How to Teach Your Kids the Value of Money
Let’s set the stage. I have two young kids, and I have an unusual relationship with money. I have been an entrepreneur for 7 years … that means no salary, no regular paycheck that I can count on, nobody to give me a raise, no bank that thinks I’m safe enough to lend money to, no safety net. The money I have at any given point is a direct result of what I’m creating in my business and for its clients. At the same time, I am responsible for ensuring my team has enough money to pay their bills, their rent, their groceries, etc.. I’ve created millions of dollars of value, and I’ve also had times when I’ve barely made ends meet.
This experience has taught me a lot about the value of money, with a perspective that few other people have. And here’s 5 things I am going to teach my kids. Maybe you’ll find this helpful for how to teach your kids, or maybe it will be useful to you directly.
1. Money doesn’t have value, value has money
The first part of this concept is easy and you’ve heard it before. The dollars in my bank account or in my wallet aren’t meaningful on their own. They’re just digits, bytes, paper and chunks of metal. They are only useful because you can exchange them for things or experiences that you do value. I can take $100 from my bank account and throw it away at the casino or I can buy a nourishing meal for my family. Turns out I value the meal more than I value the casino experience. So the value is in what you use the money for. So choose wisely. Ok that’s an easy concept.
Value has money. Totally the opposite right? It sounds odd, but that’s the way it works, generally. Put it this way:
- A company that is producing products that people value, has money. Apple has billions of dollars at its disposal.
- A festival that puts on great shows attracts an audience, sponsors and more great acts. It attracts money because it generates value for all involved.
- A start-up company will attract investors if it has value
- A VC will attract investors if it has the valuable ability to select winning companies
- An employee who builds great products, closes sales or manages successful projects, will earn commissions, shares, and a higher salary.
[Yes there are ways to attract money to you without creating value, but I’m going to choose to not teach my kids how to do that].
2. You are entirely responsible for getting money
If you think you’re entitled to a job, a house, an education, food to eat, fancy vacations, a car, literally anything … you’re wrong. Nobody will or should give these things to you because you want it. Go get it.
3. Getting money is hard if you think it is
Here’s a really good way to not get money: walk around thinking “I don’t have enough money”, feeling bad, thinking that you’ll be happy if you get more money, jealous/cynical of those who do have more money.
4. You have to give something up to get money
I don’t mean you have to work hard, skip family time, skip sleep or skip vacations. But if you want to get money you have to give up something. The most common thing is trading time for money – give up your week, go to work, get paid. Less commonly, it’s things like trading future for present, sacrificing comfort, taking risk, moving to a new city, ending a relationship. Even less commonly it means giving up on a belief about money. Choose what you give up. Choose well, and not for the end goal of getting money (see my first point, money has no value).
5. Humans are stupid and irrational about money
Most people around you have hang-ups about money. Find out what they are. Every person has an amount of money that they’d consider ‘trivial’ that they’d not really notice or care about giving up. Every person has an amount of money that stresses them out. The amount depends on the person (a multi-billionaire vs. a starving artist) and the circumstances.
Ok that wraps it up. Here’s what I’m going to do with my kids. I’m going to give my kids a little bit of money and ask them to choose what to spend it on and discuss why they value one thing/experience over another. I’m going to then tell them they aren’t allowed to spend it and ask if it still has value. I’m going to not reward my kids for bad behaviour or respond to entitlement and I will reward helpfulness and good behaviour. We’re going to talk about feelings of wanting and not having enough. We’re going to talk about goals and trade-offs and we’re going to practice them. That’s how I’m going to teach my kids about money. It’s a start anyway.