Should kids play with FIRE? Well, maybe not “real” FIRE. But, teaching them about money and financial independence at an early age can set them up with a healthy relationship with money for life.
F.I.R.E., or Financial Independence, Retire Early, is a movement that aims to achieve financial freedom by saving and investing a significant portion of one’s income, with the goal of being able to retire early and live off of passive income. It’s a concept that has gained popularity in recent years and has sparked a conversation about financial literacy, budgeting, and mindful spending.
Financial Education Responsibility
As parents, it’s important to educate our children about money and financial management from a young age. Teaching them the value of hard work, budgeting, and saving can set them up for success in the long run. Here are some ways to help your kids learn about money:
Illustrate a Healthy Money Relationship
Explain the concept of FIRE and why it’s important to have a healthy relationship with money. This can be done through age-appropriate conversations and examples. For example, you can talk about how saving and investing now can help them have more options and security in the future. Additionally, you can discuss the importance of not living beyond one’s means and the dangers of debt.
Create a Family Budget
Create a family budget and involve your kids in the process. Show them how much money you bring in, how much you spend on bills and necessities, and how much you save or invest. This can be a great way to teach them about money management, budgeting, and the importance of prioritizing expenses. You can also use this as an opportunity to talk about saving for short-term and long-term goals, such as a vacation or a college education.
Give Them Jobs and an Incentives-based Allowance
Give them small jobs around the house, such as taking out the trash or watering plants, and establish an allowance system so they can earn extra money. This will help them understand the concept of earning money and the value of hard work. Additionally, it will teach them the importance of responsibility and being a contributing member of the household.
Saving & Investing
Teach them the importance of saving and investing. You can open a savings account for them and help them set financial goals, such as saving for a big-ticket item or investing in a Roth IRA. You can also use this as an opportunity to discuss the power of compound interest and the long-term benefits of saving and investing.
Encouragement & Learning
Encourage them to be mindful of their spending and to think critically about whether a purchase is a want or a need. This can be done by asking them to consider the costs and benefits of a purchase and to think about whether it aligns with their financial goals. Additionally, you can teach them about the concept of delayed gratification and the benefits of saving for something they really want.
Setting a Strong Example
It’s also important to note that children learn by example, so it’s crucial for parents to practice what they preach and lead by example. By implementing these strategies, you can help your kids develop a healthy relationship with money and set them up for financial success in the future. One book to read together as a family that shares similar ideas is “The F.I.R.E. Planner” by yours truly. This book can be a great starting point for family discussions about money and financial independence and can provide valuable insights and tips for achieving financial freedom. Believing at an early age that you can achieve financial independence when you’re young can literally shift the entire trajectory and options kids will have in life.
Final thoughts:
Teaching our kids about money and financial management is one of the most important things we can do as parents. By providing them with the tools and knowledge they need to make smart financial decisions, we can set them up for success in the long run. Additionally, by leading by example and fostering a positive mindset around money, we can help them develop a healthy relationship with money and achieve financial independence.
My extended goal is to help you find your personal path to financial independence, and to enjoy the entire journey along the way.
More about me
- Let’s redefine the FIRE acronym once and for all! - January 25, 2023
- How to Teach Kids About Money and F.I.R.E. - January 16, 2023
- Discovering your full potential outside the box - January 2, 2023
4 Comments on “How to Teach Kids About Money and F.I.R.E.”
Great post Michael! We’ve always tried to teach our daughter about the importance of financial responsibility. One thing we taught her (and I cannot take credit for the thought) was that she would earn ‘commission’ instead of ‘allowance’. Allowance has the connotation that is given with few strings attached or that they are entitled to it. “Commission’ is earned through hard work. Anyway, just a thought. I guess as long as we are teaching them a good financial lesson is the key!
Oooh… kid commissions… love it!
Great tips mate – one of my whole motivating passions around reaching FIRE was to be able to be a great dad and have the option to be at home more
Love it! You’ve done what few pilots are able to do. Kudos to you.