Poll – The Top 3 Money Lessons for Kids

I’m worried about how our son will do when he’s older. Life seems to be getting more difficult every generation. Mrs. RB40 and I are Gen Xers and we grew up in the 80s and 90s. Life wasn’t as complicated back then. We didn’t have cell phones, the internet, social media, or thousands of tempting products. Kids were happy with TV shows, Nintendo, sports, and riding bikes around the neighborhood. Our future wasn’t complicated either. We knew if we get a good education, we’d probably do well in life.

The Millennials had a tougher time. Life got a lot more complicated when they were growing up. The Great Recession hit in 2008 as many of them entered the workforce. It was tough to find a good job and the unemployment rate for Millennials was higher than other generations for years after the recession. Also, Millennials were the most educated generation in history. Check out the chart below. 39% of Millennials graduated from college. The competition is fierce for good jobs. All these factors made it more difficult for them to save and build wealth. The median net worth of households headed by Millennials ( ages 20 to 35 in 2016) was about $12,500 in 2016. That’s lower than Baby Boomers ($20,700) and Gen X ($15,100) when they were in the same age range. There is a trend there.

Our son is a member of Gen Z, those born from 1997 to 2012. (I guess nobody coined a cool term for them yet. How about the Social Media generation?) They are pretty young, but the older ones are enrolling in college at a higher rate than Millennials. They’ll be more educated than the Millennials. The competition for good jobs will be even fiercer in the future. I think life will keep getting more difficult for future generations.

The US was the sole superpower for many years and Americans lived like kings. It’s a different story now. Globalization is here and the playing fields are getting more level. Future generations will have to fight harder to build a prosperous life for their families. The competition is worldwide now, not just in the US.

Top 3 Money Lessons

Our son is still young so we still have time to teach him everything about personal finance. However, I want to see what everyone thinks is the most important money lesson for kids. Wow, I have a big list. You can pick your top 3 and we’ll see which way the wind blows.

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These are all important personal finance lessons. Let me make a case for each one quickly.

Being Frugal – This is #1 for me. If you can live modestly and not waste money on frivolous crap, you’ll probably be okay.

Earning money – Working and earning money is extremely important too. It is very difficult to build wealth if you make minimum wage. You need to make a good income to be able to save.

Saving – You need to save for the rainy days. Most US households have less than 3 months worth of living expenses saved up. That’s not enough because things will go wrong sooner or later. You have to be prepared for an emergency.  

Investing – Unfortunately, saving is not enough anymore. You need to invest so your money can grow. Compounding is the key to becoming wealthy.

Minimizing the Big 3 – The biggest expenses for most households are housing, transportation, and food. Saving money will be much easier if you can minimize the Big 3.

Budgeting – Budgeting helped many families get out of debt and start saving. You have to spend less than you make.

Negotiating – Everything is a negotiation. If you know how to negotiate, you’ll make more money and spend less. Never pay full price for anything.

Financial Independence – Kids should know about the magic of financial independence. Once you get there, you’ll never have to work again if you don’t want to. Financial independence is the holy grail of personal finance.

Avoiding debt – Student loan debt is a huge reason why Millennials have a lower net worth than the previous generations. They owe more. Kids need to know the difference between sensible debts and bad debts. Paying $75,000 per year for an Art History degree probably isn’t a great idea. Also, consumer debt is always bad.

Giving – Help people less fortunate than yourself and make the world a better place.

Retirement – It’s never too early to start saving for retirement. The earlier you save, the better off you’ll be in the future. The easiest way to become a millionaire is to max out your 401k every year.

Taxes – I mentioned the Big 3 earlier, but the real drag on your income is taxes. That’s the biggest expense for most well-off families. Once you’re in the higher tax brackets, you need to learn how to minimize taxes.

Inheritance – Don’t worry kids. You can count on inheritance. But only if you’re nice to your parents.

Don’t Cheat – There are many many ways to make money illegally or in underhanded ways. You can run scams, multilevel marketing, lie, cheat, and steal to make easy money. However, it isn’t worth losing your freedom. Cheaters will be caught eventually.

Happiness – Money can’t buy happiness. Don’t prioritize money over everything else. If you’re miserable at work, you need to figure out a different way to live. Having no money is miserable, though. So keep that in mind as well.

Others – Leave a comment.

Well, let’s vote! I’m eager to see what everyone thinks. Share this with your friends so we can have more sample points.

More

More about kids and money from my blog buddy, Lazy Man. Seven Ways to Teach Your Kids About Money.

Pew Research Study – Millennial Life: How young adulthood today compares with prior generations. I used a lot of data from this paper. It is very interesting.

Image credit – Jordon Rawland

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.

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