One of my objectives is to help get more kids to understand about money. It’s a topic that is not taught in school but I feel can have a massive difference on a child’s future.
As managing money isn’t taught in schools it comes down to parents to teach their kids. Luckily there are some really good books on this topic to help parents. I’d recommend the following books:
- Save Your Acorns (for young kids)
- Kidpreneurs (kids 7 to 13 years old)
- The Richest Man in Babylon (from 10 years old to adults)
So getting kids to read books about money is a very important thing. Another way kids learn about money is by seeing how their parents manage their money. This got me thinking about what I learnt about money as a kid from my parents!
So what did I learn about money as a kid?
I’ll be honest, I don’t remember having many conversations about money when I was younger (sorry parents, I’m sure you did talk about it but I was probably thinking more about the latest computer game I was playing!). I did, however, learn a lot from what my parents actually did.
There were two really powerful things that have stuck with me about how my parents managed their money:
1- Stayed in the same house for 25 years
2- Lent rather than gave money to us as kids
Let me expand on these two points below and why I feel these were two very important lessons. They have also had an impact on how we manage our money.
1- Stayed in the same house for 25 years
My parents lived in the same house whilst we grew up as kids. They could easily have afforded to move house many times as they both got more senior in their jobs. I remember there was this time when they said we were moving to a bigger house and I got so excited as my bedroom would have been much bigger and I would have had a different garden to play in. In the end, they decided to stay put.
Did I resent them for not moving to a bigger house? Not at all! The fact is, I don’t remember much from being in my bedroom as a kid. I spent a very large part of my childhood playing outside or sitting at a table playing computer games. I don’t believe I missed out from not living somewhere else and I was glad I never moved away from my best friends.
Anyway, back to the point about managing money. If they had moved to a bigger house they would have spent more of their salary maintaining a bigger house, keeping us kids in the lifestyle of our richer friends in the neighbourhood and, most importantly, paid a lot in stamp duty (tax) and higher mortgage payments.
As they didn’t move house and used their pay raises to pay off the mortgage quickly, it meant we went on a lot of holidays as kids. It also meant my parents retired early and now live a very relaxing life in the sun. Their days now consist of walking the dog, visiting new places and eating at new restaurants. Not a bad life!!
How has this impacted me?
Their mentality rubbed off on me. When we moved out of our first flat and looked for a house to start our family, we looked at over 40 different properties. We wanted to find a house that we could see our kids growing up in and us getting old in. We could have moved to a house nearer to where I worked but we wouldn’t have been able to afford our ‘forever house’ in that area.
Finding our ‘forever house’ meant that we probably stretched ourselves a bit in terms of our initial mortgage and lived slightly further from work than would have been ideal. Saying that, it didn’t take long until our salaries increased so that the mortgage was not too stretching and we love the place where our house is and met some of our best friends there.
We have no intention of moving home. The thought of paying more in mortgage interest and stamp duty doesn’t appeal to us at all. Our focus is on how quickly we are able to be mortgage free (although, I note that we use our savings to invest rather than pay off our mortgage quickly).
My parents’ strategy is very simple but very few people adopt it. I know lots of people who have bought houses with the mindset that they’ll move to a bigger house in the future as they get ‘richer’. What they don’t understand is that buying a bigger house makes you poorer.
Also, as it says in the book ‘Rich Dad Poor Dad’, a house is a liability, not an asset. This is because a house costs you money (mortgage, tax, bills, insurance) rather than generating you money (unless it is a second home which you are renting out). So keeping your liabilities as low as possible is a key element to becoming rich.
Isn’t a big house a good investment?
Most people will feel that buying a bigger house is a good investment. As I learnt from the book ‘Unshakeable’, a good investment is only realised when you sell it. So if you have a big house and live in it, you don’t really benefit from the investment. To benefit from it you have to sell it and either downsize or live overseas (where it is cheaper). This means you are forced to live in a different way to how you have been before. That might be fine and something you want to do although I feel people will find downsizing quite difficult after living in a nice big house for a number of years.
In my view, your house is your home, not an investment. A second house, that you rent out, would be an investment.
2- Lent rather than gave us money as kids
My parents will argue that they gave me and my sister lots of money. What I remember is being lent money. Don’t get me wrong, this was very cheap financing. Not that I appreciated that at the time. I just wanted them to pay for stuff and leave me alone! Now, however, I’m really thankful they did this. I have a real sense of ownership about what we have. Our house is completely ours (actually, the bank does own a good proportion as we still have a mortgage). We don’t own it because our parents gifted us money or inheritance or won the lottery. We did it all ourselves and I feel proud of that!
The terms of the loans my parents gave us were always very fair and flexible. We had to pay interest but we could set the repayment term. It was always a good feeling when we paid off these loans. I learnt about debt management from a young age. Not something I would have been taught about in school!
How has this impacted me?
I want to adopt this approach with our kids. I want them to feel like they earned what they have rather than its been given to them.
This approach does get you thinking though. You work hard so you can provide for your kids but ultimately want them to learn to provide for themselves. This probably means not buying them their first car or giving them money towards their first house – unless these are loans. I’m sure there are many parents that disagree with this mindset and don’t want their kids to have debt when they have the money available. I just think of those rich kids from the reality TV shows and have no respect for them – harsh but that’s my view!
Don’t get me wrong, our children will be fortunate enough to go on nice family holidays and eat in nice places. Education is probably one area where I would be willing to help them out but only in terms of university fees. I’m not paying for their partying – they can get a job in McDonalds like I did!!
Putting books into action
The purpose of this particular blog is to show that how parents think about money has a big impact on how kids manage their money. To give your kids a good start then you can put books into action in two ways:
1 – Read them books about money for kids
2- Make sure you manage your money effectively by reading good personal finance books. My top recommendation is Rich Dad Poor Dad. You can read what I’m doing as a result of reading that book here
One other book I’m going put into action for our kids ….
The other thing I want to give my kids is the opportunity to consider being an entrepreneur. Trying to be an entrepreneur when you are young is ideal. You have nothing to lose. That’s not to say that my children will become entrepreneurs, I just want them to have that as an option. It’s not something that is taught in schools and unless your parents are entrepreneurs, how will children even consider this as a career option? With books like Kidpreneurs, children can learn and try at a young age. That’s super exciting!
I would love to hear what you learnt from your parents about money. Please comment or email email@example.com.
Other things you can read on this topic:
- Blog: How to make your kids rich?
- Reviews of book about money for kids:
Thanks for reading!