to remove or minimize the emotional component – the one that encourages the average investor to sell near the bottom out of fear, and encourages greedy buying when stocks are soaring.

Table 1: Key Index Returns*

MTD % YTD % 3-year** %

Dow Jones Industrial Average -6.7 6.4 11.6

NASDAQ Composite -7.9 12.3 14.6

S&P 500 Index -6.6 9.8 9.5

Russell 2000 Index -7.9 8.7 8.3

MSCI World ex-USA*** -5.3 6.3 3.0

MSCI Emerging Markets*** -7.5 3.3 7.3

Bloomberg Barclays US

Aggregate Bond TR 1.8 4.8 2.5

Sources: Wall Street Journal,, Morningstar, MarketWatch

MTD: returns: Apr 30, 2019-May 31, 2019

YTD returns: Dec 31, 2018-May 31, 2019

*It is not possible to invest directly into an index.


***in US dollars

If you’re feeling unsure or have questions, contact your financial advisor.

Researched and drafted by Charles Sherry and Horsesmouth.

Provided by,

David S. Toeppe, AIF®, CFS®, PPC®

Financial Planner

P.S. As your advisor, I am here for you. If you or they have any questions, please contact me. Send me an email at or give me a call at 734-915-1417.

Securities offered through Sigma Financial Corporation, member FINRA / SIPC Fee-based investment advisory services offered through Sigma Planning Corporation, a registered investment advisor. Financial Stewardship Partners is independent of Sigma Financial Corporation and SPC.

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