10 Aug 2023 Three Personal Finance Books You Should Read With Your Kids
Last Saturday the entire Beacon team, including kids, gathered at Jared’s house to hang out and have dinner. On the drive home, Gwen asked a question that she and Jack ask from time-to-time: “Dad, what do you do at work?” My response is typically something along the lines of, “I help people make smart decisions with their money.” This is usually the extent of it, but this time Gwen asked why I needed a computer to do this. “Because a piece of my job is helping people invest their money,” was part of my reply, which led to questions about what investing is and what a stock is, before Jack changed the subject by mentioning something about his favorite video game.
Emily and I do our best to talk about money with Jack and Gwen but oftentimes the conversations are similar to the one we had this past Saturday. A question or two, then the kind of topic pivot only a child can pull off. They each have their own bank account and debit card, receive an allowance, and set money aside for giving. While this is a good start, given the nature of my work I am constantly wondering what more Emily and I can do.
Until the last 10 years there wasn’t a real push by the educational system to teach kids about personal finance. The expectation seemed to be that either A) They’d figure it out on their own, or B) Their parents would teach them. “A” hasn’t worked because, as many of us know, navigating the world of money can be hard, especially if you’re suddenly faced with it in your early 20’s without any kind of educational foundation to stand on. “B” has been a failure, too, because most parents don’t communicate about money with their kids. As evidence of the latter, look at the chart below:
There are two things worth noticing on this chart, which was compiled from a 2022 survey. First, very few parents have regular conversations with their kids about money, and second, these conversations are less frequent the more the parents’ earn.
The survey also found that 83% of U.S. adults believe parents bear primary responsibility for teaching kids about money. Yet, looking at the chart, they aren’t doing that (at least verbally). Why not?
The reason is surprisingly simple: We parents don’t know what to say and are nervous to say the wrong thing, causing irreparable damage to our children and leading them to make one life-alteringly-bad financial decision after another, which, of course, means they’ll be sleeping on our couch for the rest of their lives. (Alright, that’s a bit dramatic, but that’s where my head goes sometimes!)
To better equip our kids, I have the following suggestion (challenge?): Read with them. Does that mean the whole family sits on the couch while one person reads? Sure! If it’s too hard to coordinate schedules, have everyone in the family commit to reading a certain amount each week, then set aside time to discuss. This has a three-fold benefit: Kids learn, parents learn, and lines of communication around money are opened.
Which books to read? Start with one of these three:
I Will Teach You to Be Rich, by Ramit Sethi – Few books better explain the nuts and bolts of the financial system better than this one. How banks work and which ones to avoid, the difference between credit cards and debit cards and how to pick the best credit card, the beauty of automation, and how to create a budget that prioritizes your values. Whenever I bring up this book, I always lead with “I hate the title,” because it’s not about getting rich. It’s about understanding the financial system and gaining control over your finances.
Why Does The Stock Market Go Up?: Everything You Should Have Been Taught About Investing In School, But Weren’t, by Brian Feroldi – The title says it all. This book is about answering the simple (with some sophisticated) questions we never tackled in school. How many of us know why the stock market goes up? Understanding that question alone can demystify investing and give you more confidence. Chapter titles include, “What is a stock?” and “Why do stocks have value?” “Why does the stock market crash?” “What is inflation?” “What is compounding?” Chapters are no more than five pages and it’s written in laymen’s terms.
The Psychology of Money: Timeless lessons on wealth, greed, and happiness, by Morgan Housel – My first two suggestions tackle the nuts and bolts of personal finance and investing while this book tackles the psychological side of money. It’s crucial to understand yourself as a consumer and investor, to know your values, and, in the author’s words, “to know the game you’re playing.” There’s no better writer on the topic right now than Morgan Housel. He has a unique ability to translate complex thoughts in clear, concise language. Some of my favorites: “Saving is the gap between your ego and your income,” “Everything has a price, but not all prices appear on labels,” and “Money’s greatest intrinsic value—and this can’t be overstated—is its ability to give you control over your time.”
These books are probably too advanced for young kids (Under 10? 12?) so if you’re looking for a resource on what you should be teaching littles ones and how to discuss money, I recommend “Make Your Kid A Money Genius (Even If You’re Not): A Parents’ Guide for Kids 3 to 23,” by Beth Kobliner.
Ultimately, the goals are to increase your child’s financial fluency and create an environment where discussions around money are normal, not taboo. If you are looking for more ideas or have a great success story to share, we would love to hear from you!
The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.