Do you want to make sure your children learn about money and personal finance? The best way to ensure this happens is to start at home and start early. Matt Matheson from, Method to Your Money, is an assistant principal who walks us through how we can find teachable moments for our children so they can learn how to set goals, count their money and save it. Plus we cover the importance of giving and letting them make their own mistakes early.

Welcome to The Maple Money Show, a podcast the helps Canadians improve their personal finances to create lasting financial freedom. You can make your money, make more money, with our sponsor, Wealthsimple. They’ll build you an intelligent, personalized portfolio using a Nobel Prize winning investment strategy. And the best part is, Maple Money listeners get their first $10,000 managed for free for one year. Head over to maplemoney.com/wealthsimple to find out more. Now, let’s chat with Matt…

Tom: Hi Matt, welcome to The Maple Money Show.

Matt: Hey, Tom. Thank you so much for having me. I appreciate it.

Tom: We’re both married with two children so I wanted to have you on to talk about how to deal with kids and teaching them about money. I’m interested in your thoughts on this as we go because as a personal finance guy I wonder if maybe I’m dropping the ball on this myself. I’ve taught them about saving and such but I don’t know if I’m doing as good as I could. So, let’s go through this. When did you first start talking to your kids about money?

Matt: A little bit of back-story… I have no background in personal finance and through my early years of marriage with my wife giving me some gentle nudges to learn more about it, I started to seek a real interest in it and it just kind of exploded. I got started by reading a ton of books. One of the books I read really early on was, Total Money Makeover, by Dave Ramsay. He talks quite a bit in his book about changing your family tree and teaching your kids the principles of personal finance to help them win with money. In his books he talks about having three jars; a give jar, a save jar and a spend jar. He talks about whatever your kids get paid from their jobs—and he’s not a big proponent of an allowance just for existing. He pays his kids based on a “commission” basis, a term he uses. They do work and they get paid. From whatever they get paid, a little portion goes into the give jar. The second portion goes into the savings jar and the final portion goes into the spend jar. My wife and I were chatting about this having both taken an interest in personal finance. We knew when we had kids we were going to start doing this so, when our daughter turned four we started the actual jars. That just opened up the door to a ton of money conversations. I’m a teacher and I know kids do not learn just sitting at a desk with the teacher waving a finger at them, telling them everything they need to know. That’s not how kids or people work. I’m a huge proponent of taking advantage of real life experiences. I call them, ‘teachable’ moments. And I use those real life experiences to teach kids about money. Once we started doing the different jars, different containers— even before that just because of the way we were wired to think about money we were having conversations with our daughter about what it meant to give and why we give. We’re Christians so we talked about the fact that God has really blessed us so it’s our responsibility to give back to others and to help others out. We talked about why it’s important to save. You can spend money now on a little treat, candy or something like that. Or, if you don’t spend now you can wait and save up. Then you can buy something bigger, something better. In a three, four or five-year-old way, we’re talking about opportunity cost. If you buy something now you’re giving something up later. If you pass on buying something now you have the opportunity to buy something later. With little things like that the conversation piece is massive when it comes to teaching kids about money and being intentional about having those conversations.

Tom: I like what you said about teachable moments. I probably do that more often than I realize. One spot where I am dropping the ball is my kids have piggy banks—one jar, basically. So they get the idea they can work and do extra chores beyond the usual and we’ll pay them extra money. They may get a dollar for picking up around the yard or something like that. They worked really hard. I was quite proud of them to save up for a Wii-U at the time. They’ve learned they can earn, they can save but it all went to spending. I’m also a Christian. We go to church and they really like putting that envelope in the tray. I’m going to have to circle back and explain to them what that actually does. It doesn’t just buy the snacks they like to get after church.

Matt: But those are teachable moments. Another one we did with our daughter to build her ‘giving must’ was we did the Operation Christmas Child Shoeboxes. I’m not sure if you’re familiar with that. It’s the little shoeboxes Samaritans purse and send overseas for a child in need. We went to the dollar store and bought things and my daughter brought her money that had been put into her ‘give’ container. She used that money to buy those things so she’s really making the connection between, “This is my money. I worked for this money but now I’m giving this money to someone who needs it and is less fortunate than me.” You get such a great feeling of joy from giving but it is a discipline. When I look around at people in our neighbourhood, my wife and I are driving by wondering how they are able to afford all of that. Then you think, maybe they’re not giving. Maybe generosity is not as a big of a piece for them. For our kids we just really want to impress that upon them because I’m a huge believer in the more free you are with your giving, the more free you are with your money. If I want to know what my relationship with money is, all I have to look at is what my attitude is as I’m giving. If I have this nasty attitude thinking, “I really want to do this,” but I know I have to or that I should be giving, then I know I’m not in a good place when it comes to my relationship with money. It’s starting to get a hold of me. And being in the personal finance world, the whole thing financial independence. And we take that to mean you’ve got enough money—you’ve got 25 times your expenses or whatever, where you don’t have to work anymore. But in my mind, a big part of financial independence is that financial freedom of not having your money actually own you. You’re not constantly worrying about money. It doesn’t control your life. You’re not making every decision with that in mind. That’s what we want to pass on to our kids.

Tom: With the jars that you’re doing, do you use one of those teachable moments to teach about budgeting as well? Do they understand that concept?

Matt: My daughter is just getting ready to turn six right now. The jars are basically, budget. That’s exactly what they are. They are a really simplified version of a budget. There are only three categories; give, save and spend. So as we are sitting down, yeah, we definitely talk about what she’s saving up for. One thing she wants is some sort of four-wheeler for her dolls or something like that. And this toy is probably a $50 or $60 toy. She’s got that in her mind and she’s saving up for that so week when she gets paid we count her money because she wants to know how far away she is from her goal. As she gets older I think what we’ll end up doing is giving her more money than she’s actually earned from her chores around the house. Essentially, what we’ll do is let her manage small parts of a budget for herself. Let’s say every month she gets $30 or something like that. She’ll get to decide if she wants to wait three months to buy a new pair of jeans or do should she buy that $30 shirt that month and not get the jeans. I think we’ll give her the opportunity to manage larger sums of money. I mean, we would have to buy her the clothes anyways so stacking the deck to make sure we’ll have some teachable moments in there where she learns. If she decides to blow her money on some cheap things one month and she’s got a pair of jeans with a hole in the knee she’ll have to learn to be a problem solver. What are you going to do? Take them to a tailor if you’ve only got $10 in your clothing budget. I’m a huge believer in letting kids experience the consequences of their decisions and not baling them out. Some of that is probably the teacher inside of me. I believe in those logical consequences so letting reality be the teacher is a huge thing. A lot of parents don’t do that. They swoop in and rescue their kids which really robs them of the opportunity to learn incredibly valuable lessons.

Tom: I can see how it would be tough. I do like the idea because, like I’ve said before on my podcasts, when I first really had money was when I started to go to college. I had a student loan that was just nicely plunked into a bank account and I made a lot of mistakes with it. I got my text books at least but then I went ahead and spent the rest on car stereo equipment and a lot of CDs. Even VHS tapes… and look at how useful those are now. I think you’re right though. Everybody is going to make money mistakes. But why not make them as a teenager when you still has the safety of being with your parents instead of out in the real world where you realize you’ve just blown your budget.

Matt: Totally, and the thing about when they make them when they’re kids is, if you’re intentional as a parent, you can unpack those teachable moments. When you’re in college, everybody makes dumb choices whether it’s going out and partying too hard or blowing all their money on whatever it is. Not everybody reflects on and learns from those mistakes which is probably why you have the scary numbers you see with people not being able to survive a $1,000 emergency or people $50,000 in debt. It’s because those lessons were never learned. And, like you said, having that safety net of your parents and also having them there to help explain and take advantage of those teachable moments is huge.

Tom: When I was making my money mistakes in college, I don’t think my parents knew about it.

Matt: No, they probably didn’t.

Tom: It’s not like they could see my bank account or anything.

Matt: Exactly. That’s just the thing because a lot of times kids get the student loans, go off to school and that’s it. That’s the end of the really hands-on financial involvement at that point.

Tom: For sure. If we could hop back for a second, there’s one thing I wanted to bring up. I think I understand that you don’t pay any “true” allowance, right? It’s all chore-based?

Matt: Right now it’s all chore-based. We have a chore chart so she does things like make her bed, gets dressed in the morning. She brings her dishes over at dinner. We have one category of helping others which is kind of like purposely broad so that if there is something we want done we can put it in there. She’s good about it. She’ll say, “Daddy, is this helping others?” And we just sort of check it off. Every week she gets paid. She’s young right now so she doesn’t understand that I’m really being cheap. That’s probably the best way of saying it. We pay her $1.50 a week for her chores. So she puts one quarter in the give, three quarters in the save and she puts two quarters in spend.

Tom: To get that $1.50 is she checking off a certain amount of boxes on the chart?

Matt: To get the $1.50 she has to check off all of the boxes on the chart. There are some days where we extend grace. Like this week, she had her Christmas concert at school so we’re not being too crazy about whether she brought her dishes over that night because we didn’t even eat at home. There are certain things we have a grace for but the idea would be if she misses things or doesn’t do things then she wouldn’t get paid.

Tom: Our eldest is nine and he just started to have this really bad habit of losing things at school. Everything from toques to mittens and things like that. Speaking of teachable lessons, I think I’m going to start making it come out of his money because I don’t think he has that understanding of the value of these things and maybe if it started coming out of his money he’d understand more. Do you do anything like that?

Matt: We haven’t because she is pretty young now. But I’m exactly the same way. I’m an assistant principal in an elementary school and every couple months or so we lay out the lost and found items and you’d be shocked at the nice stuff that’s in there. I’m sure parents are just beside themselves as to how their child lost a $50 Hoodie or $100 jacket. I’m a huge believer in that logical consequence piece that says, “This is yours. We bought it for you but it’s your responsibility to look after it. And, if you’re not going to look after it then there are consequences.” Again, it’s not being mean or being a jerk. You’re being kind. You’re teaching them that lesson at nine years old rather than them having to learn it at 19 when they smash into someone’s car (or smash up your car) and have to pay thousands of dollars for it. You’re just teaching them that lesson earlier.

Tom: Yeah, that’s something I wish I had thought of right from the beginning but he was losing the smaller things at first. The thing that really hit was when he lost a brand new outdoor vest he probably only wore a couple of times. It was not in the lost and found so we replaced it. That will be coming out of his money. Another thing with your kid, are you giving her real money? Actual coins she can put into these jars?

Matt: Yeah, we’re giving her actual quarters. Even when she was young, we would count out… one, two, three, four, five, and six. These are six quarters. If you get four of them it makes one dollar. We actually have this little toy cash register that has little plastic money where you pop the plastic coin in there and it tells you it’s a dime, a quarter or a nickel. I’m a big believer in using real money because I think kids are more capable than we give them credit for. As a teacher, I know I’ve definitely seen that. When you raise the bar they will reach for that bar. It’s that old saying, “If you shoot for the stars you may still land on the moon,” even if you missed. With kids, set the bar high and even if they don’t reach the expectations they will still exceed what they probably would have if you had kept the bar low. So we definitely use real money when we’re paying her. Sometimes we run out of quarters because we make change and things like that. That, again, leads into conversations of, “Okay, we’ve got a Loonie or we’ve got two Twonies. Let’s count those up. That’s $5. So if you have $5 in coins, that’s the same thing a five dollar bill. So we’re going to take your coins and give you a five dollar bill. It’s not that you’ve lost money…” For a lot of kids in terms of being concrete think, “Okay, I’m losing three things but I’m only getting one item back. I’m losing out on this whole equation.” We have those conversations around those teachable moments where we talk about what that looks like.

Tom: When we’ve been saving with our kids we actually use an app called, Rooster Money. I’m almost wondering if I need—I’m admitting all my mistakes here. I’m wondering if I need to move to cash. We don’t use cash, personally. We’re very much into the idea of using a credit card like a tool. We pay it off and all that, but to kids I’m thinking the app or just watching us use a credit card even, maybe it doesn’t feel real all the time. They do like looking at it. They like seeing the number is increasing every time they add money to it.

Matt: Yeah, I totally think that’s great. Again, my background is that I’m a science teacher. I have a Bachelors in Science so looking at some of the research around spending— if you look at FMRIs and stuff like that, brain imaging around spending totally different responses when you spend with cash and when you spend with plastic. When you spend with cash the part of your brain that is associated with pain actually lights up. When you spend with a credit card it’s not triggered. I don’t know the research on debit cards but I would assume it’s probably similar. I think it’s important for kids because as adults we grasp that abstract—at least most of us do.

Tom: And some don’t.

Matt: You’re right. A lot of people don’t. And I think for kids, there can be a tendency to look at a credit card almost like something magical. You just walk into a store, pick something up, swipe this card and you get it. The same thing with things like ATMs. Talking with kids about what that actually is… Think about it like a kid; you put in a card, press a few buttons and it spits out money. It really seems magical. Parents always say, “There’s no such thing as a money tree. Money doesn’t grow on trees.” Well, kids these days know it doesn’t grow on trees. Instead, it gets spat out of machines at banks. There is that abstract nature to the digital nature of money these days so I do think that cash is good to use, especially early on. When they get to be teenagers I think you need to move toward teaching them the digital citizenship around handling money in an online world because it’s really, really important that they’re able to navigate those apps, do online banking and navigate that whole world. But as kids, cash would be what I would use.

Tom: Well, thanks for being on the show. Can you let people know where they can find you?

Matt: Yeah, definitely. You can find me at methodtoyourmoney.com. I blog there. Check out my stuff. I actually have a free course all about teaching kids about money, so if you’re interested you can hop over there. It’s a free course if you want to check it out. If you have any questions or comments when you check out my stuff you can drop me a line. I’m on Twitter, Facebook. I’d be happy to chat with you.

Tom: Sounds great, thanks for being on the show.

Matt: Okay, thanks a lot, Tom. I appreciate it.

Thanks to Matt for sharing how he teaches his children about personal finance. You can find show notes for this episode at maplemoney.com/mattmatheson. If you know someone else that could learn from this episode, please share the link with them. Simply tell them to head over to maplemoney.com/show where they can find all the episodes there. Thanks for listening. Next week we’ll have another episode geared toward those of us with kids. So make sure you come back next Wednesday.