How to Raise Rich Kids Instead of Poor Spoiled Kids
By: Julio Borroto
Tags: Parenting Advice, Kids, Parenting, Parenthood, Children

The Steps I Had Taken to Help My Children Understand Money

Photo and Illustration by Author: Julio Borroto

1. Saving Money and Giving to Charity

Your kids will need to make money, have your kids do small chores around the home. It teaches them responsibility, and it’s a reason to give them an allowance. Have them use two mason jars as piggybanks, add funny stickers or labels to distinguish the two. Keep a little notebook next to the savings and the charity jars so they can keep track of the money in the mason jars.

Once your child has reached thirty dollars in the savings jar, have them add five to ten percent of their savings into the charity jar. Then take the remainder of the savings to open a bank account under your child’s name and you as the guardian. I have found that most Credit Unions do not require a minimum amount to open a savings account.

I know you are thinking, “Well, you should get in with the times and bank online.” The idea behind walking them to a bank is to experience the process of opening their first account. You are showing them where their loot will grow its interest.

Suppose they wonder how the money will work for them sitting in the bank. If the banker is eager enough, let them explain how interest can expand their dollars.

Take them to the bank each time they reach twenty to thirty dollars, and do not forget to toss five to ten percent into the charity jar. If you happen to drive by the bank, point out where their money is maturing. It is silly, but it is a parent thing. It will drive them nuts thinking you are excited about it too, and it builds confidence so they will continue to earn and save.

Fight off the temptation of frivolously spending the saving funds unless you plan to purchase company stocks with it. Consider purchasing securities once your child reaches a hundred dollars in the savings account and speak to your banker about stock investments. You never know, your kids might be the next big stock tycoon.

101. What to Do with the Charity Jar

To mold a charitable child, the universe (depending on your beliefs) will reward them tenfold. You are teaching them to be generous with their money, and it will benefit humanity. The charity jar will accumulate coins at a slower pace. Once it reaches thirty dollars, it is time to open a checking account at the same bank where they have their savings account.

Depending on the child’s age, most banks will not charge for a checking account. If the bank does charge, it will be an affordable fee. When they receive their first checkbook, have them fill out a check for any amount and make it payable to a charity of their choosing. Have a stamped envelope to mail it out immediately. The physical task of filling out a paper check will teach them how to spell a number amount and show them math.

Donating to a charity is a tax write-off for most businesses and a fair tax deduction for individuals. However, you would need to reach the deducted government’s approved amount, which can be in the thousands. Charitable write-offs can change yearly, and I suggest that you review all possible tax deductions with your accountant.

Children usually never reach the deduction amount, so there is very little to worry about since they will not exceed the tax write-off amount. It will not benefit them unless they are working for an employer, and they have donated enough to meet the government’s minimum donation requirement. They can then discuss it with an accountant to see if it fits within the tax deduction bracket.

2. Talk about Credit Charges without Guilt

Suppose they are old enough to understand credit and APR (Annual Percentage Rate). Please have a moment to explain the effects of owning a credit card and how the borrowed funds accumulate bad interest that impacts the purchase’s original price, and they end up paying more for that item.

We teach them that credit is useful in a pinch when the funds are not immediately available. It is essential to pay the borrowed credit as quickly as possible to avoid those lousy interest charges.

Plant an early seed in their young mind to pay the credit card off as quickly as possible before the end of the month to avoid the credit company’s interest charge. If they pay off the bill before the monthly interest rate is added on. Then that is money they have rescued from the credit card company, and your child could keep. Take the saved interest and walk it to the bank.

Simple Example: The following is how the credit card companies charge you interest. Let us say the APR is 21%, and you have spent $200.00: $200.00 x (.21 APR ÷ 12 months) = $3.50. That would mean at the end of the month; you would owe $203.50. You want to avoid those interest charges, no matter how small or big they might be. Pay off the $200.00 quickly, and you save those $3.50 to put into your bank account. Now, you have paid yourself $3.50 rather than paying the credit company.

The value of patients:

I would recommend setting aside cash to buy an item instead of using credit. Just become aware that the item will still be there tomorrow, and if your child waits long enough, they might find it at a lower price, which will save them money.

When your child has enough money to buy the item they want, but if it is unavailable. Ask the store if they will restock it, or you can call the manufacture to find out if production has stopped.

Be aware of your purchases, and do not be the first on the block to own the new gadget. It just might be a dud. I know it is common sense. However, you would be surprised about how many people need to be the first.

I always suggest that you read up on the product they are planning to buy. It might be a good investment, and your child can resell it for more once they have grown tired of it. I have advised my children to sell their toys if it is in good condition. Sell it and put those dollars in the bank.

3. Reading Is Fun While Cutting Coupons

The art of clipping coupons and finding those great deals puts cash back into your pocket. Buy the local Sunday newspaper edition, and you will find an assortment of coupons.

Please have your child sit with you reading coupons aloud before cutting them out. It will be a fun task for them as you cheer them on for finding the best deal, even if it is not something that you usually buy. It would not hurt to try it, and you can let them know that.

Take that pile of coupons to the store, and please bring your children along. Let them hand over the coupons to the cashier. When you receive your receipt, show them how much money was saved by using those coupons. Then give them the cash value you have saved in the store or split the savings between you two. Always encourage to save money in the bank.

You will train them to become bargain hunters by grabbing up every money-saving deal. Sit with them enough times reading and cutting coupons, and they will carry on the tradition to their children.

My older daughter is a coupon connoisseur because I had shown her that very same lesson of cutting coupons and banking the money she saved in the store.

4. Imagine Having Money

Allow their imagination to run wild with money. Create a relaxed setting and make some popcorn or anything that is snacky before watching TV. Ask your child to close their eyes and say, “Let’s imagine, what would you do with thirty dollars?” Or any dollar amount is sufficient.

If they are too young to understand thirty dollars, then one or five dollars might be more practical and write a list of the things they want or what they will do with the money.

Allow it to be fun since the money game is not a grading system. Let your children explore any possibility with the amount you quoted. There is no wrong or right answer that your child can give.

Then after the show is over. Take that list of the items they want, walk over to the computer to look up the things they would buy with their imaginary money. Beside each item, pencil in the cost and add it all up. Then show them how much more they would need. Assure them that they will have the money by working, saving, and investing in themselves.

Engaging your child in money conversations will have incredible benefits regarding what they can do with the money once they are adults. As they become older, have discussions about investing will undoubtedly be beneficial as well, and if you are not sure how to invest, you can always talk with an accountant or your banker.