Poll – The Top 3 Money Lessons for Kids

Most important money lessons for kids

I’m worried about how our son will do when he’s older. Life seems to be getting more difficult every generation. Mrs. RB40 and I are Gen Xers and we grew up in the 80s and 90s. Life wasn’t as complicated back then. We didn’t have cell phones, the internet, social media, or thousands of tempting products. Kids were happy with TV shows, Nintendo, sports, and riding bikes around the neighborhood. Our future wasn’t complicated either. We knew if we get a good education, we’d probably do well in life.

The Millennials had a tougher time. Life got a lot more complicated when they were growing up. The Great Recession hit in 2008 as many of them entered the workforce. It was tough to find a good job and the unemployment rate for Millennials was higher than other generations for years after the recession. Also, Millennials were the most educated generation in history. Check out the chart below. 39% of Millennials graduated from college. The competition is fierce for good jobs. All these factors made it more difficult for them to save and build wealth. The median net worth of households headed by Millennials ( ages 20 to 35 in 2016) was about $12,500 in 2016. That’s lower than Baby Boomers ($20,700) and Gen X ($15,100) when they were in the same age range. There is a trend there.

Our son is a member of Gen Z, those born from 1997 to 2012. (I guess nobody coined a cool term for them yet. How about the Social Media generation?) They are pretty young, but the older ones are enrolling in college at a higher rate than Millennials. They’ll be more educated than the Millennials. The competition for good jobs will be even fiercer in the future. I think life will keep getting more difficult for future generations.

The US was the sole superpower for many years and Americans lived like kings. It’s a different story now. Globalization is here and the playing fields are getting more level. Future generations will have to fight harder to build a prosperous life for their families. The competition is worldwide now, not just in the US.

Top 3 Money Lessons

Our son is still young so we still have time to teach him everything about personal finance. However, I want to see what everyone thinks is the most important money lesson for kids. Wow, I have a big list. You can pick your top 3 and we’ll see which way the wind blows.

What are the 3 most important money lessons for kids?

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These are all important personal finance lessons. Let me make a case for each one quickly.

Being Frugal – This is #1 for me. If you can live modestly and not waste money on frivolous crap, you’ll probably be okay.

Earning money – Working and earning money is extremely important too. It is very difficult to build wealth if you make minimum wage. You need to make a good income to be able to save.

Saving – You need to save for the rainy days. Most US households have less than 3 months worth of living expenses saved up. That’s not enough because things will go wrong sooner or later. You have to be prepared for an emergency.  

Investing – Unfortunately, saving is not enough anymore. You need to invest so your money can grow. Compounding is the key to becoming wealthy.

Minimizing the Big 3 – The biggest expenses for most households are housing, transportation, and food. Saving money will be much easier if you can minimize the Big 3.

Budgeting – Budgeting helped many families get out of debt and start saving. You have to spend less than you make.

Negotiating – Everything is a negotiation. If you know how to negotiate, you’ll make more money and spend less. Never pay full price for anything.

Financial Independence – Kids should know about the magic of financial independence. Once you get there, you’ll never have to work again if you don’t want to. Financial independence is the holy grail of personal finance.

Avoiding debt – Student loan debt is a huge reason why Millennials have a lower net worth than the previous generations. They owe more. Kids need to know the difference between sensible debts and bad debts. Paying $75,000 per year for an Art History degree probably isn’t a great idea. Also, consumer debt is always bad.

Giving – Help people less fortunate than yourself and make the world a better place.

Retirement – It’s never too early to start saving for retirement. The earlier you save, the better off you’ll be in the future. The easiest way to become a millionaire is to max out your 401k every year.

Taxes – I mentioned the Big 3 earlier, but the real drag on your income is taxes. That’s the biggest expense for most well-off families. Once you’re in the higher tax brackets, you need to learn how to minimize taxes.

Inheritance – Don’t worry kids. You can count on inheritance. But only if you’re nice to your parents.

Don’t Cheat – There are many many ways to make money illegally or in underhanded ways. You can run scams, multilevel marketing, lie, cheat, and steal to make easy money. However, it isn’t worth losing your freedom. Cheaters will be caught eventually.

HappinessMoney can’t buy happiness. Don’t prioritize money over everything else. If you’re miserable at work, you need to figure out a different way to live. Having no money is miserable, though. So keep that in mind as well.

Others – Leave a comment.

Well, let’s vote! I’m eager to see what everyone thinks. Share this with your friends so we can have more sample points.


More about kids and money from my blog buddy, Lazy Man. Seven Ways to Teach Your Kids About Money.

Pew Research StudyMillennial Life: How young adulthood today compares with prior generations. I used a lot of data from this paper. It is very interesting.

Image credit – Jordon Rawland

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

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16 thoughts on “Poll – The Top 3 Money Lessons for Kids”

  1. I think it’s a little sad that there wasn’t a single vote for giving! We focus on the principles behind how we think about money: why do we spend it, how do we decide to spend it, how we balance wants and needs, and the importance of saving for our futures and the importance of helping others.

    I think we have a long way to go still but no matter how much or how little they have, I want them to have a decent foundation in thinking about money in a healthy way.

  2. i’m not sure kids are “launching” quite the same way in this day and age. i have nieces and nephews approaching age 30. some have college degrees and some don’t but all grew up privileged. they are still being subsidized by their parents to some degree or another. seems crazy to me. it seems the softer the upbringing the less they appreciate their good fortunes. i’m sure there is a lesson in there about needing to do the heavy lifting and hard work at some point. now or later, your choice.

  3. I went with “financial independence” as my first choice since if you have a handle on that, you have a pretty good understanding of some of the others on the list.

    “Happiness” was my second choice as I learned through experience that you can get tunnel-vision on the path to FI. Trading in today’s happiness for tomorrow’s is a bad decision since you don’t even know if you’ll make it until tomorrow.

    The final choice I made was “avoiding debt.” This can be the biggest hurdle in growing your net worth. This was another one I wish I had understood earlier in life. I ran up over $30k in credit card debt during my college years and that took a lot of undoing… time that could have been spent building my nest egg.

    Although I’m thrilled with our life in early retirement, we could have been there much sooner if we knew some of these things earlier. That’s been my big push to get our daughter financially educated so she has a head start and doesn’t make some of the same mistakes I did.

  4. Probably investing, practicing good money habits, being good to others.

    I feel it will be very tough for our kids to get ahead. So they will have to rely on their parents, even once they become adults.

    Think about how hard it is to be financially independent with both spouses not working. I think it’s going to be 2X harder than that for our kids.


  5. I do think there is some overlap.

    I think number one is investing. There is a lot of advice out there and I’m not saying its all bad. The problem in my opinion is how you should invest really depends on how much you have to invest and what stage of life you are at which most advice giving does not mention. I also pick this picks because I think it is the hardest to learn. Children can pick up a lot of the others just from living with you.

    I would say number two is saving. Pay yourself first. It is so tempting at a young age to get a new car or a cool pad or the latest gadget and not have enough left over to really grow a retirement fund. I’m not going to complain if my kid is frugal or not if she pays herself first an appropriate amount.

    The number three is hard for me to choose between budgeting and earning money. I’ve decided to go with budgeting over earning money because earning money is more guidance in most cases than teaching a skill. I believe budgeting covers a lot of the above including frugality. It helps with the savings part as well. In a world where people use debit and credit cards so much, many children really don’t learn the value of money as past generations did. “Just put in on the credit card, mommy” We try to teach this with school clothes each year. We make a list of what new clothes they need and based on that list we give them a budget. I usually look up average economy prices for each item. If they want a name brand jeans then they may have to get a cheap or used shirt or find a deal elsewhere. A lot of the poor people I see don’t have good budgeting skills.

  6. Thanks for the shout out.

    It’s hard to pick 3 from the list, but at least there’s some overlap that makes it easier. I’ll take being frugal, making money, and investing. Being happy is important too, but I’ll take that a spirituality lesson more than a pure money lesson.

  7. I voted for: Investing, Being Frugal, and Others.

    I picked “Others” because there’s many ‘small’ skills that matter to your financial outcome — like being able to communicate well, or the courage to ask for a raise at work.

    Yeah, it’s tough out there. We live in a global world, and it’s tough for folks to carve out a niche, but I have faith today’s kids can do it.

  8. Not in any particular order, I’m going for:
    – Budgeting
    – Avoid debt
    – Happiness

    I thought it was going to be obvious which 3 to choose, but it was actually difficult. I guess that means that you can have a top 3, but that doesn’t mean that the others should be forgotten.

    As a corollary, when I travelled in Australia a few years ago, staying in hostels meant that I came across a lot of young people. My takeaway was that they are going to figure things out just fine, and we needn’t worry too much.

  9. I voted, which was easy for me.

    These will be the three main principles for becoming financially independent in my book “Money Wisdom for Smart People – Dummies Don’t Bother!”:

    1. Earn Money Wisely. (Don’t work hard; hard work is for idiots. Work smart instead.)
    2. Save Money Wisely. (Save at least 50 percent of your after-tax income.)
    3. Invest Money Wisely (Take risks, but take calculated risks. Invest only 20 percent or so in Guaranteed Investments and the rest in Dividend Stocks.)

    Insofar as being frugal, this is only important when one is really struggling, earning a low income and has a lot of student loan debt.) Being frugal when one starts making a half-decent income can actually hinder one’s achieving financial independence.

    To be sure, prosperity consciousness is an important element for achieving financial independence. I say that as a person who has worked less than half of my adult life, and when I have worked, I have worked four or five hours a day. Yet, at the age of 72, I am in a bettter financial position than over 95 percent of people my age. Results don’t lie, in other words.

    • Those are great principles. To me, being frugal just means don’t spend all your income. If you earn $200,000/year and save $100,000, you’re frugal. I guess that’s a bit different than other people’s definition.


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