Teaching child financial literacy

In this post we want to share with you one very interesting article, in which the author tells about the personal experience of financial education of his little son. We at PayOnline , a company engaged in organizing payments on the Internet, believe that personal finance management should be approached professionally not only in business, but also when working with personal and family budgets, so today's material will be useful to all parents, present and future. Next, directly translate:

Being rich is great fun. Real wealth is a very broad concept because its presence gives you freedom from negative stress and greater confidence in how beautiful your life is. Every morning, when you wake up, this sensation strikes you like a flock of wild butterflies. Hello, another great day.

And, of course, I would like my son to inherit this truly wonderful lifestyle after me. After all, all parents, after all, are engaged in nothing more than an attempt to make their child as happy and capable as an adult as far as possible under the constraints imposed by the real world. And if my boy is just as happy about his life draw, how happy his parents are, we will be more than pleased.

Of course, all parents want one thing - to convey their happiness, if their life is good or, if things are the other way around, to give their children a better life than the one they had. Therefore, they do their best to give financial advice and behave so that their offspring have a good model to follow. Unfortunately, the results are not always good.
')
Ways of success and prosperity that are common among most people are actually recipes for financial catastrophe. Students of colleges and universities send me letters with content like: “My father advised me to borrow a reliable NEW car with all-wheel drive so that it would be safer for me to drive in the winter and less need to spend money on repairs.” Others get into debt in the amount of 200 thousand dollars for the sake of obtaining a prestigious diploma giving small employment prospects, because their parents warned them that “without a good work diploma you cannot get today”. Many families are worried about how much you need to spend to celebrate the birthday of a two year old child with a royal scale, where to get money for education in privileged educational institutions and how to make the child look no worse than their peers in a private school where children from high income.

Perhaps these tips work well for families with an infinite amount of money. Nevertheless, they also penetrated deeply into the consciousness of the middle class, where they became completely useless for those who really want to succeed.

Child and money

In our economy, the topic of money is discussed without problems or prohibitions. Our nine-year-old son knows exactly how money is earned, what happens to them, if you spend them (they disappear) and what happens if you invest them instead (they work for you, for your life).

We moved away from our work just before his birth, so he grew up with our idea of ​​financial independence, which is that if you own assets, such as houses that you can rent, or a share in any business they bring you income. And this in turn means that you do not need to leave home for 9 hours every day, unless, of course, this is not a way for you to have fun. He sees this in the example of the difference between the daily routine of his parents and the parents of other children. Therefore, ever since he reached the age when money became useful personally for him, I always tried to give him the opportunity to independently study how it all works.

How to receive the money

Being a child these days is a very profitable venture. In addition to the free rental, our boy from time to time receives gifts in cash from relatives and a salary from me, which is 10 cents for each mile on foot or by bike as part of our total family activity. The amount is quite considerable, because we rarely use a car, whereas the counter on its mountain bike with 20 inch tires has already exceeded 1200 miles, and it is finished wearing high-quality footwear until it grows out of it.

Over the next few years, I expect him to move from these small children's sources of income to their own, more independent. He is free to choose between the traditional method of employment or a full-fledged and serious business.

Some parents like to pay much attention to academic education. They say: "Until you finish your studies, getting good grades is your main task." However, in my understanding, a good education is first of all a wide variety of life experience. Working and making your own money at any age, even if it is such simple things as filling the shelves in a store or manually assembling carts, play a key role in this process. The school is only a small part of the child’s education, and not the most important one. In fact, my most vivid memories of the high school days relate precisely to the time I spent at work, and not at school.

Here you can talk about a non-standard approach. Instead of a physical piggy bank, my boy prefers to keep his money in the Mr. Money Mustache Bank. A bank is a spreadsheet containing each transaction my son performed with his money. In order to make a contribution, he gives money to me. To withdraw money from the account, he asks me for cash, or I make a purchase for him online.



My son's spreadsheet

However, for every dollar left on the account, interest is charged at a 10% annual rate with a monthly capitalization. I am very glad that I can teach him such an important lesson, because it helps him to understand that:

• his money is not infinite (he cannot always beg his parents to buy something);
• to keep money invested profitably. His $ 600 account now brings $ 5 monthly, and this is a very tangible interest income;
• any unexpected profit can be added to capital, interest will grow exponentially. The presence of such an account of considerable size gives financial freedom for life.

Where does the money go

Right now in his life there are only a few real consumer addictions: computer games, books, and some phone or tablet applications. He spent all this over $ 100 last year, which represents a considerable percentage of his income, but in most cases he considered that the pleasure received was worth the money spent.

It is very interesting that now he has begun to show a fairly high level of generosity. When something breaks in the house or the other child does not have enough money to pay for what they want, he immediately offers a large amount of his own money to compensate for the loss or lack of funds.

What expenses are covered by parents

However, I still support the bulk of the educational infrastructure of children's fun. To assemble a computer for him, I purchased components worth about $ 500. Together we have assembled a very cool gaming PC. We make robots using VEX IQ kits costing $ 400, and most books, outdoor activities and travel are free for him as a family member. Money for any organized entertainment is also allocated by us, at least until he reaches his teenage age. But just like his father, he shows a noticeable desire for the independent organization of his leisure time with his friends, instead of relying on adults, and I am happy to help him continue to continue in the same spirit.

Live by example and give to others.

In Ron Lieber’s book , a difficult topic is raised: “Why do we have so many things, and other people have so little?” This is a good question, because trying to answer it often leads to an interest in helping other people. But I find it difficult to answer it, living at the peak of American luxury, possessing a multitude of houses, boats and my own planes. Our annual expenses amount to less than 25 thousand dollars, which is lower than the average for our country, and they remain at this level even when revenues exceed this amount many times. I hope that this example of the fact that “expenditures do not necessarily have to grow in proportion to incomes” will extend to the next generations in our family.

Limiting your own needs quite logically leads to the need to find an effective outlet for cash surpluses. Therefore, we follow our own informal, "non-billion-dollar" version of the Oath of Donation . This means that we will not have any large family inheritance: each generation will voluntarily create its own surplus funds.

There is one important key point. If you can’t use money to make your life happier, then what is the use of it? Check out examples of children living in super rich US enclaves such as Palo Alto and California. Despite the incredible wealth and the presence of some of the best and most expensive educational institutions, the children there experience more stress, are less happy and more likely to commit suicide than the rest of their peers, who have only a small proportion of such wealth.

The problem arises when parents who have achieved high results decide for themselves that pressure should be exerted on their children to show better results than other successful children and strive to earn the right to study in elite schools. All this is supposedly necessary in order to withstand competition in this incredibly complex modern world.
I once wrote on my blog:

... but, ultimately, it will be about the money and the freedom that they can give you. Freedom from anxiety and freedom from most kinds of nonsense.

So for me, such education in an atmosphere of fear and pressure with the goal of making children of competitors is nonsense. Life is not a competition, but a huge, open to cooperation world, hospitably meeting and rewarding everyone who treats it that way.

Perhaps most of the most prosperous middle-class parents still operate within a very limited way of thinking. If their lifestyle is tied up at a high level of consumption, and they themselves earn 600 thousand dollars annually, but still continue to pay contributions for the car and the house, they will think that their children will also need to earn and consume as much to be happy. Of course, such an approach requires a well-paying job in the most expensive sector of the economy and education, which would allow such work to be obtained.

But this is the wrong approach. For almost 10 years I have had a stock of money that far exceeds the amount I need for a good life. Thanks to this experience, I cannot imagine that my son will not be able to earn constantly and in abundance in order to save up a reserve of money already in the early period of his adult life. Therefore, there is no need to struggle to obtain the attributes of elite status. It would be much more effective to grow within your own niche without the need to be in a dull material dependence, which will constantly require you to achieve more. Paradoxically, the approach proposed by me is so rare that, ultimately, because of its unpopularity, it may bring you even more money.

What knowledge is really needed

All these children's things are just a foundation for learning a larger and slightly more radical view of the question of money that I want to instill in my son as he grows up. The basic idea that needs to be learned is that money is an entity that can be managed, which can be controlled, without allowing everything to turn out the opposite.

Read the following statements and see if you agree with them. For each of them, you can find an exception or argue about weak points, but in general, philosophy is surprisingly correct if you persistently follow it throughout your life:

• Income should not be considered as a certain amount that the employer or the government rationalizes on the basis of a specially tuned system of fraud. Treat it as a byproduct of your hard work, which comes in conjunction with the acquisition of new knowledge and understanding of how the system works. Even it can be controlled, if you so decide.
• “Costs”, “needs” and “cost of living” are all terms that are born out of the wrong way of thinking. Replace them with “my expenses” and you will see that they are under your control. Proper behavior and the ability to negotiate with other people theoretically can even allow you to live for free. You can get any job in any city, country, and at the same time, many other desired related attributes of life - all of your choice. Even if you never take advantage of this opportunity, the very realization that you have absolute power over your own expenses is your key ally in obtaining financial freedom.
• And, finally, the solution of the money question does not mean the acquisition of the very good life that you are looking for all the time. In this sense, money today is the main obstacle for most people, but you can easily learn how to manage it even at the initial stage of your life. And then you go to solving more real problems. You will learn what life really is: hard work, good relations with other people, a fair amount of useful difficulties and the study of everything that can be learned throughout its length.

Here, perhaps, is all the experience that I have accumulated so far for raising my son. The foundations are solid, however, like everything we do in life, described here - the results of an experiment that is still ongoing.

The author proposes not to drive oneself into the framework, not to be held hostage to common patterns and concepts, he offers to think more broadly, more freely, to teach the same to his children. It offers a simple but effective way to explain to the child what money is and how it can be managed.

And how do you teach or plan to teach your children financial literacy? If you need to organize payment acceptance on the website or in a mobile application, feel free to contact us . Email us with any questions and subscribe to our corporate blog.