When I was a kid, I always wanted to buy what my friends were buying. I remember when the Reebok Pump basketball shoes first came out, all of my friends bought a pair except for me. I never was allowed to buy my own pair because they cost 160 dollars, enough to buy 4 reasonably priced pairs of shoes. I remember playing basketball and not getting picked to play because all of the “Reebok Pump” kids wanted to play on the same team. (I assure you that not getting picked had nothing to do with my basketball skills:))

My point is that your child’s spending habits are very heavily influenced by peers and other societal pressures. Take my Reebok Pumps story as an example. We all wanted the shoes because Reebok did an excellent marketing job. Kids who couldn’t afford the shoes wanted them even more badly because all of their friends had them.

Photo By miniroom549

If you are not careful, your kids will develop poor spending habits early and will be more susceptible to marketing and other societal pressures in the future. This is how I plan on dealing with it.

Dealing With Peer Pressure And Teen Marketing

Why do companies spend so much on marketing towards kids? It’s because they are the most susceptible and malleable. When I was a kid, I didn’t know any better. I literally bought into every sales pitch that came my way. Those Cavaricci pants (old school I know) will allow me to attract more females? I want a pair. Those pills will make me grow taller? Get me a bottle. Regarding the Reebok Pump basketball shoes, I genuinely thought that they would improve my game and my jumping ability.

How can a parent compete with all of this marketing? It begins with establishing a sense of skepticism within your child. As a teenager, I hated being manipulated and deceived and your child will too. Point out to your kid the flaws in the logic and how the marketing companies are purposely trying to deceive them.

“Those shoes are not going to make you jump higher. It’s all a lie. Those shoe companies purposely tell you these things to trick you into buying them. Go borrow your friend’s shoes. If you can beat me in basketball with them on, I’ll buy you a pair.”(Make sure you can win before you try this)

“Trust me, those pants are not going to make you popular. Your personality will make you popular. You just need some confidence.”

“How about a Gicci handbag instead of a Gucci? Didn’t you know that Gicci is Gucci’s more talented brother?” (Don’t use this one BTW)

Sure, your kids may not entirely buy into what you are saying, but don’t encourage them to fall for the hype either by buying these products for them. Once you buy one thing, they will want something else and the pattern of wanting will never end.

If skepticism doesn’t work, the best solution is to put them on a strict budget. Give them a set amount of money to spend on food and clothing. They can blow all of their cash on Reebok Pumps or whatever, but then they’ll have to make do with what is left over.

Dealing With Holiday Marketing

I used be a sucker for Valentines Day. Why? Because they marketed the occasion so well that I always felt compelled to blow copious amounts of money on my female friends. I remember back in high school, I spent egregious amounts of money on this holiday alone (Is Valentines Day a holiday?). That’s not even counting 1 month anniversaries, 2 month anniversaries, birthdays and Christmas.

If I didn’t have a girlfriend in high school, I could have put all that money into mutual funds and stocks and perhaps be a wealthy man today, but that’s a story for a separate post. The point is that the marketing of these holidays will encourage your child to spend beyond his or her means.

In the worst cases, your child will participate in spending contests with their friends.

“David bought Jennifer a gold bracelet. Isn’t that so sweet? I can’t wait to see what you got me”

Ack! I remember hearing those words come out of my girlfriend’s mouth. Trust me, it wasn’t a comfortable position to be in and I felt compelled to top David to show how much more I cared for my girlfriend than he did.

So how would I address this issue? I would emphasize that relationships have nothing to do with how much you spend but by how much meaning is behind the gift. I would tell my child to try and find something for their significant other that has special meaning or relates specifically to a conversation that they both had. Finally, I would tell them to just break up because high school romances never last anyways.(Warning: This last one might not fly too well:)).

Sometimes, none of these talks will have any effect. Your only recourse then is to just let your kid screw up and learn from it. I remember blowing a ton of cash buying a gold necklace for this one girl who broke up with me shortly after I gave it to her. I hate you Hallmark!!!

Incidentally, the necklace was still well within the return policy but did she return the necklace to me? Hell no! I was pissed and out over 150 dollars of hard earned cash. After that fiasco, I learned to not do that ever again.

Lending And Borrowing Money

Is your child a chronic borrower or a chronic lender? If your children often borrow money from their friends, make sure they pay back what they borrow within a reasonable time frame. I had this wealthy friend in high school who used to lend me money left and right without expecting me to pay him back. It was great for a while until he asked me to do a favor for him that I felt uncomfortable doing. Without going into too much detail, his favor involved cheating on a test. Because I felt obligated to help him out, I ended up doing what he asked. We were no longer friends afterward.

Don’t let your child get stuck in an unequal relationship. If you notice any purchases that are out of the ordinary, talk to your child. Ask them where they got the money and make sure that if they are borrowing money to pay their friends back.

Does your child like to lend money out? The problem when you are young is that you have no concept of money or how to keep track of it. If your child is not careful, money issues can come between friends and ultimately lead to destroyed friendships. Your child needs to know that it’s his or her responsibility to keep track of loans of significant amounts. If a friend asks for another loan without having paid back the last one, then you should teach your child to say no.

What’s even more important is that your child needs to feel good about the loan. He or she should never loan money out of obligation or pressure. That’s all you can really do. Outside of that, your child will just have to learn the hard way if the money is never paid back.

Chalk It Up To Experience

In reality, there’s only so much that you can do. Peer and societal pressure is too prevalent for you to avoid entirely. Your kids are going to do what they want and you can’t possibly keep tabs on everything. But by reinforcing some basic concepts over and over again, hopefully some of it will eventually sink in.

Part of the reason most kids in America have no concept of money is because parents don’t share their financial information with them. Most kids have no clue how much their parents make nor do they have any idea how much it costs to survive in the real world. Because this information is not readily available, it is only natural that kids will make assumptions regarding their household finances. Most of the time, their assumptions are grossly incorrect. Next time you have the chance, talk to your kids and check to see if they have the following misconceptions.

Your Kids Think You Are Wealthier Than You Really Are

My dad is an electrical engineer and my mom is a biochemist. When I was growing up, I used to think that their combined income was around 300k a year. Why did I think this? I blame television shows and the media.

Photo By Bethography

Everyday on TV, you hear about millionaires and billionaires and how their wealth is just oozing out of their ears. The media rarely reports stories about the middle class, so kids naturally correlate what they read and hear about rich people on TV with real life.

One of my favorite shows growing up used to be MacGyver. Was MacGyver ever on a budget? Sure, he wasn’t flashy or anything, but he seemed to have plenty of money lying around. He was an engineer of sorts too just like my Dad. I certainly never saw him holding a day job or hurting for cash.

How about Knight Rider? Watching David Hasselhoff driving around in a fancy computerized car fighting crime on an endless budget didn’t really strike me as unusual at the time. What about athletes and the ridiculous salaries that they command? If all of these people are making good money, isn’t it reasonable that my parents earn good money too?

Next time you see your kids, ask them how much they think you make. Better yet, ask them this question after an episode of Beverly Hills 90210. I’m sure their numbers will be grossly off. Unless you set them straight, your kids will have a natural tendency to think that money is plentiful and that you are the king of cash.

Your Kids Have No Clue How Much The Household Expenses Are

When I was a kid, I thought that the only expenses our family had were food, gas and clothing. Our family didn’t eat out that often, so food couldn’t have been that expensive. We didn’t drive a hell of a lot so our gasoline bill couldn’t have been that high. Oh, and I certainly didn’t dress as well as the other kids in my school so clothing expenses couldn’t have been that much either. We must have been saving a crap load every month!

Now that I’m an adult, I look back on my teenage years shaking my head. Can you tell me what expenses I left out as a child? Practically all of the big ticket items, like rent, car payments, utilities, credit card bills etc… were missing. Trust me, if you don’t point out to your kids some of your expenses, they will naturally think things are free. Take electricity for example. I used to assume that power was a god given right provided to everyone! The only utility I knew of that wasn’t free was the phone bill because my Dad routinely yelled at me for racking up high long distance bills. Every since he told me how much our phone bills were, I stopped making as many calls to my friends out of state. If your kids are aware of the costs, they will do their part and try to conserve. If all else fails, you can always use guilt as your ally(more on this in a subsequent post).

Your Kids Have No Concept of Financial Priorities

As a teenager, I only had one financial priority, having fun. I spent money on clothes, games, food and going out. I wasn’t aware of the necessities. I had no clue what it took to survive.

I didn’t know that my parents were working their butts off so I could have fun and be like other kids. I had no idea that my parents were putting in extra hours so I could go to college and not have to take out student loans. Why did they keep this information from me? I think I would have been a much more financially conscious kid had I known the hardships that they went through to make me happy. Honestly, I didn’t really need half of the stuff I spent money on.

My parents did a great job raising me, but I can’t help but feel a little guilty that I didn’t help out more. That’s why I think it’s important as parents to assure kids of the financial priorities of the household.

Your Kids Have No Idea How Much You Have Saved

This point is very similar to the one about your kids thinking that you are rich. I had no idea that our family didn’t have much savings growing up. When I asked for a brand new car for my birthday, I naturally assumed that the 20 thousand dollars would just be a drop in the bucket. Just whip out a check and hand it to the car salesman. Better yet, use the credit card!

Now, I realize how low the savings rate is in the United States. The average family only saves around 5% of their income per year. Many people have negative savings and are heavily in debt. Looking back, I was such a bratty teenager but I’d like to give myself the benefit of the doubt since I didn’t have all of the facts.

Why Don’t We Share More About Our Finances?

I asked several parents this question along with my wife. Parents don’t divulge their financials for 3 main reasons.

1. Parents want to shield their kids from the harsh realities of life. They don’t want their kids to worry about money so they can enjoy life.
2. Parents that have a lot of money don’t want their kids using it against them.
3. Parents are embarrassed at how little they’ve saved.

This is how I look at it. The longer that you shield your child from the harsh realities of life, the less you are preparing them for the real world. Once your kid is in college, they’ll be on their own and they’ll make many crucial mistakes unless you prepare them ahead of time.

If you are a wealthy parent and you don’t want your kids to know about your financials, then I can’t really comment because I have no experience here. All I can say is that being wealthy is a good problem to have. Worse case scenario, you can probably afford professional advice for your child.

If you are ashamed by how little you’ve saved, you should still let your kids know so that they’ll spend less. Hopefully, they will not make the same mistakes as you in the future.

I received an extremely well written and thoughtful comment from Bleu Panda regarding my article on 5 Crucial Subjects Schools Don’t Cover That You Should At Home so I thought I’d respond to his comment in a blog entry as a token of my appreciation. Please take the time to read his comment below followed by my reply

Thanks for the being open and honest in your posts. I’ve really enjoyed reading some of them and look forward to the rest, as well as future ones.

Regarding your post about 5 crucial subjects schools don’t cover, I would suggest another one that isn’t really taught – collaboration. You may have alluded to it in the section on how to deal with people or in other entries about entrepreneurship, but perhaps you may have some additional thoughts

Photo By Capra Royale

on it. I think it would be helpful to learn about collaboration early on in our lives. When we were young, we were taught to share, which was somewhat enforced in school through projects, etc. But I don’t recall emphasis being placed on true collaboration, which I am sure is vital to entrepreneurial ventures.

As early as elementary school, and throughout high school and college, we were instilled with the mentality to be individually competitive. I have found that in the real world, I’ve had to learn how to not only work in teams, but also enable my team to work with and learn from other groups, which creates quite a dynamic. I have also had to learn how to influence others without authority. I think in order to be successful, especially in a progressively global economy, we have to learn how to effectively leverage the resources around us, the most vital being people. Throughout your ventures, what was your experience collaborating with others beyond your wife? Were those experiences not only helpful, but also necessary to your success?

My Thoughts On Collaboration

While I think collaboration is a crucial part of a child’s education, it actually never crossed my mind that this subject was missing from my school’s curriculum. I can’t speak for schools elsewhere, but my high school did a fantastic job of teaching collaboration through group projects and team activities.

A good example of this was with the annual science fair held at our school. One of the rules of the fair was that every student had to work in groups of three and present a project to the rest of the school. Everyone took it seriously because the top projects then went on to the state fair where actual monetary prizes were awarded.

The catch was that the teacher often randomly assigned the groups of three. More often than not, you would be assigned to work with students of completely different backgrounds, interests and egos. When such a team is forced upon you, you have to learn to adapt and get along with each other quickly otherwise things can spiral out of control.

Another way my school taught collaboration was through team sports. Sports like football, basketball, baseball and volleyball all require you and the other members of the team to practice, get along and depend on each other during a game. That is why I believe that team sports are so vital to a childs’ development. My daughter’s only 9 months old, but I’m already trying to figure out what sports she’s going to play:)

True Collaboration

But Bleu Panda brings up an interesting point. They don’t really teach true collaboration in schools. What is “true collaboration”? True collaboration to me is when different people working on totally different projects help each other out even when there isn’t any mutual benefit in doing so. In the purest sense, true collaboration is providing assistance and working together without expecting anything in return.

Schools tend to promote the opposite. We are constantly compared to our peers whether it be through class rank, grades or various other sponsored contests. Sometimes our science fairs became so competitive that some groups tried to sabotage each others experiments. There was very little collaboration across different teams and it always felt like every man for himself. I think the overall fun factor and quality of the science fair could have been much improved with a more collaborative atmosphere rather than an ultra competitive one.

The reality of it all is that we live in a competitive and cutthroat world. The idealist in me would like to see a much more collaborative atmosphere, but the realist in me also sees the need to compete and watch your own back. It’s ultimately up to you to determine the right balance for yourself.

Collaboration And Entrepreneurship

Bleu Panda also asked “Throughout your ventures, what was your experience collaborating with others beyond your wife? Were those experiences not only helpful, but also necessary to your success?”.

After collaborating with my wife, working with everyone else was like a piece of cake:) Seriously though, my wife and I collaborate with many people everyday whether it be vendors, customers or partners. In general, we always try to be as helpful as we can towards everyone. Often times, we go out of our way to help people out.

One of the main things I’ve learned with entrepreneurship is that if you provide assistance to others without expecting anything in return, you’ll inevitably receive more back than you initially gave.

It’s kind of ironic how it always works out that way. Good will breeds good will which ultimately leads to mutual success.

This concept can best be illustrated through an experience we had with one of our customers. This particular customer wanted to make her wedding extra special by hand crafting all of the wedding favors for her guests. Ultimately, her ideas did not involve the use of our products but we helped her out anyways by searching for the necessary materials from other stores online. We probably spent several hours helping her for no money at all.

Shortly after we did this, she referred our company to her friend who happened to be a wedding caterer and we’ve since gotten a ton of business from this person. What if we hadn’t been so helpful? What if we just brushed this customer off? Chances are we would have missed out on a great business opportunity.

It just goes to show that you never know when someone you’ve helped in the past will come back to help you out in the future. It has become our policy to collaborate closely with our customers and our vendors to figure out ways to better serve each other. Inevitably, heated situations will arise, but never burn any bridges and be as helpful as you can!

Influence Without Authority

I just wanted to touch on Bleu Panda’s last statement regarding influence without authority. The power of influence is critical to the success of any individual. Just because you have authority over someone doesn’t mean that you have the power to influence them.

As an example, I’ve worked with several managers in the past with whom I did not respect. Even though they had the power to fire me, I never really took them seriously because I didn’t look up to them at all. Their words basically carried no weight.

The power of influence is a natural by-product of self-confidence. By instilling a sense of self worth and self-respect within your child, you can be sure that they will have the power and authority to influence other kids.

Further Reading

Who here thinks Bleu Panda should start his own blog?

• Reader Response: How To Prepare Your Daughter For Dating
• 5 Crucial Subjects Schools Don’t Cover That You Should At Home

In my previous article on mistakes parents make with kids and money – part 1, I pointed out 3 crucial mistakes that parents make with their kids and money.

1. Parents use credit cards in front of their kids
2. Parents buy their kids stuff because other kids have it
3. Parents hide financial details from their kids

If you happen to fall into any of the above categories, chances are you’re already sending wrong messages to your children about money. What’s worrisome is that this isn’t even an exhaustive list. In this article, I’m going to point out even more things that parents commonly overlook regarding kids and money that I’ve both experienced and observed first hand while growing up.

Photo By RedGlow82

Probably what is most disturbing is that we as parents make these mistakes with only good intentions in mind. We want our kids to look back on their childhood with fond memories and in most cases, we think that we are doing the right thing by making our kids happy. But if you’re not careful, you’ll send the wrong monetary messages to your child. Here are some more mistakes that parents make with their kids and money.

You Spend Money On Your Kids Without Telling Your Spouse

I was a master of playing off my parents as a kid. My dad was always more strict with money and both of my parents often had disagreements regarding how money was to be spent. I used to use their differing opinions to my advantage. In the beginning, I used to ask my Dad first whenever I needed to buy something frivolous and more often than not I would get “no” as an answer. So I’d ask my mom instead and she would always have a more sympathetic ear.

“I don’t think that Dad thinks this is a worthwhile purchase, but I really need these things for school.”

“Oh that’s nonsense. What do you need? For something this small, your Dad doesn’t have to know.”

My mom was a total softie when it came to shopping. She always wanted to see me happy and sometimes she would secretly purchase stuff for me without my dad’s knowledge. Just to be clear, it wasn’t as though we were sneaking around behind my father’s back, but my mom did buy me a lot of things that my dad probably never knew about.

So what message did that give me? For one thing, I learned to never ask my Dad for anything. If I needed to buy something, I went directly to Mom. At that point in my childhood, I liked my mom better because she was my ticket to free stuff.

The second message I received was that it was okay to purchase things without my father knowing. It was almost like my mom and I had our own secret conspiracy going on in the background.

You can see why these messages are bad right? If anything, it taught me that if my dad didn’t know about a purchase, then the expense didn’t really exist. It also taught me that it was okay to be secretive and deceptive regarding money. To prevent this from happening with your child, you need to form a united front with your spouse regarding monetary policy in the household. Kids are smart and they’ll always take advantage of loopholes in the system.

You Give Your Kids Money Unintentionally

When I was growing up, I made the majority of my money just by scrounging around the house. My parents would leave a few bucks here or drop a few bucks there. Sometimes they’d give me 20 dollars to buy something and never ask for the change back. Sometimes I’d ask for more money than I needed to fund a particular activity.

For example, if I wanted to buy tickets to the high school football game, I’d intentionally ask for extra money for concessions or other miscellaneous expenses and simply pocket the money. All of this money really added up after a while. If I was diligent in running errands for my parents, sometimes I could pocket 50 dollars a week or more.

Because I didn’t have to earn it, the money I made scrounging around didn’t carry much value to me. So in many cases, I’d spend it frivolously on food, games or other entertainment expenses. I personally think that parents need to be careful how much “free” money they leave lying around. If you want to give your kid some money, make them work for it by doing chores around the house. If I had to mow the lawn or rake the leaves for that 50 dollars a week, I probably would have appreciated it more.

You Have Absolutely No Clue Where Your Kids Spend Money

As a kid, I blew most of my cash on worthless stuff. Every time I amassed even a small amount of money, I’d spend it frivolously on computer games, food or candy. Sometimes, I’d treat myself to a nice dinner or blow a large amount of money at the local arcade. A kid who truly values money will not spend it frivolously.

A kid who values money will save it for something that he/she really wants to buy and his/her decision to buy the item will be steadfast and unwavering. If you observe your child’s spending habits, you can spot and fix many money problems early on. I think it’s especially important for parents to know what their kids truly value and want. You can usually get a pretty good idea of how your kid is developing just by observing what they spend their money on.

Keeping tabs on what they spend their money on will also allow you spot other problems as well. Here’s a good example. One of my friends in high school who never had any money growing up one day suddenly started spending up a storm. He purchased a brand new stereo for his car and he treated a bunch of us out to an expensive dinner. Where did he get the cash? Turns out that he was illegally breaking into vending machines to steal the money. As his friend, we questioned how he got the money and urged him to stop. Fortunately, we pressured him to do the right thing before he got into any major trouble.

What’s odd was that his parents had no clue anything was wrong. If his parents saw his new car stereo, or took an interest in what he was buying, they would have known something was amiss. In retrospect, I think my friend purposely broke into the vending machines because he wanted to test his parents to see if they were even paying attention.

Conclusion

It’s hard enough to teach your kids about money in the first place. But if you are sabotaging yourself with mistakes at the same time, it’s downright impossible. These are all the common mistakes that I’ve observed while growing up. If I’ve missed anything at all, please chime in with your thoughts.

Further Reading

• Mistakes Parents Make With Kids And Money – Part 1

My parents came to the United States with practically no possessions and very little money. They had to take odd jobs just to scrape by and could barely afford to have a roof over their heads. Every morning my Dad had to carry 2 buckets of water with outstretched arms up a mountain barefoot in a snowstorm to the water well a mile away. Okay, my Mom and Dad may have exaggerated some of their hardships but the fact is they didn’t have many luxuries growing up.

Because my parents lived a difficult life, they did their best to make sure that I had a fun and memorable childhood. In doing so, they always tried their hardest to provide me with everything a kid could want and need. In fact, they tried so hard that I kind of grew up a little confused. What could be so confusing about a happy childhood?

Photo By Orphan Jones

I was confused mainly about money. Because my parents never let me get a job, I never had too much money lying around. Every time I needed some cash, I’d have to ask my parents for it. Can I get 10 bucks for the movies? Can I get 20 bucks for some food? I need 50 bucks for some new clothes. I’d ask and more often than not I would get what I wanted. So what was so bad about this?

Basically, I had no concept of the value of money. As a parent, I can see how it’s an easy trap to fall into. You want your kid to have a good childhood so you buy stuff to make them happy. But what you are also doing is setting them up for bankruptcy later on in life. Here are a few common mistakes that parents make with their money and kids.

You Use Your Credit Card In Front Of Your Kids

Whenever my Mom and I went shopping, she’d always whip out the credit card to pay for everything. We would be at the cash register and I used to always stare at this strange piece of plastic in disbelief. You mean you just show the clerk this strange object and you get to walk away with all of this merchandise for free? Not only do you get to keep the things you bought, you even get your plastic back. You get a whole of bunch of stuff for nothing! Sounds like a good deal to me!

Can you see the problem here? I had absolutely no connection with the items that I was walking away with. I had no clue how much things cost or how many hours it took to make the equivalent amount of money. I used to love shopping because in my mind everything at the mall was free. Looking back, I had fond memories of shopping with my mom, but what was the ultimate consequence?

Now let’s fast forward to my freshman year in college when I got my first credit card. I remember going nuts at the Stanford bookstore right after activating my card. I purchased a laptop, assorted sweatshirts and clothes and a ton of school supplies all in the span of 20 minutes. In fact, I charged so much that I exceeded my credit limit that day (thank goodness for credit limits). It wasn’t until I received my bill that I realized how much money I had spent.

But what’s this? I only have to pay 20 dollars and I can continue to use the card? Once you get that first bill, it’s extremely tempting to just pay the minimum balance and continue spending. For many kids who have no concept of money, that’s exactly how the snowball effect begins.

It’s extremely difficult, but as parents, you should try your hardest to not use credit cards in front of your kids. If you have to, make sure you let them know how much you’ve spent and emphasize the value of money in doing so. I think if my Mom emphasized the magnitude of money spent on each of our shopping trips, I probably would’ve had a better concept of value when I got my first credit card.

You Buy Your Kid Stuff Because Other Kids Have It

I grew up in an area that had a huge diversity of wealthy families. Some kids were filthy rich, drove BMW’s and sports cars, and wore designer clothing that was ridiculously expensive. Other kids were dirt poor and couldn’t afford cars or fancy clothes at all. My family fell somewhere in between.

In my mind back in high school, I used to think that there was a strong correlation with the clothes that you wore and the car that you drove with how popular you were with the other kids. All of the rich kids with their flashy jewelry and fancy outfits really stood out and most of them hung out amongst the popular crowd.

I wanted to be popular too so I felt I always needed nice stuff too in order to fit in. I’m not saying that it was wrong for me to get some of the stuff that I did get, but after a while I felt somewhat entitled to getting it.

“All of my friends have nice cars. Why shouldn’t I have one too? Are you saying that my friends’ parents love their kids more than you love me?”

For a parent that wants to please their child, this can be a very compelling argument. Don’t fall for this load of crap. Thank goodness my parents didn’t fall for it either or I’d probably be a spoiled brat today. I think it’s fine to treat your child to a few luxury items here and there but make sure that they realize how much it costs and how much sweat and tears are required to earn it.

You Don’t Tell Your Kids How Much Things Cost

If I had known ahead of time how much college tuition was going to cost my parents given their financial situation, I probably would have spent far less money during my teenage years. The problem was that I had absolutely no clue how much money my parents made. I had no idea how much the car payment was, how much the mortgage on the house was or how much our monthly food budget was. In my mind, we bought a bunch of stuff every month and we had more than enough money to cover the expenses around the house.

I can understand why my parents wanted to shield all of the expenses from me but was that a wise decision in retrospect? If I knew about our financial situation (which wasn’t stellar by the way), I would have taken more responsibility to save and to spend less on entertainment and other frivolous expenses. I probably would have whined much less as well about stuff that I absolutely “needed” for school.

I think you have to trust your child with monetary information and have them learn from it. Anything that involves demonstrating the value of money or how it is handled and budgeted can make a valuable learning experience for your child.

Further Reading

Why am I so interested in teaching kids about money? It’s because my wife just gave birth to our baby girl. Instead of computers and gadgets, my brainpower is now fully devoted to learning how to raise my child the right way.

This post is getting a bit lengthy so I’m going to split it up into two posts. Please check back in a day or two for part 2 of this article.

• More Mistakes Parents Make With Kids And Money Part 2

If you take the time to sit back and reflect on all of the knowledge and experience you’ve gained throughout your life, you’ll inevitably come to the conclusion that only a very small fraction of practical knowledge was actually learned in school.

Looking back, I used to think school was the be all and end all of education. Growing up, I took my classes very seriously and was encouraged(euphemism for forced) to get straight As. I was the epitome of a model student and studied hard to ace my way though high school and college. But looking at my life today, what knowledge from school do I actually use on a day to day basis? Maybe 5%? Why are so many important and crucial subjects overlooked in school? Why do schools do so little to prepare us for the real world?

Unfortunately, I don’t have the answers to these questions. What I do know though, is that I’m going make sure that I teach my daughter every thing that I know to help her get ahead. Hopefully, I can fill in the numerous gaps in the existing system so that she’s better prepared to deal with the people and obstacles that she will face. So what am I going to teach her?

Personal Finance

The first thing I’m going to ingrain into her head is the value of money (I would have said the dollar here but we all know it’s not worth very much right now). It’s absolutely astounding how many people I know that are just scraping by and living paycheck to paycheck. It’s understandable if you don’t make that much money, but some of these people make over six figures and don’t even save a dime. I have one friend who makes 90k a year, is living paycheck to paycheck and has a 30k credit card debt. How the hell did she get herself into that situation?

I believe that these consumption habits start at an early age. If we simply buy our children toys and gifts without letting them know what it takes to earn the money to pay for them, they will inevitably assume that money grows on trees. I’m going to teach my child how to save money and to only spend it on items that she absolutely needs. Hopefully, I’ll have the willpower to say no even when she flashes her patented dimply smile at me. Though I have a high confidence that I can resist her charms, unfortunately her grandparents have this tendency to spoil her rotten. If any parents reading this have any opinions on how to deal with grandparents, please lend me your suggestions.

Investing

When I think back about all of the money I could have made had I known about investing earlier, I’d easily be a millionaire today. The S&P has returned an average of 12% a year since I was born. Ever since I was in elementary school, I probably used to get around 1000 dollars a year in red envelopes and other cash gifts. In high school, I also did a bunch of odd jobs during the summer for probably around 6k a year. Let’s assume conservatively that in addition to my parents help, I could have saved and invested an average of $2000 a year from 1975 – 1997 and 15,000 a year from 1997-present (while working a steady job). Assuming a 12% rate of return, I’d have a little over a million dollars today.

It is estimated that tuition at a private college is going to be over 150k per year by the time my daughter reaches 18. If we don’t start investing money now, there’s absolutely no way we’re going to be able to afford it. Ideally, if I teach my daughter how to invest even small amounts of money at an early age, she should be financially ahead of the game even before she graduates from college.

Entrepreneurship

I don’t want to make the mistake of overemphasizing getting good grades in school. While I definitely think school is important, I can’t help but believe that school turns kids into obedient followers and not creative thinkers. We are taught that if we follow directions and learn what the teacher tells us to learn that we should get rewarded with an A. What does an A really mean? Does it mean that we’ll be successful in the real world in a particular subject?

Teaching and fostering entrepreneurship is the best way to instill responsibility, independence and creative thinking within your child. Sure your kid will probably fail a couple of times but they’ll eventually persevere and pick up some practical knowledge along the way. When I was in elementary school, I started and opened a school store selling school supplies. I didn’t make a cent, but I provided a valuable service to the other students and learned a few skills on how to run a micro business. Teaching entrepreneurship is the best way to apply the theoretical knowledge learned in school to real life applications. When I took econ and marketing classes in college, I didn’t appreciate any of it until I had to apply it to our online store. Learning from a book is nice but learning from experience is infinitely more valuable.

How To Deal With People

It’s pretty amazing to me that they don’t offer a class on how to deal with people effectively. Learning how to deal with people is the most important skill for a person to have. Even if you aren’t well educated or lack intelligence, you can still be very successful just by being able to influence other people.

Simple skills such as being a good listener, being able to build trust, and showing a genuine interest in other people’s lives are traits that should not be overlooked. If you can instill some basic social skills into your child, they will be better prepared to deal with the variety of personalities that they will inevitably encounter.

How To Deal With The Opposite Sex

Last of all, I’m going to teach my little daughter that boys are yucky and that they are all scumbags. Proper daughters are not to date until they are 25 years of age and should listen to whatever their daddy has to say.

On a more serious note, I’m kind of resigned to the fact that my daughter will eventually start dating with or without my consent. The best way to prepare her for dating is to take her on dates myself. Once or twice a year, I plan on taking her out for night on the town and showing her how a gentleman is supposed to treat a lady. Hopefully, she’ll come to expect this sort of royal treatment whenever she goes out with a boy and will never settle for anything less.

Are there any subjects that you want covered in school that I missed here? Please lend me your thoughts. Also, don’t miss the follow up response to this article here.