Teaching financial literacy for kids may seem like a tall order…when considering that financial literacy even for adults is a national deficiency.
But teaching kids about money is crucial if you want your kids to grow up financially responsible and independent.
As a parent, you will have a strong vested interest in it, because if you fail at it you’ll eventually pay the consequences (literally), e.g., if your adult kid can’t support themselves and move out of the house.
And early retirement? You can probably kiss that goodbye if your kid is financially reckless.
So, instilling good financial education for your kids is a wise investment…maybe even the wisest investment.
This week, I spoke with Robin Taub, author of the book “The Wisest Investment,” about how to instill financial literacy for children. We discuss strategies, role modeling, and techniques for teaching personal finance and money lessons to your kids.
What you’ll learn:
- Why teaching kids about money is hard
- What financially well-educated kids have in common
- The right age to start teaching kids about money in earnest
- The crucial money lessons kids at each maturity level should know to have healthy skills, habits, and mindsets about money
- Robin’s core framework for teaching kids about money
- Common mistakes parents make when teaching their kids about money, and the most effective role modeling parents can do to successfully teach their kids about money
- How to get kids to become self-motivated to learn about money, saving, investing, and budgeting
- How parents can create teachable moments in daily life and turn them into money lessons for their kids
- How to answer awkward questions like “how rich are we” and “how much money does our family make”
- How parents can help teach their kids to embrace impulse control and delayed gratification when it comes to money
- Guidelines for paying kids an allowance or paying kids to do chores
- How to teach kids about budgeting (and when it’s age appropriate)
- For affluent families: how to make sure your kids don’t take money for granted or become spoiled entitled brats
What methods have you found to be effective when it comes to teaching your kids about money? If your kids are self-motivated to learn about personal finance – earning, budgeting, saving, investing – how did you get them to be self-motivated? Let me know by leaving a comment.
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- The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life
- Robin Taub
- 9 Crucial Money Lessons Your Kids Must Learn to Succeed as Adults (HYW027)
- How to financially prepare for starting a family with Kevin Mahoney (HYW038)
- Hey, rich people. Wealth management includes telling your kids how rich you are.
- The best parenting guidance I’ve learned for raising successful children
- How to motivate your kid to win the national spelling bee (and excel in life)
- Schedule a private 1:1 consultation with me
- HYW private Facebook community
Read this episode as a post:
Andrew Chen 01:22
My guest today is Robin Taub.
Robin is a personal finance speaker and best-selling author of the book “The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life.”
Prior to writing the book, Robin worked at large accounting firms including KPMG and Ernst & Young, as well as at Citibank in Canada. She’s been doing financial consulting since. Robin is a graduate of the University of Toronto and holds both the CPA and Chartered Accountant designations.
Robin, thanks so much for joining us today to share insights and tips on how to teach good money lessons to one’s kids!
Robin Taub 01:52
Thanks for having me. I’m excited to be here.
Andrew Chen 01:55
I’d love to start just by understanding a little bit about your origin into this topic. How did you get interested in this topic in the first place about teaching kids about money?
Robin Taub 02:05
Well, I do have two kids myself. They’re now in their 20s. But 10 years ago, when I first wrote the book, I was interested in financial literacy because it was a few years after the global financial crisis and there was an awareness as to the importance of financial literacy and financial capability in the general population for making good decisions.
And at the time, the publisher of the first edition of this book did some research, and they found that parents are really struggling with this topic. They found that almost 80% of parents try to teach their kids about money, but more than two-thirds didn’t feel they’ve been very successful at it, and more than half didn’t know what information they needed. So, they asked me to write this book.
And because I am a financial professional, and I had been out of school and graduated and working for a long time, I had two kids, I thought, “Yeah, this is something that I feel strongly about.” And between my own lived experience with my kids and research, I felt like I could bring it all together in a book. That was the impetus for it 10 years ago.
Andrew Chen 03:16
Okay, perfect. That’s really helpful context.
There are a lot of personal finance books out there. What gives you unique insight on this topic? Why should folks pay attention?
Robin Taub 03:27
Yeah, that question is like, “Why you, and why this book?” Because I have a deep financial background, as you mentioned, I am an accountant by training, and I also worked in tax as well as in derivatives marketing. That’s what I did at Citibank Canada.
So it’s not at a superficial level. This is at a really serious level.
And I’ve also always continued to learn about personal finance and investing. It’s something I really enjoy and I’m interested in.
And then, having raised two kids who are now in their 20s, and seeing firsthand the importance of giving them the knowledge, skills, and confidence, which is really the definition of financial literacy, the knowledge, skills, and confidence to make responsible decisions at different stages of their lives, and seeing how that’s paid off.
So, I think those two things: my education and my experience, professionally and personally.
Andrew Chen 04:29
Excellent. I want to start out with the hard question. At least to me, it’s hard.
Why is teaching kids about money hard? To someone who hasn’t done it before, it probably doesn’t seem like rocket science, but it’s not easy. What makes it challenging?
Robin Taub 04:43
It’s true. The fundamentals of earning, saving, spending, sharing, and investing, it isn’t rocket science. Some of it is common sense, agreed.
But it’s still really challenging for parents because, as I mentioned before, they feel like they don’t have the time to do this, or the opportunity. That’s one thing.
Many feel they don’t have the knowledge. I was lucky this was what I did professionally. But a lot of people, they’re doctors, they’re lawyers, they’re all kinds of other things, they’re teachers, and they just don’t have a financial background.
And maybe this is something that they’ve struggled with personally, so it becomes really hard to teach your kids if you don’t feel like you’re good at money yourself. And it’s easy to avoid the topic when you’re running a busy household.
So, for a lot of reasons, parents avoid it. And they’re afraid they’re going to get uncomfortable questions, like “Are we rich, or are we poor?” or “How much money do you make?”
So, there are a lot of excuses for why parents don’t get to it. And again, the concepts are difficult once you get into it. And even if you don’t feel you’re good at this yourself, you can learn along with your kids.
But it is so worth it because the consequences to your kids, if you don’t, are serious. But it could also come back to haunt you if your adult children aren’t financially responsible, independent, and money-smart.
Andrew Chen 06:09
Yeah, totally. I’m sure they’ll boomerang back.
I’m trying to visualize what parents who do a good job teaching their kids about money really get right. If I was visually observing a family that had been very successful in teaching their kids about money (maybe that’s you), what are the markers or characteristics that those kids might have in common?
Robin Taub 06:32
I think what you would see, if you’re watching a family who, in my opinion, is succeeding at teaching their kids, is: The parents would be good financial role models for their children. They would have their own financial house in order, so that they can lead by example.
Because kids are aware of both the good and the bad money habits in the house, and they are watching and listening and learning from you. And that’s true in all areas of life. As a parent, you have to be aware of your behavior because you are a really important role model for your kids.
So, I think in a household where this is being done well, kids would notice. They would pick that up by osmosis, what their parents are doing, and emulate some of those good habits.
Because forming good habits are really important. Habits become more difficult to break as you get older. So, that’s one thing they would observe.
They would also notice that these parents are looking for teachable moments and looking for these opportunities to build a money lesson into their day-to-day lives.
As I said, one of the issues is “I don’t have the time to teach my kids.” But you’d be surprised, if you look for these little moments, they crop up naturally because we’re constantly doing things with money.
We’re buying things. We’re saving for things. We’re paying bills.
And your kids may ask questions. Or you might offer up, “Do you want to know what I’m doing right now? I am looking at our monthly budget,” or “I’m paying our mortgage online,” or “I’m looking at our Visa bill.”
So, there’s always these opportunities to talk about money with your kids.
And then the third thing they would notice is that these parents are very well-aware of their personal values, the things in life that are most important to them as individuals and as a family. And they’re using those values to help guide and prioritize financial decisions for the family. And they’re making an effort to instill those values in their own children, so that the kids can internalize them and then use those as guiding principles throughout their lives.
So, those are three things.
Andrew Chen 08:35
That’s really insightful. You mentioned role modeling, teachable moments, values. That speaks to the parents.
What would I observe in the kids?
Robin Taub 08:44
Kids who are learning these things are establishing a foundation in what I call the five pillars of money: earning, saving, spending, sharing, and investing.
Depending on the age of these kids you’re observing, whether they’re young kids or preteens or teenagers or young adults, they’re starting to develop knowledge and skills in those five areas. And the information that they’re taking in and then applying is relevant to their day-to-day lives and the stage of life that they’re at.
Obviously, someone who is a young adult in college, they’re going to have different specific examples in their lives under those five topics than a preteen would. But you would see that they’re reaching these financial milestones, whether it’s filing your own tax return as a young adult, or saving up for college, or helping to pay for college, or just living within a reasonable budget as a preteen that’s starting to go out more independently with their friends.
And saving. You would see them using a piggybank, or going to the bank, or using a debit card. So, those things.
Andrew Chen 10:00
That’s helpful to visualize a little bit. What age is good for parents to start in earnest, imparting lessons about money to their kids?
Robin Taub 10:11
I suggest around age five because that’s when kids often start preschool, and they’re around other kids, and they’re noticing what other kids have and do, and they might start asking questions about money.
Anytime your kid expresses an interest or curiosity around money because they see you using it, or they see you tapping or using your phone, that’s the time to start. So, even if they’re younger than five, go for it. But I think for most kids, usually it’s around that time that they start to be able to take it in.
And then, even by the time they’re seven or eight, they’re a little more reasonable. They can understand more complicated concepts. So you always just have to take into account how mature they are and what stage they’re at.
Andrew Chen 10:55
Yeah, that makes sense. In your book, you break down financial education into age ranges: 5-8, 9-12, 13-17, 18-21.
I was curious if you could share a little bit about what are key money lessons that kids should ideally be internalizing by each of those age ranges, so that they’re learning and developing the right skills and habits and mindsets at the right velocity, and properly amortizing critical personal finance lessons throughout their childhood?
Robin Taub 11:27
For each of those four stages that you mentioned, in the book, I have topics under each of those five pillars of money.
Let’s just pick, if a young child is earning money, it’s usually from holidays or birthdays or visits from the tooth fairy. They’re not working. They don’t have a job.
But as they get older, a preteen could be babysitting or being a camp counselor. A teenager could be working in retail, at a restaurant. And an emerging adult could have a job on campus if they’re in university or college.
So, at each stage, there is an appropriate activity or a thing that they could be doing around earning. And that’s how I approached each of the five pillars.
A young kid would be saving in a piggybank. A preteen would be opening a youth account. An emerging adult would be opening a student account or an investment account.
As they get more mature, the specific topics and examples under each of those five get more sophisticated. And hopefully, you’ve been building the foundation from the time that they were younger.
A lot of stuff under spending has to do with paying attention, being mindful of their spending, having a budget, and what does that mean at different ages? It’s going to be different if you’re living on your own in college versus when you’re a preteen starting to go out with your friends.
So, just really trying to think about what is age-appropriate at every one of those stages, for each of those five pillars.
Andrew Chen 13:09
Yeah, that makes a lot of sense. As you’ve mentioned now a couple of times, these five pillars being earn, save, invest, share, spend, right?
Robin Taub 13:17
Yeah. That’s a different order, but yes, that’s right.
Andrew Chen 13:20
Okay. What do you find commonly, as a kid progresses through their childhood, which of those pillars tends to get more focus at each of the phases?
Robin Taub 13:38
I would say investing becomes more and more important in the later, more mature stages. As a teenager, you could start with simple stuff, like compound interest or GIC or something like that. Some high school students might be learning in school already about stocks and bonds and investing, but usually they’re not ready for that until they’re a little bit older.
And they also don’t have a lot of money to invest, unless they’re working or they’re very entrepreneurial, until they are finished getting to the end of university or college years. So, I would say that’s more for the later stages.
I feel like spending is important all the time because we live in a society that stresses instant gratification and consumption, and our kids are exposed to so much media and social media and have FOMO (fear of missing out), so there’s a lot of pressure to spend and keep up the appearances online of living your best life. I feel like that can start as young as preteens.
And trying to help your kids set goals and delay gratification, that’s really important. And then, as I said, a teenager is going to have a fairly simple budget if they’re still living at home. But you still have to go over what you’re paying for, what they’re paying for, if they’re working or not.
Once they go off to university, that’s a big milestone and a big expense, so it requires a little more budgeting and a little more planning.
I like the share category because it doesn’t get as much attention usually, but it’s so important. And that can start really young. I remember when mine were little, they used to bring money in coin form, which we have once a week to school to give to charity, to put in a box.
And as they get older, there’s always opportunities at school to do fundraising for different causes or for the school itself. Those types of opportunities are great throughout the different stages. And as they become teenagers and young adults, volunteering is a really great way to also build career-related skills, like networking, depending on what you volunteer for.
Sharing and doing things as a family that are philanthropic is also a great way for parents to deal with kids who are starting to develop a sense of entitlement, because it puts things in perspective, and it reminds them to be grateful for what they had, and it shows them that not everyone lives the way that they do.
I really love community projects as a family, and I’ve personally done, with my kids, certain projects. My daughter and I volunteered at a place called Soup Sisters where we made soup for families living at shelters, and we’ve done fun runs and those types of fundraisers. It’s just a really important way to remind kids that there’s a bigger world beyond their own narrow needs and wants.
Andrew Chen 16:48
Yeah, that’s a really important area of financial education. I do want to circle back to that because I think it’s worth deep diving.
But even before we get there, what are common mistakes that you see parents make, or potentially ineffective behaviors or strategies that they use when it comes to teaching their kids about money?
Robin Taub 17:14
The biggest one is that they just wait too long. They wait until their kids or teenagers are older to have the money talk.
I sometimes joke around with parents, “Would you rather talk to your kids about sex or money?” Because they’re both these big, looming talks that you are supposed to have, and should have, and not even just once, but on an ongoing basis.
And I think the biggest mistake is that parents avoid the topic because, as I’ve said, they feel like they’re not good at it. They don’t have the time. But not starting early, it deprives your kids of the opportunity to make mistakes when the stakes are low.
Andrew Chen 17:57
And anyway, they’re learning something out in the world.
Robin Taub 17:59
Andrew Chen 18:00
So they might as well learn it from you, right?
Robin Taub 18:03
There’s that, too. If you don’t teach them who is, they’re going to pick things up from siblings or grandparents or friends or the media or celebrities and athletes who are living in a completely different world.
They’re going to be picking things up. They’re going to learn the hard way. So, as parents, to the extent we can, we want to spare our kids that and show them the right way.
And everyone is going to make mistakes, myself included. So it’s important to make those mistakes when there’s not a lot of money involved. Because if you have no experience managing money, and you wait until you’re older to start doing that and making decisions, it’s very easy to screw up and to dig yourself into an expensive hole.
One thing that comes to mind right away is credit cards. A lot of kids go to college, and they are bombarded with credit card offers, and they take them, and they just are naïve. It’s not their fault.
No one has taught them. No one has sat them down. They don’t know how they work.
They start using them, and all of a sudden, they’ve racked up credit card debt, and it has to be repaid. As you know, the interest rates are high. And before you know it, that’s an expensive mistake that can get out of control.
So, that’s why you want to start teaching them early. I think that really is, by far, the biggest mistake I see out there: just ignoring it or waiting too long.
Andrew Chen 19:33
I guess related to this, what are, in your view, the most effective actions or type of role modeling that parents can do to successfully teach their kids about the key money lessons?
Robin Taub 19:50
I think that if you’re diligent with your finances, your kids will pick up on that, and they’ll notice. They’ll see you going through your bills, paying your bills, doing your tax return.
They will notice if you’re the kind of person that makes impulse purchases, that’s constantly buying things without saving up for them or thinking about how you’re going to pay for it, if you just put it on your Visa and just worry about it later.
Things like even your attitude towards work. Do they see that you’re motivated and excited to go to work, or are you dragging your feet and complaining about it a lot? Kids will pick up on things like that.
They really do notice if you tend to be more of a spender or more of a saver. And often in relationships, one-half of the couple tends to be one, while the other one tends to be the other. But your kids will observe those things.
Whether you talk about money openly with your partner or with your family. They will notice that.
There are actually 11 healthy habits of financial management in my book: things like paying yourself first. Are you saving? Are you investing?
Do you talk about it? Do you have your wills and powers of attorney done?
Is there a clear understanding of the difference between needs and wants? Do you talk about stuff like that? The big picture of the household finances and the household budget that you’re managing.
I feel like there’s so many things that your kids can pick up on without even you being aware of it.
I actually have, in the book, a quiz called “The Financial Role Model Self-Assessment,” and it just asks you a bunch of statements to help you become more aware of the behavior that you have around money.
Andrew Chen 21:53
Interesting. Taking the assessment, what is a parent meant to do with the results?
Robin Taub 22:02
I’m going to actually pull it up because there is a summary at the end. And it’s just supposed to give you an awareness of what kind of role model you currently are and what kind of role model you can be in the future for your child.
It’s just meant to bring more awareness to your behavior around money, because sometimes we just forget that we’re acting a certain way or that we’re behaving a certain way around money with our kids.
Andrew Chen 22:45
I think that’s mostly what I want to understand. I guess it’s just meant to hold up a mirror.
Robin Taub 22:51
It’s like a true or false. It’s a statement, like “I wouldn’t stretch myself financially in order to drive a nice car.” And that also taps into your values.
So, you answer that with true or false. “I adhere to a structured budget” is another one.
“I’m usually eager to get to work.” “I keep well-informed for everyday financial decisions.”
There’s 20 of those. If you answer true fewer than 10 times, I feel like you have some work to do. If you’re between 10 and 15, then you’re modeling good behavior some of the time, but you could do a little bit better.
And this isn’t a comprehensive list of behavior, but it’s just meant to give parents pause to think about “What message am I sending with my behavior around money?”
Andrew Chen 23:42
To me, the Holy Grail: What advice do you have for getting kids to develop and intrinsic interest and motivation to learn about money? Because that will be self-sustaining and perpetuating if you set it up right.
So I’m curious, are there behaviors or actions that you’ve found to be effective to actually get kids to self-motivate and wanting to learning about saving and investing and budgeting, and make it feel relevant, and not dry and boring?
Robin Taub 24:12
I think when they’re younger, you want to make it engaging and fun for them, just to spark an interest. But really it becomes real and important once they’re teenagers, because they want to do stuff.
They want to go out with their friends. They want to go to concerts. They want to travel.
They want to start doing stuff, and that takes money.
Now, every family is going to be different, and every family has different means in terms of resources as well as values. So they have to decide for themselves: How much are the parents contributing to the kids’ needs and wants at that stage, and how much are they expecting their kids to be earning that money?
I feel like when teenagers or kids of different ages earn their own money, they will think a lot harder about spending it. Now, that’s true if you’ve given them some money as an allowance, and I encourage parents to do that, so kids have an opportunity to learn how to manage money.
But it’s really true when they’ve worked hard for it because they know it takes a lot of effort to make money, and it can be really easy to spend. It can go like that.
So, I think that working and earning some of their own money, and having control over the choices that come with that—save, spend, share, invest—that is what sparks the interest in learning more, getting better at it.
Some kids will understand investing. They’ll really intuitively get that.
“That means my money is working for me. I may not have to work as hard if I can start investing early.”
Or they might understand that certain jobs, different educational pathways lead to different careers, which also lead to different earning and different opportunities in life.
I think most kids are going to be interested because you can’t live in this world without money. And the sooner they experience that connection between earning it and spending it, the more engaged and invested in it (no pun intended) they’ll be.
And I think some kids are just natural savers. I hear this from parents all the time.
“My kid is such a saver. He’s always squirreling it away. I can’t get him to spend any money.”
And then I hear the opposite: “My kid can’t keep it in his wallet. It’s just always gone. He’s spending and spending.”
So, I think there’s natural personality characteristics that make kids one way or another. And I think that also applies to their interest in money.
But I think it’s such an important life skill. It’s so basic. And the consequences of them not having it, like bad habits, even stress and health consequences of not being good with your money.
Even talking about that with your kids, you’re emphasizing that this really is an important life skill that we all need, and if we want to live the lives that we want, if we want to have and do the things that are important to us.
Andrew Chen 27:23
I’m sure you’ve spoken with many parents before, observed perhaps even more than that. Do you find that kids’ financial values, behaviors, for the most part, will correlate very strongly with their parents? How common is it for them to actually diverge, for parents and kids to go in opposite directions?
Robin Taub 27:44
I feel like they’re both, because some of it is just going to be hardwired. It’s your personality.
And even within a family, siblings can have really different values. I see that with my own kids, for example.
So, I think some of them will get passed down and will be internalized just by osmosis. But your kids are individuals, and they are going to have things that are important to them that may not be as important to you.
Things like education, for example, families that value that and think it’s really important to have higher education, I think those things do get passed down. But some people might really need structure in their lives, whereas other people value flexibility.
And I think there’s research that shows that personality traits are hardwired, and some of them will affect how we are with money. But I think you hope that the values as a family that are really important to you, your kids will absorb those, and they will take them on as their own.
There’s another exercise in my book called the Values Validator that helps you determine what your top values are. Again, it’s a series of questions to help you tease out what’s most important to you.
You can have your kids do that, too. And you can literally see: is there overlap?
And that’s another teachable moment. It’s like an interesting conversation.
Andrew Chen 29:21
On teachable moments, I wanted to drill into this a little bit.
In your book, you write, “You don’t have to schedule a family conference to have great conversations with your kid about money. Opportunities will present themselves countless times in your everyday life. The trick is to recognize those teachable moments and to take advantage of them.”
How can parents recognize these teachable moments in real time, on the spot, turn them into teachable lessons? Tactically, how does a parent, who has not done this before or who isn’t used to doing this, develop a muscle to consistently recognize teachable opportunities and then turn them into memorable lessons on the fly?
Robin Taub 30:05
Anytime you’re doing anything financial, that’s when the light bulb should go off. So, if you’re at the grocery store with your kids, let’s say your younger kids tag along with you, and you’re paying at the cash, if you’re using debit or credit or cash, talk about that. Explain how they’re different.
Cash is disappearing right now, and we’re really mostly using digital forms of money. That’s a little hard for younger kids to understand because it’s conceptual. So, I would still say, if you’re using cash somewhere, that’s a great teachable moment for younger kids to see that.
But the kids that are older that can understand these digital forms of money, it really is important for them to understand the difference between a debit card, which is “buy now, pay now,” and a credit card, which is “buy now, pay later.” As I was saying before, if they don’t understand how credit card works, and how often you have to pay it, and what happens if you don’t, they can get into trouble.
Other things I’ve mentioned are: if they see you at your computer, going over your finances, or setting up an automatic transfer from the account where you get paid to an investment account, or they see you working on your investment.
Today, my son and I were looking at my asset allocation, and I was trying to explain to him how I created the spreadsheet, and how I decided what the allocation should be, and whether I’m happy with that or not happy with that. That was a good teachable moment because I was doing some work on that anyways, and he happened to be here, so we got into that.
Tax time is also a really good time, too, because you’re pulling up all your stuff. You’re getting the slips to tell you how much you made, and other things that go into a tax return. It’s such a good opportunity to sit down with your kids and go over things.
But if they want to go somewhere and do something, and they’re asking you for money for that, that’s also a teachable moment. Anytime money is involved, in my opinion, you could build it into a little bit of a lesson.
Don’t go overboard. You want them to take it in and not be like, “Here she goes again. It’s another teachable moment.”
No, don’t do that. But I think you’ll feel, as a parent, when the time is right.
When they’re expressing curiosity, take advantage of that. Encourage it.
Andrew Chen 32:35
I definitely get that, and I’m just wondering, in some of the examples that you gave with your own kids, tax time, are you pulling the kid in, or are they walking up and saying, “Hey, Mom, what are you doing?”
Robin Taub 32:48
Both. With my kids, it used to be literally “Pull up a chair, get your slips. We’re doing your tax return today.”
And I would literally sit there with them while they use the software and put everything in. That, we actually did together.
But my daughter called me, and with her job, there was a group savings plan or investing plan, and she was like, “I don’t know what to pick. How do I decide which investments to buy?” So we had a conversation about that.
So, sometimes they’re initiating it. Or let’s say when they’re going to university, and they were contributing to the cost, but we were too, so of course, we had to have that conversation together. And that’s really great.
“Okay, let’s go over the budget. What are the different line items? What’s reasonable?”
“Let’s keep track of this, so we could go back and say, ‘Was that enough? Too much?’”
Andrew Chen 33:46
All of these examples that you’re giving, it directly impacts the kid, right? It’s their college. It’s their group savings plan, whatever the case may be.
Is that really the key?
Robin Taub 33:57
Andrew Chen 33:58
I’m just trying to think, if I had a 14-year-old kid, they’re not working. How do I abstractly pull them into explaining how to file taxes? It’s not interesting to them, right?
Robin Taub 34:11
It’s not age-appropriate then. That’s what it’s telling you. If it’s not relevant to the stage of life that they’re at, they’re not going to take it in or be interested or remember it anyways.
And that’s what the research shows about financial literacy. It should really be tied to a life stage or decision that you’re faced with.
So, I’m not going to sit down with my kid right now and explain to them about mortgages because they’re not going to get it. They’re not going to care.
But one day, they’re going to start looking for maybe a home, and it will be important. And we will talk about down payments and mortgages and fixed and variable and all the costs that go along with home ownership.
Or let’s say the topic was home ownership. Right now, they’re renting. They don’t care, so I wouldn’t do that.
And they’re in their 20s, so for sure, you’re not going to talk about that with your 10-year-old.
You also don’t want to burden your kids with some of the stressful financial stuff that you have to deal with as parents. That’s your job.
So, you really have to think about: a 14-year-old, what do they care about? What’s their world all about? Going out with their friends, school, maybe a summer job or summer camp or travel, whatever they’re doing.
I would look for my in with those things, because that’s what they care about. That’s what’s important to them. That’s what they may be saving for.
Andrew Chen 35:38
Makes sense. How should parents handle awkward questions, like “How rich are we?” and “How much money does our family make?” and influence their kids to be discreet if you share those info?
Robin Taub 35:56
The answer is as honestly as you can, stressing confidentiality and the fact that these are private family matters and not things that you want them sharing on social media, but not feeling like you have to tell them all the numbers, if you don’t feel like it’s appropriate yet.
I don’t know if I did with my kids when they were teenagers. No way. I feel a little more comfortable, now that they’re in their 20s, revealing more to them.
But I think you can always talk about general principles. Even if you don’t tell them how much you make, you can talk about the range of salaries for the type of career you have or job that you have.
You can talk about the importance of paying yourself first, of taking savings off the top always, stashing them away in a separate savings or investment account, and living on what’s left. You can talk about needs and wants or setting goals. You can always go back to first principles.
And even the “Are we rich?” you might be honest, like “Yes, we have more than the average American or Canadian.” Or some families are very affluent, and the kids are aware of it.
And if you’re not honest about it, they’re going to find out. Their friends are going to tell them. They’re going to Google it.
So, better to be honest, but you have to make sure that what you’re telling them is age-appropriate. Always filter it through that.
And keeping in mind their temperament, too. Some kids are mature, and they can handle a lot. You really know your own kid and how they’re going to deal with that information.
Andrew Chen 37:46
Related also to values, one of the most important traits that kids need to become, in your words, responsible, independent, and money smart, is the ability to control impulses. We talked about this a little bit earlier in delayed gratification.
But that ability is hard to cram down a kid’s throat. It’s hard to teach. And also, it runs counter to the kind of consumption advertising type of exposures that kids are constantly getting exposed to, which you cannot shield them from.
Any tips for parents on how they can help their kids strengthen their impulse control and delayed gratification, and even see it as a virtue rather than an unpleasant chore?
Robin Taub 38:33
Yeah, because you don’t always want to be saying “No, no, no. You can’t have this. You can’t have that.”
I have a few tips. The first is you can encourage them to get a job, if they don’t already have one, to help pay for some of the things that they want. Because as I said, they’re going to work hard for that money, and it’s going to feel harder for them to spend it.
If they’re spending your money, it’s not real. It’s funny money, so they don’t appreciate it.
The other thing is philanthropy as a family, or maybe they do it with their friends. But it’s so valuable because it really does put things into perspective, because kids can get really involved in their own worlds and wrapped up in their own reality, and they don’t always take the time to appreciate that not everyone is as fortunate as they are.
And I also think, going back to the role modeling, as parents, we need to model an attitude of gratitude and to show our kids that we’re grateful for what we have, and to not always be talking about “I want a new car, and a new this, a better this, and a better that.” To show appreciation for what you have, I think that kids will pick up on that.
And there’s different ways to do that. I have friends that go around the dinner table once a week, like on Friday nights, and everybody shares one small win or highlight from their week or thing that they’re grateful for. And it’s just a nice focus on the positives.
Other people use gratitude journals. I think those are really valuable as well.
I think, as parents too, we have to help our kids become media savvy, and educate them that the media is trying to convince them that their wants are needs, but they’re not. They are mostly wants. And just remind them of the difference between needs and wants.
And I feel like with the pandemic, it was a bit of a reminder that was forced on everyone because while things were locked down, there was very few wants that we could really have, and it was all about just needs. And everyone was concerned about, at first especially, “I just want to make sure I can cover my needs.”
So, needs and wants. I don’t think that ever gets old. And I think even young kids can get that something is nice to have, as opposed to have to have.
We have to live somewhere, we have to eat, we have to have some clothes to wear, but we don’t need to go to restaurants, and we don’t need the latest toys and video games or vacations. Those are all nice to have. And you have to prioritize.
But it’s tough. And it’s tough for parents, too. There’s so much coming at you, and there’s a lot of FOMO out there, don’t you think?
Andrew Chen 41:30
Yeah, totally. Kids are just not as well-prepared to filter signal from noise.
Robin Taub 41:43
Andrew Chen 41:44
How should parents think about whether to pay their kids for things like chores or getting good grades? And if you do decide to pay them to do certain things, how do you make sure it doesn’t set an expectation for paying them to do every little thing, and that without paying them, you can’t even get them off the couch?
Robin Taub 42:03
I think it does set that expectation. I think that’s one of the problems: this debate about how to use an allowance.
Some parents want their kids to earn their allowance and really want them to do some things to earn that from chores. Others feel like the chores need to be done out of a sense of family responsibility, and everyone needs to pull their weight, and they can get their allowance as a teaching tool for how to manage money.
I think you can do a bit of both. I think you can give your kids a minimal allowance with the expectation that they pull their weight around the house. And if you want them to earn, then you can ask them to do things that go above and beyond, that you would maybe pay someone else to do.
And if they’re old enough, they can get jobs, as we’ve talked about. But I think it does set that expectation that everything comes with a price.
No one is paying me to empty the dishwasher or take out the garbage or all tons of things I do around here. And I think it’s important for kids to help out. I really feel strongly about that.
And I think sometimes we do it because we need leverage as parents, and sometimes the only leverage you have is “You haven’t cleared the dishwasher once this week. You’re not getting your allowance.”
I get that. It is going to happen. But it will deprive them of the opportunity to manage money if you withhold their allowance.
And I think it’s so much more motivating for them to just understand that running a household is a lot of work, and if they don’t pull their weight, it’s just more work for you, and it’s not really fair.
Andrew Chen 43:44
Are there guidelines that you either use yourself or you coach other parents on regarding these type of tasks or behaviors we do not pay for because you should just do them, and these other tasks might be okay opportunistically?
You know what I mean? I’m just spitballing here.
If my kid was like, “I need to be paid to earn good grades,” I’m like, “Dude, it’s for your benefit.”
How do you draw bright lines?
Robin Taub 44:15
That’s a whole other issue, the paying for grades, which I really don’t believe in. You said earlier, “How do you get your kids intrinsically interested in money?” Well, how do you get them intrinsically interested in their future?
They should be working hard in school because it’s a prerequisite in order to get the grades they need to get into higher education and, therefore, be able to earn and have the life that they want to have.
Andrew Chen 44:43
I think that works if you grew up poor, have a chip on your shoulder. You don’t need extra motivation. But if you’re in an affluent neighborhood and you’re mediocre, it’s like life still seems about the same, right?
I guess that’s what I’m very curious about, this question of when do you use money and when do you draw a bright line and say, “You need to do that because that’s the right thing to do”?
Robin Taub 45:05
I would say, if you would normally pay someone to do something… And I don’t want to say that there’s a prescription for this, because every family is different in terms of their means, their values, and all that stuff.
Some families really are very self-sufficient, and they don’t pay a gardener to cut their grass. They don’t pay a mechanic to change their tires. They do it themselves.
That’s a value, and maybe they have the skills. So there’s really no rules.
But I would say, if I had to pay someone to do something, like detail my car, I don’t think I would expect my kids to just do that as part of their allowance. That’s a lot of work. It’s not really fun or fair.
So, I would pay them to do something like that, but I’m not going to pay one kid to babysit the other kid. And I know that there’s some families where the siblings are like, “I want to be paid if I have to stay home and babysit my baby brother,” and I’m like, “No, you’ve got to just do that as part of pulling your weight in the family.”
Emptying the dishwasher, even helping with dinner. My kids are older. They were cooking and they were helping clean up after dinner.
Keeping their own rooms neat. Come on, I’m not going to pay you to do that.
If you want to live like a slob, fine. I’ll shut the door, and I won’t go in there. But I’m not cleaning it, and I’m not paying you to do that.
So, I use that. If I have to pay somebody else to do it, I would maybe pay them if it goes above and beyond. But if it’s day-to-day household stuff, forget it.
Do it. You’re going to do it one day for your own household. You might as well learn what it’s all about.
Andrew Chen 46:49
I want to also talk a little bit about budgeting. You talk about this in your book a lot, and we’ve discussed it as well in passing here.
In your book, you write, “Teens may not have much overhead if they live at home because you’re still taking care of most of their needs. As a result, they may not know what their lives really cost.”
And a mistake that teenagers often make, especially if they don’t have savings goals, is to use all of their income just on discretionary spending. And you mentioned that as your kids get older, it’s a good idea to sit down with them to make a budget, to ensure they start internalizing more of the cost of their day-to-day life.
How do you do this? Literally and tactically, how can parents introduce their kid to budgeting, and teach them how to do it, and take an interest in it, and do it seriously, including when it’s a good age to do this?
Robin Taub 47:41
For teenagers, you as a family have to decide: How much of their lives are you paying for, and how much do you expect them to pay for, and how? Are they going to go get a job? Is that realistic?
Some families are like, “No, I want my kid to just focus on school and sports or whatever they do. We’re okay to pay for all that stuff.”
That’s fine. But I think that kids will find it much easier to spend your money than money they’ve worked for.
Teenagers have a pretty simple budget: food, eating out, entertainment, transportation, maybe a bit of travel. It’s not complicated yet because they are still living at home. I don’t know a lot of parents that charge their teenagers rent or make them chip in for the utilities.
Cellphones, that’s a whole other story. A lot of parents are like, “I want you to be involved with your cellphone, so you have to pay for some of it or all of it, figure out the plan that makes the most sense for how you’re going to use it, cost compare.”
That’s a really great teachable moment because they care a lot about their phone, right? They want a good phone. They want it to do stuff.
So, that’s a really good way tactically to get a kid involved and invested in a budget, specific budget item. They also need computers for school. Just getting them involved in those conversations and understanding what these things cost, it’s really important.
And even just the other items, like transportation. Are they using public transportation? Do they have a car?
Are they using Uber? Are they walking everywhere? Different cost points.
The last thing you want is that your kid has access to your credit card on their phone, and they’re using Uber all the time, because that gets so expensive. And they’re not paying it, so they don’t see it or care. Those types of conversations.
What’s their day to day like? What do their weeks look like, weekends? Where are they spending money?
What’s realistic? And who’s going to pay for this? Are you expecting them to work?
Getting really into the details. And then, as I say, budget is a living, breathing thing, so if it’s not working, if it’s off, you’re going to have to go back and revisit it, and see where.
Andrew Chen 50:18
There are a lot of high-earning professionals in my audience, and one of the fears that I think many higher-income, affluent families have about raising their kids is making sure their kids don’t turn out to be spoiled, entitled brats.
Robin Taub 50:31
Andrew Chen 50:32
There are examples of this you can see in the media. Any advice on actions, behaviors parents in this situation can take to make sure their kids don’t take things for granted and develop a sense of entitlement about money?
Robin Taub 50:46
Yeah, I think you’re right. I think most parents want their kids to have a sense of purpose, not a sense of entitlement, even if they grew up with wealth and privilege.
And that’s not always easy to do because sometimes it’s just easier to throw money on something. Taking the time to teach your kids is work.
It does take time. It does take effort. But it is worth the effort because, otherwise, they will not learn for themselves.
And they will find it easier to spend your money. And they just don’t seem to have an appreciation in the same way.
So, I think it goes back to what we were saying earlier. Even if you’re giving them money for allowance, make it reasonable. Don’t make it excessive so that they can live large.
Encourage them to get a job, so that they can get that sense of what it takes to earn money, but also the satisfaction of putting in a good day’s work where you do something that you’re proud of. Because everybody needs a sense of purpose, even if you have money.
So, I think for them to start to figure out what they might want to do, start to cultivate their interest for career and stuff by working and getting exposed to that, is really important.
Again, the philanthropy. Some wealthy families put their kids on the board, if there’s a family trust, or some kind of family office. They get involved with governance of that, and they get a sense of some of the causes the family is supporting.
Just gratitude in general, I feel like it goes back to that. Giving back discourages that spoiled, selfish attitude, and just reminds them to put things in perspective and be grateful for what they have.
It isn’t easy. Model it yourself. Model a good work ethic, so your kids see that.
High-earning professionals work very hard. Nothing comes easy, and I’m sure your kids notice that. Those are conversations you want to have about work with them: how hard they work and why they do it.
I think setting goals is so important. Goals that are tied to their values, that are really meaningful, will help them delay gratification and not always having instant gratification and just trying to get all of their needs and wants met instantly. They understand that you have to work towards something.
Andrew Chen 53:45
I guess related to that, there are folks in my audience who either are already early retired or those who are aggressively pursuing FIRE (financial independence retire early). I don’t know if you’ve encountered folks in this community in your work. They might have a different set of considerations when it comes to raising their kids, if they have them.
Because for one thing, they’re not working. They’re doing other stuff. And so, if the kid, at an impressionable age, sees that “How come Mom or Dad doesn’t actually ever seem to be working, and yet I’m supposed to work, and work really hard?”
Any advice for parents to navigate that seeming contradiction?
Robin Taub 54:27
Talk about it with them, because first of all, you had to have worked hard to have gotten to that point where you can retire early. Maybe your kids were really young when you were doing that, and they don’t remember it.
But have those conversations: why you did it, how you were able to do it, what it took. Are you enjoying it? Is it everything you thought it was going to be?
And then maybe is this something that they could see for themselves? Do they see themselves having a traditional job, a corporate job? Do they see themselves having more flexibility?
From my understanding of the FIRE movement, part of it, like anything in life, is the income side, but the other half is the expense side. Some people are able to do it because they keep their expenses really low. They’re able to minimize their wants and needs, and live on maybe less than someone who has a corporate job.
Because you know how lifestyle just inflates sometimes with the money that you start to make. So, that’s a whole other conversation.
Maybe your kids are cool being minimalists and living a certain way, or maybe they’re not. Maybe they want a more traditional life.
So, I think just talking about it. And again, it goes back to your values. Clearly, if you’ve chosen that path, it taps into something that is a deep value for you, of independence and maybe wanting to accomplish something beyond just career success.
Because I’m sure people that retire early, they’re not all hitting the golf course every day. Sometimes they move towards something else.
If you think of Bill Gates who retired from Microsoft as CEO fairly young, he started a foundation and was focusing on other things. Or Jeff Bezos just retired from Amazon.
I’m sure he’s not retired. He’s just focusing on other things.
So, I think that sense of purpose can be cultivated and talked about. And it does come out of what we’re passionate about, what we value.
Is that what you find when you talk to people that have done this?
Andrew Chen 56:51
Yeah, for the most part, most people who retire early definitely don’t just go sit on the beach. They usually are interested in other things, so they just spend their time productively on other things.
That might be something that’s productive to society, like doing something more civically oriented. Or it could just be something for personal fulfilment, like learning a bunch of languages, or whatever the case may be. But very few people tend to just sit on their butt on the beach, for sure.
Robin Taub 57:21
Yeah, you don’t see that very often, especially if they retire young. It just seems like people have these encore careers, so they retire from their first career, and then they have their second career. Even that’s an interesting conversation to have with your kids: how you chose your first career and why you chose to leave that and pivot towards something different.
Andrew Chen 57:47
All right, Robin. This has been really insightful. I’ve really enjoyed chatting with you.
Where can listeners find out more about you, your book, what you’re up to?
Robin Taub 57:56
Thanks, Andrew. The book is called, as you said at the beginning, “The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life.” And you can find that on Amazon.
I also have a website called thewisestinvestment.com. You can go there. You can also get the role model self-assessment on that website.
I have another website, which is robintaub.com, and there I have the values validator that we also talked about today. People can go to that website and get the validator, if they’re curious to discover what their values are and what their kids’ values are.
And that also has more information about some of the other work I do, including the speaking. I’m also on social media, all the usual places. And they’re on those websites.
Andrew Chen 58:47
All right. That’s excellent. We’ll definitely link to all those resources in the show notes, and look forward to sharing that with folks soon.
Robin Taub 58:55
Thank you. Thank you so much for having me.
Andrew Chen 58:57
Yeah. Thanks so much for joining us. Take care.