Mrs. Frugalwoods here: I’m delighted to welcome Shannon McLay from Financially Blonde to share her strategies for raising a financially astute kiddo. I’m pretty sure her son knows more about personal finance than most adults, so I was most grateful when she agreed to write this for the Frugalwoods audience. Enjoy and be sure to check out Financially Blonde afterwards!

Will thought white shoes were the coolest thing. I just thought he looked like Cousin Eddie.

I love my son more than life itself; however, he was one of those kids who truly embraced the “terrible twos” and then aged right into the “trying threes.” He challenged every last decision we made for him except his clothing choices. Miraculously, he did not have an opinion on his outfits.

He is my first and only child and as most parents know, there is no handbook for making the best parenting decisions and rather than read books about his behavior, I chose to take the organic approach and go with what felt best to me. Not surprisingly, what felt best to me was that I was always right and he was always wrong, and I knew that every push back was a battle and the only way I could prove my superiority was to win each battle.

Fortunately, my hubby was, has been and always will be on the same wavelength as me as far as winning battles at home, so we had multiple dinners that ended with all of us crying at the table. I was never embarrassed to leave Target when my son was acting up about something he wanted, and when I made a threat about a punishment, I always carried through on it, including throwing a new toy down the garbage chute at our apartment building. It was not one of my finer moments, but I was determined to win each and every battle at all costs.

The good news and silver lining to all of this home drama was that it paid off. Once my son crossed over to four, the painful lessons he learned through each battle finally started to sink in and he began to understand who was in charge at home. Little did I know that these battles would present the perfect training grounds for teaching him about good money habits.

Hard to believe that a face this cute gave us so much trouble

You see, in training my son to understand that I was in charge, I was learning the value of patience in educating him. Even though we had the same dinner battle every night for 740 nights straight, he didn’t start to learn until night 741, and I developed the patience to wait 740 nights until he did learn. I employ this same patience with our money lessons.

Surprisingly, he is much more receptive to money conversations than he ever was to eating his chicken, but I still have to remain consistent in what I am teaching him. When Will turned five, we started having money talks with him. As he received cash gifts from family and friends, we decided to let him use the cash as he wished. We kept his cash in a plastic sandwich baggy and allowed him to make his own choices.

Financially Fit and proud of it!
Financially Fit and proud of it!

As I shared on my blog, this led to a disastrous fail on his part of spending every last dollar. He was devastated to realize he had nothing, and I was excited for the teaching opportunity presented to me to help him learn about making smart money choices and saving versus spending.

A year later, his baggy grew to all-time highs, and he was so proud of himself that he celebrated by spending more of his money; which led to another great teaching opportunity that I took advantage of and we spoke about earning more money and selling some of his toys on eBay.

Another year has gone by and we are now discussing investing some of the baggy money in a UGMA account where we will allow him to pick the stocks he invests in and we will review his account with him quarterly just as I would with my clients.

As I tell many people, my son is the most Financially Fit person I know and it fills me with great pride to watch him make money choices and have in-depth conversations with me about his money. However, it has taken a great amount of teaching and patience from my husband and me to get him to this point. Just as he now eats everything that is put in front of him for dinner after 740 nights of fighting, he now makes informed money choices after 740 days of money talks.

We cannot expect our children to understand money or make smart money choices if we only talk to them about it on holidays or every other weekend just as we cannot discipline them and teach them proper manners if we only do it every so often. You need to make money talks a central theme in your home and look for opportunities all the time to teach a new money lesson.

Our neighbor drove a new car to the bus stop a few weeks ago, and I shared with Will that we would never drive a car like that. He asked why and I plainly ran through the numbers with him and explained that we could travel to Italy multiple times for that one car and asked if he would prefer Italy or the car. Not surprisingly, he chose Italy.

Free tickets to see our favorite football team = win/win
Free tickets to see our favorite football team = win/win

We have been speaking about money with Will for three years now, so this subject is far from taboo, and I think that is healthy for him and for us. As he ages, we include him in more family finance decisions and ask for his opinion, and this not only helps him with his own money choices, but he learns how we make them as well. Our conversations have evolved as he has because we have made it a habit it our home to continuously teach him good money skills just as we made it a habit to teach him good manners.

How often do you have money discussions in your own home? What financial lessons do you hope your kids learn?

Shannon McLay is a financial planner who left a “traditional” financial services firm to start her own company, NextGen Financial, to help clients in their 20s and 30s get financially fit. Through her blog, Financially Blonde, her book, Train Your Way to Financial Fitness and her partnership with Money Saving Pro, Shannon is committed to making financial fitness fun, easy and accessible for others. 

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  1. We don’t have any kids yet, but I was thinking the other day about how the financial lessons my parents taught me really seemed to stick. The first – and biggest – lesson I learned from them was debt is terrible, and you don’t want to have any of it. I ignored that lesson for a while, but somehow when I got near 30, it finally stuck (like lots of other lessons that I ignored for a while, but finally “got,” such as eat your veggies, T.V. rots your brain, and get a good night sleep). It sounds like the lessons you are teaching your son stuck at an early age, but it’s reassuring for me to know that even if kids don’t get it right away, the things you teach them are somehow still in there, and may re-appear when they become adults.

  2. I feel that teaching my daughter about money will be one of the most important lessons I can teach her. Really she is so young that money looks the same to her, it’s green paper, but just two days ago she got in my wallet and pulled out my cash and said “20 dollars” and had a $20 bill in her hand. It was a proud daddy moment for me. I don’t want her to be afraid of money or to have money control her life. I want her to abhor debt and not be afraid of investing. My parents did an amazing job with me, but never learned to invest and thus didn’t teach me. We have a 529 and will start a Roth for our daughter as soon as she qualifies. You can give you kids money or teach them how to manage their money…I think the 2nd is more valuable.

    1. I completely agree with you Lance, it’s way better to teach your kids to manage money than give it to them. It’s the same thing as that proverb about giving someone a fish or teaching them to fish. I am all about fishing lessons!

  3. I think it’s great you are so open with Will about money. It’s something I wish my parents had done with me. It’s a long story, but we got everything we every wanted, and I think that negatively affected our mindset about how money should be treated.

    1. Ha! I know, the white shoes were hysterical and he thought he was the coolest. I think since you have two, it’s probably good to start them together and 5 and 3 will be a great time. The 5 year old will start to get it and the 3 year old will want to copy the older sibling.

  4. We haven’t done much yet other than start our daughter a savings account with the money she receives at birthdays. She is only 3 now but once she is old enough to learn about saving, I plan to give her the account and help her handle it.

    1. We found that using cash was a great teacher. Too many of my clients have no idea what to do with money because they grew up with a card and had no concept of the finite resource that is your money. When he was 5, he counted it we used it to help him learn adding and subtracting.

      1. I think it depends on the kid, my 6-year old prefers to have his allowance directly deposited into his bank account which he reviews on a weekly basis. Having the money not quite as handy as cash means he stops and thinks for a moment before spending it (and usually decides not to).

  5. You sound like an amazing set of parents! Kids are in the far distant future for me, but I love your approach and it inspires me. I think back to my “money lessons” growing up and realize they were very few and far between. I suppose I ended up alright, but learning these lessons from the ripe age of five would do wonders! Thanks for sharing your story 🙂

  6. There’s no arguing who’s the boss in our house: it’s our daughter. We pick our battles strategically but do let her win most of the small stuff. Ya, she’ll probably be a brat.

    She’s only two right now, but has started to get interested in money. She likes to give over the credit card in stores and likes to play with coins at home.

    She knows that whenever we bring home a toy it is a special day and that usually we just leave the toys for other kids to play with. The grandma’s like to give her special days pretty often, so this has been a tough lesson for me to give!

    It sounds like your son is much further along with money and I’m pretty shocked that he’ll be picking individual stocks: I don’t even do that as an adult yet!

    1. It’s great that your daughter is showing an interest at an early age, it’s a great first step. As far as the stocks, he is picking things he knows, so his first two companies will be Dunkin Donuts and Nike. Just like with adults, it makes sense to pick stocks that you know with products you like, the odds are that someone else likes them too.

  7. Let them learn while they are young, so when they are old they have financial wisdom! Our kids enjoy hands on learning through their allowances. I almost get excited when my son makes a money mistake because I know it will help him in the future! My daughter is a saver and usually has more money than me;0)

    1. We have a 529 account set up for him already, so we view the UGMA account as something for “his money.” It’s just a way to give him some tax protection until he is of age to use it and keep his funds segregated from those that we have earmarked for his education.

  8. I would appreciate more concrete steps and advice here. I am glad that your son is “Finacially Fit” and interested in stocks and not buying new cars so he can go to Italy, but I would love to know the steps you’ve taken in between that got you to that point.

    1. Hi Sarah! Actually in the first link I provided to my blog above, is my post about specific steps to help get your kids financially fit. This post was all about a component of it which is consistency. I have found with my son and my client’s kids that the more consistent you are with money habits the earlier you can get, the better the results. The more times kids hear or repeat a lesson, the more likely it will start to sink in. However, if you want specifics, I have written those as well, it was just too long to write here and I have written about it on my site already.

  9. We don’t have kids yet, but I hope we teach them to be financially successful 🙂 but, as always, it’ll be a learning curve and who knows what might happen. I’m going to keep an eye on your blog in the hopes you’ll share in more detail how you got to this stage – the steps you’ve missed out in between 🙂

  10. Aw, I love the pictures! I can’t imagine how trying those years were. I have to say I’m sad to admit I gave my mom a lot of grief over food at times, and she regrets giving up so easily and letting me “win.” Parenting is no easy task, and I admire you for going through all of that without reading any books on the matter. Will has a great teacher, so it doesn’t surprise me he is so financially fit. =) I hope more and more parents take this approach with their kids. I think I suffered a little because my parents were so reluctant to discuss money.

    1. It’s definitely not easy Erin, and I really do understand why and when parents throw in the towel over any fight with their kid, but I am seeing now what I felt back then, it really does make a difference who wins more of the fights over time.

  11. They say you have to pick your battles. We didn’t interfere too much in how our kids spent their money, but I think we could have done a better job instilling that they need to save some of it. Three out of four are pretty good with money today, but one let’s it run through her hands, although I think she’s slowly getting better. It could be a maturity thing but she’s also special needs. Will is such a happy smiley kid! He must bring you giggles each and every day!

  12. I came late to the game with my daughter. I stressed frugality to her but now she is 13 and gets a monthly allowance $95, which seems a lot, but she has to buy everything with that. She is responsible for gifts, toiletries, clothes, school events (like hot lunches). It forces her to decide what is important, to save up for what she wants and realize how much things cost. She’s made some painful mistakes, but by not bailing her out she is Iearning how to live within her means.

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