Teaching kids about money… one step at a time

At almost 3 and half years old, Baby T1.0 is slowly grasping the concept of money. As someone who has spent a lot of time talking and writing about money, it is fascinating to see this development.

The other day Baby T1.0 and I were out shopping at a local grocery store. While walking around in the store he asked me if he could get some treats. I stopped the shopping cart and asked him if he had any money to buy these treats.

“No but daddy you can pay with the plastic card.”

Smart kid, so I tried to give him a lesson about credit card.

“Baby T1.0, the plastic card is not a magic card. Daddy and mommy load money on it and only use the card if we have money on it. Do you have money to put on the card?”

“No.”

“Ok then we can’t buy those treats.”

“Ok.”

I felt it was important for him to understand that credit cards are not some sort of magical card that daddy and mommy pull out to pay anything and everything. I wanted to instill the idea of responsible credit card use, because credit card will be a big part of his life.

The other day Baby T1.0 was playing Lego. Although it was sunny outside and the room was bright, he decided to turn on the lights.

“Baby T1.0, please turn the lights off.”

“But I WANT to keep the lights ON!”

“Baby T1.0, could you come over so daddy can tell you something?”

Being a curious kid, he came over and listened.

“Do you see that it’s bright outside?”

“Yes daddy.”

“Can you see in here without the lights on?”

“Yes.”

“Baby T1.0, we turn the lights off when we can see inside. We only turn on the lights when we can’t see, you know why?”

“Hvorfor?” (Why in Danish)

“Because if you have the lights on when it’s bright inside, you are wasting electricity. Electricity costs money. So when it’s bright inside and we have lights off, we are saving money.”

“And you know why we want to save money?”

“Why daddy?”

“Do you like it when daddy plays with you all day?”

“Yes!!!” (Getting all excited)

“By saving enough money then one day daddy doesn’t need to go to work anymore. Then I can then play with you all day. Do you like that?”

“Daddy I love playing with you all day. Can we play Lego?”

“Yes, so Baby T1.0, what do we need to do?”

“Turn off lights when it’s bright outside.”

“Yes, and also turn off the lights when you’re not in the room. This is also why we don’t keep the water running when you wash your hands. We are saving money that way too.”

Later that night I asked him to tell Mrs. T what I taught him. He was very excited and explained that we are saving money so I could play with him all day one day.

I guess the lesson stuck. 🙂

At this age he’s very impressionable. Perhaps I’m stretching the truth a bit but I think it’s important to teach him the idea of being frugal. It certainly doesn’t hurt to teach him the idea that one day when we’re financially independent, I will have more time to play with him.

Dear readers, do you think I should be teaching Baby T1.0 these money related lessons at 3.5 years old? Am I stretching the truth too much?

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On an unrelated note, I came across this great video yesterday on why your life is not a journey. It’s definitely worth your time watching it and discuss the idea with your loved ones. This is why I think it’s so important to find the right balance between enjoying your life now and saving for the future. And why we all need to develop the Be-To-Have mindset.

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35 Comments

  • Reply
    R
    April 6, 2017 at 7:12 am

    Hi Tawcan,

    I love these stories. I think it’s a very valuable lesson to teach our kids good values at a young age.

    Have you thought about giving Baby T1.0 allowance?

    My thoughts are to give my 4-year $8 a week. 20% goes into long-term savings, 20% for short-term savings, 10% for sharing/giving, and the rest can be used as the little one sees fit. What are your thoughts on this?

    • Reply
      Tawcan
      April 6, 2017 at 7:59 am

      We have not thought about giving Baby T1.0 allowance yet. Maybe that’ll come once he turns 4? Mrs. T and I still need to discuss more about allowance. When I was a kid I never had allowance but I can see how having allowance can help teaching about money, especially the saving part.

  • Reply
    Jim @ Route To Retire
    April 6, 2017 at 7:46 am

    I’ve noticed a little bit of pride when I get to teach my daughter a financial lesson and she gets it. I feel like I’m doing my job as a father just a little bit better. She’s 6, but already ready to buy some real estate rental property because she understands a very broad idea of how cash flow works with it.

    Nice job on training the kiddo the right way from the get-go!! 🙂

    — Jim

    • Reply
      Tawcan
      April 6, 2017 at 8:01 am

      That’s awesome your daughter already understands how cash flow works when it comes to rental property. That’s really impressive. That reminds me of the 7 year old girl that I met at Canadian Personal Finance Conference that was teaching us how to do Canadian taxes. Kids are so impressive.

  • Reply
    Dividend Daze
    April 6, 2017 at 8:51 am

    I think anything financial are good lessons to learn early on, especially cash flow. I don’t know about you, but most people had to self teach themselves pretty much everything they know about personal finance. While I’m still young and have ample time to put my strategies to work, It would have been nice to start out with the knowledge I possess now. With the time value of money and proper knowledge, their possibilities are endless the earlier they are able to start in life. Thanks for sharing.

    • Reply
      Tawcan
      April 7, 2017 at 10:13 am

      You’re right that most people self-taught themselves about personal finance. It’s really a shame PF isn’t taught in school. I plan to teach my kids about PF as much as I can.

  • Reply
    Stephanie
    April 6, 2017 at 10:04 am

    I like your approach. You kept it very simple and to the point, which usually works best with young children. Maybe Baby T1.0 will be the one teaching his sibling about money?

    • Reply
      Tawcan
      April 7, 2017 at 10:14 am

      Haha that’ll be pretty awesome if Baby T1.0 can teach Baby T2.0 later one. I’m sure he will do that, he’s already teaching Baby T2.0 some stuff.

  • Reply
    FI3000
    April 6, 2017 at 11:28 am

    Tawcan,

    I definitely don’t think you’re stretching the truth too much. My kids are a little older than yours (10 and 7) but I’ve been trying to teach them the value of money since they about age 3. I started with a similar approach as you. First just teaching them the concept of money ie- everything we have or consume costs money. Over the years I’ve slowly expanded on that and we’re at the point now where they have a good grasp of finance basics (ie-compounding interest, shares of companies = part ownership of the company, dividends vs capital gain). Almost brought a tear to my eye last week when my oldest decided against buying some new pokeman cards because he thought he wanted to save up to buy a stock (he doesn’t know which one yet though.)

    • Reply
      Tawcan
      April 7, 2017 at 10:15 am

      That’s pretty awesome your oldest wanted to save up to buy a stock. Sounds like your lessons have stick. Teaching them the concept that everything we have or consume costs money is a good lesson. I think it’s also good to teach them on how to conserve things and not waste things. Conservation is important.

  • Reply
    Ashley
    April 6, 2017 at 2:16 pm

    Good job man! When will you start teaching them the value of REIT’s in a diversified portfolio? 🙂

    • Reply
      Tawcan
      April 7, 2017 at 10:16 am

      LOL, maybe when he turns 4? :p

  • Reply
    Dividend Diplomats
    April 6, 2017 at 5:55 pm

    Tawcan –

    I think those money lessons are perfect. Cute way to get them involved and to see the benefit at the end of the journey.

    -Lanny

    • Reply
      Tawcan
      April 7, 2017 at 10:16 am

      I’m sure I’ll be teaching him and Baby T2.0 (once she’s older) more money lessons.

  • Reply
    Troy @ Market History
    April 7, 2017 at 4:08 am

    I think you’re teaching him these lessons at too young of an age. As long as he doesn’t throw tantrums whenever daddy doesn’t buy something, I think you should avoid talking about money with him. Let kids be kids – they won’t be carefree forever. Start talking to him in a couple of years down the line about money and finances.

    • Reply
      Tawcan
      April 7, 2017 at 10:19 am

      We were out buying shoes yesterday because his feet are now too big for the shoes we bought a few months ago. We picked out some shoes for him but he pointed to a pair and said he wanted those (b/c they had Minions). I asked him “do you have money?” “No.” So I told him that we can’t buy these b/c we only have so much money for his shoes. He didn’t throw any tantrums. I was impressed.

  • Reply
    Mr. Tako
    April 7, 2017 at 5:12 am

    Wow, I’m impressed Bob. My kids don’t remember anything I tell them for longer than 60 seconds. I constantly have to ask them to turn the lights off, close the fridge, and turn off the water….and do they ever remember why I ask them to do it?

    Not a chance!

    Consider yourself lucky!

    • Reply
      Tawcan
      April 7, 2017 at 10:20 am

      Haha we’ll see if he remembers these lessons in a few weeks. He has good memory though so I’m hopeful.

  • Reply
    passivecanadianincome
    April 7, 2017 at 9:10 am

    Hey Bob

    Good story, our son is currently 4. We started allowance around 3 he always want to help us clean the house and do dishes so we decided to give him 1$ a week. His birthday was in februaury we upped it to 2$. Generally he helps around the house but only thing he is required to do is keep water in dogs bowl and feed our dog. I think teaching kids about money is huge and I’ve said just like you have. I don’t need to work as much if we save money. We go to walmart and he wants the kinder egg. do you want it or do you want to buy something at dollar store? he will instantly put it back. Plus he even brings change to donate in those sick kid bins etc which will make any parent proud!
    We have some friends who think he is too young for allowance and stuff but it teaches them early and I like how he knows he earned the candy or whatever he buys.

    • Reply
      Tawcan
      April 7, 2017 at 10:21 am

      When it comes allowance Mrs. T and I believe kids shouldn’t get allowance just for helping out household duties. They have their own household responsibilities that they need to do. For example, Mrs. T and I don’t get allowance for making meals. 🙂

      Having said that, I think giving him some allowance might help teaching him the concept of money even more.

  • Reply
    Eric Escobar
    April 7, 2017 at 9:26 am

    Hi Bob,
    Did you read Cazzin’s article in moneysense a few months ago, I found it quite interesting.

    http://www.moneysense.ca/learn/teaching-kids-about-money-ages-0-to-6/

    • Reply
      Tawcan
      April 7, 2017 at 10:22 am

      Hi Eric,

      I came across that article a while ago. Will have to reference it for later. 🙂

  • Reply
    [email protected]
    April 7, 2017 at 10:56 am

    Great post as teaching my kids about money is a big priority. My wife has had the same conversations with my son as you did with your son. As to one of the comment regarding allowance…I don’t know…3 1/2 still seems too young for me. While a few dollars is not a lot of money a week, I’m not sure what he really needs to buy. And I don’t know if I just want to let him buy random stuff he wants. He rarely asks for toys and we barely buy any (he has toys from gifts/hand me downs)…until recently when he become addicted to Chuggington on Netflix. My wife saw how much he loved it and bought him one of the characters. He was so excited when he got it. However, he has started to ask for the other characters. My wife told him that they cost money and that he will have to wait. Now he says, “baba, I want Wilson and KoKo but mama says it’s expensive so I have to wait!” =)
    I know this is a pf blog but curious how you and your wife are teaching languages to your kids. My wife speaks Spanish growing up in Central America and Chinese (being Chinese) and we’ve tried speaking those languages. And while he does understand a lot of Chinese (Cantonese), he just speaks English ever since he started day care. He didn’t speak at all for the longest of time so I was just glad he spoke…but now it’s hard to get him to speak the other languages.

    • Reply
      Tawcan
      April 7, 2017 at 11:55 am

      Thanks Andrew. I’m really glad that money was a topic that we openly discussed when I was growing up. It was great to be able to openly discuss money related topics with my parents. It’s funny that people have brought up allowance. Growing up my parents never gave me any allowance. They always had a place in the house with some money laying around (a few small bills and coins). It was totally acceptable for my brother and I to take the money if we needed to buy something. We just had to tell our parents. Somehow this open accessible limited amount of money and open money discussions have taught me a lot about money. At 3 1/2 I really don’t know what Baby T1.0 wants to buy other than candies and toys. I really don’t want him to spend money on these random things. 🙂

      That’s awesome your son has learned about delayed gratification and understands the concept that some things are expensive so he must wait for it.

      No worries about asking about languages, this site is really more than a regular PF blog. As you may know already, Mrs. T is Danish and I’m Taiwanese. We talk to each other in English but we try to speak to Baby T1.0 and T2.0 in Danish and Mandarin whenever we can (when my parents are looking after him they speak Mandarin to him too). Baby T1.0’s Danish has exploded after our recent Danish Xmas vacation. He’s fluent but apparently mixes English here and there. I used to be able to understand him in Danish but having harder and harder time now. He understands Mandarin but doesn’t speak it as much. His English is great but we were never worried about his English since we live in Canada and figured he’d be able to pick it up easily. He also learned sign language when he was younger. It’s kind of funny because he’s often ask us how to say specific words in Danish or Mandarin. By teaching him Danish and Mandarin, Mrs. T and I have been able to learn a little bit of each other’s language. Kinda neat.

      Baby T2.0 just started to sign so it has been interesting to see that Baby T1.0 has started doing more signs too. When Baby T1.0 talks to Baby T2.0 he speaks in both Danish and English. It’s really cute to see.

  • Reply
    FullTimeFinance
    April 8, 2017 at 1:16 pm

    Honestly I’m holding off on anything so in depth until six or seven. For now I’m working on more understanding that things do cost money so we take care of then because we can’t just replace them.

    • Reply
      Tawcan
      April 10, 2017 at 10:37 am

      That makes sense too. I guess it really depends on the kid on whether you can start teaching him/her about money early or not.

  • Reply
    Dividend Diplomats
    April 9, 2017 at 6:43 pm

    I don’t think it is ever too early to start. I don’t know this from experience, but rather watching my niece and nephew grow up. My niece is almost five, and she remembers the most random things. She knows WAYY more animals, bugs, etc. than I do, thanks to her grandparents. The point is, I don’t think you’ll ever know if a lesson will stick (see story 1 in your article), but when it does, chances are your child will remember and never let it go. But that doesn’t mean you souldn’t at least try. You found a great way to deliver the message about electricity and one that I will remember one day down the road when we have a family!

    Thanks for the great read tonight Tawcan.

    Bert

    • Reply
      Tawcan
      April 10, 2017 at 10:39 am

      Haha that’s true you don’t know whether they lesson will stick or not. Funny you mentioned that though. This past weekend Baby T1.0 woke up early and was playing Lego. He turned on both sets of lights i the room. Mrs. T saw that and asked Baby T1.0 what I had taught him earlier. Baby T1.0 just said ”
      undskyld mor” (sorry mom in Danish), and went on to turn off one of the lights. I guess the lesson did stick. 🙂

  • Reply
    Amber tree
    April 15, 2017 at 12:30 pm

    2 great lessons.

    We also think it is important to teach our kids a few money lessons. The oldest is now 6 and gets 1€ per week. Recently, she splurged 8€ on drinks for herself, her sister and some friends while away. We knew she was going to do this and let her. We then could have a chat with her on how many weeks she needs to save for that, asked if it made her happy… Still a long way to go, and with an early start, that is no problem

    • Reply
      Tawcan
      April 17, 2017 at 11:24 am

      I hope she saved up 8 weeks’ worth of allowance to get those drinks instead of getting into debt. :p

  • Reply
    Dividends Down Under
    April 27, 2017 at 1:26 am

    I love how you talked through the reasoning, in such a straight forward but grown up way for Baby T1.0 to understand, I only hope that I can be as great at talking through these things as they come up when our little one is at that age/stage. Thankfully I don’t have to worry about that stage hitting anytime soon because she’s still kicking me from the inside!

    Mrs DDU

    • Reply
      Tawcan
      April 27, 2017 at 4:26 pm

      Thanks Mrs. DDU. Baby T1.0 remembered the lessons most of the time but had to get reminded here and there.

  • Reply
    Patrick
    April 27, 2017 at 5:00 am

    Great you start to teach the value of young age. My kids have passed that stage and we just finished our first Budget Fun lesson 2 weeks ago. You can always download our materials and tweak it for your own purposes

    It was a lot of fun and it make them think and realize that life is not cheap.

    • Reply
      Tawcan
      April 27, 2017 at 4:27 pm

      That’s a great approach to teach them about budgeting at a young age.

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