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What we’re teaching our kid about money


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.

teach our kid about money

Delayed Gratification

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

teach kid about moneyThe 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?

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

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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{ 28 comments… add one }
  • Mrs. Frugalwoods March 25, 2015, 3:56 am

    I think the delayed gratification lesson is a great one–and, I’m sure it helps that you illustrated it so well with the bike examples. I like how you’re integrating financial lessons into daily life with your son, seems like they’ll be more likely to stick that way.

    I’m not sure exactly when I started receiving an allowance, but I think it was probably around 1st or 2nd grade to the tune of maybe $1/week. I remember trying to convince my parents to pay me more for doing extra chores around the house, but I’m pretty sure that never panned out.

    • retirebyforty March 25, 2015, 10:13 am

      It’s tough to explain to the little guy that we should wait. Kids just want things right away. He’s getting better at waiting and not whining about it, little by little… I don’t remember when I started getting allowance. My childhood is a big haze. My memory is so bad.

  • Jon March 25, 2015, 3:56 am

    I think I was around 8 when I first started getting an allowance. My parents were good at teaching us delayed gratification. There were a lot of things we wanted that they would not buy for us. We had to do chores to earn the money and then buy the item we wanted. At the time, I hated the idea, but it has helped me now that I am older!

    • retirebyforty March 25, 2015, 10:14 am

      He’s a bit too small to do chores, but soon I’ll get him to go throw the trash out and some other little chores.

      • Retired To Win March 26, 2015, 5:35 am

        Well, my Dad figured out how to teach us right from kindergarten that money has to be earned. He did it by rewarding us with money for getting good grades, landing on the honor roll, etc. We could either go to the store right away and buy something with the money or we could “bank it with Dad” until it built up enough to buy something we had targeted.

        And an allowance? What is that???

  • Mrs SSC March 25, 2015, 4:19 am

    Another way to start teaching the fundamentals of money and saving without real money is to do a sticker chart. So – you would like draw say 50 squares on a piece of paper and then at the end of the chart have a picture of the toy he wants. Then let him earn those stickers, so he can see how they build up and get closer and closer to his goal.

    My son is just a tad younger than yours – and he likes to try and earn ‘coins’ but a penny and a quarter are just as exciting for him, so he doesn’t quite get the value concept… stickers are more visual, and seeing the blank and filled spaces helps him understand the goal.

    • retirebyforty March 25, 2015, 10:15 am

      I’m not good with sticker charts. It seems to work wonder for the other moms. I’ll talk to the missus and see if we can set something up. A picture of a toy at the end is a great idea.

  • BE Pennypacker March 25, 2015, 5:58 am

    I want to say I was around ten when I started getting an allowance. I had to do chores and behave myself, otherwise, no money for me. I remember always thinking I wasn’t getting as much as my friends were. Although, my parents did let me do extra chores for bonus money like washing the car or mowing the lawn. Looking back now, I appreciate the fact that my parents didn’t just hand me cash.

    I love that the bank has cookies! Our dogs love going to the vet for that same reason.

    • retirebyforty March 25, 2015, 10:16 am

      Bonus chores is a great idea. We’ll keep that in mind when he started doing regular chores.

  • Taylor Lee @ Engineer Cents March 25, 2015, 6:16 am

    I think you’re taking the right approach in teaching them about delayed gratification and thankfulness in what you got. 4 is just really too early age for kids to understand the concept of money. I think around 7-8 you’ll get a lot more traction.

  • Talaat @ His and Her Money March 25, 2015, 6:22 am

    Our kiddos are 5,3, and 1 so most of our lessons center around their piggy banks and bank accounts as well. Additionally by us being Christians, we have explained the concept of tithing to them and how they are to give 10% of any money that they receive to church. We even let them walk our tithes and offering up to the front and put in the basket.

    I think giving kids incremental lesson while they are young, will help lay the foundation to add the more complex and detailed explanations of personal finance later.

  • Crystal March 25, 2015, 6:33 am

    We recently shopped for a balance bike for my two year old son. Each time we went into a bike shop, he would want one. We started explaining that we were looking for just the right bike for him. He was very accepting when we left without one as we had not found The Right Bike.

    • retirebyforty March 25, 2015, 10:17 am

      Wow, that’s a great 2 year old kid. Actually, our guy listened more when he was little too. Now he’s thinking more for himself and making life tough for everyone. 🙂

  • RA50 March 25, 2015, 8:58 am


    I believe you are doing the right thing too start teaching Junior at eraly stage even if he doesn’t understand everything the first time.
    Take you time, repeat and repeat.

    I geet my first weekly allowance when I was 10 or 11, the by 15 I got a monthly allowance, which was more difficult to manage. But my parents gave me a challenge to put some money in my saving account when I was receiving the check. I must say it’s how I started and continued since then.

    Cheers, RA50

  • Michael March 25, 2015, 8:58 am

    I like the idea of him wolfing down cookies at the bank, as a kid you look forward to those things, one of the joys of childhood.

    How about putting back 10% of everything into a permanent savings. Starting that process at an early age would have been a great thing for me. Not a savings to buy that Lego set you really want, but one that buys your first house, or funds your retirement. When I was a teenager working hard for that weekend money, putting back a percentage would have gotten me started on the right track. Can you imagine having a percentage of everything you ever earned?

    • retirebyforty March 25, 2015, 10:18 am

      Yeah, he’s looking forward to Friday every week. The 10% idea is a great one. We’ll open a checking account for him and starting putting in 10% as he earn. I’ll probably match it to teach the concept of employer matching too. 🙂

  • Pennypincher March 25, 2015, 9:29 am

    Studies show that delayed gratification is/was key for later success in life. The taking time to comparison shop is a good start. Soon he’ll be an expert at it.
    It took my kid a while to “get this”. I always said, “she doesn’t “get it (understand)” now, but she will eventually “get it”, meaning, we wait for a sale, discount, best fare first. This And also learning wants vs. needs.
    Work ethic is another good start. I tricked her into picking berries all summer. It felt more like fun, but it was work! Hope this all makes sense, y’all!

    • retirebyforty March 25, 2015, 10:19 am

      Delayed gratification is tough, but it’s a valuable lesson. It’s too bad that most people don’t understand this concept or just can practice it.

  • kammi March 25, 2015, 9:31 am

    Get him to build something with you. Something that takes a while that you guys can do together. It requires focus, commitment and if you repair something and buy the parts for it (say, an old bike that you guys turn into an electric bike or something), it also teaches him what it takes to create value for something, and he gets the fulfillment of building something with you from the ground up. Plus, it’s father/son time. I used to check the oil in the morning and help my dad rewire parts of the house when I was little, and it helped me later on with life skills, as well as made me see value in some things others take for granted.

    • retirebyforty March 25, 2015, 10:20 am

      That’s a good idea. I’ll think of something to build. Maybe we’ll have to wait until he’s a bit older. He’s too little to help with anything right now.

  • Sharon March 25, 2015, 9:40 am

    Delayed gratification will help him grow into a more responsible and thoughtful person. The kids that think that they should have everything right now are doomed for failure. Also, I like the idea of matching money for purchases instead of giving outright. For instance if one of the nephews want a new bike and it’s $500 bucks, then I will agree to pay for some portion of it. That way they have skin in the game and will likely take better care of it if they had to sacrifice to help purchase it.

  • Vivianne March 25, 2015, 9:50 am

    Wow, I’m impressed. Beside delayed gratification, you also taught him to shop the around for the best price and patient. These are all great skills to have. I agree math is the clear winner. Everything come down to math, the goal is to simplify everything into equations and concept to math – physics is math, science is math, music is math, draw, painting, and obviously investing.
    You can also teach him risk and strategy. I grew up playing poker, blackjack and other card games. I also played chess, checker, gomoku, reversi, and a lot of board games. I don’t go to the casino. I can make calculations very quickly in my head, probably because I was playing card games.

    • retirebyforty March 25, 2015, 10:21 am

      We are playing board games with him now. We simplify the rules a lot. He cheats a lot, though. He doesn’t really understand the concept of rules and win/loss yet. He always want to win and if he doesn’t, he’ll cry… We’ll work on this one. 🙂

  • William Medina March 25, 2015, 10:33 am

    I agree with you and applaud your efforts. They are never too young and yes, it will take time to teach certain concepts.
    I started playing monopoly with my kids, I purchased a game that stressed certain money principals in order to get out of the “rat race” game. Money concepts are difficult to teach because as I have seen in my own experiences – even adults don’t understand it well.
    For instance, I wrote a book for my kids about success and becoming rich – the goal of the book was to teach them that success starts now. What you do now even at an early age counts. The big pull was on education – learning, the love of learning in orderr to succeed (that means doing well in school). Long story short I published the book for fun and many of my own family were shocked that I wanted to teach my children how to be greedy, self centered money grubbing capitalist. I have even had strangers comment on my blog about how my title was in appropriate because I shouldn’t be teaching my children to want to be wealthy or rich.
    It’s not about being greedy, it’s not about being selfish – its about financial freedom.

    And whether people realize it or not – it is necessary to “learn” how to manage money if you truly have any aspirations in life. Take it from someone who learn that lesson too late in life.

  • Tawcan March 25, 2015, 10:49 am

    Great approach, this is something we’ll have to teach Baby T once he’s older. I think delayed gratification is a very important lesson to teach.

  • Josh March 25, 2015, 11:08 am

    Teaching delayed gratification and saving money is important, but kids also learn lessons from observing parent’s behavior. One of the most valuable lesson you can teach them is the importance of working hard and persevering through the tough periods to achieve something. Being a stay at home dad and working part time is fine while children are very young, but once they’re school aged, it’s a terrible example to set. One doesn’t need to work at a corporate environment, but at least work 40 plus hours at a minimum to set a good example.

  • No Nonsense Landlord March 25, 2015, 7:04 pm

    You have potty training accomplished. Now teaching kids the value of money is a great thing. I received an allowance at a pretty young age, maybe 2nd grade. But I had to do work.

    Teach them some business skills now. If they want something, they should come to you with their idea why they need it. Have them start to develop selling skills, and cost/benefit analysis on a limited scale.

  • nicoleandmaggie March 26, 2015, 6:05 am

    The first thing that DC1 spent his allowance money on was also a lego set.

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