Review: Raising Financially Fit Kids

Every other Sunday, The Simple Dollar reviews a personal finance book.

raising financially fit kidsIt should come as no surprise to long-time readers of The Simple Dollar that I’m deeply passionate about raising my children with a strong sense of independence, self-motivation, and a strong ability to manage their own money in a sensible way. In fact, I’ve read and reviewed several books on this very topic; among them, Young Bucks, The First National Bank of Dad, and Make Your Kid a Millionaire.

Raising Financially Fit Kids by Joline Godfrey is perhaps the most thorough book on teaching personal finance to children that I’ve yet come across, as well as the best designed. It’s glossy, loaded with wonderful pictures of bright-eyed children, and organized in a thoughtful fashion.

But is it a really helpful guide to teaching children how to properly manage money? Let’s dig in and find out!

1 – From Safety Nets to Self-Sufficiency
Every kid is different. Some kids are naturally spenders – they can’t wait to spend every dollar they get. Others are hoarders – they carefully preserve every dime they see. Some kids are budding entrepreneurs who love to get out there and develop plans for making money. There are countless flavors – and countless different behaviors.

So how can you offer good financial education to all of these different types of children? All of these types are rewarded by teaching them how money flows – the benefits of saving, the benefits of spending, the benefits of investing, and the benefits of giving. In other words, don’t simply force them to go against their natural behaviors, but don’t just go along with them either. Instead, teach them balance – the balance between spending, saving, investing, and giving that’s an intrinsic part of adult life.

2 – Outwitting the Money Monsters
Time. Peers. Media and marketing. Magical thinking. These are all enemies of good money management for children (and for many adults, too). Time is a factor because in many modern households, both parents are working, the kids are in tons of activities, and there’s little time to spare. Peers are a factor because of peer pressure. Media and marketing constantly influence kids to want things that they would have never considered before. Magical thinking teaches them that plastic is free money, just like the tooth fairy.

The best solutions for each of these areas is the same: quality time spent with your kids (not just time running from activity to activity or parked in front of the television) and open and honest discussions about everything (so they feel okay asking you questions, mostly to take away unnecessary magical thinking).

The middle portion of the book focuses on specific issues for various age ranges of children. Godfrey argues that there are ten basic money skills that should be worked on (with different tactics depending on age) throughout a child’s life:

1. How to save
2. How to keep track of money
3. How to get paid what you are worth
4. How to spend wisely
5. How to talk about money
6. How to live on a budget
7. How to invest
8. How to exercise the entrepreneurial spirit
9. How to handle credit
10. How to use money to change the world

The meat and bones of this are laid out in four very nice fold-out tables, one for each of the four age ranges discussed in the following four chapters. It can almost serve as a checklist of sorts.

3 – Stage One: Ages 5-8: I’m Just a Kid
In the early years, the focus really should be on a basic introduction of the ten money skills above (so that the basics of the idea are clear to the kids) and positive reinforcement of good choices (not punishment of bad ones).

Godfrey encourages having a weekly allowance that’s given without any sort of requirement and that it should be split among spending, saving, and giving. In addition, Godfrey encourages developing a list of “bonus chores” that will stretch your child and really make them work, but earn them an additional amount (which is also split among the three areas). Another important part: talk about all shopping trips in detail. Explain to your child why you’re buying what you do and also talk about their spending choices and whether it’s a good idea to spend their spending money on bubble gum.

4 – Stage Two: Ages 9-12: Encouraging Passions
At this stage, the first flickers of independence are starting to appear and you should facilitate it. Give the child more control over their saving and spending and charity decisions. Encourage them to take on larger entrepreneurial projects and give them really big tasks for earning extra money. The more projects they start on their own, the better.

The real focus here is in making sure your child gains self-confidence and a realization that they’re doing it themselves and that they’re doing it right. You can do this by letting them make decisions, letting them follow through, and complimenting their efforts.

5 – Stage Three: Ages 13-15: Breaking Away
This is the perfect age to have your child get a simple job on their own (or perhaps kick an entrepreneurial project into high gear). Hit your own social network to find good job opportunities for your child and suggest them.

This is also a perfect time frame to have them do “dollar tracking.” In other words, have them keep careful track of every penny they spend over a period of time, then summarize and evaluate all of that information so they can clearly see where their spending goes. You should do the same at the same time so that they can see how an adult spends money – and both of you should strive to do it with full honesty.

6 – Stage Four: Ages 16-18: Standing Tall
This is an appropriate stage to really begin involving your child in your real financial situation. They’re just about to take the leap into their full independence, so this is the time to show them how you manage things. Show them your financial state. Review with them how you pay bills.

Another important way to help them take flight on their own is to let them start being in charge of important financial tasks. THEY should be managing their college applications. THEY should do their own FAFSA.

7 – Money and Gender
Boys and girls are different – does that mean you should be teaching them money lessons in a different fashion? In so many words, Godfrey basically says “no.”

The lessons that you should teach both your boys and your girls is that they can do this. They can succeed on their own merits and they can make their own rules. There are countless male and female success stories out there – people rising from humble backgrounds, people doing amazing things. Your children can do it, too.

8 – Raising Rich Kids
How can you do these things if you’re affluent? The most important thing is to discuss this forwards and backwards – if your children are affluent, it’s likely they’re aware of their lucky situation. Make it clear that they have been given a great opportunity to start, but that once they’re on their own, it’s up to them to make of themselves whatever they will. Point out that the kids who come from nothing are going to be hungry and they’re often going to work very hard to get ahead – and they’ll have to compete with those kids.

Finally, don’t helicopter kids into middle adulthood. Allow them to be independent as early as possible, making their own mistakes and mis-steps along the way. Offer a helping hand, but if you pave the road for them, they’ll never learn the self-reliance they need to make it in a world without you.

9 – Raising Young Philanthropists
How can you show your children the value of sharing what they have with the world? The best way to do this is to be an example yourself, all the way along. Be involved in charities. Give your time and your talents to causes you believe in and encourage them, as early as possible, to do the same.

As your child begins to develop a social conscience of their own, encourage them to follow up on that conscience and do what you can to get them involved in a charity. Few things will help a child grow more than a lot of hours invested in a charity that’s deeply meaningful to them.

10 – Yikes! My Kid Won’t Leave Home! Now What?
To put it simply, don’t. You shouldn’t provide a nonstop roof over their heads (although short term help is fine). Nor should you provide a constant subsidy for your kids.

Why not? Doing that discourages their independence. Free money means that they don’t have to put any effort forth to get the things they want in life, which teaches all the wrong lessons.

It’s okay to help on occasion, but never help in an open-ended fashion. That results in nothing positive with an adult child.

Is Raising Financially Fit Kids Worth Reading?
Let me put it this way: Raising Financially Fit Kids is the best book on financial education of children that I’ve yet read and I intend to give it a permanent place on my bookshelf soon (my review copy was checked out of the library).

What’s so good about it? Virtually every page is loaded with great specific ideas for teaching money concepts to children. More importantly, a great deal of thought was put into the layout of this information, making it very accessible and easy to read and find.

Add it all together and you’ve got a stellar book, one I look forward to utilizing as my kids grow older. In terms of practical use, it’s far and away the best book I’ve found on kids and money.

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  1. Mneiae says:

    Sounds like a good book. The only objection I have is that kids honestly cannot do the FAFSA on their own. They need their parents financial information to do it and it should probably be done together.

  2. princewally says:

    I disagree with an unconditional allowance. I tried it and it was the wrong incentive. We tied it to chores and suddenly my son handles his money responsibly. He’s got a savings account and he plans his spending.

    It’s also the way the real world works, which can’t be a bad principle to grasp.

  3. karyn says:

    I don’t know if I agree with number 10 (my oldest is only 6 so maybe my views will change). I think that if my child is working through college and/or just plain working hard and he or she seems normal enough socially, I would let him or her live with me. I think the modern American expectation of moving out right away is foolish. We talk about overwhelming college debts and mortgages – well, staying home would allow the child to pay more towards tuition or towards a downpayment. It was the way previous generations saved up enough to buy their own land. It’s also a better choice for “green living” to combine resources. Thanks for the book suggestion though; I know I’ll be checking it out.

  4. Little House says:

    Thanks for these tips Trent! I can use the first two tip in those age ranges for teaching the kids in my classroom. Many times, students can begin to count money and change, but they don’t get a lot of instruction at home on managing the money they receive. I try to thrown in the environment as well to help explain purchasing too much stuff leads to too much trash!

    Also, points 8 and 10, I have two younger siblings (both in their late 20′s) still living at home! I think I need to share this book with my parents, who are all in their 60′s and still supporting their adult “children”. (I have two sets of parents, and they each have an adult child at home to clarify.)

    #6-Karen, when your child is in their late 20′s, I’m sure you’ll feel like it’s time for them to leave and be independent. Somehow, we all figure it out. But, if parents coddle their children too much, or make excuses for them not getting a job, it hinders their independence.

    thanks-
    Little House

  5. kristine says:

    I will read this book.

    But I want to add my 2 cents about marketing. The best way to keep a kid under 10 form the “gimmies” is to not get cable or satellite TV, where all the commercials live.

    Instead, get kids’ programing on DVD from the library, and never see commercials! We not get cable till my kids were 10, and they asked us for a thing they saw n TV! But they saw the same shows as their peers.

    Besides, commercial interruptions do not allow for developing a really great attention span.

  6. This sounds like a really good book. But if the learning the process he provides doesn’t start until age four, I say, why not start earlier?

    My little one is 2 1/2 and although I certainly don’t try to ram any kind of money issues down his throat, he is already beginning to learn the basics of money and what it is, and how it is earned, and how it is spent.

    I think if you tread lightly, you can set the seeds early for a financially fit kid.

  7. Jill says:

    when I was growing up (late elementary school, early high school) I had jobs that were considered “being part of the family” (cleaning my room, dishes, garbage, tidying my things in the house).

    I then could do weekly cleaning jobs for my mother for my allowance (bathrooms, vacuuming, ironing shirts.)

    Worked for my family!

  8. Todd @ The Personal Finance Playbook says:

    I’m passionate about teaching my kids about money as I raise them as well. On gift giving occasions, for example, my wife and I intend on giving them one gift that is something they want (like a doll or basketball), then giving stock, or Roth IRA contributions. Their 529 will be all we fund outside of gift giving.

    We intend to go through the statements with our children and explain compounded interest as early as they can understand it. Sounds like a good book. Nice review.

  9. Rosa says:

    Thank you for the review. I’m going to track down a copy of this book.

    One thing we do is, we let our son help as we give charitable gifts for holidays, and as I choose my “extra” charity target each month (my Christmas present from my partner this year was $600 more charity in the budget, or $50/mo – at first it all went to Kiva loans but now they’re paying back so I’ve been charity shopping on charity navigator).

    So along with going to Target and picking a toy for his cousins, my 4 year old gets to look online at kiva loans, floresta sponsorships, and help make the “should we get grandma a cow or a chicken from Heifer this year?” decision.

    We’ll have to wait a while to see what kind of affect this has, but I know that in our family, my parents let us in on giving decisions and my partner’s parents never talked about money with their kids, and every year I’m the one wrangling for more charity in our budget.

  10. Great post.

    We spend quite a bit of time teaching the kids the difference between needs and wants . . . a real challenge!

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