It’s important to teach your kids sound financial habits, such as when to save, when to spend, when to donate, and when to invest. Listen in to this week’s episode to hear Josh and Austin discuss how you can approach positive financial habits as a parent in hopes of preparing your kids to have financial success.
Main Talking Points
[4:21] – Teaching Your Kids to Save
[8:27] – Bucket #1: Saving
[11:00] – Bucket #2: Spending
[13:03] – Bucket #3: Donating
[14:21] – Dad Joke of the Week
[15:18] – Bucket #4: Investing
[26:16] – Instilling Good Habits
Links & Resources
How to Teach Kids About Finance & Investing – The Everyday Advisor
CFPB Help for Parents and Caregivers
032: Understanding Different Account Types
011: So How Do You Pay For College?
Invest With Us – The Invested Dads
Free Guide: 8 Timeless Principles of Investing
Social Media
Full Transcript
Intro:
Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better, helping you to understand the current world of financial planning and investments. Here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey, hey, hey, welcome back to The Invested Dads Podcast, a podcast where we take you on a journey to better your financial future. Today, we are going to be talking about how to teach your kids about saving and investing.
Josh Robb:
That’s right. Yeah. As Austin and I, as invested dads, we want to be instilling those habits into our kids.
Austin Wilson:
True.
Josh Robb:
And we’re talking about this from a high level. It really is teaching habits. It’s really teaching them delayed gratification and setting goals. That’s the two things. And because those things can and do involve money when you get older, but as a kid, there are things you can use to teach them those habits, even before they understand the concept of money.
Austin Wilson:
Yeah, absolutely. Even three- to four-year-olds can understand that waiting is better. And it’s kind of funny, there’s a lot of videos out there of people, parents putting candy on the table and they’re like, “Okay, well, don’t eat this. I’m going to go do whatever and come back.” And then they put a secret camera up and they’re watching their kid. It’s kind of like that. Usually that kid’s got to weigh, is it worth eating the candy now and getting in trouble and maybe not doing the right thing? Or waiting to eat the candy and then you have happy mom and dad.
Josh Robb:
Or a reward.
Austin Wilson:
Yeah, exactly. Hopefully in the way of a vegetable or something much more healthy.
Josh Robb:
Yeah. Maybe, or just the whole point is if you’re able to put off something you want, you may be rewarded with something even better.
Austin Wilson:
Exactly.
Josh Robb:
And that’s really the whole point of delayed gratification. And then along with that, setting goals, right? And we’ll talk through that as we go. But the whole point really is habits, forming habits, because saving is a habit and we have to teach ourselves to save. We have to teach ourselves to say, “Okay, this money I have, some of it I’m going to put aside for later.” And you have to build that habit.
Austin Wilson:
And it’s not the way that we naturally want to operate. It’s counterintuitive to force ourselves to not get what we want right now, especially here in 2021, when I can get whatever I want ordered from my phone delivered to my house by the time I get home from work. There is no need for delayed gratification in this world. However, for your wallet and for your overall financial plan, it’s extremely important to learn how that is so important.
Josh Robb:
Yeah. Or even just entertainment. We were doing a thing at our youth group at church, and we were showing some old devices, electronics, and we showed an old VHS, right? And then they had a picture of what was the separate machine to rewind VHS tapes that you could have, right? You put it in, it speed rewinds it. And we were talking about that, how frustrating it was if you rented a movie and you were not at the very beginning of the movie. But nowadays, you could live stream and you could get it right there, or a DVD, which starts always at the beginning. It’s just, you don’t know the pain of having to wait through rewinding.
Austin Wilson:
Do you remember the stickers on the VHS? When you read a be kind, please rewind or something like that?
Josh Robb:
You would get fined from certain rental places, if you didn’t rewind.
Austin Wilson:
What? Oh, that is crazy.
Josh Robb:
I mean, talking 25 cents, but still.
Austin Wilson:
I mean, because we were sitting down to watch a TV show last night, and it’s all internet based, so we don’t have cable or hard lines, so it’s all in the internet. And we had a challenge to our instantaneous gratification because we were watching a show and it had to buffer. And we’re like, “What the heck is this?” So I had to reset my router. And after that, it was perfectly fine. So yes, delayed gratification is something that’s very important to teach from a young age.
Josh Robb:
Yeah. And so we’re going to talk a little bit about that, a little bit about how you can teach your kids, not only about those financial habits, but also investing in general. If you’re interested, the Consumer Financial Protection Bureau-
Austin Wilson:
The CFPB.
Josh Robb:
That’s right. And they have a lot of great stuff for adults when it comes to financial protection, but they also some great resources for helping you teach your kids. So we’ll link that in the show notes.
[4:21] – Teaching Your Kids to Save
Austin Wilson:
So yeah, that’s kind of why, at the high level, we kind of think we should be teaching our kids this, but let’s look at some ways to actually get down and actually teach our kids how to do that. So let’s start at the highest level we can, let’s start with saving, Josh.
Josh Robb:
All right. So obviously, saving is just putting money aside and not spending it. So how do you teach your kids that? Well, there’s an old tool out there called a piggy bank, right? Everybody knows what that is growing up. If you watched Toy Story, that was one of the characters, right? But the concept of the old piggy bank too, it used to be a ceramic thing, and you put the money in, and the only way of getting that money out was to smash it. And so the whole point of that was to teach them, access to that costs you something. You lose your piggy bank when you want that money out, right?
Austin Wilson:
So then the world got soft and they put those little holes that you can pull it off, so not cool.
Josh Robb:
Yeah. But I guess maybe it was just all the pieces of broken ceramic everywhere, who knows? But the whole point of that is you teach your kids, put some money aside, right?
Austin Wilson:
And don’t touch it.
Josh Robb:
Here’s a dollar. Take a little bit of that and put it over to the side, right? Now, you can enhance that and teach them or reward them by using interest, right?
Austin Wilson:
So you mean Juliana gives me some money that she gets for her birthday, and I put in her piggy bank, and I can offer her the equivalent of what my bank offers me at 0.00001% interest?
Josh Robb:
That’s right. The concept of interest, the percentage, the amount is less relevant than the concept of your money growing while it is being saved, right? And that’s really what you want to teach them, the habit. And so, however you want to reward them, using interest is fine. There’s some great books out there from people when it comes to teaching that. Some use a rate and they’ll say, “Here’s actually how much it’s going to compound.” Or it’s just more of a reward of, “Hey, if you put this money in whatever, the piggy bank, a savings account, a wall, box, it doesn’t matter, at the end of the year, end of the month, or whatever timeframe, I’ll add X amount to that, I’ll put another dollar in,” or whatever it is. Who cares what the savings rate is? They’ll just see the reward of not touching that money means more money’s in the pile.
And so, again, coming back to it, it’s the habit you’re teaching. They don’t need to know that, well, the rule of 72 says, if you’re giving me this rate of return, my money is going to double. It doesn’t matter. What matters is that habit.
Austin Wilson:
And yeah, it’s the habit that matters, but it also instills some of those basic financial principles such as compound interest, which is one of our favorite things where, like you said, it doesn’t matter what interest rate or what dollar figure, whatever you’re going to do, is adding it on. But they can see that as money stays saved, it grows, and then that growth gets grown upon and growth gets grown upon. And it’s a beautiful thing. It’s one of our favorite things, Josh. We talk about it all the time.
Josh Robb:
Yep. So saving, that’s cool. But we all know in real life, you don’t just save everything you get. Maybe kids can.
Austin Wilson:
Wait, you don’t?
Josh Robb:
Maybe kids can.
Austin Wilson:
You mean there’s expenses?
Josh Robb:
You got bills, you got obligations, you’re taking care of these kids. So helping them figure out how much to save and how much to spend, or in our terms, budgeting, is a great thing to do.
Austin Wilson:
Yeah. It’s not something that kids want to do, but it’s something that’s going to help them be, again, set up better in the future. So if you can teach your kids that you need to save money with a goal to go buy something, in addition to actually saving for other things. But if you can teach them that that’s the process you go through when you want to buy something, you first save for it, then you go buy it, that helps people set themselves up to be in a lot better financial situation where they’re not using our unfavorable D word.
Josh Robb:
Yes.
[8:27] – Bucket #1: Saving
Austin Wilson:
Dogs. Debt, no dogs are expensive. Dogecoin? Oh, we should have an episode on Dogecoin. But yes, debt is bad. We want to set our kids up to avoid unnecessary debt because that can really drag down your financial situation. The older you get, it can make a huge impact on that. So really, there are four buckets about spending, right? Josh, so saving, spending, donating, and investing. Those are four buckets. So talk first about save.
Josh Robb:
Yeah. And those buckets kind of come from, again, if you look from an adult standpoint, you have your savings, whether it’s retirement savings, emergency fund, spending, which is all your needs, hopefully you’re doing some sort of charity donation, and then the investing piece, which is that longer term. And so there’s no different, while you’re teaching the kids what, hopefully, they’ll be doing later on, the difference, and we’ll get to this later, but it doesn’t matter how they get their money, whether it’s an allowance, whether it’s chores, whether it’s just birthday money, whatever it is, this can be done with any type of thing. It doesn’t have to be a set, every week you give them money. But when it comes to the buckets, saving is first. It’s kind of like emergency fund, right? For us. We need some sort of money set aside for short term goals.
But for them, their short-term goal, I mean, they’re possibly only been in this world for five years. They are a short term goal at that point, right? They haven’t been around long enough to understand that concept. So their concept for them, what you’re teaching for saving is a goal that they can see in the near future, right? Something that they can obtain. So maybe it’s something like, “Hey, we’re coming into summer, you’ve kind of outgrown your bike. You mentioned you wanted one, let’s start saving towards that bike. So in a month or so, with our help, maybe you can get one. There’s going to be some garage sales. Maybe we can find a $10 bike somewhere and your savings, we’ll be able to get it.” So you’re setting a short term goal.
Austin Wilson:
And a realistic goal that, it’s one of those things, that especially with kids, probably the gratification of having achieved a goal financially and saved up and bought something is going to be very important. So if that goal is, “I’m going to save up and buy a bicycle this summer,” so you chuck money away, whenever you get a couple of bucks or whatever, and then you make that, you make that purchase. You buy that bike. You know how that is going to feel? It’s going to feel very good. And then it’s going to make them want to do it again.
Josh Robb:
Right. And you want to celebrate with them, right? Because spending is not a bad thing. And so when they reach that goal, you want to celebrate with them, because they worked hard for that money and you want to say, “Nice job. Let’s go get it. Let’s have some fun. Let’s go for a bike ride afterwards,” or whatever it is, because you want them to realize that once you achieve that goal, you want to do, because I’ve known a lot of people as adults who save well, but have a hard time spending that. And they just don’t get a chance to enjoy it. So you want to be able to do both. So that’s a good one.
[11:00] – Bucket #2: Spending
Austin Wilson:
So yeah. That kind of covers saving and spending. Third category that you had mentioned is donating. So kind of elaborate on that a little bit.
Josh Robb:
Let’s real quick. Look at this spending only in the concept of, as a parent, sometimes watching your kids spend. So if they have a portion that’s just theirs to spend, right? You got these buckets. So let’s say it’s a dollar, and you say, okay, you want, whether it’s 10%, 20%, whatever you’re setting aside of these buckets, they will have a spend bucket, and kids will spend stuff on dumb things.
Austin Wilson:
Wait, really?
Josh Robb:
Right? And as an adult, you have to come to this kind of realization that it’s okay to let them buy dumb stuff with their spending bucket, because that’s their choice and they’re allowed to do it. Now, you can definitely use those as teaching moments that maybe they spend it on dumb stuff, and then a week later, they want something. And you say, “Well, remember when you bought X and spent all your money? Next time, let’s see if maybe we not spend it at once and save a little bit for something that may show up later.”
You can definitely teach. And if they’re doing something that is really, really dumb, you could probably step in and veto it. But in general, you want them to learn those lessons as well, because part of that whole concept of what we’re doing here is letting them realize that they have that freedom, but it comes with that consequence, right? If I have my dollar and I go to the candy store and I buy all the candy in my one trip, but then next week, all my friends want to go to the candy store and I don’t have my dollar, I’ll have to realize in the future, maybe I’ll wait.
Austin Wilson:
It’s a lot easier you’re to learn that lesson on one, five, 10, $20 things when you’re young, then having to learn that on one, five, 10, $20,000 things when you’re an adult. So that’s how those habits can kind of build. So yeah.
Josh Robb:
And I’ve seen it too, where over time, the kids say, “You know what? I know I wanted this, but I might wait. There might be something better.” And that’s when you get excited, because now they’re really thinking through that and not just going for that instant gratification, they’re saying, “Is this really worth the money I’m giving up?” And maybe the answer is yes, maybe it’s no, but you want them to think through that process.
[13:03] – Bucket #3: Donating
Austin Wilson:
So back to donations. So yeah. Giving is an important part of adult finances, or it should be. So talk about how you can think about that with the kids.
Josh Robb:
And you’re right. It’s important, because it gets them to think outside themselves, right? “Up to this point, this is my money. I’m going to buy my stuff.” And you’re just turning that vision outward, saying, “Yeah, that’s your money, but look at other people that could benefit from that money.” And I think it’s a great way to help them. There’s ways that they can donate where they could see an impact, right? And just ask them, what are they interested, and what are they excited about? Obviously you don’t want them just handing it to their best friend and say, “Oh, I donated,” but you can help them along.
This is another one where you’ll step in and help, but let’s say they’re really into animals, right? You can donate to a local animal shelter. Then you could take the kids over and show them, “Hey, you know what your donations did? You helped buy the food for those dogs that are waiting for an owner.” Those types of things where they’ll actually see, “Okay. So my money did something fun or exciting or interesting or helped someone or something.” So donation is great. But again, it’s teaching that habit, teaching those long-term financial things you want as an adult to say, “You know what? Some of this money that I worked hard for could benefit others as well.”
[14:21] – Dad Joke of the Week
Austin Wilson:
Yep. All right, Josh, before we get to the fourth and final bucket that we were going to talk about, I have got a dad joke of the week for you. And it’s actually multi dad joke.
Josh Robb:
Oh boy.
Austin Wilson:
But it’s similar. So you’ll see what I’m saying.
Josh Robb:
I got you.
Austin Wilson:
So Josh, this is more of a principle. Giraffes never apologize to each other. Did you know that?
Josh Robb:
I did not.
Austin Wilson:
Because it takes them too long to swallow their pride. That’s funny.
Josh Robb:
Oh, because it’s a long neck.
Austin Wilson:
Same punchline.
Josh Robb:
Okay.
Austin Wilson:
Okay? But start with, why don’t cannibal lions apologize to each other?
Josh Robb:
Well, I’m going to guess it has to go with their pride then.
Austin Wilson:
Cause it takes them too long to swallow their pride. That was kind of morbid.
Josh Robb:
It’s a two part.
Austin Wilson:
I think Reddit.
Josh Robb:
It’s a zoo joke.
Austin Wilson:
When you join the R/Dadjokes Reddit thread, you see these all the time.
Josh Robb:
You got these good ones.
Austin Wilson:
Some of them do not make the cut, for various reasons. Those made the cut.
Josh Robb:
There’s some good ones in there.
[15:18] – Bucket #4: Investing
Austin Wilson:
Those made the cut. So yes, we are back to the final bucket. Josh, the invest bucket, it really is about the principle of planning for things farther away than right now.
Josh Robb:
Yeah. So savings was short-term. Investing is long term.
Austin Wilson:
Exactly. So talk about investing with kids, what that looks like, how to do that, and some principles on that.
Josh Robb:
Yeah. So again, this is the longer-term. So this is really where that teaching comes in, where you’re saying, “Okay, this money, it’s not for that bike this summer. It’s not for that family vacation we’re doing later this year. This is for something when you get older,” or that’s what you’re teaching them. And it forces them, again, to stop thinking about the now and thinking and planning for the future. Now again, a three-year-old, it’s going to be hard to do, but if you help them along the way, and again, force that savings habit, then they can get used to that of, “Okay, I’m putting some money aside. I’m probably not going to touch it, but it’s going to, for some reason, my dad said I’m going to do this.” And then that “for some reason” becomes a reality as they get older. But there’s a lot of ways of doing that. And so, we’re going to talk about kind of the nitty gritty details here on how do you do that?
Austin Wilson:
And just probably a good disclaimer is that we have already had some episodes that hit on some of these topics, and we can link those down. But we did an episode on account types. We’ve done an episode for paying for college and those kind of things. So we’ll link those in the show notes. Don’t worry, if you want more resources, check those out. But Josh, start at the top.
Josh Robb:
Yeah. So they were just talking about helping kids learn about investment. So you’re right. The account types walk through a lot, but for kids, there’s a couple different approaches. One is opening up an account that is for a minor. So there’s an UTMA account, which is U-T-M-A, and then a UGMA, which they’re both just for, they’re trust accounts for minors, because a trustee is nominated to take care of it until they turn 18 and take over. All right? So usually, the parent, or whoever opens the account, is an adult, which here in Ohio is 18 years old. You got it, so you’ll be an adult. And then it’s for the benefit of a minor. But during that time, the adult is the one that controls it. So they are the ones that choose the investments and make contributions and all that into the account. Now, once the kid turns 18, the account becomes theirs. So, worth noting, you no longer have control over that as an adult, as the parent.
Austin Wilson:
Even if your 18 year old is making really dumb decisions.
Josh Robb:
Yes. So the 18 year old has that money, and it’s their money at that point. So if they go to Vegas and spend it all.
Austin Wilson:
Bad example, Vegas, you have to be 21 to get into most casinos.
Josh Robb:
I mean, you could just spend it. I don’t know. You could go wherever you want to spend, I don’t know where you go.
Austin Wilson:
Candy store.
Josh Robb:
Yes. There’s probably a candy store in Vegas somewhere. I don’t know. There are some limits to that. Those pertain mostly to the gift tax, because you’re putting money of your money into a kid’s account, right? Even though you’re the trustee over in charge account, it’s no longer your money. So in this year, 2021, it’s $15,000 per person. So a married couple could do $30,000 per kid, because it’s per person, per person you’re gifting to. After that, you could actually add more than that. After that, you’re just reducing your lifetime exemption. Again, we’ll go back to that. Account tax, we get a little more detail, but in general, you can put that money in. It’s then under your control until that kid turns 18 or whatever the age of adulthood is for your state.
Austin Wilson:
So that’s, let’s think pre-18, one option there. Another option is when you’re thinking about how to pay for post-18 education. So maybe how to pay for college. So kind of elaborate on that a little bit.
Josh Robb:
Yep. So there’s the 529 plan, which is, again, you have a beneficiary listed on that plan, and then you have an adult managing or running that plan, but it’s designed for college education. So if you use it for college education, the money grows tax free, and it’s tax-free on the withdrawal. So it’s great. The difference between these two, those minor accounts, the UTMA accounts, are looked at as a child’s asset, because usually when they head to college, they’ll probably be about 18 at that point, but either way, it’s still a child’s asset, which means that any financial aid is reduced by 20% of that asset value, whereas a 529 or any adult asset, parent asset, is only a 5.6% reduction. So there’s also an impact on FAFSA, depending on the account type. A lot of information. We talked about that in the college, paying for college, but in general, 529s are great for education expenses, not great for anything else, because there’s a penalty and a tax on top of it.
Austin Wilson:
So I guess those are a little bit more restrictive options that we’ve talked to about there.
Josh Robb:
And the last thing I should note, depending on the account type, the UTMA account, there’s tax rules as well, because it is considered the minor’s account, even though you’re the trustee over top of it, you’re the one managing it, the money’s already been given. And so there’s tax. So the first $1,100 is tax free because of how they set it up for kids. The next $1,100 is at the kids’ tax rate, and then after that, it becomes a parent’s tax rate. And those move with each year, there’s an adjustment. So it’s roughly that, let’s just say. But then after that, it’s at the parent’s tax rate that is being taxed. And you’ll probably have to file a tax return for that kid, depending on how much income-
Austin Wilson:
Seems complicated.
Josh Robb:
Yeah. So in general, avoid some non-income producing assets in there and don’t have some capital gains, but just keep that in mind. There’s tax impact for those type of minor accounts.
Austin Wilson:
So I guess the least restrictive option you can have is just a plain old, black and white, vanilla brokerage account. You open a brokerage account, it’s in your name. So Josh, you open it for your kids, it’s in Josh’s name, but you can designate any kid you want as the beneficiary for that account if you want to, like you had mentioned above, there are some gift tax rules with this, but it’s your money, technically. It’s not the kid’s money. You have full control.
Austin Wilson:
And it does not, now, due to financial eligibility for FAFSA, for college education planning, it does not have as big of an impact on the FAFSA forms, because it’s not in their name, it’s in your name. So that is a good thing, but that’s kind of your most flexible option where you’re flexible to choose the investments and do all of that. You’re flexible to take it out and put it in and do whatever you want. And it’s really not your kid’s money at all, until you give it to them. And yeah, it can be your money forever. You can just have it shoe horned or whatever for your kid, just put their name on it in your head. So that’s kind of a great flexible option.
Josh Robb:
Then the last one, we’ve talked in the past about Roth IRAs. There are minor Roth IRAs. So it’s a Roth IRA for a minor, hence the name. Pretty easy to understand. The concept there though is like regular Roth IRAs, a minor Roth IRA, a child has to have earned income. So if you have a part-time job, any kind of summer job, if you own your own business and they do legitimate work for you, so age appropriate work. So for instance, let’s say you own your own business and you have a building. If they come in, they clean, that’s age appropriate, they can sweep or do whatever, you could pay them a reasonable rate, and that would count as income for them. So as long as they have earned income, gifts don’t count, investment earnings don’t count, allowances do not count, so it has to be real earned income. They can make contributions to Roth IRA.
Austin Wilson:
Anyone can make contributions.
Josh Robb:
Yeah. So I say they, so the IRS does not care who puts that money in, as long as the kid who’s that minor Roth IRA is attached to shows income.
Austin Wilson:
Is there an age restriction?
Josh Robb:
An age restriction?
Austin Wilson:
How early? Suppose you have a five-year-old, yeah. Suppose you have a five-year-old.
Josh Robb:
Can a five-year-old have a job?
Austin Wilson:
Sweep a floor? Yeah. Can a five-year-old sweep a floor?
Josh Robb:
Yeah, there’s child labor laws in every state. So again, that’s why it needs to be age appropriate, right? Can a five-year-old have a lemonade stand? Probably.
Austin Wilson:
But it doesn’t matter how much money they make.
Josh Robb:
No.
Austin Wilson:
So as long as they have one dollar-
Josh Robb:
If they earn a dollar, you can put a dollar in a minor Roth IRA.
Austin Wilson:
Oh, but you can’t exceed their income.
Josh Robb:
It has to be, it equals their income. So up to $6,000, or their earned income.
Austin Wilson:
I can see some very wealthy families using this as a big loophole.
Josh Robb:
It’s not even a loophole. You have to show legitimate earned income, but especially for small business owners, if you have kids and you have some sort of clerical work where they’re just filing paperwork, whatever those types of things are that you could say, “That’s a job that I could hire my kid to do. They could come in, I’ll pay them what a going rate is for that type of employment.”
Austin Wilson:
How do they audit that, what the going rate is?
Josh Robb:
Well, if you, for instance, let’s say they sweep the floor…
Austin Wilson:
Pay them $5,000.
Josh Robb:
Yeah, you can’t do that. But if you say, “I’m paying them $10 an hour to come in and sweep the floor,” okay. Hiring new, unskilled labor in the area is $10 an hour, legitimate. So that’s kind of how they do it. Now, again, you just got to keep good records. If you’re audited, that’s where you have to prove it. But in general, minor Roth IRAs are great, because Roth IRAs it’s after tax money. Well, depending on who’s contributing, it doesn’t matter. But the kids’ tax rate is super low, probably, if they have any tax at all. And it grows tax-free. It’s awesome. Now, there’s all the cool stuff with the Roth IRAs that you can have withdrawals [crosstalk 00:24:34].
Austin Wilson:
Does it convert to a regular Roth?
Josh Robb:
So once it becomes an 18 year old in Ohio, again, whatever your age of majority is, that becomes just a Roth IRA. It’s just a minor Roth, because again, you have somebody listed as the adult owning the account, because the minor can’t own it yet. But it’s a great thing. Again, you still have all the cool stuff where you can withdraw for a higher education, first-time home down payment, those type of things are tax-free withdrawals, or there are no penalty withdrawals, depending on which ones you pull out. But it’s great. And if you think, again, going back to compounding, if you could start putting tax free money in a Roth IRA at, let’s just say 16, when a lot of high schoolers are going out and getting a job, if you just say, “Hey, you know what? We could put $6,000 in your account. How about you just put three in and I’ll match three? You’ll get 50% match right on that for me.” That’s great. I mean, you can give a nice incentive for your kids by saying, “Hey, if you put some in, I’ll put some in too.”
Austin Wilson:
And they’re starting so early, compounding will be great.
[26:16] – Instilling Good Habits
Josh Robb:
So that’s, to me, if you can, again, if they have real income, again, I see this most likely being used, and I’ve seen it used for those young high school that get those summer jobs, get those working at McDonald’s or whatever, where they’re earning legitimate earned income, and maybe they’re spending and other fun stuff, but you say, “Hey, if you just put a little bit in, I’ll put some in as well.” I mean, honestly, the parents can, as long as they have $6,000 income, doesn’t matter who puts the money in, because again, it’s technically considered a gift to the kid, and then it doesn’t matter, because it’s all under that threshold of gifting. So it’s fine. Austin, what do you think? Any other thoughts about investing? That was kind of the investing, kind of how to do it, but high level, what do you got?
Austin Wilson:
I’m even going to go higher level than where we’re at here. So yeah, I guess it’s really easy to focus on investing as it relates to instilling good financial habits and think about it as purely financial, but moms and dads listening here, our jobs are so much bigger than that. That’s kind of the thinking that I’ve got. So I think it’s also important too, while it’s good to know and instill these financial thinking habits with our kids, we also need to be, boom, investing in them in every other way that we can. So whether that be emotionally, spiritually, physically, that means spending time together. And of course, financially, like we mentioned about it, that too. Invest in your kids in all of those ways. And doing it well isn’t easy, and we’re not going to do it perfectly, but it is one of the best investments you can make along with your marriage.
So invest in your kids more ways than just financially, because you can be the most financial invested parent in the world, and slack on every other one, and it’s not going to matter. So I guess first and foremost, make sure that you’re investing in your kids in every other way. Hopefully the financial piece follows as well. So I think that that’s just an overarching thought that I have about this conversation in general, because I think that you can be super great parents, and not have a lot of money, and maybe not have great financial habits or whatever, but you can still do a great job of parenting your kid. And that’s more important at the end of the day. Although, as with all these things we talked about, it is extremely important, and it can set your kid up for a lot better success longer term, to be doing some of the financial stuff as well.
Josh Robb:
And like you said, you don’t need to have a lot of money to teach these habits, right? And it flows into everything you’re trying to teach your kids. We all want to be good parents and leave our kids in a way that they can succeed down the road as they become adults. And like you said, this whole financial piece is just one piece of the overall parenting picture. But I like to always remember that the other side, kids listen. So make sure that when you’re having your conversations about finances, they hear those positive things. It’s not just, you’re always nagging each other about the spending side of things, or you’re always saying, “Oh, I wish we had more. I wish we…” But you’re also having those positive conversations, and in a sense, bringing the kids into those conversations. Including them. You don’t have to tell them all the numbers of everything that’s happening in your budget, but include them, age appropriate, into that family conversation.
Because I can remember with our kids, driving in the car and they’ll ask the question, “Well, why don’t we have X?” And the easy answer is just, “Well, we can’t afford it, or you spent too much of my money, that’s why.” But the better answer is, “Well, we have other goals, and this is what we’re trying to do.” And then you walk them through it. Or at the end of the year, kind of as you’re getting your tax stuff together. “Hey, just so you guys know, did you know that throughout the year, as a family, we gave money to X different things? You guys realize that?”
One of the things we do as a family is we sponsor a kid through World Vision, and we have the picture up, but we talk through that every once in a while, and we talk about what we’re doing, how it’s just not a time thing, but ongoing. And it’s fun for those kids, our kids, to see that and participate, right? And so those are the important things that you’re teaching the habits, but showing the habits, living the habits, right? It’s one thing to tell your kids to save money, but then also throughout the month, say, “Oh, I can’t buy this because we’re out of money.” You got to show them in order for them to learn.
Austin Wilson:
Yeah, and celebrate the wins, your wins as a family, with your kids. So you pay off your house, or you pay off your car, or whatever you do, have a great dinner with your family and be like, “Hey, let’s celebrate this. This is a good thing.” And they’re going to see that you’re excited about achieving that goal and that’s going to help them want to do the same with their money.
Josh Robb:
Yeah. Or on trips or vacations, give the kids a little bit of money and say, “Hey, this is for you to buy something on a trip because this is fun. I want you to remember it.” But give them that freedom to choose what they want to remember it by.
Austin Wilson:
Bubble gum it is.
Josh Robb:
It must be. But all those fun things.
Austin Wilson:
Yeah, absolutely. So yes, finances with kids is something that everyone does a little bit differently, but it’s more important that you do something to instill those habits, and it’s going to make a difference. As always, check out our free gift to you. It’s a brief list of eight principles of timeless investing. These are overarching investment themes meant to keep you on track to meet your long-term goals. Some of these things could impact your kids. So probably good to get them in the loop on that. Check it out. It’s free on our website. Josh, how can people help us grow this podcast?
Josh Robb:
Yep. As always, make sure you subscribe, that way you get our new episode every Thursday. Leave us a review on Apple Podcasts. That is always great. We check all the reviews and it also helps us rank higher so that other people can find us. And then if you have any questions, thoughts, awesome stories about ways you taught your kids about investing, send us an email at hello@theinvesteddads.com. And then of course, if you know anybody with kids and they’re talking about ways of helping them learn about saving and investing, share this episode with them.
Austin Wilson:
All right, well, until next Thursday, have a great week.
Josh Robb:
All right, we’ll talk to you later.
Austin Wilson:
Bye.
Outro:
Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode.
Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin, or any podcast guest are solely their own opinions, and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.
