Parenting for Financial Freedom: Why Teaching Kids About Money Matters

Instilling Money Management Skills in Children for Early Financial Independence

In this episode of The Retire Early Retire Now podcast, host Hunter Kelly, a certified financial planner, discusses the importance of teaching kids about money management. He shares personal insights and practical tips on how to instill financial literacy in children from a young age. Hunter explains his approach to implementing Dave Ramsey-inspired strategies, such as the four-envelope system for spending, saving, investing, and giving. He emphasizes the benefits of instilling a strong work ethic through chores and consistent practice in both academics and sports. Hunter also discusses the significance of open financial conversations within the family, aiming to raise financially independent children who won't rely on their parents as they grow older.

00:00 Introduction to Teaching Kids About Money

00:21 The Importance of Financial Independence for Kids

01:52 Personal Reflections and Dave Ramsey's Influence

03:10 Implementing the Envelope System

03:24 Teaching Work Ethic Through Chores

04:18 Incorporating Financial Lessons into Daily Life

05:03 The Value of Consistency and Compounding

09:09 Planning for Future Financial Education

10:49 Parental Transparency and Financial Conversations

13:07 Conclusion and Final Thoughts

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Transcript

0:00

And welcome back to The Retire Early Retire Now podcast, where we dive deep into strategies that help high income earners achieve financial freedom sooner, live better, and take control of their retirement. I'm your host, hunter Kelly, certified financial planner and founder of Palm Valley Wealth Management. And in today's episode, we're gonna talk all things teaching kids about money. I think it is, underrated. Achievement that, if you can teach your kids about money and they can be self-sufficient earlier, why would you not be able to retire earlier or become financially free? The last thing you want is them going through college or being reliant on you financially when you're ready to retire, right? And so no better time than the present to start teaching them about money. it's been on my mind a lot. My son is about to start kindergarten. and so I want to not only, get him prepared for kindergarten, but also start instilling some traits like doing chores, things of that nature, but also within that, teaching him about money and how money works, and. investing in, in all these different things that we'll talk about in this podcast today. So, hopefully you find this useful. for those especially that have young kids or even kids in high school, it's never too late to start teaching them about, Making money, spending money, saving money, investing money and giving money, right? And so all the things that make the economy go round and round, and then using that money as a tool, not necessarily making it all about money, or just accumulating money to accumulate, but accumulating that money so that you can do the things that you want to do. Using that money as a tool, like I just said. and so this is essentially what the podcast is about, but, We're, we're gonna talk all things children today, right? one of the things that, I like and, if you've listened to this podcast long enough, you may know this story a little bit, but. I used to be a big fan, or really still am a big fan of Dave Ramsey and his process, he's helped a ton of people get out of debt. while I don't agree with everything that he's ever said, I do agree that his process of the baby steps and, and getting outta debt and everything has helped the vast majority of people and makes it a simple, solution that people can follow. and so it may not be the most efficient, but if you stick to the plan, you will certainly become debt free, and be a lot more wealthier, moving forward, right? he's done a lot of help. And so one of the things that he has done, he wrote a children's book, with his daughter, about teaching your kids how to, uh, learn about money. And, they teach the envelope system just like, uh, they do to the adults in Financial Peace University. I'm going to, adjust it a little bit, just like have adjusted kind of his baby steps over time and, and what works for me and, and, my clients and things of that nature. But, so I've been thinking again a lot about how, how do I want to teach my son and eventually my daughter about money, and work ethic and, and how to use that money. And so I, I want to start out first with this envelope system. And so there's gonna be four envelopes. I'm gonna have a spend envelope, a saving envelope, an investing envelope, and then a giving envelope. And so the first couple of lessons that I want to teach him, one, is how to be a good employee. And so how would I teach'em that right? I think the best way to do that is via chores, right? So learning how to make your bed and doing that on a consistent, consistent basis, right? Um, one of the things that bugs my wife and I is that when he comes into the house, he takes the shoes off. There is a storage unit for the shoes, but the shoes stay still in front of the door, right? And getting him to understand that when you take your shoes off, you put'em in, the bin, right? Keeping his room clean, clean off the table after he eats, and some of this stuff we've already implemented. but. I do want to start kind of, compensating him, if you will, if that's the right word for this type of stuff, so that I can start implementing lessons about money. And then also as he is, getting and preparing for kindergarten, we have been practicing like his sight words so he can start to learn how to read numbers. just some recognition, how to count by twos and fives and things of that nature. And so doing that on a consistent basis. One, we'll teach'em, hey, there are things that need to be done on a daily basis, whether they are mundane, whether you like doing them, they just need to get done regardless of how you feel about them. Right. and so there's things about my job, given the state audit. Like I did not wanna pull all of those documents together. but it is something I had to do and it had to get done right regardless of how I felt about it. and so starting to teach him that. And then, the other side of that is, is especially with like schoolwork and, and the sports that he plays, being consistent about learning your sight words and practicing your sight words or practicing hitting a baseball or, we just got him into juujitsu practicing his moves and juujitsu or whatever that may be. Doing that consistently over a long period of time, understanding, hey, this is gonna start compounding, it's going to get better, and hopefully improving that work ethic. Right? And so. If he can do these lists of chores, learn how to be a good employee, if you will, of of the family, and start to see the benefits of, doing these things like sight words and numbers and practicing sports on a consistent daily or weekly basis. that is. Probably more, that is more valuable to me, than actually the money, right? Because if he can learn these things, then the money will just come. But if he is doing this on a weekly basis, I have not decided how much I want to. pay him each, each week. But, I'm thinking somewhere between five and$10 and this is how I'm going to, make him structure it right. And so we'll have, again, the spend, the save, the investing and giving. So if he is getting paid$5. I will essentially make him put one into spending, one into saving, one into investing, one into giving. And then I'll let him pick that last dollar to where he wants to put that money to start giving him, basically letting him choose, right? And so with the spend, I suspect their stuff that he will want to buy every few weeks. And again, this is where I'm kind of struggling with how much I should. Pay him each week. Um, because, I want him to have a decent amount and to spend so that he can reap a little bit of instant gratification, but then also want to have a conversation with him on, Hey, is there something big you want to save for? Right. Um, and is it a larger toy? Is it, sports equipment related? Is it a trip that you want to go on? what do you want to save for? and then obviously that saving, we would keep in the envelope and he would not necessarily touch it until he achieves the dollar amount that he needs to purchase that particular item, right. With the investing. Dave Ramsey doesn't talk about this, in his kid's book, but I kind of want to start showing him compounding interest. I know he's not gonna understand, Hey, I bought a ETF and it's gonna grow and things of that nature. But I do want start, Incentivize him, incentivizing him to put into that envelope by matching, the dollars that he puts in. So if he puts a dollar in there, even if he puts that extra dollar that he can put in there, I'm going to match that dollar, so he can start seeing that grow. Right? And so. Early on, I'm probably not gonna open up an actual investing account. I'll just match it so he can see that he, that money is growing without him actually really doing anything for it. now as he gets older, I may open him up a little trading account where we can buy some s and p funds or whatever. so he can kind of see that fluctuate day to day or week to week, whatever that may be. And start learning about investing that way. And so, and then the last one will be giving. So whether that's a charity or, something that he wants to save, to buy for somebody, I just want it to be designated for something other than himself, so that he can learn to start giving. Right. And so. Again, the first thing I want him to learn is, Hey, I gotta be a good employee. I gotta learn to do these mundane tasks like making my bed, putting my shoes up, cleaning my plate after dinner, making sure my room is clean, so on and so forth. I need to practice, my sight words and my numbers and, and sports related things, on a consistent basis and learning that compounding. Effect of getting better every single day. Right. and then at some point when he gets a little bit older, obviously he's only five and will be six here soon. At some point, I will want him or help, want to help him start a business, right? So he can start learning how to add value to the world, not just be a good employee. There's nothing wrong with being a good employee. We need good employees. but business ownership has been such a big part of my life. and I can see how valuable it can be, uh, whether you're helping somebody with financial planning or, creating value in in another way, but. how do, how do we, create something that adds value to the world, that someone would want to compensate us for it, right? And if you can do that, then you can start to create your own working life. You don't necessarily have to be, constrained to what your employer says as far as working. You're nine to five or eight to five or whatever. work life. You can build it how you want to. So if you want to be nine to five, we'll go ahead and do that. But if you wanna work on, on Tuesdays and Thursdays and, and take off the rest of the time, whatever, right? you can build a business and that will allow you to create your own working life. the next thing would be, allowing him to have ownership in that business, right? if we're doing a lemonade stand, like how do you wanna make the lemonade? Where do you wanna buy it from? what do you wanna charge? and making those, Which are easy decisions, but for a six, seven, 8-year-old, that may be a big decision. Like, how, how are we gonna make this happen? Right? that's kind of how want to see the progression. And then as he gets older, again, we'll start investing. And then when he gets his real job, start thinking about a Roth IRA and getting more into the weeds with, with that sort of thing. Now. The next side to things are how are my wife and I going to treat our situation, and how open are we gonna be? Because one of the biggest mistakes that, that I see, in my own life and then, how I. Talk to my clients and things is that, especially me when I was growing up, my parents kinda shielded me for money conversations, right? Um, I didn't know much about their situation. Obviously. I knew that my, my dad made most of the money. My mom decided to go to work, I think once I got into middle school or high school, and she started making money, but I didn't know, like the context of it, how they were saving or. What they were doing with it and what was the purpose of it. my dad did do a good job of saying, Hey, you need to save and you just spend less than what you're making. Those types of things. But, it was very elementary. And so I want to be a, a bit more open, with my kids as they grow older about money. Hey, what is that doing with money? Is he, is he spending it all? Are we in debt or are we saving? Why are we saving so much? How are we investing? now I don't know that I'll get into specific numbers, but I will certainly say, Hey, these are the things that we're doing and why they're, why we're doing them, so that we can go on these family trips or we can do certain things throughout the year or whatever that may be. But, one of the things that I see that. parents often forget is to be open about it so they can start learning. Because again, the whole point or the reason why I have been thinking about this, is because, I don't want my children to be financially reliant on me when they grow older. Of course, I would help them if they need it and things of that nature, but if I can teach them how to fish, if you will, then now when they get older, then. I don't have to worry about supporting them financially. and then it will allow us to, be able to retire earlier and be able to, Take them on vacations if you want to, and, and things of that nature. It doesn't mean because I want them to be financially independent so that I can retire earlier. Doesn't mean I won't spend time with them and things of that nature. It just gives us more freedom and more flexibility to do that because they're capable of taking care of themselves financially. Right. Yeah, I feel like I'm rambling a little bit. That's just what's been on my mind. I think that teaching kids about money as early as possible will certainly help them, especially since our education systems certainly does not do that. it can start to give them sense of purpose, right? understanding like, Hey, I want buy this toy that's$30, but I only make.$5 a week, how am I going to save for that? And how long is that gonna take? hey, every time I put into this investing envelope, dad gives me an extra dollar on top of that dollar. starting to get those con concepts, starting to teach them work ethic, how to be a good employee, hopefully eventually, how to start a business and, and what to do and making those decisions. and so hopefully you guys found this, this, This is useful and, and whatnot. But again, thank you for being patient with me. I wanted to get this podcast out this week, just out a little bit late. But hey, if you like this podcast, if you like this content, please share this with a friend. It means a lot to me. Go ahead and leave a five star review on your favorite podcasting app as well, and we will see you in the next one. This podcast is for educational purposes only. It is not meant to be financial or investment advice. Do not make decisions solely based on this podcast alone. Please seek professional help when considering your own situation, and please keep Palm Valley in mind when making those considerations. I.