Fast-Tracking Your Kids To Financial Success #587

Cookie Monster deliver the message, or at least a butter beer. Sure, which they never addressed this in the Harry Potter books, but it does seem like there's a small trace amount of alcohol and butter beer because like the Dobby whatever would get drunk on butter beer. I guess it just didn't affect the kids as much. Maybe it only affected household. It's just yeah, our our kids are talking about it the other day. They're like, well, we can have butter beer,

but we can't have are whiskey. And then Kate never talking, We're like, wait a minute, technically it's not addressed. But I do think there's small amounts of alcohol in butter beer.

But that's not what we're talking about today. We're talking specifically about kids and how it is that you can give your kids just a massive leg up um I feel oftentimes when we're in young adulthood, we say to ourselves, if only I had known this ten years ago, twenty years ago, if if only I had been able to start my life with this knowledge that I have now,

I would have made some different decisions. And so basically that is what we're talking about today, the different lessons that you can begin teaching your kids who are still at home, but then also specifically some of the accounts and some of the specific strategies that you can employ with your kids in order to get them investing for their future. And we hear that from how the Money Listeners a lot they're like, man, I wish I had

this information when I was a lot younger. Some of some of who are something upon this podcast late thirties, early forties or even later in their life, and they're like, man, this has been transformational. But if I had known this stuff when I was early twenties, I would be crushing it now, which is true, like the early even more transform I would be a beautiful butterfly already instead of in the pupa state. Right there's a lot of kids

stuff that is coming to mind. Right now, We're not going to incorporate more into the you might even sink the Reading Rainbow soundtrack Mitochondria. Do you remember Mitochondria? That's the powerhouse of the cell. Would be like some schoolhouse for rocks. I mean, there's so many options here, lots of different things we learned in school. But before we get rolling, man, I want to mention something We've been emailing a little bit with a listener who actually happens

to be Ukrainian. He and he's also living in Ukraine, and he was asking about maybe some sort of financial goals that he had, and he kind of casually mentions how his savings and financial goals have been on pause for the past eight months, and oh, yeah, I wonder why, maybe because Russia has completely invaded his country. But I don't know, he simultaneously. He didn't put that out there just for us to like feel bad for him necessarily.

He was just a matter of factually stating that, like, yeah, you know, I haven't been able to pursue my goals like I have been, but I'm really excited for things to get about going again. I mean, I wanted to share that just because when you hear something like that, it just gives you just some incredible perspective, right, some of the problems that we have in our lives that seem to loom so large in our minds, something causing

us stress. In reality, they're not all that big. And especially if you're a listener and you live here in the US, I think, I mean, I I feel that I've got a lot to be thankful for within my own life, not only for you know, me and you and the business and our families, but just also for our country. Even though we're all aware of what's been going on over in Ukraine. When you kind of have a I guess just like a personal somewhat of a personal connection that brings it to life a whole lot more.

You're right, man, that does like and it just makes me think, like, not that our country doesn't have problems that need to be worked on, that need to be discussed, but man, we're really lucky to live here. There's so many good things about living in the United States, and it doesn't My heart goes out to our listener in Ukraine.

I hope that his country is able to restore their their freedom, their independence in the near future, and then he's able to get his you know, goals of financial independence, restore it soon too, and our heart goes out to everybody in Ukraine, like your cause still matters over here, and it's it's still something we're thinking about and talking about. But Matt, let's move on. Let's let's mention the beer that we're having on this episode. This is Postmeister october Fest.

It's by odd story. It's which is a brewery actually had of Chattanoogat picked this beer up when I was there just a couple of weekends ago, did you, Yeah, so you actually were at this brewery. No, just a local beer store there, which which is honestly it's Imbibe. I think it's what it's called in in Chattanooga. Fantastic beer store. Yeah, great selection. So next time you're in Chattanooga one, I'll recommend you some hikes if you email me, but I'll also recommend that you go to Imbibe and

pick up some beers there. So all right, Matt, let's let's get onto the subject in hand. We're talking about fast tracking your kids to financial success. And for some reason, as we were fast tracking, right, I started maybe think about racing. And I'm not a huge racing fan, but Americans have kind of You're always challenging me to foot races, like, just take it easy, dude, going for a walk. Well, I prefer wrestling, but you know, foot races are fun too.

But Formula one has kind of come back in vogue with the success of Netflix's Drive to Survive. Yeah, and and it's honestly, it's a really it's a really interesting show. I never was in the Formula one and I still don't really like watch races or anything like that, but the show. I watched some of that show at least,

and it was super interesting. But the interesting thing Matt about being a Formula one driver is is that the driver with the fastest lap time in trials the day before the race, they get the what's known as the pole position, Right, they get the top spot in the race. Is that right there at the finish line, right at the front starting point, so as also becomes the finish line at some point later on the race. And uh, but the pole position, we know so much about racing.

The pole position though it's crucial. It is this crucial advantage to being able to win the race because, uh, the stats show that if you start first, the person first out of the gate. They win more than forty two percent of the time, So there's sixteen cars. Makes a lot of sense. But if you're in first place to begin with, the chances are overwhelmingly you have a much higher chance of success. Where you start matters. You don't have to pass anybody, you're just I guess you're

just out there just driving really fast. You gotta stay in front of people, right, that's all you gotta do now having to worry about hitting tires with the other guys. Right. But that's the thing with Formula one is that they got those exposed tires, and I'm always like, how do they not just like just launch, just jump onto each other until makes it crazy? I mean that like Nascar where you can kind of like push into each other and bump each other into game finches. Really it's it's

pretty nuts. But anilimeters Joel millimeters. But where you're starting right impacts impacts how you finish in a significant way in Formula one. But the truth is it's the same exact exact thing with money. And it doesn't mean that like inheriting a trust fund, that's not what we're talking about here. But if you're a parent, you greatly influence whether your kids start out in the personal finance pole position.

We'll talk about passing on knowledge in this hose, but we're also going to talk about the mechanics and the accounts that can give your kid a leg up, which most of us, if we're honest, didn't have, Like we didn't learn about this stuff in school, and in all likely your parents didn't teach you about personal finance, so you kind of maybe started off behind the eight ball. Well,

how can you change that for the next generation. That's the topic of today's episode, right, Yeah, Yeah, what you know at the start has a remarkable impact on where you are going to end up at the finish. It's gonna have a remarkable impact on the quality of life that you're gonna be able to lead. And we think that there is a massive advantage gained in life when you've got these basic financial literacy principles being taught to

two kids consistently as they are growing up. And it doesn't have to be uber fancy or sophisticated, right, Like, honestly, it's pretty simple and straightforward stuff, but it's incredibly foundational as kids begin to develop their own ideas of how does the world works. But let's say that you've got teenagers. Now, maybe your kid wasn't necessarily hustling at age six selling lemonade out in the neighborhood. Let's say didn't develop an award winning app at the age of eight. That are

their kids? Who do that? Okay? I read about those kids sometimes, like who are they? That's incredible either, I'm not sure if their parents are amazing. I mean it's probably both, and right, the parents and the kids are pretty incredible nerds. But he signed play instead losers. But even if you have a kid that's older, the truth is, you still have time to get them pointed in the right direction. Like, honestly, you still have influence. Even if you have a grown adult who's out of the house,

who is you know, there's still your kid though. Uh. And we actually talked about this with our friend Bobby Rebel back in I think his episode five and eleven. It's not too late. So that's right. We're gonna discuss how to set your kids up for a successful financial

future in detail during this episode. Yeah, and most holks, like I said, they learned in their thirties or forties, and then they get started and they're like, man, I wish I had known that stuff earlier instead of really just learning from my bad beats, from the mistakes I made and then having to kind of figure it out

from there. It just seems like a lot of people and not only are you kind of learning along the way from the mistakes you've made, but those mistakes actually make it harder to make progress, right because let's say one of those mistakes is taking on too much student loan debt, or one of those mistakes is getting into credit card debt up to your eyeballs and then realizing, wait a second, wait a second, that's not the route

I should be taking. It just makes it that much harder to get to the place where you want to be. And so, yeah, the earlier kids start learning about money, the more time they have to impleuent that knowledge, the more they can avoid having to learn from mistakes, the more they can just learn on the front end, and then that gives them also time to to enjoy compounding returns, right, which is something we talk about a lot on the show. How your money working for you is huge. It makes

a massive impact on your ability to build wealth. Time allows them to have more exposure to the market, and it allows their money to kind of start doing the heavy lifting on their behalf much sooner, and that that means that they don't have to do as much heavy lifting as most of us did in order to get our financial financials on the right path. The earlier they get started, it actually means they can be a little more relaxed as they as they get up with their money,

and that's not the norm. That's pretty cool that you can actually help your kid set them up for for that sort of success, but it's definitely not what most

people experience with their personal finances. Yeah, yeah, So this is why this is such an important thing, because your kids have time on their side, and you know, Joe, you're talking about compounding returns, like not, not only do we see this eighth wonder of the world at play with our you know, with our kids actual dollars, but we also get to see the compounding effects of their behavior as well. You know. It's it's just like the virtuous cycle of how our money ends up making money

for us. Healthy habits build upon other healthy habits. I think helping your kids establish these tried and true money practices are going to serve them for years to come. You can help them to create this base layer of solid habits that they can use to propel their progress even more as they get older. It's it's just kind of like just again, imagine that snowball, and every single time it revolves around it like the first time it revolved,

it picked up a little bit of snow. But then the next time it does an entire rotation, it's picked up even more and it continues onward. Yeah, and it's all those like we're always teaching our kids these other habits, healthy habits right as they're growing up. Rush in your teeth, yeah, and like being respectful to your friends, parents, take care of your Yeah. I mean I remember having sir and ma'am beat into me as a kid, like I had

to respond to my parents that way. But that's the kind of thing that like we're always teach her and kids to do stuff like that. But for some reason, money habits get left out of the mix for the most part. So most kids, they know how to be polite, they know how to be kind, they know how to take care of their bodies and how to brush their teeth stuff like that, but they don't know how to take care of their money, and that's a problem. But

the reality is that kids are malleable. That's another important fact that we have to talk about because they just soak up information, so dang well, they're ripe to be taught some of these things. And so if we miss out on the opportunity to teach them when they're young, it only becomes difficult the older they get. Their prefrontal cortexes are still being developed, so there's a lot more

elasticity going on that's those brains. And interestingly enough, there's some recent research that shows that all of our brains actually have more plasticity than scientists previously thought. I think it's just came out. Speak for yourself, your brain is done developing. Well. I thought this was kind of cool that there's some of this research found that people still in their sixties and seven, there's more plasticity in their brain than they previously thought. They have more ability to

adapt and learn than was previously assumed. But of course kids still have far more ability. They're changing that so it's it's much easier to teach them money early on. Based on their physiological makeup. They're just going to be more susceptible to having these ideas get embedded deeply in there. They're gonna stick around, and then they're going to have an impact for years and decades to come. Teaching the next generation something as important, something that we use on

a daily basis, something is necessary as personal finance. Doing it regularly and starting at a young age is just is massively important. Yeah, something else worth mentioning is, man, I think that kids actually can help set you up for financial success. You know the reason we're talking about setting your kids up for financial successes for their own well being. We're like, we're doing it for the kids themselves.

But obviously, you know, when when the stakes get raised like this, it does like you could see a benefit to you personally, but it could come full full circle as well, because even though you may have been able to plan as well as you thought you could, you never know what kind of curveball's life might throw you and down the road, maybe when you're in your golden years. Hopefully your kids are in a great position to where they might be able to welcome you into their home

when you are in your later years. Yeah, for sure, and so hopefully you're planning well for your financial future. But your kids who are financially savvy can help you when you become old and infirm, Matt. Which I look forward to those days personally, but you're doing it for them for you know. I don't know if I told you this. Emily and I recently took a marriage test and one of the questions that there was one question on there that made me smile, and it said are

you looking forward to growing old with your wife? And I was like, heck, yes, I am, Like, I don't know, I'm like kind of looking forward to old age. I think it's gonna be fun. Yeah, I think it'll be fun. I'm definitely still looking forward to like next month as as well. I mean, I don't want to come to come too fast. Yeah, Yeah, it's gonna it's gonna still

gonna be good. And hopefully, hopefully my kids are financially savvy and they are able to, yeah, support us, not not necessarily financial, but to be there for us and to be on solid footing themselves. But let's talk about how we get our kids to that point, Matt. Let's talk about the most important factors that help fast track kids to financial success that we can instill in them as parents. Now we'll get through our thoughts on that

right after this. All right, we are back from the break and again we're talking about fast tracking your kids to financial success and you know, Joe, like, we'll talk about some of those specific accounts that you can set up for your kids, maybe even how much you should

be investing for their future. We'll get to that in a bit, but first we wanted to touch on some aspects that you can begin now like today, where there's no income required, you know, in order to get that ball rolling, because a lot of a lot of times, in particular when it comes to investing, your kids need to have that earned income. Or sometimes you're like, man, I have an eighteen month old, Like, we're not talking

about investing yet, since where do I start? And investing is a place you gotta get too, but it's not the place you start. Yeah exactly. I mean so, so I think when most folks, when most parents, in particular, when they think about teaching their kids about money, like they might instinctively think of maybe just the formal lessons that they can teach, right, or or maybe they're thinking like there's some kind of like kids and Money program

that they can sign up for. But we think that the behavior that you're modeling for your kids and the example that you're setting that that is even more crucial because the reality is that what you do well that means more over time than than what you say. And so, yeah, you want your kids to not only do as you say, but you want them to also do as you do. And so one of the things that makes me think of is the tone that you're setting when it comes

to talking about money. And so, for instance, every time you talk about money, well, if it's a fight in your house, um, I think what you're doing is you're setting the expectation that anytime we talk about money like

this is how it should be talked about. Uh. And so I think it's important to not just discuss what it is that you're talking about, but how it is that you're going about talking about that, because there's a chance that your kids might completely push back against that and they're gonna say, well, that's never going to be what it's like when I grow up. But at the same time, this is the expectation that you're setting, and I think it can be an uphill battle if you

are setting that kind of negative tone. That kind of negative vibe anytime you talk about money. Right. So one example I think we could give to this Matt, just in some other area of parenting is let's say you enjoy cursing, which is totally fine, Like I don't have a problem with that, but U but let's say, are

you talking about me specifically? Just general example here if somebody likes cursing, just love to curse, Yeah, they love it, and then they hear their kid cursing and like wait a second, no, no, no, you're not allowed to do that like this, I thought I taught you better than this. Well, the fact is your kids are going to imitate what

you do. And so even if they don't do it in front of you because they know it's gonna get them in trouble, they're probably going to use that language behind your back with their friends or something like that. So the example we set, like how we behave our kids are going to imitate that. They're going to respond more to what we do than to what we say. I just I just think that's ultimately, that's that's how they learned how to be. In this word, they learn how to be based on how we exist. And so

you got to think about that. Um so, so, yeah, your example matters a lot. I still remember our conversation Matt with Jail Collins back in the day, and he basically said he gave more credit to his wife for how his daughter turned out, even though he wrote like a best selling investment book, right, the Simple Path to Wealth that like tens and tens and thousands of people have read. I don't know if I don't know if it's sold a million copies or not yet, but he

wrote this massively successful. But but he said, no, no, my wife modeled it day in and day out for our daughter. She deserves the credit. And I think there's a lot of truth to that that the modeling matters

more than the words that are said. Although the conversations are important to you gotta have those discussions because even if you need to have a little bit of both, because like let's say, even even if you handle your money, impact will be well, that's just not quite enough when we're talking about transmitting that knowledge to our kids, because it just it doesn't happen by osmosis, right, It doesn't just seep in just because we're doing the right thing.

It kind of does, but it also kind of doesn't. Let's say you have a million dollars in your four o one K because you've been a great investor, but you never ever ever talk about it with your kids. Well, they don't necessarily know that, so you've got to use words too, And so we would say it makes sense to have more money talks, but to make them actually

a little more mundane. That might sound a little weird to have mundane money talks, but we would say that means chatting normally about purchases at the store, about delayed gratification, how you're saving up for something, but it's gonna be another six months till you can get it, until you've saved up the cash to buy that thing without having you go into debt for it, answering questions too, and

a thoughtful way. Kids have questions about money all the time. Yeah, I think when you say mundane, that doesn't mean boring conversations. It just means like talking about them in a in a like day to day kind of way, where like the emotion is removed from it, sort of like what I was saying earlier too, Like it's it's a desire to teach in the every day in the ordinary, And you know not for these conversations every time you have them to be just charged and loaded with with emotion

and monumental. You're not going to teach your kid how to invest in like one sit down combo, like birds in the B style chat, right, It's gonna take like short, thoughtful combos over an extended period of time. And and like that means including your kids and decisions. Mat I don't know about you. Sometimes I have a hard time letting my kids do things when I know they're gonna

make a mess. But but ultimately that's in their best interest, right, whether it's yeah, learning to scrape their plates and put them in the dishwasher, and I'm like, oh, I guess I'll just do it myself because I do it better than they do. But I think the same thing is true when it comes to including them in money decisions. It's like, well, it's gonna be quicker, it's gonna be

more efficient if I handle it myself. But if you want your kids to be money savvy, you're gonna you're gonna want to start including them in those money conversations along the way, even though it's going to maybe draw out the deliberation process. It's gonna make it take a little bit longer. Ultimately, it's going to be in their best interest if you kind of start including them in

those discussions and if you value their input. That's right. Yeah, And you know, of course all kids are going to be different, right, Like you're likely you're gonna have to take a different tact with each one. Uh. Like, for instance, you might have one kid who's a natural saver, and you know, that might make you so proud, like makes you feel really good that they're able to stock away all that money, but they still need to learn how

to spend on things that are important to them. And of course they'll need to be taught how to invest as well. They maybe they're naturally a saver, but they're not willing to put that money at risk by investing it. And we are going to talk about investing here in a little bit. But it's more than just you know, like that natural proclivity that a kid might have. It's the way that kids learn best that can vary as well.

It makes me think, like, for instance, it is your kid more of a visual learner or an auditory one, Like can you just have a conversation with them about stuff, or is it helpful for them to see things, Because if that's the case, like maybe playing a board game like Monopoly, like that might help to generate a great money discussion if they're able to see, I don't you know, all the properties lined up, but they're they're holding that

play money in their hand. And so just keep that in mind because if you're using ineffective methods of teaching your kids, it might feel like trying to to put a square peg in a round hole. Yeah, for sure that the method matters. You're gonna adapt it to each kid. You're not gonna be able to just like take the exact same route with with everythingle Let's say you have multiple kids. Some some people choose have one. That's great. But with Matt, we've got three kids. They're all different.

You've got four, I've got three, and they're all different, and so we I have to kind of approach them uniquely in those conversations based on their personality and based on kind of their bent when it comes to money, and you can't. You can't. Just like, honestly, I feel like I've learned so much from reading this The biophy on on Warren Buffett. But like one of his mistakes I feel like as a parent is he just assumed

that his kids were gonna be just like him. And as far as their natural tendency to want to dive into business and to be a self starter, uh, it took them multiple decades to get to that point to where they're making uh I think what he would call savvy money and business moves. But like, I feel like that would be an instance where he just assumed that they're gonna be just like him, and that's just not the kid. I think a lot of parents assume that, and then once you especially if you have a few,

you're like, wait a second. They're all different, and maybe they have little bits and pieces of of me and Emily, but they also are completely themselves in some anyways. And I don't really expect them to turn out just like me or even anywhere close necessarily. But before kids can do anything with their money, Matt, they've got to earn some of it, right, And I think that's crucial to help your kids form a connection between money that comes into their lives and the work that it takes to

get it. This is just another one of those massively important lessons that it takes when it comes to fast tracking your kids to financial success, because I don't want my kids thinking that they get money just because they're alive. Just because they breathe doesn't mean they get money in their bank account or that I give them cash straight into their hands when they ask. So yeah, we would say it's important to take some steps to help your kids think of creative ways that they can earn money

for things that they end up wanting. You don't have to necessarily help them with like a lemonated stand or bake sale every single weekend or anything like that, Like that's putting too much pressure on yourself and there's no need to go that hardcore. But you might want to make it like a quarterly goal or something like that to to help them with ideas that can generate income. And so much that depends on their age. Older they get, they can probably do this on their own. They don't

even need you. Let's say they're eleven, twelve, thirteen. There's things that they can do in the neighborhood to make money that don't necessarily have to involve you coming up

with the idea of participating with them. Uh and and so much depends on their intrinsic desires to We've done things like selling hot cocoa, or we've done art sales where the girls like they make their own art and then they put it out for sale at the end of the driveway, or just selling old toys like right and are there are their toys that they've had that they've gotten for holidays over the years and birthdays that they feel like they could part with and they'd rather

have the cash than to have these toys that they don't play with anymore. These are all kind of great ways to teach them how to make money, the value of a dollar and stuff like that, But are really so much of it starts with helping them find ways to earn money and understand that that is the main way that money comes into your life. Totally. Yeah, I think kind of thinking about these things creatively with your kids,

it's it's sort of the gift of entrepreneurship. Yeah, Like the ability for you to impart upon your kids the knowledge that they could potentially earn money in all all of these different types of ways. I think that's that's an incredible lesson that we can help train our kids in as well, but on on that note, allowances, let's talk about that because I think a lot of folks like this, this question always comes up when we start

talking about helping kids to handle their money effectively. And you know, I think allowances can be a good idea. You know, ensuring that your kids have money to to save, to spend, invest to give money like that puts the concepts that you're discussing into practice for them. Uh So, yeah, get you know, giving your kids a set amount of money each week based on their age, that that can

be smart. But it's also important to to create a distinction that there are just going to be some chores they're they're gonna be some tasks out there that they have to help with just because they're part of the family, not because uh it's something that they're going to get paid for. Uh. And so keep that in mind. But it's a fine balance to strike when you are um basically, what we're focusing on are the different practices of what you can do with money once you haven't in hand.

That's what I feel like an allowance focuses on. But you still want to keep them receiving that money. Very close to the concept of working for that money. Otherwise, I think if you use allowances ineffectively, it can have a negative impact, right, like making it feel like that money just falls out of thin air. So first tying that money to the work that they're doing, and then focusing on those other practices as well, like like you know,

like I mentioned, spending, saving, investing, giving. I think it's really important too for parents to set budgets for certain things that they spend money on, and then if their kids want something it's more expensive, say all right, that's gonna come out of your money. So I mean, my parents did this with me really well, when like buy

and sneak or something, Remember your sneakers. Yeah, it's like like listen, there's a money threshold that they're gonna spend if I want the fancier ones, I got to come to the table with my birthday, Christmas allowance money whatever that is, And so that made me rethink. It helped me realize the value of the thing that I wanted.

And lots of times I took the cheaper item that my parents would fully subsidize, and on occasion I would pony up the extra dough to get the exact item that I really wanted so much depending on how much money I had and how valuable that thing actually was. But not those Scottie Pippens. The Scotty Pippens I did get, Oh you did? I did? That was like the one fancy pair of Yeah, and they were awesome, but they're

worth it. They were worth that was your craft. I still remember those things that age twelve, but that's while shoes kind of where my my craftier equivalent at that point.

But those are the kind of discussions I think that are really fruitful is saying, like, listen, we've only got this much money to allocate towards a school book bag or whatever it is, and it introduces the idea of scarcity, but like the fact that there is only so much money so or at least only so much money that we're willing to spend, right, Because that's the other thing as well, is it's not to put this fear that we're going to run out of money, like before your

kids and some with some families that might definitely be the case. But in other cases you probably have plenty of money that you could buy an extra pair of shoes or a different jacket or something like that that your kid might, but it's about being honest and saying, well, this is how much we're willing to spend beyond that that's on you. And by the way, so we're talking about earning and talking about allowances, let's talk about like

especially as kids get older. I think it's important to mention high school jobs here because, uh, we think of those as being a really good thing and that a lot of kids should probably be working at that point in time. And the reality, Matt, when you look at the numbers, is that fewer kids are actually doing this. Something close to fewer young folks are working in high

school than was the norm decades ago. I think some folks would say, you've got the whole rest of your life to work, why would you want to get started when you're fifteen. Don't don't ruin his childhood, right exactly? I mean, I guess I get that response, like it makes sense to me, But I would say, I would retort.

I would say, there's there's like a host of skills like time management, of working with the team, personal responsibility, learning to like look an adult in the eyes, those kinds of things that a kid is able to learn if they have a real after school job that they might not be able to learn in the same way at least at home. That I would say the most important benefits that you get of working at that age,

they go just way beyond making money. It's not about the five dollars and fifteen cents an hour MATT that I made when I was fourteen working at the fast food restaurant across from across from my school. But it's about all those other intangible benefits that served me that like I had to learn at an earlier age, and I feel like they paid massive dividends moving forward when I like went into an actual career. Yeah, it's not like you set yourself up for success with uh your

minimum wave right said job, it's not about them. It's less about the money, right, No, I wasn't that even really investing that money. It's it's barely helping buy like the cheapest car possible. It's not one of those things in the car maybe covered your gas is literally an eighteen hundred dollar Toyota Corolla or whatever, but it's uh or no, it was a camera. They just were the

signs of Corollas back then. But those are the kind of things that like, it's it's not about the money, It's about all those other things I learned, showing up on time, getting the job done, doing stuff I didn't like, like squeezing lemons. I was the worst. All right, Well, so earning money that is the first step, right, but let's talk about what you do after that, and hopefully that includes saving a good portion of that earned income.

One great tactic to incentivize your kids savings is by paying what we would call an astronomically high interest rate, which is a great way to help them to understand that their money, that he can make money, even if it's just sitting around. That is exactly what we did with our oldest daughter. We were sitting down and I was paying her two weekly in order for her to understand that this was something that she could do that

would actually move the needle. Because I remember when I was a kid going to the bank and Dad, no, we we opened us savings account. I don't know what rate that they're they're they were paying, but I was

only earning like pennies. And I just remember even at the time, thinking, I don't think this is like teaching me the lesson you think, because I had like zero desire to to continue to save more money, but finding a way to help those lessons to sink in and then help your kids as well to consider what it is that they're saving for. I think that can be

helpful as well. Again with with our oldest, she's a really content child, uh and there's not it doesn't seem like there's a whole that that she wants, and so I've kind of been surprised at the fact that, uh, we're having to trying to like prod her a little bit and be like, hey, you know, this is something you could potentially get, kind of like dangling some of these carrots in front of her in order for her

to be more ambitious. It's good overall. I think it's a good thing that she's content, But when it comes to being like an aggressive saver, it's not necessarily stoking the fire, you know what I'm saying. But you know, all savings eventually become expenses as well, because what is it that you're saving up for it, Well, it's typically spend money. And so I think part of this is helping your kids to consider some of these different spending decisions so that you know they don't end up buying

things on a whim that they're going to later regret. Yeah, I mean, I think I mentioned a couple of months ago taking my oldest nine year old to to Costco and she wanted this like squishy mellow pillow thing, and I think it was eighteen dollars, I don't remember, but it was a spur of the moment, and so we said she had zero desire to have that until she saw She had never talked about getting one of these before.

I think she already had one, Like it's conra Nickels, Like, she's got so many stuffed animals, it's hard for me to be like, great, yeah, let's spend money on this. But it's her money, so she gets to choose those things. But we have a forty eight hour role. And so I was like, listen, if you really want this, two days from now, I will bring you back here and we will get this squashy mellow and it's all yours, like, spend your money on it, but well, let's make thoughtful

purchasing decisions. And so two days later she remembered it and she wanted it. I was assuming she was going to completely forget about it, but no, she was like, no, it piqued my interest. This is the thing I want to spend my money on, and I think it's okay. Then I took her back when we got it. But sometimes, uh, teaching your kids money about how to use money effectively, it's gonna take a little more from you because that I had to drive back and and it actually let

her get get the eyem that she wanted. But it's that's that's what it takes though. It takes patience and time, and I think oftentimes we're not willing to give it that kind of time, you know, Like that's the like I was thinking about when we were talking about the ability for kids to learn things because their minds are more malleable. I was reading some up on that, and oftentimes it's because kids are willing to explore, and exploring

takes time. And as adults, we I mean, we often times have so many different responsibilities and tasks that we have to get done. We don't explore. We just immediately jumped to conclusions, we make our decision, and essentially we're kind of closing off our mind from the ability to

making some of these new connections. It does take just a little bit more time, and you know, Another aspect I think as you're teaching your kids about money is just to keep in mind who you surround yourself with, like specifically who your kids are friends with, as this will either have a positive or negative impact on their

understanding of some of these lessons. So, for instance, it's going to be harder to make that connection between working really hard and earning that money if they're friends are getting everything handed to them on a on a silver platter. Uh. And so this might not be something that you discuss with them directly, but it's just something to keep in

mind as it. You know, I think it will tint how they see everything, not just in how they earn money, but then also how they spend money, because you know, Selma might see some of her friends with those and they're like, well, they get those all the time. It's sort of the like the song that's just kind of playing in the background. Um, it's it's it's that's the water that we live in. And oftentimes we're not even aware of their desires or what they think is normal

or acceptable exactly. And it is to a certain extent you don't have you don't have full control over this. You don't have full control over who they're gonna be friends with and they're going to experience thing is so part of that is how you talk about it when they do. Like the other day, I think I mentioned again I don't know if I talk about this on the show, but someone's like, I want an Apple Watch and we're like, what are you? What are you talking about?

That's crazy? Those are really expensive. Um, but we're not an Apple family anymore. Well, and like Emily has this like fake smart watch that cost twenty bucks on Amazon and she's like, Mom, you've got one, and and I'm like, no, I don't. I've got a fake twenty one that you know that That just tracks a couple of basic things. And so having those conversations be like one, well, just because one of your friends has one doesn't mean that

everybody's got it. And to just because even if all your friends had it, that doesn't mean that's what our family does. And you have to have those family values and have the ability to have those discussions even when their friends are living life in a different way financially. There's a family culture you're trying to establish, and that's that's important. Yeah, I mean, yeah, there's there's a lot.

So you said that, like you don't always have control over like who your kids become friends with, and that's totally true, but we do have control over the environments, like generally speaking, that we in the neighborhood that you live in the neighborhood, and even just like how we approach consumption, right, like if you are always at the at the store, and that's maybe how you know mom or daddy how they like to relieve a little bit of stress, you can maybe go to the store, you

buy something new. Uh, that all of these things, I mean, this goes back to the example that you're setting for your kids. But if you are surrounding them with consumption, well chances are that's going to be something that they tend to revert to. But yeah, you know, like a lot of these lessons can begin at a really young age before they're earning an income, but once they do have a job, once your kid does have an earned income,

they can start investing for their future. And so we're going to talk about teaching your kids to invest which accounts are best for them, plus thinking about college costs as well. We get to all of that right after this. All right, let's keep going we want our kids to be to be money savy. We want our kids be able to handle money well. We want them to be confident in their abilities to use the tool that is

money to help them throughout life. We want our kids, we want every hid of money listener want their kids to be confident with money too. And again it's something that doesn't get taught or it's on us to be able to make sure that they have that ability. But let's talk about how to invest, because that is one of those things like getting your kids started. The earlier the better right on the investing front. But this isn't typically something that you're gonna be covering with them when

they're in grade school. This is maybe like slightly more advanced, and they also don't typically have the money to get started investing in some of these concepts I've talked about with my fourth grade at this point, because like when we talked about investing, and we're gonna talk about plans and saving for college in a second, but she when she asked me whether or not I was saving for her college, I was like, yeah, a little bit. I am saving a little bit, and here's how it works,

and it's actually I'm actually investing for your college. It was a perfect chance to talk to her about investing in how it works. But uh, yeah, you're really one of the things you're gonna want to focus on, I think. But for you get to the mechanics of the accounts and stuff like that, is you want to talk about maybe how amazing compounding returns can be. Because to me, that's the thing that can hold somebody's imagination because it

is a pretty impressive concept. And the better you can paint that picture, the more it can can help connect the dots. I think for your child to understand what you're doing when you're investing, and and then also to be able to talk about how you yourself are investing, like one of those one of those convos where uh, like, how you're directing your dollars and why. But I think the older they get, the easier it becomes to cover

that ground intellectually. But it also gets easier to help them then funnel money into an account, start tracking their progress, uh, and then helping them get excited about growing that money for their future. That's so true, man. Yes, let's talk about which accounts are best for kids to start investing in. And this may not come as a surprise to most folks out there, but our favorite, of course is the rath I ra A. This account can help kids start

investing super early. But the thing is they have to have an earned income in order to be able to stalk away money into this account. But that doesn't necessarily mean that they've got a legit job at like a fast food restaurant where you know, at the ages eight or something like that, it's legal. Yeah, maybe they should, but mowing lawns, babysitting like that counts as earned income as well. Working as a poolboy like that's like as

a twelve year old, that's something. One of the ways I got creative working in the neighborhood is taking care of people's pools, testing the water. I got really good at making sure that pH man we nailed it. Like I added those droplets of die or I don't know what was in it, but I made the solution match the color, and that told me how many additional chlorine sticks they needed. But you take that earned income, uh, and then you're then able to start putting some of

that money within a roth Ira account. But the max that they can stock away into these accounts is six thousand dollars for this year next year, But they're also capped at their earned income level, right, and so let's let's say they only make bucks. Well, that's now they're seeling of what they can contribute to that account. So you gotta keep that in mind as well. But there are many reasons that we love the rath I RA.

For one, it's it's super flexible. Right if your kid wants to tap some of those funds to say, like buy a house in their twenties, that's something that they can totally do. But it's also the best from a tax perspective. They'll be sheltering decades worth of returns from taxation going this route, while they are most certainly going to be at the lowest tax bracket they'll ever be in their lives. Yes, in their entire lifetime, it's never

gonna be better than that, exactly. So yeah, this is a perfect time if they have earned income, to get started on that rath. And the cool thing is you can actually help them make that happen, not just by like literally taking them to the website, helping them fill out the information and starting that custodial wrath. But one other thing we want parents to consider is if you have the financial ability, and that's not everyone is to make a matching contribution when your kid opts to prioritize

their future by sticking money in that rath. Let's say they're like foregoing the now in favor of the future because you have with them about investing. That's great and it's worth celebrating. But let's say they do make something like six thousand dollars in a given year, we would say that you should offer, if you can, again to stick three thousand dollars of your own money into their retirement account. If they opt to invest three thousand bucks of their own money. And this is a couple of

things I think you know. It helps them understand that they're gonna likely have other matching options in their working career, none of them are going to be as generous as the one that you're giving them, but helps them realize, okay, cool, This is actually kind of part of the mechanism of investing. Employers often contribute sometimes dollar for dollar based on what you contribute, and helps get them ready for that. But it also makes it far more likely that they're going

to be excited to do it. Because who doesn't get excited about free money? And so if you're like, hey, you should totally do this, and guess what, not only should you do it, but I'm going to help incentivize you to do it. It's going to create some excitement around the process, which is good. That's what you want, Like, you want your kid to be to get to be pumped about investing for their future, and it's kind of hard to do that. But free money is one of

the ways I think that that you can act. Will you do that? And then you can kind of track the progress together. Download the app on their phone so they can log in, not robin Hood hopefully so they can like day trade, but you know where they can see the progress of their accounts over time. And then you guys can have you know, regular or monthly or quarterly discussions abou kind of what's going on with their

account and and how much they're investing and stuff like that. Yeah, I think one of the reasons matching can be just an exciting thing for kids as well as because let's say a kid earns six thousand dollars, Well, they're not gonna want to put every single dollar into that roth Ira like where they've got no spending money. It's like, all right, cool, I made six thousand dollars of this summer and you're like, all right, let you go ahead, slide all that money over into that new wrath Ira.

That's gonna be really discouraging when it comes to the ability to kind of realize some of those tangible benefits of having worked that job in the here and now. Like it makes me think about a craft Bier equivalent, Like, you want to be smart for the long term, but simultaneously, you want to make life enjoyable in the here and now as well, and you want to help your kids know how to do that to strike the balance exactly. Yeah, speaking of helping your kids, you can help them to

build a solid credit score as well. That's something that we would encourage you to do. Is something to be attentive to. And so you can do this by making sure that your your child is an authorized user on your credit card. That can help you to achieve that. But only do this if you if you pay off that card on time and in full every single month at the end of every building cycle at the very least. If not, you could actually be hurting your kids fledgling

credit file. But here's the thing. You don't actually give them access to your card, and so by adding them as an authorized user, they get all the benefits of having that credit to their name without any of the headache to you if you were to have a kid with a credit card. But by doing this, the credit brrers. They start to build this file on each kid that you that you do this for, and you're building a solid credit history for them before they've even had the

ability to even get their own credit card. This is a highly underrated, I think tip for a lot of folks out there, and something that could totally give your kids a leg up for sure. Agreed, Yeah, building that credit file now, getting them started in the right direction, having an actual to score a decent credit score when they graduate high school, that's pretty cool and that's something

you can do pretty easily. Again, like Matt said, though, as long as you're handling your own credit, well, that's the only time you want to do that, because you don't want to set your kid up for with having a bad credit score when when they graduate. But on the credit no, Matt, it's it's also important that our listeners help their kids protect their credit, and that means that you should be freezing their credits. Right. But here's the thing, you might not even take this step for yourself,

and so it's important to do that also. Uh So, yeah, free your own credit, right, we want you to do that. You've actually got an article on our website that will link to that includes the links to the credit bureaus

in order to get this done. Interestingly enough, it's a little bit different process for minors than it is for fully grown adults, and so the realities it's not going to take very long, but this article is gonna help basically hold your hand and help you get your credit frozen, get your kidsredit credit frozen, and I don't know, maybe ten or fifteen minutes to freeze everyone in your family's credit.

And basically what this does is it's just preventing someone from opening up credit in your name or in your kiddo's name. And so we want to make sure that you get this done because not only are you trying to help them build a solid credit score for their future, you want to make sure that nobody's gonna be able to hijack their credits in order to do like nefarious things with it. That's right. Yeah, Okay, let's talk about college for a second. Uh, we've we've done entire episodes

on college and specifically how we think it's overrated. I think that was episode fight. We would recommend you go listen to that one if that sounds interesting to you. But the value of a college degree, it certainly can be massive for a lot of folks. Degrees are also not as valuable as they used to be as well, and so the key then is to talk with your kids about the value proposition of higher education. Uh, you

want to look at the costs. You want to you want to look at what that will get you, Um, what you think that might be able to earn you down the road. You've got to have a degree, of course, to become like a lawyer or a doctor. Uh, it's going to be helpful for other jobs out there as well, but engineers. Yeah, but it's not completely necessary, right for a lot of other careers that that your kids might want to embark on. And so the key to making college worth it is by keeping costs low and to

help your kids make this important decision. It's important to have these conversations over the years. Uh, not just you know, after they've had ten years of percolating thoughts in their head as to, you know, what higher education and what college might look like for them. You don't want them to get seventeen years of thinking one thing in their mind and then all of a sudden, a year seventeen, you're like, oh, by the way, this is what we're thinking. Yeah,

you don't have the acceptance letters. Someone in the mail basically being like nope, to expensive. Note. Don't want it to be a surprise. That's a wrong way to handle it.

But you've got a bunch of years to kind of talk about that and to kind of start helping your child think forward about that process and and think about a budget for that as well, so they make a decision that's reasonable for the family finances and reasonable for their future that they're not getting saddled with a bunch of debt, because you want to prevent that as well.

Like we see the horror stories right and left mat of kids being just graduating with ridicu this amount of debt, not being able to find a job in the career field that they've chosen, and it's tough sletting right, having a loan payment, that's the size of a mortgage payment and not having the income to back it up. That's what we want your kids to avoid. If you want your kid to be set up for financial success, that might mean going to college, but it definitely means avoiding

a ton of student debt in the process. And and that's why we don't recommend saving for college in a account as a must do for most folks. That's it's an important thing to mention as well, Like it's it's already true that there are easier ways to pay for college than for your own retirement. Right. They don't make scholarships sadly for sixty five year old retirees. If they did, that would be awesome, But your child might qualify for

scholarships for different ways. They could do work study, like they're all sorts of different ways to help pay for the costs of college. And so it's more important for you to prioritize your own funding your own retirement accounts than it is to fund their college savings account. And at the same time, we'd rather see most folks spending more money on killer experiences for their children, like stuff like art classes and sports and going to sporting events

are educational trips. Maybe it's a family trip to Washington, d C. To see all the Smithsonian something like that, like which are all free, by the way, they're all free, and the plane ticket of the car ride is gonna cost you money, so is the hotel. But that's a

really cool kind of thing like that. That to me means more than saving up more in a five account to reduce the cost of college when there are so many other ways to help pay for it, and so many other thoughtful UH approaches you can take to reducing the cost. And there are certainly like tax advantages to investing with within a five nine, but there are a lot of folks who should avoid them, at least until they're maxing out their own retirement accounts in the first man.

I'm not sure if if our listeners saw the most recent stats from the Brookings Institution, but they say that it's gonna cost dollars to raise a kid, and this is before college as well. This is a lot of money, you know. Although we do think that you can probably get by UH with less by spending less money up here's the rub. We are often so focused on giving our kids the best stuff, right, like we want them

to have more than we had. We want them to for their childhood to maybe be better than what we experienced. And that's completely understandable, but I think we can take that instinct too far and instead of working with them to provide some financial literacy in their lives, like a meaningful personal finance education will go so much further than brand new gadgets, right, rather than some new sneakers like

you like your Scottie's sin Joel's right. But I mean the reality is that if your kid is confident about how to handle money, they're gonna be light years ahead of their peers um and that confidence then we'll radiate I think outwards into other areas of their lives as well.

It's like the superpower that will it'll stick with them for decades to come, and it's something that you're gonna be able to start instilling in them even now at the very early age, like they might like barely even know how to talk or to even listen to what you're saying. But I promise all of these lessons, the example that you're setting, the tone that you're said within your household anytime you talk about money, all of these aspects, all of these lessons are working to get your kids

on that fast track to financial success. And it really is an amalgamation of a lot of small things over an extended period of time. Right's. Unfortunately there's no like magic bullet, there's no special potion or anything. But we barely sort of touched on it. But it takes patience, you know, And it takes a willingness from a parent to be able to pour into their kids, uh, and to be able to find those opportunities to teach them

in the everyday moments. And often times we just want to like, yeah again, just sign them up for sign them up for some some sort of program and for life to be easy for us. Like you said, we want to optimize everything, and that often means not having those conversations that are necessary to teach the next generation how to do the right thing for their future and with their money. But let's get back to the beer, Matt. This one was do It in october Fest from Odd Story,

which is out of Chatta, New Good, Tennessee. What were thoughts on this beer? It was really tasty, man so in october Fest. So that meant that this is a mars en So it's just a it's a darker lagger, and in particular, if you are new to the craft beer scene, I would totally recommend that you look up either in october Fest or Marzen, because it's going to have some of these bready elements that I think you

might be drawn to. Oftentimes, when folks are trying to get into craft beer and there they start off with like some of these crazy I p a S and they're just like, oh man, it's just way too bitter. I I cannot handle that. I'm like, well, yeah, no, I'm not surprised at all, like an I p A that that is an acquired taste. By the way, is it even legal to drink in october Fest in November? But I don't know. We're doing it anyway. You're allowed to breaking the craft your last today? Did you dig

this one? Yeah? I liked it. I thought it was yeah MALTI. It had like some toasted notes, like a little bit of a caramel vibe, the nice little dry finish and october Fest or not. I like it when they come around every year. I don't drink a whole lot of them. They're not like a go to style. They're usually like they're a little bit reserved for me in their flavors, but they always fit the season. Yeah, they do always remind me of the Christmas to all

dry crackley leaves on the ground exactly. No, it fits like I was glad to have this one today. I never thought about that. They kind of taste the way that leaves smell. Yeah, you know, like you kind of like walking if you're hiking in the woods or walking along the sidewalk and there's a bunch of dry leaves and you can kind of the sun's kind of beaten down on them and you can smell them. Marzin kind of reminds me of that. Are you go? All right?

I like it a perfect, perfect weird for today. All right, all right, that's gonna do it for this episode. For folks who want the show notes, you can find those up on our website at how to money dot com. That's right, But buddy, that's going to be it until next time. Best Friends Out, Best Friends Out.