The MapleMoney Show » Financial Literacy

Growing Up Financially Independent, with Doug Nordman and Carol Pittner

Presented by Wealthsimple

Welcome to The MapleMoney Show, the podcast that helps Canadians improve their finances to create lasting financial freedom. I’m your host, Tom Drake, the founder of MapleMoney, where I’ve been writing about all things related to personal finance since 2009.

Every parent wants the best for their children, which is why we teach them how to manage money properly. And while we sometimes get mixed results, the truth is that it’s a lot cheaper to make mistakes with money when you’re 12-years old.

My guest this week had an excellent example to follow as she was growing up. That’s because Carol Pittner’s parents became financially independent before she turned 10. And when her dad retired early at age 41, Carol witnessed firsthand the benefits of saving money early and often, and she’s followed in his footsteps ever since.

Carol and her father, Doug, join me on the show this week to discuss what it’s like to grow up financially independent.

It’s unusual for children to be motivated to save money at a young age, which is why I found Carol’s story so interesting. Early on, Doug taught his daughter about the benefits of saving money at the ‘Bank of Carol’, where he paid her monthly interest on every dollar she kept. Carol says that she loved the concept of her money making money.

Carol’s good money habits may also stem from her parent’s approach to allowance, chores, and jobs, keeping them separate from one another. Carol shares how she got her first “real” job and some of the lessons she learned from that experience.

If you’re a parent who’s struggling to instill good money habits in your children, this episode is for you.

Do you prefer to invest in socially responsible companies? If so, our sponsor Wealthsimple will help you build a portfolio that focuses on low carbon, cleantech, human rights, and the environment. To get started with Socially Responsible Investing, head over to Wealthsimple today!

Episode Summary

  • Growing up in a financially independent family
  • What motivated Carol to go out and earn money when she was young
  • Carol explains how the Nordman household managed allowance.
  • Should your kids’ allowance and chores be connected?
  • Money lessons are a lot cheaper when you’re a child.
  • Learning to save at the ‘Bank of Carol’
  • Is it easier to manage money with cash or in a digital form
Read transcript

Every parent wants the best for their children which is why we teach them how to manage money properly. And while we sometimes get mixed results, the truth is, it’s a lot cheaper to make mistakes with money when you’re 12 years old. My guest this week had an excellent example to follow as she was growing up. That’s because Carol Pitner’s parents became financially independent before she turned 10. And when her dad retired early at age 41, Carol witnessed, firsthand, the benefits of saving early and often. She’s followed in his footsteps ever since. Carol and her father, Doug Nordman, join me on the show this week to discuss what it’s like to grow up financially independent.

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. Do you prefer to invest in socially responsible companies? If so, our sponsor, Wealthsimple, will help you build a portfolio that focuses on low carbon, clean tech, human rights and the environment. To get started with socially responsible investing, head over to today. Now, let’s chat with Doug and Carol…

Tom: Hi, Carol and Doug. Welcome to the Maple Money Show.

Carol: It’s good to be here. Thank you for having us.

Doug: Thanks, Tom. It’s good to be back again.

Tom: It hasn’t been that long since I had you on, Doug, but I wanted to get you back on with your daughter, Carol, because you guys have an interesting story. I already found it interesting that you were financially independent before it was a buzzword or thing to do. And now I also find it interesting that you can share that next stage where this all worked with children when you’re financially independent. I know that with a lot of parents sometimes it’s the biggest time of struggle when you’re trying to make ends meet. Maybe you have one spouse not working because of the child… There’s all sorts of things that can get in the way of some of your goals financially.

Doug: Absolutely.

Doug: Absolutely.

Tom: Carol, can we start with you? What I heard from Doug previously, is you were seven years old when he crossed the line of being financially independent. How much do you remember at that point? You were so young. I should also share that Doug, you said you were retired when she was 10. Is that right?

Doug: That’s right. Carol was a half years old when I retired. We had already been financially independent just before the pension started.

Carol: I don’t remember when Mom and Dad by at age seven. For me, it was a bunch of numbers in the background. I was only seven years old. Money wasn’t real yet. But when I was nine years old and Dad had officially retired from the Navy, I got to be home more often. And that was the biggest lifestyle change for me. I didn’t have to be at the before school program at 6:30 in the morning or the after school program at 3:00 in the afternoon. Now that Dad was home, I could actually be at home as well. I could watch my favorite TV show or take a little longer with breakfast in the morning. It was nice to just not have to be in all those different groups all the time.

Doug: Her parents were a lot easier to get along with. They smiled a lot more. They seemed to be getting better sleep.

Carol: You guys were happier. It wasn’t a night and day happiness, but all of a sudden I didn’t see any more of that stress or worry that parents are constantly trying to hide from their kids. They try to hide it but the kids still see it anyway.

Tom: Doug can just remind us, what was your age when you retired?

Doug: When I retired in 2002, I was 41 years old, almost 42. And Carol was nine and a half, almost 10. It’s been 18 years since then. Carol has spent more than half her life growing up under financial independence. If you’re trying to motivate somebody for financial independence, putting them in a financially independent family and having that child go to school while you’re out there enjoying an FI lifestyle, that’s really powerful motivation.

Tom: Yeah, that’s a great point, because one of the things I was wondering was, how you get this through to your kids that “this came because of this…” My worry was I will never consider myself retired because I’m doing all the online things and all that. But I do worry, even in my own situation, what my kids think sometimes when it looks like I’m just messing around on the computer. I’m worried that they don’t kind of get the same appreciation for what work might actually mean. It’s not always so glamorous as sitting in the basement on a computer. How did you instill that in Carol? How did you show what hard work looks like?

Doug: Well you want to show you’re setting a good example for your kid by putting out a lot of physical effort, staying up all hours of the day and night, having to work nights and weekends, answer emails at all hours and generally just being miserable. I’m not sure what kind of example that sets for your kid but it certainly sets a better example when you’re financially independent and able to work as you choose. Work the way you want to work when you want to work. Whether you get money or not, you’re doing things that you feel challenged and fulfilled by and that you enjoy doing. I think we’re setting a much better example of working on our terms instead of doing the traditional corporate career.

Carol: And for kids to have the opportunity to compare and contrast. For me, there were some things that were very overt. There was one morning where Dad drove happened to be driving off to go surfing for the day. He’s got the boards attached to the top of the car and he’s in his swim clothes. And the way that he has to drive to get to the beach happens to go by my school bus stop so I got to drink in the scene of my Dad with the boards on top of the car saying, “Bye, honey. I’m going off surfing. Have a bad day at school.” I just thought, I could be doing that instead of going to school all day. Then when I do go to school all day, I see the contrast of all these teachers who say, “I have to go work today. I have to go deal with middle schoolers today. I have to go deal with…” and you can see quite clearly that you have your happy, financially independent parent doing exactly what they want to do all day versus the folks that are working a traditional job that are maybe not doing what they want to do. A lot of people are concerned about how to show their kids the reality is that it’s not just you. It’s your kids learning from their friends, neighbors, teachers and from all the other adults around them.

Doug: I also thing they still develop the work ethic you really want to see in them because they want to be financially independent. But they also understand work life balance and quality of life probably more internally and instinctively at a younger age than you would pick up as an adult coming out of a traditional background, a traditional corporate career. I’ll also point out that although you’re the parent worried about setting the good example for your kid and what kind of information or impressions they’re picking up, it’s really not about you. All your kids want to know is that they’ll have more time for mom and dad when they’re young. And as they get older, they really don’t want to be seen at all in public with you. They just want to know that they’ve got access to your wallet, your car and transportation and everything else to spend time with their friends. And it would really help if you’d get them the latest cell phone and pick up their cell phone expenses.

Carol: But if you raise the money savvy kid, they realize after a while they don’t even need mom and dad for that. They can just figure it out for themselves.

Doug: They can get their own money, start their own entrepreneurial career. I think financial independence for somebody who’s in your house and is young, who grew up around it understands that’s the way life should be. And they really don’t understand why anybody would do anything different.

Tom: That’s great to hear. I’m glad, Carol, that you were able to pick up on the differences with teachers and parents of other kids because my worry was it would kind of look like, “Oh, my parents didn’t have to do anything and it just all worked out.” So I’m glad you were able to sort of figure that out early. Doug, is there something you did beyond Carol picking that up on her own elsewhere, to instill that in her? That this came from certain choices we made?

Doug: Oh, absolutely. When kids are young and realize that you’re not working anymore, maybe they’re a little concerned over where you’re going to get money to pay their allowance, buy groceries or have a house. When kids are young, you’re going to tell them that you’ve worked and saved and you have a lot of money to last the rest of your life. You have enough. You can take care of all the things the family needs and maybe take care of some of the things the kids want. Then you talk about it. There are teachable moments every time you reach for your wallet or every time you’re paying a bill. I remember one day you looked over my shoulder and said, “Holy cow, Dad, we’re rich.”

Carol: Yeah.

Doug: And I said, “Well, your mother and I are rich but we’ve got to make this money last for the rest of our lives.” We’ll tell you how to figure that out. We’ll help you figure out how to manage your money and then build your financial dependance and make it last for the rest of your life. And I think that’s working, right?

Carol: It is.

Doug: So far, so good. So you bring up this conversation all the time because you’ve been talking about it anyway. You’re pursuing financial independence. Some of my friends probably feel like I can’t shut up about it, and that tends to filter through to your kids too. You grow up in a household that always talks about managing money, saving, investing and reaching financial independence. Again, you’ve internalized it by the time you get to high school and college. When you’re the kid in your freshman college class that has been contributing to their Roth IRA for three or four years, that sets a certain standard of living and expectations and understanding of finances.

Tom: I love that. It’s very interesting because it’s quite different than myself growing up.

Doug: Oh, it’s a lot different than my growing up too and I’m glad to make sure the second generation gets a little better head up.

Tom: Exactly. It was quite easy for me to talk my way into money when that wallet came out. I think that it came out a little too easy. I’m also glad you used the “rich” word. We so often say financially independent. But another way of saying it can be just “rich” especially to a child. The fact that you didn’t let that become something where you just handed it out to her is important because I think back to my childhood… If I knew my parents had a certain amount of money, I’d have a certain expectation that I could get this toy or whatever. So I’m glad you guys did that. Carol, you mentioned how you were motivated to go out and earn money. Did you have an allowance at all? What was your situation there? Or was Doug just not giving you anything at all?

Carol: We had a whole set up that was known as “allowance chores and jobs.” We also spelled this out in one of the chapters of our book. The way it works was, chores were things that you did as being a good member of the family. It wasn’t something tied to money at all in our family. You can if you want to. It’s something that can be adjusted based on your family values. But for us, it was easier if chores were tied to negative consequences. So if I didn’t do my chores, then I couldn’t watch TV or I couldn’t play with my PlayStation. Or I couldn’t do all these things that kids love to do. And then I had something called an allowance and I also had jobs. Allowance, once again, you were a good member of the family. It was the kind of thing that I got every week and the amount varied by age. When I was a five year old it was three quarters a week, 75 cent. As I got older and older, instead of on a weekly basis, it would be on a monthly basis or a quarterly basis. By the time I got to my senior year of high school, it was once every 6 months. I just got a pile of cash and had to figure it out for the next 6 months. Now, when it came to jobs, jobs were things I could do outside of chores and I could only do them after I finished my chores. If I wanted to get an extra $10 or $15 before the weekend, I could ask Mom and Dad, “Is there any lawn mowing needed around the house. Painting, plumbing, what kind of work can I do?” And the first question would always be, “Did you finish your chores?” Once I actually finished my chores I’d come back and say, “Okay, now I’m ready to do the work.” When I was six and seven years old I didn’t have a great attention span. I would maybe do a half hour of work so maybe that would be about $2.50 or $5. But then as I got older and my attention span and my work ethic got better I had learned a few skills along the way. Dad had been teaching me about how to paint a house, how to caulk a tub. I remember doing that as well as changing the oil in a car before I actually started driving cars. Those little kinds of chores around the house… the things the adults don’t really want to do and the kids don’t really want to do either. But at least you can upload that work. After my high school years, that was about $10 or $15 an hour. All encapsulated again, it was an allowance that I got for being a good member of the family, chores I had to do as part of being a good member of the family. And then jobs that could be done once the chores were done, I could earn extra money that way.

Tom: I like the separation of this. The allowance isn’t tied directly to chores. This is something I’ve been wondering myself. Should my kids allowance and chores be connected. If they didn’t do their chores, am I supposed to reduce the allowance? I wasn’t sure where that should lie but I like this format where chores and allowance are separate and then there’s jobs on top.

Doug: Every family is going to do this differently. It’s very controversial whether or not you can even give an allowance, let alone tie it to chores or behavior. We felt that the allowance is a perpetual way to put enough money in a child’s hands that they can make choices. They can’t go out to get everything they want but at least they can go out and make some choices and learn how to manage that money. The money we put up as allowance, the money they earn doing jobs, that money would have been spent anyway on raising them. It was money that we were going to spend on raising a child one way or another. The parents could raise it or the kids could spend it. And either way, we did that. It moved more of the money into their hands and gave them more control over their spending. Carol talks about being in high school and getting her allowance once every quarter or twice a year. That was the money that would have been spent anyway on clothing, toiletries or other expenses for her to be a kid but it forced her to make a lot of choices. We used to joke in the family that when you get that much money, you can dress really, really well or smell really, really good but you’re going to have to make some compromises to make it all work out. There were more teachable moments, more good conversations. Everybody’s going to figure out their own values on how they want to do allowances, chores and jobs, but our structure covers all three and lets you pick what you like and what your family prefers from that menu.

Tom: Well, it sounds like a good way to go. It’s not really like you’re giving her this extra money. You’re giving her the money you would have spent on clothing. Carol, did this ever backfire? Did you ever make a bad choice?

Carol: Did I make that ever make a bad choice with money? Yes, I made several bad choices. But that was the whole point of the allowance, to have the opportunity to make the bad choice. Because it’s not just about the initial bad choices, it’s about the entire chain of consequences that comes after the bad choice. For example, I remember I had gone to this festival one year. It was one of the local festivals and I’d gone with the next door neighbors and a couple of other friends. They happened to be really popular people and I just wanted to be another “cool kid” with them. And I made some purchases based on that peer pressure. I still remember those purchases because I remember getting home with all of that stuff and thinking, “What was I thinking? Where did this come from? Why did I buy this? This doesn’t matter to me at all.” But it took that whole chain of reaction of going out there trying to keep up with the popular kids (in this case). But in most cultures it’s called “keeping up with the Joneses” going out there and spending money on things that I thought would be important to me and then coming home and finding out this is not what I want to spend my money on at all. I had to go through that whole reaction. I had to actually go through that pressure, buy the things, bring them home and live with it for a while to realize that it all happened. You can tell kids do this over and over again. Sometimes they’re going to say, “Yeah, sure, parents!” But other times they’ll actually start to understand. That particular episode happened when I was in fourth grade, but then it would happen again in middle school. I wanted to fit in with everybody with Pokémon cards and Yugioh cards. It took that whole structure once again. I had to go through the whole buying, remorse, regret then coming back to thinking I’d save my money better this time… Then again, buying, remorse, and regret. Once I got through that a couple of times, I finally got to the point where I said, “Okay, things that actually matter to me are this, this and this…” So looking really good or smelling really good—smelling really good actually mattered more to me.

Tom: Well, that’s fair enough. At least you decided what matters to you and that’s where you put the money. I’ve always liked the idea that financial independence doesn’t have to be this ultimate frugality where you spend on nothing. There is room to spend. You just have to figure out what’s important to you.

Doug: I’ll point out too that when she would come home and say, “ I wasted my money or I did that wrong thing that I didn’t want to do and I got pressured into doing something else,” we wouldn’t sit there and admonish her. That’s the problems with money and kids today. You’re restricted. Instead, you should say, “Well, how did that make you feel? Wow. What happened? What do you think got you into that situation? What would you watch out for next time? What would you do differently?” Frankly, these are questions that I have all the time with my spouse and friends so it’s perfectly normal to have that kind of conversation around the family dinner table. And when kids are doing this at elementary school, high school, even college age, they’re doing it with $10, $20, $50, maybe a couple hundred bucks as a college student which is actually a far cheaper lesson to learn at those ages and internalize before you go on and start making those mistakes with your paycheck, your 401k, car loan or your mortgage. You scale up over the years by making a lot of little management mistakes, a lot of little money mistakes when you’re younger. And by the time you’re older, you’re ready to handle the big bucks.

Tom: Yeah, as a child, it was pretty easy to come by money. By college, not only was I making my own decisions—the money became a lot bigger. You get a big student loan. I was having my first real job. And the decisions I made had been really brutal. The things like spending a lot of textbook money on a car stereo. I think my car stereo was worth more than my car. So I like the idea you can make these mistakes a lot earlier on and start to get a sense of value in what’s important to you.

Doug: As a parent, if you share those kinds of decisions you made when you were a kid with your kids, by telling them all those mistakes you made at that age, kids will say, “Well, I’m going to do better. I can be more responsible. I can be better at my money management as a kid than my parents were,” which, frankly, was not that hard considering the decisions I made when I was in college. But it also helps them understand that there are better ways to do this and they don’t have to repeat everybody’s mistakes.

Tom: The idea of kids not always wanting to pick up on parents advice though, is interesting. It’s amazing. When I look back at it all the things I could have learned from them, they were telling me but I just wasn’t listening. I’ve done the same with my kids. I try to tell them… if you do this, this is going to happen. I’ve seen this before. It’s like you’ve watched a movie and you’re telling them what’s going to happen. And sure enough, it happens. It can be something as simple as a parent saying, “If you do that you’re going to get hurt,” and two seconds later they’re crying.

Doug: Now, which one had more learning happen? The lecture that you gave them or the actual pain, injury and recovery?

Tom: Right, that’s what I mean. It seems like kids will not listen to the parents. You have to make these mistakes on your own. ‘m so glad that Carol was able to make these mistakes a lot earlier because, with humans, you can’t seem to actually get through life mistake-free. You have to make them to take that next step.

Doug: Exactly.

Carol: One of the things Mom and Dad would always say is that the whole money learning experience wasn’t just about me. In fact, it wasn’t about me at all. It actually had a lot more to do about Mom and Dad.

Doug: We talk about getting kids these money skills as young as you can. The more comfortable they are with handling large amounts of money in their 20s, the more comfortable they’re going to be with helping you manage your money when you get into your 70s, 80s, 90s, when maybe you’re not able to manage your finances anymore. We all know peers who are taking care of finances with their parents. Or trying to help coach their parents through various things that they’re having trouble with cognition as they get older. I take a lot of comfort in knowing that she’s comfortable managing large sums of money. It helped her when the Navy was dangling bonus money in front of her and it will also help her when she has to make large, expensive decisions for us in our elder years. I also take a lot of comfort knowing that she can handle it. She doesn’t have to stress out over being a caregiver for an elder like I did a few years ago. She already has the skills. She already knows how we think and she already knows what kind of choices we’d make. And she is able to step into our financial shoes and make those choices for us when we’re no longer able to.

Tom: Yeah, that’s a great point, too. You already have someone with a similar mindset that’s going to make the right decisions and you can trust in that. Carol, there’s one thing I wanted to hop back to. You mentioned how you were able to do jobs within the household. At what point did you get a different job? As a kid, I delivered newspapers, And with all the money mistakes I’ve made, thankfully, I had this entrepreneurial gene in me because, as kids would quit, I’d add two more and I pretty much had this little town covered. When did you take that next step where you’re getting some kind of payment from someone else? Whether it’s as little as a lemonade stand, a paper route or something else?

Carol: Officially, it was age 14. I was not a very entrepreneurial kid. I’m still not a very good entrepreneurial adult. It’s something I’ve never really been very good at.

Doug: I don’t know about that. You’re doing all right, from what I can see.

Carol: And that’s the thing… When I was growing up, I had some trouble with math. There is an afterschool program called Kuman. It’s an international program that actually started in Japan. They teach math and reading and also in certain parts of the world they’ll teach Japanese as well. I’d been doing this program for a good six to eight years at that point. I started because I was having trouble in subtraction and it was going so well that I decided to just keep up with it. And I was doing calculus by the time I was in middle school. Because I’d done the program myself, I knew what it was like to be one of those students, the boss looked at me and said, “Hey, do you want to work for me as well? The youngest age I can employ you at age 14. Do you want to start as soon as you turn 14?” I said yes, please. I’d love to. This is a real wage job. And of course, that was before I found out about taxes and all the other stuff. This was a real wage job and that meant I could have a real Roth IRA and I could have real money in real accounts. I could “adult” it at age 14. It was that freedom. It was it wasn’t money that was coming through Mom and Dad through allowance, chores and jobs. It was money that I got to go get outside of the household. So that was the exciting part for me. It was just being able to have my own thing.

Doug: That was more money than she’d seen in our household, that’s for sure.

Tom: Yeah, well, that’s just it. It’s similar to my college story. You suddenly have this increased money and now you can make all sorts of new mistakes and thankfully learn from them. What did this job look like? You were going to school at the same time so when were you fitting this in? With my paper route, it was getting up earlier in the morning, doing a couple hours before school.

Carol: When I started at age 14, the limit for working hours was four hours per week. So we used to set a timer. It was an after school program because it had elementary kids in it. And for me, being high school, it was after high school at the end of the day. They would set a timer at work and when my four hours were up for the week, I was done. I had to go home. But when I turned 16, I could do the normal work week. I could do three hours on Monday and Wednesday and then four hours on Saturday morning. I actually had a substantial number of hours so I had a substantial amount of cash from all that.

Tom: This sounds so much better than the things I did.

Doug: I’ve done that morning paper route gig and I’ve got to agree, this is way better.

Carol: It was really nice.

Tom: You don’t make a lot of money with the morning paper, but I’m glad I did it because it was a chance to not just do the work—but like I said, I was kind of empire building with my paper route. I saw that picking something else up would give me a little more. I had my own chance to learn some lessons there. We’ve talked about the chores and the jobs and the allowance. This is all in the making money side. Going back again in time, when did you start picking up savings tips? Were you guys doing the jars or the piggy banks or the envelopes or anything where you portion this money out differently?

Carol: I think I got my first of all that when I was around four or five years old. I remember being so excited that I had a wallet. I would get my weekly allowance from Mom and Dad and I would put it in my wallet. And they would look at me and say, “We have an idea for you to make some more money.” Now I’m listening. And they’d say, “If you want, you can keep your money in your wallet and you can spend it whenever you want. We’re not telling you how to spend your money. But what you can also do is put that money in the bank of Carol.” I said, “What’s the Bank of Carol?” They said, “In the Bank of Carol, if you give us your money, we will pay you a penny, per dollar, per month, of interest. So every month, whatever dollar amount you have in that account, we’ll pay you that number of pennies.” I thought that was pretty cool. That means if the kid thing of mine starts going, I can get this much money in three months and this much in a year. I’m not going to keep this money in my wallet. I’m going to put it in the Bank of Carol. And so I gave that money back to Dad. And as far as I know, it was sitting at a desk drawer the whole time. It wasn’t actually deposited in the bank.

Doug: Well, we might have invested in a slightly higher return. But you’re right, the Bank of Carol was the incentive for her. Kids can’t do percentages, but boy, they can understand a penny, per dollar, per month. And a month is about as long as deferred gratification really can last. We used to glam it up. We’d show her printouts of how the money would grow. We’d talk about how much money she had this week and how much money she’d have next week if she could hang on. We’d pay out promptly at the end of the month. You build trust. When you are running the Bank of Carol, you have to make sure the customers feel confident that whenever they want their money out, it’s right there for them. They can grab it, run and go get the thing that they want. It’s another teachable moment. We really worked hard to make sure she had a lot of confidence in the system and got the money she wanted and could see how it would grow. We all know, as adults, it’s hard to watch the money grow. We keep making deposits, saving and investing but it’s hard to see that money compounding. And luckily, when you’re paying out a 12 percent annual return on a certificate of deposit that matures every month, that money compounds pretty good. And a kid can pick up on that. That worked out well for the saving and investing part.

Carol: And this bank of Carol started when I was five years old so by the time I was nine years old and was finally old enough to have a custodial account at the local bank, I already knew the concepts of checking and savings. That was the next big step, understanding how to maintain a checkbook. But I already knew how to maintain accounts.

Tom: This was back in the 90s when everything felt a little more manual. Everything’s digital nowadays. I still think kids do better with physical money. Maybe adults too. When it’s digital you kind of get detached from it. I know this isn’t part of your history, but what do you think about that nowadays? What would either of you do if you’re trying to instill these same values? Would you stick to this manual Bank of Carol pennies so they can see that or let them learn this whole world of FinTech?

Carol: I would do both. I have an 11-month-old daughter right now so I’m new to parenting. I’m learning about diaper changes, sleep cycles and all of that stuff right now. But one of the things that I’m constantly learning as a parent is you want to start something with your child as soon as they show an interest or a passion about it. It’s the same thing potty training, if you start too early and that’s going to overwhelm the kid. But when they start showing an interest, then that’s the best time to start potty training. It’s the same thing with money. Start them off with cash because that’s something that’s physical. It’s in their hands. They know it exists. It’s not some abstract idea on a website somewhere. Eventually, they’re going to say, “Well, Mom and Dad, how come you don’t have so much cash? How come you get to use this little card instead?” And that’s when you can start talking about the difference between credit cards and debit cards. Like you said, luckily the internet has finally grown to the point where there are companies that maintain family debit accounts. FamZoo is one of the ones that we’ve heard of but there’s a couple of companies out there that have different sorts of dashboards and methods you can use to maintain a debit account within your family. I would always start with cash because the root of all money is really, cash. But after you get that physical part and start getting those questions about cash, versus plastic, versus checks, and all those new questions from your kids, then I would start moving up into the digital world.

Tom: Yeah, that’s the other side of my concern. We put all our spending on credit cards. My worry is with my kids. I’ve explained it to them. But again, if you’re not really listening, it’s hard to get that through to them. But, yeah, they see that that plastic card come out all the time and there’s no sense of real connection there. You’re just handing this card over. You’re getting whatever you want and we’ll figure it out later.

Doug: But maybe that’s a good point for a new generation. You and I didn’t really have access to that card until we were teenagers or even young adults. And of course, we would make a bunch of mistakes with a credit card when that money is more virtual than physical. If you grew up with credit cards and debit cards, if you always felt like you always had one, maybe by the time you’re a teenager or in college, maybe you’re accustomed enough to that, that it feels as real as it needs to feel. Maybe you’re aware of what your credit card charges are and maybe you know that you can control your money very tightly without having to worry about losing it or getting it stolen. Maybe you’ve always done it that way and it just seems normal. Whereas for you and me translating from digital and actual cash, that’s always been a little awkward. Maybe kids today are able to do that at a much younger age and don’t have that awkward transition.

Carol: And the key here with credit cards is, supervision. A lot of people are thinking you can’t touch that credit card. But the reality is that kids just want to hold it and see it. Credit cards are shiny and they have cool pictures on them. They have all these numbers and this chip… Kids just want to hold onto that card. And so the worst thing you can do as a parent to say you can’t touch that yet because you’re too young. The best thing to do is to say, “Hey, here’s a credit card. This is not a toy. But what we can do is take this over to this machine and pay for groceries. Then let the kid actually swipe the card or tap it—whatever the method is, and let the kid actually do that. It makes them feel like an adult for a moment. By doing that they understand a credit card is not a toy, it’s a tool. And that’s the lesson you’re trying to reinforce. Not that tools are dangerous and not that money is unsafe, you’re trying to reinforce that money is a very powerful tool.

Tom: I’ve always liked that analogy where something like saw or hammer is a tool but it can take your hand off. I’m a big fan of credit cards as a tool. I am very pro credit card. But, obviously, it’s not right for everybody. Some people just cannot handle it. I like the idea of letting kids handle the cards too. You mentioned when you got your wallet. The first thing my kids had were just old gift cards and such. If I used up the gift card, I just kind of take a Sharpie and write through the number just so I knew it wasn’t a live gift card still. So they’d have a wallet full of cards.

Doug: Cool.

Carol: Yeah, that’s cool.

Tom: Well, it’s cool, but maybe I did teach them it’s a toy by doing that. But at least they got to have a wallet full of cards and could pretend to do different things with it.

Doug: Speaking as a professional rookie grandparent now, I can assure you that later on, now that those kids have had a toy gift card, when grandma or grandpa give them an actual gift card for holiday or birthday, then they’re going to know what to do with it.

Tom: It’s similar to what you said, Doug, about letting kids have things like credit cards younger with a very small balance. That way they can make these same mistakes on a digital level. I guess the gift card would work the same. If I wanted to give my kid a job, maybe they do $30 worth of work and get paid in a $30 gift card. Now they can decide what to do with that.

Doug: How did you feel when you spent that entire gift card at the toy store in 10 minutes instead of saving some of it in the bank of kid with a penny a dollar per month?

Tom: The other thing I like about this “bank of kid” concept is if I heard it right, you weren’t really suggesting the traditional advice was, “Oh, I’ll put 20 percent for savings and 10 percent for giving and the rest you can spend.” Did you just leave it wide open for those decisions to happen?

Carol: Yes, and that was part of the whole learning to “manage” your money. I was still only in elementary school. I don’t even know what a percent is yet. I know what a penny, per dollar, per month, is. And so to say, save 20 percent for this, 30 percent for this and 40 percent for this, I would have thrown up my hands and said, “I’m gone.” But what mattered more was Mom and Dad said, “What if you didn’t spend all of your money? What if you saved $5 for this? And what if you saved $10 for that? And what if you saved $3 for this?” You can predetermine a category if your kids were looking for that suggestion, if they’re looking for that guidance. But I wasn’t looking for guidance from Mom and Dad on how to spend my money. I wanted to spend it my own way. So for me personally, the categories didn’t work. But that’s why it works for other kids, because they want categories and they want those boundaries. That’s why when it comes to money advice, it’s not a one-size-fits-all. We’re trying things out with our kids because every kid is going to have a different personality.

Doug: When we had conversations about spending, saving and donating to charity, we didn’t put values on it. We didn’t put dollar amounts in each jar or try to make it concrete or make it a quota system. We just had conversations about the concept in general. Once you give the kid the money and start talking about the bank of “kid” that gets the savings and investing part down pretty quickly. I think you worked at a homeless shelter or something?

Carol: It was a food kitchen.

Doug: A food kitchen, yeah. That made a real big impression. I mean, you can talk about giving to other people who don’t have as much fortunate as you or as much wealth or luck. But when you’re there and you’re watching people that look like you (at your age) and families that you’re familiar with—when you watch that, it becomes very personal, very quickly. That exposure came and we talked about going to charity as adults as she was growing up. In her teenage years we had shown her what we were doing with that. She saw that example and experienced it without ever having to put any kind of a quote or structure on it. I think the first time we really talked about a budget was when you were probably middle school, maybe even high school. I remember she had budgeted 110 percent of her income for everything she wanted to do with her life. We talked about the how that would work out in the long run. And those are very teachable moments. Again, you take advantage of whatever the child displays, the curiosity or the interest and just run with it and see how they’ll handle it.

Tom: We talked a lot about letting Carol make all sorts of mistakes. Was it just that it was a small amount and you were financially independent already that left you able to not interfere as a parent? I find it difficult, this idea that—

Doug: I would use the word terrifying. But you’re absolutely right. It takes a lot of confidence in your own money story. It takes a lot of your own experience and some feeling that this is how you’re going to teach somebody to do that. You’re giving them a sandbox and you’re letting them run around in that sandbox. They can create a lot of damage without hurting anybody else or injuring their finances too seriously. But don’t get me wrong, there is going to be money wasted. You are going to have to have a mental image of your kid lighting a $20 bill on fire, running around the backyard like a Fourth of July sparkler. But that’s how the learning occurs. And it’s much cheaper when you’re younger than waiting until they’re high school or college age. As a parent, part of this probably comes from our military background. As a military service member, you learn to give the people you’re training enough room to learn the job without actually breaking the equipment or injuring anybody else. Over the years of training people, you develop a measure of comfort. Can this person really take this submarine periscope depth? Well, we’re going to find out, but we’ve trained them and we’re ready for it. And so you hold on to the reins a little tight and you kind of watch what they’re doing and try not to let them get too far off the beaten path. I can make an analogy between training junior officers and raising children. It’s probably not a complimentary analogy, but there are a lot of the same techniques that will work on both. As a parent, you will be uncomfortable at times with the knowledge that this money is just going to go up in smoke and flames. It’s hard to get comfortable with that. But in the long run, the money that’s wasted today when you’re seven or eight years old is money that’s going to be saved, invested, and compounded. And it’s going to make them confident at saving for their own financial independence later on in life.

Carol: The other thing I wanted to point out is that this is U.S. numbers. I know it’s an international thing we’re doing here, but in the U.S., it costs $230,000 over the lifetime of the kid to raise them. But that’s one standard coming out of a government bureau statistic. If we look through our own numbers… Dad actually did keep rough numbers over the years. I only cost $156,000.

Doug: Only.

Carol: Only. And that’s the thing. There is a certain fear that $20 is going to turn into $200 and then into $2,000. That’s going to happen whether or not you’re teaching your kid how to handle that money.

Tom: I really like this concept of just keeping a little more open and letting them make the mistakes. I’ve talked to so many people through the blog and the podcast that it was starting to bother me that so many people just had to make this big mistake. So many people have this “rock bottom” story before they turn things around. So I’m finding a lot of hope in this that if you kind of instill this a lot earlier when people are more impressionable (but also when the mistakes are smaller) that there’s a lifetime benefit to this.

Doug: So far, so good.

Carol: Yeah.

Tom: Well, Carol, we’ll have to have you back on in five years when you start doing your own money lessons with your child. This has been great, guys. Can you let everybody know about the book and where they can find you online?

Carol: The book is called, Raising Your Money Savvy Family for Next Generation Financial Independence. And you can find it wherever you buy books. If you want to go online to Amazon, we have it there. Or if you want to support your local bookstore, ask them to order it through their system. We are both active on Facebook, especially in a lot of the Choose FI Facebook groups. And we also have, Raising Your Money Savvy Family, as a Facebook page. The last thing that I’m working on is bringing up a blog called, It’s like wildfire, but child fire. And you can find me at any one of those locations.

Doug: I’m in the same Facebook groups with Carol. I’m also writing at The Military Guide. We’ve been there for the last decade. You can email me at [email protected]. Everybody is welcome to contact us through the site or through email because some people want to talk about personal details that you don’t really want to share on Facebook about personal finance. So any of those are fine. We really enjoy getting those questions because it turns out everybody has a question like that. Everybody has common concerns. And the better we get at answering the questions that people send us, the more able we’re able to communicate with other people and explain this in simpler, more clear terms, to help people explain to their kids and start them off in life with all those advantages. I’ll also put in a plug for your local library. You can get the book at the library. You can get the e-book at the library and you can even get the audio book at the library. So please try before you buy. And if the book works for you, let other people know about it.

Tom: Great, thanks, guys, for being on the show.

Doug: Well, thank you, Tom.

Carol: It’s been good to be here. Thank you.

Thank you, Doug and Carol, for sharing your story as an inspiration to money savvy parents everywhere. You can find the show notes for this episode at Are you a member of the Maple Money Facebook community? If not, I’d love to connect with you there. It’s a great place to ask a question or share a recent money win to encourage others. To join, head over to to share with the group. Thanks as always for listening. I’m looking forward to a great year of episodes and I’ll see you back here next week.

We felt that allowance is a perpetual way to put enough money in a child’s hands that they can make choices. They can’t go out and get everything they want, but at least they can go out and make some choices and learn how to manage that money. Click to Tweet