Last year I asked some UK 🇬🇧 financial experts, "What’s the one thing you wish you knew about money as a kid?" I got some great responses which I shared in my blog here.
This year I thought I’d ask the same question but to some US 🇺🇸 financial experts. The responses were equally as good and just as varied.
There were two distinct themes. Some were focused on what they wish they had done with their money and others were more about understanding the importance of how they feel about money. Both what we do and how we feel about money are so important and in a lot of cases they are linked (although most people don’t realize just how linked they are).
1. Knowing what to do with money:
Habits are key!
“I received great financial advice as a kid from my father. It is the reason I am passionate about financial literacy education. Arguably, the best of all that guidance was to make a habit of paying myself first. When you do that, you place yourself on the path to increasingly greater financial stability and success.“
Like Sam’s father, I want my kids to form a habit of saving money from a young age. Especially as kids form a lot of their money habits by the age of 7! Remember, it’s the money habits that our kids form that will determine their future financial wellbeing.
With so many companies trying to get our money, we need to make sure we save before we spend otherwise, we probably won’t save anything. Here’s a story I told my girls to help them see the importance of saving first -> story.
Make that money grow!
Like so many parents I meet, our financial experts wish they had known that money can grow.
This was simply put by financial expert, and professional soccer player, Amobi Okugo:
“I wish I knew the concept of compound interest.”
This is such an important concept. As the famous saying about compound interest goes “He who understands it, earns it. He who doesn’t pays it”. We need to make sure that kids today grow up understanding this concept so they can earn it rather than pay it.
One of the simplest ways to get kids to understand compound interest is to get them to think of money like a seed. If they plant that seed (save / invest) it will grow into a tree. That tree will then produce seeds (interest / dividends) which can be planted into more trees. If you leave it long enough then you’ll have a forest. We need kids to learn that money can grow, just like a seed into a forest.
So how do we make money grow?
“The one thing I wish I had known about money as a kid was how important it is to invest your money. When I was growing up my parents always said, ‘save, save, save your money’.
Yes, it is important to save, but it is just as important to invest your money so your money is working for you. George Clason the author of 'The Richest Man in Babylon' said, "make your treasure work for you...make its children and its children's children work for you." This is only possible through investing your money in ways that will allow your money to reproduce itself.”
This is something I’m very passionate about. If kids can learn about investing then they will have such an advantage in life. This is why I have been teaching my girls all about investing. You can read how here.
Also, I would strongly recommend everyone reads the book Derrick mentions ‘The Richest Man in Babylon’
Investing doesn’t have to be hard
Many adults feel that investing is complex. They see people talking about it on the TV and have no idea what they are talking about. “Bull markets / Bear markets”, “Ratios”, “Growth / Value“, “Small / Large Cap”. This puts a lot of people off from investing.
However, as Andy Hill, host of the award winning Podcast “Marriage, Kids and Money”, said:
“One thing I wish knew about money as a kid is that investing doesn’t need to be overly complicated.
Getting started with a stock market index fund, investing consistently, having patience and leaving it alone is the recipe to becoming a young millionaire.”
I love this. Despite me working in investments for many years, I follow the simple strategy that Andy has highlighted above. When it comes to investing, the simple strategy is the best strategy. Here’s a story I told my kids to help them remember this -> story
Investing takes patience
One of the superpowers needed to be good with money is patience. We need to help our kids see just how important patience is. This is something that former NFL running back, now author of the book My Money Vehicle, Jedidiah Collins mentioned:
"People see money differently, we all know that, but what I wish I knew as a kid was HOW people see money differently. The answer comes with understanding the most powerful part of the 'Time Value of Money Formula' - (is) Time.
Most see money on a day to day basis and spend accordingly. Some will begin to see money through a month to month or year to year basis and begin to save accordingly. Few will understand money enough to see it over a decade timeframe and begin to invest accordingly.
If we could all begin to see money longer, we could all begin to U.S.E. it!“
If you plant a seed, you can't expect a tree to suddenly appear, it takes time to grow. Just like it takes money time to grow.
All the responses above are definitely things I wish I had known as kid and will be helping my kids learn. As mentioned earlier, it’s not just what we do with our money that’s important. It’s how we feel about money that’s also important and this has a huge impact on our financial wellbeing.
2. Understanding how we feel about money:
Feelings about money are so important
When people try to get healthy, they go on different diets but many don’t work. This is because there is something else going on. There is something about people's relationship with food which is driving their actions.
The same is true with money. Most people don’t realise that a lot of what they do with their money is based on emotions and other aspects of their life rather than just knowledge and logic. This is what a lot of our experts wished they had known when they were younger.
Starting with financial planner Sid Misra:
“I wish I believed when I was younger, and even in my 20's, that the money and material items don't make you feel any better. I knew it intuitively, and because of my upbringing, but I didn't truly believe it.
If you are using money and material items or even the approval of others to fill a hole or void you have, you will never be happy and/or content.”
Most people play the game of “Keeping Up with the Jones’” as they believe the Jones’ are happy and they will be too once they have what the Jones’ have. It’s never the case. Here's some tips to help you teach children about 'keeping up with the Jones' -> tips
Money isn’t everything
“True friends will be the ones that you don't need to spend money with to have fun.”
I will always stress this point to my daughters as they grow up. I appreciate that this is hard for a lot of kids as they grow up. Most kids want to be popular and having money and nice things will attract people and increase your popularity. The key is to make sure that they value ‘true friendships’ over popularity.
Money is just a tool
Continuing on from this, financial coach Dave Lowell said:
“I wish I had known that money isn’t inherently good or bad, but it’s just a tool. If you are a good person, then you will be able to do more good with more money.”
This is something I strongly believe. Money is just a tool. Having more tools doesn’t make you happy. It’s what you do with your tools that can make you happy.
This is why it is so important to teach kids about using money not just for buying material things but that it can be used for helping others and for new experiences. Both of these uses are much more likely to make you happy. Here’s a blog I wrote on this topic -> blog
Help is every where
When it comes to money and kids, many parents don’t know how to start the conversation (especially as most parents haven’t been taught about money).
Therefore, if your kids want to learn about money, it’s important to know what options you have. This is the point Money Coach, Christina Teh, wished she knew more about:
“I wish I knew that it was possible to hire a financial coach.”
If you are a parent and want your kids to learn more about money, then I’m sure any one of the above experts would be willing to help. Also, teaching kids about money is why I started Blue Tree. I write weekly blogs on different money topics using stories and simple analogies so you have the knowledge and confidence to change the financial future of your kids for the better.
I want to say a massive thank you to all the financial experts for providing their responses. I’m sure a lot of parents will have learnt a lot from this.
Thanks for reading! (Remember to subscribe below!)
P.S. If you haven’t already, make sure you check out the responses from our UK financial experts here