Money Matters: Teaching Kids About Money Transcript

0:00:00.0 CJ: WTIP is pleased to bring you another edition of Money Matters, a monthly feature intended to help us understand more about managing our finances. Scott Oeth is a certified financial planner and adjunct professor. He's taught retirement planning and wealth management strategies to hundreds of financial professionals. And he joins us now by phone. Welcome, Scott.

0:00:23.2 Scott Oeth: Hey, good morning CJ.

0:00:24.6 CJ: Yeah. So you wanted to talk about teaching kids about money, quite an important topic these days.

0:00:32.7 SO: Yeah, I'd say so, and it's, a big one and you, and I could probably talk about this every week and never completely crack the code on it, but I think that you, given that, many people struggle financially throughout their lives. It can be a great source of stress. It can cause relationship issues. And many things that just really one of the best gifts you can give your kids to try and start teaching them money skills in a, good money mindset early. And, I've heard it said that, "If you don't teach them, someone else will," and they're certainly subject to so many impressions of advertising and brands, conspicuous consumption and, speculative behaviors that, doing what we can to try and get them on the right track early on can really help improve their lives later.

0:01:24.2 CJ: Okay. So what's a good age to begin teaching kids about money? And how do you recommend we begin?

0:01:31.9 SO: Yeah, well. CJ, what's the old joke they say about voting in Chicago, early and often? I think that applies here. It's, I was looking at this and believe it or not, there's different research showing that money habits and attitudes are deeply ingrained by, I mean, in the single digits, there's a study outta Cambridge citing age seven, another one, age nine. I think it depends exactly what they're looking at, but without a doubt, they're picking up things really early on, and a lot of it they are picking up from their parents. There's not a lot of teaching in this, especially in early years in schools. There's not a lot of outside resources, most kids aren't reading money books, they don't have their own financial advisors. So it really is coming from parents or grandparents or their community.

0:02:14.5 SO: And so, getting going early on and like I said, I think there's a whole lot that could be discussed here, but from a high level, I like to think about it in kids, a couple broad areas. The mindset around money is so important modeling, parents are their role models. And then there's the mechanics of it, the different techniques and tips. But the mindset is really where I think it all starts. And it all starts with everyone and trying to instill in kids an idea of ownership and that their actions, take responsibility for them and everyone starts in different place. Some people have tremendous obstacles, other people, start with different advantages, but what's true in either event is each little decision you make along the way is either moving you forward or backwards and trying to instill that.

0:03:03.7 SO: And I think it's, not necessarily, trying to inspire your kid that they need to have a Lamborghini and a mansion on the lake, but just the idea of you'll be more comfortable, you'll probably have less stress in your life, you'll feel more self confident if you're able to at least be self reliant, take care of yourself, be thoughtful about your spending patterns and your future goals and then work towards that. I think, in the mindset or, in one of the things I think about a lot of CJ is there's a lot of popular personal finance books out there and commentators, and oftentimes, I kind of listen to them like eeeehhh, and kind of nitpick with some of the details or the specifics, but without a doubt, one of things I really admire is the mindset, the inspiration that they're able to inspire.

0:03:47.9 SO: So I think that's really important and that next one, the modeling, this may be uncomfortable that kids are getting it from, you gotta look in the mirror, they're getting it from us. And I think of that song, "Cats in the Cradle." And they're gonna grow up to be just like you, that said it is interesting. Sometimes, is very often in families to say, Well, why does one adult child have very different money patterns than others? So it's not, I don't think it's completely within people's control, but they are all watching. They do pick up a lot of things from parents. And so I think when possible, trying to lay out your decisions and talk openly about, Well we are choosing to do this and we're consciously choosing not to spend here.

0:04:28.1 SO: And, we would like to, maybe be able to help your school or to retire at a certain point. And putting those decisions out there is very important. And I think back, I grew up hearing quite a few stories of my depression era grandparents and their thrift and hard work and how they scraped and struggled to get by. And then... I can picture my dad watching Wall Street week on public television. Well, why on public television? Because we didn't pay for cable, probably but it was just put out there. No, it's too expensive. We're not gonna do that. We never did. You know, I went off on my own and we still didn't have cable or anything like that at home. And I ended up studying finance and doing a masters in finance and working with so many great clients over the years and becoming an adjunct professor. And some of that passed on. And now, our oldest CJ is home from school. In her first year, she chose to go to a happily relatively affordable state school that's regarded as having one of the best personal finance programs in the country. And that's what she's studying. So these things sometimes do get passed on.

0:05:33.0 CJ: Yeah. Whether you want them to or not, right?

0:05:38.3 SO: Yes. Yes.

0:05:38.9 CJ: Okay.

0:05:39.3 SO: You know, one idea that I really loved hearing about is, you know, for like the family financial goal, maybe something like a vacation for the summer and sharing some of the details, maybe it's not everything, but, and each person, so maybe a child saying. "Hey, we'd like you to save whatever it is, $10 or $25 out of your earnings for this trip. And here's how you can earn it." So you have some spending money that you can do whatever you want with and to get people excited and thinking about that, the working towards the long term payoff.

0:06:09.2 CJ: Okay. So you talked about mindset and modeling and mechanics, any more specific steps or tips on the mechanics part of it?

0:06:18.2 SO: Yeah, I think there's a lot there. So many things we could talk about that here again kind of three big areas, I think are important if you're kind of, how do I start trying to teach my kids and work with them in this area and in the mechanics of early earning, getting them started on that path and think about earning and spending decisions is a second one, and then the third one, saving in long-term investing, and if you start getting them going and building those three core areas, that's I think really a foundation for success. And so your allowances, I do think are good because it gives the kids some money to work with and to begin making their own financial decisions and maybe making some mistakes, some of that, "Oh, I thought I really wanted this in the moment, but I kinda regret it later because I wish I would still have that money in my piggy bank or in my pocket for X, Y, Z" that came down later in the road and... Well, allowances are good.

0:07:10.8 SO: I really like jobs and earning and tying that to labor and letting kids, if they have a desire for something, you'll really work towards it and earn it, and I pay our kindergartener a couple of bucks to pick up sticks in the backyard before I mow the lawn, and my wife told me, he mentioned on the way to school yesterday that he was concerned 'cause he heard I said I was gonna mow the lawn, and he knew he had Cubs Scout after school, and he was kinda worried he wasn't gonna be able to get his stick job done before I mowed the lawn. And I thought, Oh, wow. Isn't that great? You know what I mean?

0:07:44.8 CJ: Yep.

0:07:44.9 SO: He's been doing this for a few weeks, he did a couple times last year, but he's taking ownership of that and he's very homeward, we're taking a little trip and he's gonna bring his money and he gets to spend in whatever he wants.

0:07:55.1 CJ: Nice.

0:07:55.2 SO: So, I think that's a really big, the spending decisions, piggy bank is great, seeing dollars grow. I love the idea of the clear jars, see the money building up, and a jar for their earnings, okay, here's your stick money or your allowance, here's a jar for spending that you get to choose, whatever, but we should have some of this be savings and this is long-term, and to start separating that in the moment, spending from savings, I know some people like to add a third jar for sharing or charitable contributions and get kids into the habit of saying, "Hey, let's commit a certain portion of your earnings, like we do to helping others who are less fortunate or causes we care about."

0:08:32.5 CJ: Oh, I like that.

0:08:33.4 SO: Of course, that last step of the mechanics CJ is the one that is really close to heart, it's savings and investments, and to the point you can maybe it starts off with the bank of mom and dad, but getting a bank account when possible and letting them see that balance build up, and there's some great ways to get started with long-term investment plans, on 529 plan that helps save for college or if your child does have some earnings, they may even be able to set up a Roth IRA and invest long-term there, that can just be a tremendous start to get them going in the right direction.

0:09:05.9 CJ: Where were you when I had tiny kids Scott, I should have had this conversation way back when.

0:09:14.3 CJ: We're talking with Scott Oeth and we are talking finances with Scott on the first Wednesday of the month on North Show morning. Anything you'd like to add, Scott, before we go?

0:09:23.1 SO: Well, CJ, I think there's a big role for grandparents in there too.

0:09:27.7 CJ: Oh, yeah.

0:09:28.3 SO: Maybe you still can have a strong role to play. I think that's great, and I we'll be putting this together in a blog post and putting up to my site, and of course, you record the audio and have it on the WTIP site, and I think it's this kind of thing through you know we spoke about a year ago with some ideas around managing impulse purchases, and I think that's a really important one for kids, and so I know that's in the archives on your site and on my blog as well.

0:09:56.7 CJ: I'm gonna revisit it right now.

0:09:58.9 SO: Okay.

0:10:00.9 CJ: Alright, thanks, Scott, we'll check in again next month.

0:10:02.9 SO: Great, thank you CJ. Looking forward to it.

0:10:04.8 CJ: Alright. Bye-bye.