At what age should you start teaching your kids about money? Do you worry that they’ll make the same money mistakes you made when you were young? Can you show them how to properly spend, save and share their money? If you ask yourself any of these questions, you’ll want to listen to this week’s episode. Susan O’Brien is an award winning wealth management adviser and author of the book, Networth Thinking – A New Way Forward for Wealth Management. Early in her career, Susan realized that what weighed on parents minds most when it came to their finances was their kids. She joins me on the show this week to discuss ways to teach kids about money and help them navigate the heavy consumer influences that are all around them. 

 

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 maplemoney.com/wealthsimple today. Now, let’s chat with Susan…  

 

Tom: Hi Susan. Welcome to the Maple Money Show. 

 

Susan: Hi, Tom. It’s lovely to be here today chatting with you. 

 

Tom: There’s an interesting topic you mentioned to me so I wanted to have you on to discuss it; how to deal with your kids, money and how to instill some money values into them. Can you tell me where this first started with you? What made you get into this? Was it from the job side or parent side? What was the start of this connection with money? 

 

Susan: I started 23 years ago advising people on money. I had four little children at the time. I had an almost two-year-old, a six, nine and 12-year-old. I was in the thick of things. I thought that I was going to be the most amazing stockbroker in the world buying this bank over that bank and this company over that company. And I quickly realized that everybody I worked with had the same ideas as I did. They were more concerned about teaching their kids how to handle money and show them not to be too entitled, have a sense of integrity. I know how their spending reflects the values, even if they haven’t realized it, so I quickly came to the conclusion that the most important decision was not which company to buy (although that’s an important decision) but the impact of our wealth on our children, grandchildren and how to teach them to be really good stewards of wealth. So, both personal experience and also the industry that I’m in. 

 

Tom: Yeah, it sounds like it just came together at the right time on both sides then?

 

Susan: It did. 

 

Tom: How do you first bring this up and how young? What’s your advice on where to start and how? 

 

Susan: My advice on where to start is earlier than you would ever imagine. I used to think that three years old was too young until I saw these kids on YouTube. All those shows where they’re toy testing and buying this and buying that. I came to realize that children as young as three— I’m even maybe putting it down lower because I go to a restaurant now and see a family sitting there with the little ones with headphones watching YouTube and there are a lot of commercials on there. It just seems that you’re inundated at a very, very young age with keeping up with the neighbors. But with these kids, it’s means keeping up with their friends where they’ll say, “They have the best thing,” or, “Why don’t I have that Barbie or that electronic toy?” There seems to be a buy, buy, buy mentality without any realization of the value it brings to you. But also, the cost it brings to you in terms of maybe the family’s wealth or money. So many people and children included in this are buying without thinking. There’s no neutrality value in that money. I really talk a lot about having our purchases reflecting our values. If you’re spending money one way, you can’t spend it another way. For adults, if you’re spending money on that “coffee habit” all the time and it’s costing you $2,500 a year, that’s the perfect amount to put into a registered education savings. I often ask grandparents to do this as soon as babies are born because the parents likely don’t have the money to do it. You can start that money conversation very early, “Oh, we’ve started putting money into your education fund because we really value reading and the purchase of books rather than toys, toys, toys, toys.” Kids often ask why they can’t have a toy their friends have and it’s difficult sometimes for parents to answer that question. I do family meetings and intergenerational family meetings. You know how busy you are with kids. You often don’t have the right answer for everything. But if you have a little bit of time to talk about what your priorities are or a little bit about your spending plan, your budget—budget is such an awful word, “Budget! I’m not going to budget.” If it’s a spending plan, how are you going to spend your money? You might focus on how mom and I want to save or how dad and I want to make sure that there’s going to be some money set aside for education. “We value that and feel it’s important we make sure there’s money there rather (for education) than the next toy or this or that.” They’re not always easy conversations to have but it’s not always easy being a parent. 

Tom: I like the idea that you can work this in. You mentioned, YouTube. I remember when I was a kid, I’d watch cartoons like Transformers, G.I. Joe and they were all basically TV shows that were commercials for toys. I even recently learned the next generation after that actually put some laws in place that you couldn’t have these TV shows that were really commercials. When you mentioned YouTube where you have kids opening toys and such, it’s literally all about the product. I guess it counts as a money teaching but I’ve taught my kids the business side of that where they’re probably getting paid to review that toy. It’s not even just the traffic they get from it, there’s a whole business around these things. Or when they see some other supposed “influencer” going to some fun place or doing something, I tell them they’re basically watching a commercial, which is fine if you understand that. But just don’t take everything at face value with those. 

 

Susan: I think that’s a great conversation that you’re having. As soon as you started talking about that, all I could think of Ryan’s World which is the top-grossing commercial on YouTube. I think it’s difficult sometimes for all of us, particularly young children, to separate what’s there versus what they’re doing for money or for business. I think it’s difficult for young children in particular to separate that from their parents, grandparents and their aunts and uncles who really do care about them, want the best for them and want to help them develop good habits and make good decisions about money. I think with parents and grandparents we want to say, “How do you make good decisions with the money that you have because money is finite. It’s not an ever expanding, growing money supply and you have to have priorities.” That’s what we help people do. We really have deep conversations. I’m really trying to get at the nugget of what’s important to them about money and how to communicate that in an age-appropriate way. 

 

Tom: I like what you said about priorities and values, too, and showing the children that through your spending because I think a lot of us parents and grandparents probably don’t even have that figured out ourselves. When you mentioned how much coffee could cost in a year— I know it’s cliche to talk about the $5 cups of coffee but when you are spending that kind of money, you have to make a decision on how much money you have and what you actually value. Do I want it to go into coffee or do I want it to go into an RRSP? People may listen to this episode and do it for their children but it might actually force them to really think about what’s important to them with that finite amount of money they have too. 

 

Susan: Absolutely, Tom, because children are going to model your behavior. If you do a lot of impulse buying or you haven’t been thoughtful about your purchases, you can’t expect them then to be sensible about what they’re buying. I noticed that when we go into a store with my kids and my five-year-old granddaughter, she wants everything. I’m always at Canadian Tire. I don’t know why I am, but it feels like I’m always at Canadian Tire. And at Canadian Tire, as soon as you walk in they’ve got all these toys and she’ll say, “I want this because my friend has this.” And now, before we go into a store, I have to prep her by telling her she can buy one thing like a pack of gum or something. “We can look at all the things you would like but we’re not going to be buying anything.” I think being really conscious about how you’re spending money as adults is really important because our children pick up everything subconsciously. We can have great conversations. I have a whole list of children’s age-appropriate books on money on my website. Bedtime’s can be some interesting little books that are appropriate to them, but they’re going to model their parents. In the end, they’re going to model their parents. 

 

Tom: And like I said, it might help the parents. Maybe that’s an additional check. If you have your own spending heading out of control, just knowing that your kids are watching  might be enough to even fix your own finances and set a good example. 

 

Susan: And Tom, I would say fixing your own finances is a very difficult thing to do. I think if you have a great adviser, a great advisory team, they will help you do that. What I find sometimes with husbands and wives is… Take my own situation for example. My husband and I go around in circles. We’ll sit down and maybe pour a glass of wine and I’ll say, “Okay, we need to talk about our spending,” and all of a sudden that conversation is dead. “Is it my spending, your spending, how we’re spending, what are our priorities?” So a really good financial advisor will take you through all kinds of deep conversations to get what’s really important to you, to prioritize what’s important and then put the dollars behind what’s important to you. Sometimes that third party really helps because often times you’ll just kind of go around in circles, “Oh, maybe we shouldn’t have done that.” And it turns into the blame game. There should be no blaming here. It’s more about being aware, being conscious and then being guided to what’s really important to you. If you can figure that out, then you can start articulating it to your kids. 

 

Tom: If we’ve instilled some of these values where we’re making them more conscious of what they’re spending, what’s next? Are we showing them examples of how they can save? What kind of saving are we talking about? Are we talking different jars or actual bank accounts? 

 

Susan: Yes. Again, I think it’s age-appropriate. I think it was Rockefeller who decided on the three jars. One is for spending, which is the fun part that everybody seems to want to do. Spending, saving and sharing. So maybe it’s best having three jars because we’re talking right now about having our spending being aligned with our values and then being able to articulate our values to our children subconsciously and consciously. The other part, when talk about the registered education savings plan, for instance, that’s the saving bucket, really. That’s the saving jar. We have some money to spend because it’s almost instant gratification. That’s probably why we like it. We’re wired that way—it feels good. We have our spending and our saving is really delayed gratification. Instead of having something today, we feel it’s a bigger priority that you’re going to continue with your education so we’re putting in our savings jar. Or they might be saving for a larger purchase. In my book, I’d write about saving for a 10-speed bike in those days. But it might be saving for something that’s significant to your child. Something bigger than that instant gratification or that toy. Maybe it’s saving for that family camping trip or maybe the family camper. Spending is instant gratification. Saving is delayed gratification so that’s a lot tougher. And then sharing is even tougher than that. With my kids, they don’t want to share anything, particularly with their siblings. Even putting their old clothes in a bag to take and donate is a big thing. They couldn’t even bear giving away anything even if they never use it again. I’m very involved with the philanthropic community so I’m co-chair of the major donor cabinet at United Way. I’m on the advisory engagement committee for the Calgary Foundation. I feel so lucky in my own life. I love what I do and I love providing financial competence and teaching families how to manage money and pass it on intergenerationally. But I also want to give. And you can give in different ways. That sharing bucket might be sharing of your own clothes or donating your own toys or books. I know the three buckets are supposedly money, but what we’re trying to do is teach our children about it. If they’re sharing bucket is a piece of paper where they say, “I’m going to donate a specific toy or give these clothes because for September when school is starting…” they can put that little piece of paper in that bucket. It doesn’t have to be actual cash. Although money does run through our lives, again, it’s about our values and how we live as people. For me, wanting children and grandchildren to be good with their money, I also want them to be good people as well. 

 

Tom: Yeah, and I like that idea that they could share stuff instead of just money because it goes ahead into when they’re a teen or adult where you could be sharing your time as well through volunteering and such. Especially when you’re younger. Maybe you’re in college. You’re not going to be writing these huge charity checks. The only thing you have is time, really. So I do like the idea that it doesn’t have to be about money. You can assign a value to that instead and still kind of a check off your to do list. 

 

Susan: I also like it because it’s a project that you can do with your children. It’s not you rounding up their old toys or their old clothes and going down and donating. You’re doing it together, right? You just have one of those spontaneous conversations where you say, “You don’t play with this toy anymore. There are so many people in the world that…” Oh, I’m not going to go there because my parents always said things like, “Eat your dinner because there’s some kids who have no dinner.” 

 

Tom: Yeah, someone on the other side of the world would love to have your broccoli—

 

Susan: Putting that together, you’re not using it any more so wouldn’t it be nice if someone else could use it? Packing things up together gives you time to do something together which I think is really important in families and yet have this goal of helping others. And it also creates some awareness of the world. We live in a very privileged city and a very privileged country. I don’t want to discount anyone’s particular hardships because I know through this past year it’s been really difficult for a lot of people but I still want to teach our children that we live in a world of abundance and sharing is important. 

 

Tom: We talked about this idea of jars and handling money. Does that mean that you’re probably more on the side of dealing with cash and coins with kids? Because I’m a very digital guy. 

 

Susan: That’s the problem, there’s no cash. 

 

Tom: There’s no direct relationship to actual money when they see me whip out the plastic card that just magically pays for everything. 

 

Susan: Yes, we probably live in a cashless society so today it’s tougher than ever because kids will say, “Dad, why can’t you just go to the bank and get more money?” or, “You never pay with money. You use that little plastic thing. I’ll just take that plastic thing.” My five-year-old granddaughter knows how to insert the card and she also knows my PIN so she puts my PIN in. She’s been doing that for a year. I think it’s much tougher now. You have to have theoretical jars. With little kids, you might have to go to the bank and get some cash. There may be one dollar in each dollar or 25 cents in each jar. But certainly, with older kids it might be an Excel spreadsheet or another digital way of keeping track of things. 

 

Tom: Yeah, I’ve had my kids make comments—I don’t remember exactly what they said, but the general idea was that they thought this card was pretty easy to use. I have tried to remind them of the obvious stuff, that this credit card is a tool and we only spend what we can pay off. We’re not carrying a balance on the card. We’re using it for convenience and rewards and all that but it’s not this idea of buy whatever you want and figure it out later. There’s still got to be some structure to it where I can spend this much in a month and I just happen to use a card instead of carrying a wad of cash around. 

 

Susan: All of those are great points. And what we’re talking about here is half of the equation because we’re talking about the spending. We haven’t talked about how you earned that money and how long it takes you to earn it. Some people will say, “That bike cost me an hour and a half of earnings.” Until our kids get their first job, they can’t conceptualize that the money is not at the end of that plastic card, not in the bank… “I don’t just get the money? I have to work five hours to pay for that new video game?” Then they think, “Do I really want to work five hours for that video game or do I want to work for something else?” And maybe it’s putting some money away for my education too and that’s the savings bucket we talked about. Although it’s not a bucket anymore. 

 

Tom: I think this is another case, too, where if you think about this as a parent or grandparent, you might have your own epiphanies because not everybody looks at it that way. There’s the amount of time put in, especially accounting for taxes, of course, too. You can’t just say I earn this much. You’ve got to think about take home pay and how many hours you are working just to have certain frivolous things. If you looked at it as time worked, that one hour out of your 40 hours in a week is paying for something you really don’t need, you might start to look at it a little differently than it just being a certain dollar amount. 

 

Susan: And that’s exactly what I strive for, is awareness. Just being aware of what you’re working for. That goes into that spending. How am I spending the dollars and what’s important to me? And that filters down through children and grandchildren. Even the friends you hang out with. They may have completely different ideas of how they spend their money. It’s the same as your children’s friends. They may have completely different ideas about what they need or want or how they spend money. I think awareness is just amazing to actually now be conscious of our income, our spending and how they tie into our values, and how they tie into what we’re telling our children consciously and subconsciously. It’s actually freeing. I do it every year myself. It’s kind of a freeing exercise in a way. To really look at my spending in line with my values because that instant gratification jar, I like that one, too. I like instant gratification. It’s a really good exercise to do alone. It’s a good exercise to do with your spouse. And it’s a particularly good exercise to do with a really great financial adviser. 

 

Tom: We talked about the spending and the saving and the sharing, but within the savings side, whether with your own kids or people you’ve talked to, do you start looking at actual investing? How does that work with kids? Can they actually open an investing account or do you need a parent involved? 

 

Susan: That’s a great question. To me, it boils down to how do we get anybody to save money? Not just kids—how do we get adults to save money? We’ve done different things with different kids at different stages, depending on the kids. You cannot actually open an investment account until you’re of legal age, which is 18 in Alberta. But parents can have an informal interest account. They can own that investment account until the kids get to age 18. The kids could be putting money in but they’d have to put it into their parents bank account. Most of the time, we’ve found with kids, getting them started is the hardest thing. In my own situation, I match my children’s savings. I will say to them, “If you sign up to this amount per month, I will match it.” My son says, “But what’s the rate of return on that?” I told him 100 percent. I’m matching it so your rate of return is 100 percent and that’s before we invest it. Then, as you see some money accumulate and see it invested appropriately, now all of a sudden it does feel a bit like money grows on trees. It doesn’t really but you something to look at. You can look at that account and see it growing. Again, it often age-appropriate, depending on your children. We often match. Parents will often match a savings program. That shows that the parents are committed to it as well. The savings program can often have a label on it. It can say it’s for education but it different for kids at different ages. Maybe it isn’t labeled education. It can be whatever you think is appropriate as a goal—that is what you want to label that account. Getting them started is the hardest thing. Of course, you see a lot of books on pay yourself first so that’s appropriate. And by the way, you never pay yourself first. The government gets the first cut. 

 

Tom: Yes. 

 

Susan: You pay yourself a second. But that’s more for when you get your first job. Getting your first job… as kids in Alberta often get it at 14. They’re working at grocery stores, they’re packers or something. It’s a pretty young age when you think about it. But it’s that first paycheck so the discussions are around that first paycheck. And if you can save some off of each of those paychecks, maybe mom and dad will match it. Maybe they won’t. It just depends on your situation. Maybe you have a goal for that savings program. And all of those are really great points of conversation. 

 

Tom: I like the matching idea. And again, it depends on everybody’s situation, but you can certainly put a cap on it too much like some pension plans out there. We’ll match it up to a certain amount and anything else, you just get the gains. The reason I like the idea of matching is the 100 percent return. They might not see an exciting benefit, even investing if they make 10 percent over a year on their $100. They might think, “I made $10 but I didn’t get to spend this $100,” so it might not be enough of an impact because they don’t see the effect 20 or 30 years down the road. They’ve just seen that small amount. I do like the idea of matching it where you can because it seems like an easier decision to me. For a kid it’s that $100 thing. What do you want to do with it? Do you want to double it or do you want to waste it? 

 

Susan: And the other thing about matching is we’re thinking really long-term here. But for some (depending again on age) kids, they I can’t think really long-term. They can’t think in 20 years. But you could have that match for a specific item. Maybe it’s something they really want that’s really out of the immediate price range of what is appropriate. It could be a shorter term and it could be a different goal. But you want to get them in the habit. With all of us, it’s not only the habit of saving, but increasing our savings over time if we possibly can. That’s the trick, to increase that over time. But yes, absolutely. That’s what I did with my kids. I tell them, “Up to this amount, I’ll match that.” And it’s been really good for me to actually because I want to help my children. I always say, I want to give them a hand up, not a hand out. I want to help them become good stewards of their wealth and this is one way I’ve found that’s really effective and relatively easy as parents. You have enough things on your plate. You’re trying to do everything very well so it’s got a lot of competing priorities. 

 

Tom: And if it helps some parents go this direction, you could look at it a bit selfishly and think, do you want to help them now or do you want to help them later? Because as parents, you’re probably going to dig them out of some holes at some point. It just seems if you give them good money values and get them started saving, working towards their education and all these things, it’s actually going to make it easier on you as a parent when they’re 18, 30—or whatever the age might be, some kids are going to come back looking for help if you don’t give them those values ahead of time. 

 

Susan: I love how you said “dig them out of some holes” because that is another million dollar question. Should you dig them out holes? And what kind of holes should you dig them out of? The biggest stuff for young people, particularly when they go off to higher education like university, everybody is trying to sell them on credit cards. One of the biggest reasons they get into problems is credit card debt which can lead to repercussions on your credit score, buying a car or a house, etc. Now, the question is, if they have that, do you just let them fail and have that over their head and maybe pay it off really slowly or whatever? Or do you actually pay it off? I would love to hear some responses from some of the people on this podcast or others. I’ve done both. The first time I think it happened with one of my kids, I said, “I will pay it off and you pay me.” That was pretty marginally successful but I think the lesson wasn’t as strong as it could have been. Whereas, when I took a little harder line, the lesson was more reinforced. Again, we want to teach our kids. How harsh that lesson should be is a very good question. 

 

Tom: And even at the college age, they can still learn those lessons, making those mistakes. They might be older in college but they’re still relatively young and they can learn from that mistake. I know when I was in college, I got that credit card and I didn’t understand it really. And thank God the total available money I could borrow was something like $2,000 or $2,500. 

 

Susan: Yeah, it’s about the same today.

 

Tom: It wasn’t anything I could do some major damage with because I don’t know where I would have stopped. It just it did feel like free money back then because I didn’t have any of those lessons with things like credit. 

 

Susan: And typically our kids don’t because they see us—again, going back to our earlier discussion, we just take that credit card, put it into a machine and we pay for things. Getting the real world to intersect with what we’re doing is important. So many kids go through that credit card thing. Again, you want to limit the amount that they can spend on the credit card. Let them learn how long it takes to pay it off. That kind of thing. And we talked about age, college age, university age, where it’s not too old to learn. We’re not too old to learn. I’m not too old to learn. I’m always learning. I’m learning from everyone I work with. As I told you, I’m still reviewing my own spending, saving and sharing plan so I don’t think anyone’s too old to learn. I think we have to give ourselves credit for continually learning. 

 

Tom: Yeah, exactly. I point that out to my kids too. When they were doing this whole online school over a good chunk of the past year, I would show them how doing these online courses or watching certain videos, you can always keep learning. There is immense benefit to that. So, yeah, it’s a process. You just keep improving yourself, sometimes making mistakes. But it happens so you just learn to deal with it.  

 

Susan: Yes. Those money values, how we’re spending, sharing, saving,  how we talk to our children, our modeling, our behavior, our spontaneous purchases—do we get it right 100 percent of the time? Absolutely not. We don’t get it right 100 percent of the time. But again, I want awareness around it. Am I living my life and spending my time and money in accordance with my values? And am I passing it on to my children who are absorbing it at a much younger age than anyone would have ever thought, like those three-year-old’s watching YouTube? 

 

Tom: Thanks for this “prompt to parents” to start early. Can you let people know where they can find you online and let them know about the new book? 

 

Susan: Absolutely. So I wrote a book called, A New Way Forward for Wealth Management. It’s all about networth thinking. I wrote that book because I thought a lot of people were looking for a new way to interact with the financial services industry. The old way just wasn’t doing it anymore. They wanted a new way. So I have www.networththinking website than has lots of tips and strategies. There’s a book list for parents for age-appropriate books if they want to change their bedtime reading routine. I’m also on Facebook. You can look at networththinking.com there. We’re Networth Thinking on Facebook and as well on LinkedIn.  

 

Tom: Great. Thanks for being on the show. 

 

Susan: Thank you so much for having me today. It’s been a pleasure talking to you. 

 

Tom: Thank you, Susan, for explaining why it’s so important to teach kids about money from an early age and for giving us some valuable lessons to share. You can find the show notes for this episode at maplemoney.com/159. 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 recent money win to encourage others. To join, head over to maplemoney.com/community to share with the group.