3 Crucial Things I'm Teaching My Kids About Money

Many people grow up without any formal instruction about personal finance. Some states are beginning to teach personal finance in schools, but the latest data shows that just 40% of high schoolers will have taken a personal finance course before they graduate.

Most of us pick up ideas about spending, budgeting, and saving money by looking at what our parents do. That idea has made me think about what I want my kids to learn about managing their money. Here are a few lessons they've been learning about saving, investing, and giving back.

1. Saving money

Several years ago, my two sons wanted expensive Lego sets, each costing more than $100. My kids love Lego, and I knew they could build the sets and play with them for a long time. But it wasn't their birthday or Christmas, and I thought it'd be the right time to teach them a little bit about saving up for things they want to buy.

I generally let them buy whatever they want with their money, but I told them they had to save up birthday money and any other monetary gifts to make the purchase. It took a while, but they finally had enough money saved for the sets and had a blast putting them together.

The lesson they learned: Saving money takes time and effort. After spending most of the money they had on their Lego sets, they were cautious about letting their savings accounts go back down to $0. They learned the value of waiting for something they wanted and also how easy it is to spend everything they've saved.

2. Giving to charity

When my wife and I received some of the COVID-19 stimulus money, we decided to give some of it away, and we wanted to involve our kids in the process.

We found a charity where you can buy goats, chickens, and other animals for people in different countries that help them provide food for their families or to be used to generate income. We let our kids pick out which animals they'd purchase, so they could feel connected to this gift.

The lesson they learned: I'm still learning how to be generous with my money, but I wanted my kids to see that the money we have -- whether we earned it or it was given to us -- can be used in more creative and generous ways than just for our own wants and needs.

3. Investing

I recently talked to my oldest son about a stock I bought in a company that I think has great long-term potential. My son has some general interest in the work the company does, so I knew he'd understand a little bit about what I was talking about.

I wanted him to understand the benefits of investing money to ideally generate more money later. I've got some more investing lessons to teach both of my kids, and one fact I want to drive home is that the earlier you invest your money, the more time the magic of compound interest has to work.

The lesson they learned: This lesson is a work in progress. The next step I'm going to take is to show my kids my brokerage account and the benefit of putting some money aside for retirement in a low-cost index fund. I'll also show them some investment calculators that show how a small investment can potentially turn into a much larger sum over time.

Just like all other lessons I try to teach my kids, it takes more than once to tell them how something works for them to learn it (I can relate!). But my goal is to make discussing money a normal topic to discuss -- and that there are a lot of different ways to use it. And if I'm lucky, I'll learn more in the process, too.