Last week, Melanie mentioned some money skills to teach your kids and I thought it’d be good to examine what we’re doing. Our kid is only 4 years old so it’s a bit too early to teach him about investing or something complicated like that. At this age, he knows money is a good thing. He always picks up coins whenever he sees one and puts them in his piggy bank. That’s the main thing he knows right now. We are trying to teach him more, but it’s slow going. He’s so distracted most of the time.
One thing I’m trying to teach him is the concept of delayed gratification. When you see something you want, it’s best to sleep on it for a bit. You can take the time to shop around online and offline. Then if you still want in a few days later, you can buy it.
This winter was pretty mild in Portland and we had some nice sunny days in February. We took his old glide bike out to ride around and it was getting too small for him. It’s also time for him to learn how to ride a regular bike. So I started shopping around on Craigslist and dropped by a few stores. We went to Walmart and Target first, but their bikes were pretty bad. It’s cheap at around $100, but they are heavy and not very good quality. We found a Raleigh and a Trek on Craigslist, but they didn’t work out. The Raleigh was too worn out and the Trek sold too quickly. Anyway, I always take RB40 Jr. on these bike shopping excursions and he’d say – “I want a new bike!” every time. Eventually, we found a Specialized bike on sale at a local shop and we got that. It’s expensive, but I know he will use it very often. When he outgrows it, the bike will go to his little cousin and it will last for years. I’m not sure how much of this is getting through to a 4 year old, but I’ll keep working on this delayed gratification concept.
Saving up for something
The little guy saw a General Grievous Lego set at Target and he really wants it. I told him – maybe you’ll get it for your birthday or Christmas. He just had his birthday so the next one is a long way away. Next time he asks, I’ll tell him to check his piggy bank. He might have enough for it actually. This would be a good lesson on saving up to buy something.
On a side note, we’ve been watching all the Star Wars movies and animated series to prepare for episode 7. We love Star Wars! It’s a ton of fun to watch everything again. The new Star Wars Rebels series is pretty good, too. RB40 Junior’s favorite is the Lego Star Wars. He wants to be Darth Vader when he grows up…
RB40 Jr. goes to the post office and bank with me every Friday. Sometimes I’d find a check in the PO box and we’d go deposit it at the bank. Actually, I haven’t explained much of this process to him. I’ll try to talk him through it next time. Our bank has cookies on Friday, so he’s usually wolfing them down. I think he associates ‘bank’ with ‘cookies’.
We also go to the ATM once in a while to get some cash. I told him that the money comes from our bank account, but I’m not sure he really gets it. He probably has to be a little bit older to understand this concept.
Math is the key
I think that’s probably all you can do at this age. When he’s a bit older, we’ll teach him about income (allowance), debt, investing and all that good stuff. Actually, I just read something extremely interesting in WSJ. A study found that personal finance classes don’t really help young people make good financial decisions. The knowledge is retained for only 6 months to a year and it’s usually gone by the time you need it. The researchers found that the biggest differentiating factor is really math. If you know math well, then it will be easy to understand concepts such as compound interest and mortgage.
Wow, I thought a personal finance class would be helpful, but maybe that’s not the case. It’s probably best to involve kids with your financial decisions at home so they will be immersed in it from a young age. We’ll make sure our kid is comfortable with math so he’ll have a good foundation to build on when he’s older. He’s learning to add on his own now. That’s pretty cool to see.
What should we teach our kid next? When did you start getting allowance when you were little?
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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