What I’m Teaching my Son about Money

I’m not going to lie to you – being wealthy is a lot of fun.

And I’m not just talking about novelty fun that you get from driving around in a fancy car. True wealth is more of a big picture thing – freedom from negative stress and a higher confidence about how great life is. It hits you like a pack of wild butterflies every morning when you wake up. Holy shit, here comes another great day.

I want to pass this gift along to my son if at all possible, because it is truly a great way to live. After all, as parents we are really in the business of producing the happiest and most capable adults we can, given the constraints of the real world. If my boy eventually ends up as happy with his lot in life as his parents are, we will be more than satisfied.

Surely every parent wants the same thing – to pass on their happiness if life is good, or if not, to give their kids a better life than they had.  So they do their best to dish out financial advice, and to model good behavior for their offspring to emulate. Unfortunately, the results are not always good.

In a country where Ridiculous is Ubiquitous, most people’s best attempts at getting ahead are in fact recipes for financial disaster. I get emails from high school and university students telling me, “Dad advised me to finance a reliable NEW car with 4WD, so I can be safe in the winter and spend less on repairs.” Other people rack up $200,000 in student loans for a elite degree with few job prospects, because their parents cautioned “You can’t get a good job without a degree these days.” Still other families stress over how much to spend on olympic-caliber toddler birthday parties, how to afford ivy league preschools and how to fit in with the other high-income families in their private schools.

While any one of these pieces of advice might work fine for a family with infinite money, they have trickled deep down into the middle classes where they become unhelpful for those wanting to truly get ahead.

I just read a book called The Opposite of Spoiled, by Ron Lieber. While the book was thoughtful and thoroughly researched, I was still fascinated by how much things have changed since I was a kid. There were chapters on how to handle the social pressures of a high-income neighborhood. What do you do when the other kids have nicer stuff than your kids, or vice versa? How do you say no to your kids when they want things that you can’t afford for them? How do you handle allowances, jobs, paying for education, mobile phones, cars, and giving to others?

All of these perceived social pressures of the Wealthy New York style of childraising were unfamiliar to me. It was three decades ago in a small town in a different country that I approached my own teenage years, and we followed a much simpler model of family finance back then. Much like the Unfrozen Caveman Lawyer, I found myself wondering “What the hell are these modern people fussing about? Do they really worry about this stuff?”

It seems to me that if we bring the financial values of a small working-class 1980s town forward to today, life gets a lot simpler for kids. And in the long term, richer.

Little Money Mustache and Money

In our household, money is an open subject without any attached baggage or taboos . Our 9-year old knows exactly how money is earned, what happens when you spend it (it’s gone), and what happens if you invest it instead (it works for you, for life).

Since we retired just before he was born, he has grown up with the idea of financial independence – if you own assets like rental houses or shares of businesses, they provide income which means you don’t have to leave home for 9 hours every day and commute to an office unless this is your idea of fun. He sees this by comparing the daily routine of his own parents, to what other parents do each day.

So ever since he has been old enough to have a use for money himself (age six or so), I have tried to give him a chance to learn for himself how it works.

Making Money:

Being a kid is quite a lucrative proposition these days. On top of the free rent, he gets occasional cash gifts from relatives and a salary from me that consists of 10 cents for every mile walked or biked as part of family life. These tend to add up in a mostly-car-free family, as he already has more than 1200 miles on the little 20″ tires of his mountain bike and we wear through quality shoes before growing out of them.

Over the coming years, I’m expecting him to move from these little-kid sources of income into more independent ones. Whether he pursues traditional employment or hardcore full entrepreneurship right off the bat is up to him*.

Some parents like to focus on academics: “Until you graduate, getting good grades is your only job.” But I like to think of a good education as a highly diverse set of experiences. Working and earning your own money at any age – even if it includes stocking shelves and assembling wheelbarrows at a hardware store – is a key part of this. School is just a tiny part of a kid’s education, and not even the most important part. In fact, my most vibrant experiences from high school were side effects of work rather than classes at school.

The Spreadsheet:

bankaccountThis is where things get a bit unconventional. Instead of a physical piggy bank, my boy prefers to keep his money in the Bank of Mr. Money Mustache, a spreadsheet that contains every transaction he makes with money. To make a deposit, he just hands me some cash. To withdraw, he asks me for cash or has me buy something for him online.

But for every dollar that remains in the account, he accrues interest at a 10% annual rate with monthly compounding. I’m excited about the teaching value of this, because it shows him that

  • his money is finite (not just a limitless pool that you tap by nagging parents to buy you stuff)
  • keeping the money invested is profitable (his $600 account is now bringing in a very tangible $5 per month in interest)
  • new windfalls can be added, interest compounds exponentially, and an account like this of sufficient size means lifelong financial freedom

Where the Money Goes:

Right now, he has only a few true consumer loves in his life: PC games, books, NERF guns, and the occasional phone or tablet app. So he has spent over $100 on those things (quite a large percentage of income) in the past year. But in most cases, he has felt the fun value has been worth the spending.

Interestingly enough, he has already started to display a high degree of generosity. When something breaks in the house or another kid doesn’t have enough money to pay for something they want, he immediately offers up a large sum of his own money to cover the shortfall.

What the Parents Cover:

Meanwhile, I still cover the basic infrastructure of educational childhood fun – to build his computer I bought about $500 of parts and we assembled them together into a pretty spiffy gameworthy PC. We build robots with a $400 kit of VEX IQ stuff, and many books, bits of outdoor equipment and trips come for free as part of being in the family. Any organized activities also come from this freebie budget, at least until he reaches his teenage years.  But like his Dad, he has shown a strong preference for self-guided activities with friends rather than adult-organized ones so far, and I’m happy to let him continue with this style.

Living By Example, and Giving:

In Ron Lieber’s book, the tricky subject of “why do we have so much, when these other people have so little?” comes up. It’s a good one, because this observation is often the gateway to taking an interest in helping other people. But for me, it would be hard to answer a question like that while living at the pinnacle of American luxury with multiple homes, boats, and jets. Since our annual spending of around $25,000 is lower than average for our own country, and it stays that way even in years when we make many times that amount, I’m hoping the example of “spending does not need to scale with income” will jump to the next generation.

When your own needs are capped, it becomes only logical to find an efficient outlet for the surplus money. So there is an understanding that we operate with an informal, non-billionaire’s version of the “giving pledge“, meaning there will be no large Mustache family inheritance – each generation will be left free to generate its own massive surplus.

Higher Education, Performance, and Stress:

For me, this is where the rubber really meets the road.  If you can’t leverage money to live more happily, then what good is it? And yet consider the stunning case study of the children of the nation’s uber-wealthy enclaves like Palo Alto, California. Despite incredible wealth and some of the best educational institutions money can buy, kids there are more stressed, less happy, and more likely to commit suicide than others who live with a fraction of their privilege.

The problem arises when high-achieving parents assume that their kids need to be pushed to achieve more themselves, to beat out the other high achievers and gain access to the most elite schools, in order to compete in this incredibly challenging modern world.

Remember way back when I started this blog in April 2011? Right there in the first paragraph of the first post, we hit this sentence:

“… when it boils down to it, we are talking about money, and the freedom it can give you. Freedom from worry, and freedom from most forms of bullshit.”

To me, raising kids to feel pressure and fear so they can be COMPETITORS is bullshit. Life is not a competition. It’s a gigantic collaboration, and the world welcomes and rewards people who see it that way.

It may be that most parents of the very-upper-middle class are still operating from a scarcity mindset. If they are addicted to a high consumption lifestyle, earning $600,000 per year but still making car and house payments, they will assume that their children will need to earn and consume just as much in order to be happy. This of course dictates a job in the top fraction of the top percent of the economy, and education with enough prestige to secure such a job.

On the other hand, having crossed the threshold of having more than enough money for a good life almost a decade ago, I cannot even imagine my son not earning a plentiful and permanent surplus very early on in his adult life. Thus, there is no need to fight for traditional elite status. It is much more efficient to rise up to into your own niche without the constant drag of material addiction telling you you aren’t good enough. Paradoxically, this path is rare enough that you might end up earning even more money in the end.

What I Really Want Him to Learn:

All of this kid stuff is just the groundwork for the bigger (and slightly radical) perspective on money that I want to instill over his lifetime: that money is something you can master and control, rather than letting it control you.

Observe the following statements and see if you agree with them. While you can poke holes and find exceptions to each one, the overall philosophy is remarkably true if applied forcefully over a lifetime:

  • Income is not something that employers or the government ration out to you based on a rigged system. It is something you generate yourself. It is the byproduct of your hard work, combined with learning and mastering the system itself. Even the system itself is subject to your control if you choose.
  • “Expenses”, “Needs”, and “Cost of Living” are terms that come from a mindset of weakness. Instead, use the words, “My Spending”, and realize it is in your control. By making the right moves and the right arrangements with other people, you could theoretically live for free. You can end up in any job, any city, any country, with any number of additional dependents – all at your own choosing. Even if you don’t exercise every last option in life, knowing that you have complete power over your spending is a key ally for financial freedom.
  • And finally, money is not the end of the quest of having a good life. While it is currently a major barrier to most people, it is easy to master it early in your life. Then you move on to the real challenges: finding out what life is really about. Hard work, being good to others, a good amount of proper difficulty, and learning as much as you can pack in during your time alive.

This is my experience so far in raising a Junior Mr. Money Mustache. Although I feel the foundation is solid, like everything in life it is an ongoing experiment. I’ll let you know how it turns out.

* My first jobs were paper route, lawn maintenance, and gas pump jockey. Then I moved up to more prestigious and comfortable jobs of working in the town hardware store and eventually cashier in the 24-hour convenience store. Out of this list, I’d only discourage a teenager from pursuing gas station work – avoiding toxic vapors during key periods of brain growth seems wise in retrospect.

  • Steve P. May 31, 2018, 11:10 pm

    Dear MMM,
    Thanks for sharing, I am a father of four the youngest is now 20. Helping them to understand how important it is to live below their means and make plans with their money has been easier with some kids and more challenging with others. Personalities play a role but I find once I get across to them that is important to take the emotion out of spending, then it all becomes basic math.

    Also it’s helpful if the parent doesn’t suck at money.(Something that I’m currently cleaning up now).

  • Eric Williams June 20, 2018, 8:26 am

    Trying putting your kid to work at 12. Remember those days? We have a generation of lazy kids bc that wasn’t engrained in their habits at that age. It’s so important for them to earn and spend so they understand how money works. Not having money leftover bc you wanted some bling, makes them think twice about spending today wo saving for tomorrow. Parents do not appreciate the human brain and its switches regarding money. Personalities determine a lot of this and consumerism is a trick that needs to be taught. But until they get to work, they will never understand squat.

  • Nathan July 26, 2018, 6:23 am

    My parents might not have done the best job guiding me to a good career but they did at least instill a hard work ethic in me early on. I was homeschooled and helped my dad build my parents house from the ground up at age 13. Fun stuff!

    I’m curious, where do you plan to give your excess money at the time of your passing?

    Thanks for all of your thought-provoking content. I’ve implemented so much of your philosophies in my own life.

  • Sher July 31, 2018, 3:40 pm

    Loved this. With kids 7&5 years now, and me 46 and re-educating… I recognize I have work to do. As expats (I’m Canadian, he’s a Brit – we live and work in Romania), we LOVE our decadent lifestyle… And that costs us. Your writing and the Your Money Or Your Life book are blowing out minds! The future is bright. Big thanks.

  • Matt Henry August 11, 2018, 9:31 am

    What an opportunity fidelity has given removing investment minimums from mutual funds last week. My oldest daughter, 7 years old, just made the decision to invest in fstvx total stock index fund for a whopping 6.62. If bank of Dad pays a 10% annual dividend yield reinvested, what a teachable opportunity!

  • Karina November 6, 2018, 12:37 pm

    My daughters school back in Michigan had a bank where 5th and 6th grades can learn banking and all other students can deposit money into a real bank account. They had raffles and won a small prize for every deposit. My daughter earns money on a commission. Each chore is based on a agreed upon price (except for all bedroom chores which are mandatory with no pay). Now that we moved she didn’t have a bank account for 3 months and spent $100 and asked to open a new account so she wouldn’t have easy access. Her new account has a website with games, a punch card for earning prizes, and more. I get paper monthly statements so she can view her activities and interests, no good interest. I’m planning on paying her next time with a check so she can go through that process. Shes super excited. (9 years old). We have many conversations on money safety and courtesy. Dont walk around with cash in your hand and dont comment on your friends lack of money.

  • Matthew Gormley November 13, 2018, 8:16 am

    Yesterday we were at the library and my kids (ages 5 and 2) wanted to play Monopoly. When I was a kid we’d play the game, try to build houses and hotels, and the game never seemed to end.
    The library had a version called Millionaire Monopoly and it almost made my head explode. It’s an “updated” version of the game that truly tone deaf. Community Chest cards are replaced with dice rolling chances to win large sums of money. “Roll to win a speed boat race.” “Pay someone to be your Plus One at the premiere.” I had to call an audible and change the rules of the game. I’m flabbergasted that this version even exists, but I really shouldn’t be surprised.
    It got me thinking about how could a game like Monopoly be tailored to deliver a Mustachian Message? Mustache Monopoly? Giving every dollar a job to work harder… Choosing to buy now or recoup the gains later. The lessons are sticky, easy to remember when paired with an example. Maybe we could crowd-source a project and let it be iterative?
    I for one am just getting started re-calibrating my Sucka Filter, so the lessons of even the earliest blog posts are impactful for me an my family. There aren’t a lot of great financial informational tools out there that would work for both kids and newbies…

  • Denise November 13, 2018, 12:25 pm

    What if you already did everyone wrong? I just found the blog maybe a month ago and have jumped on the savings band wagon. But I’m already 47! I feel like a hundred. And my kids are already 18 and 16 and looking back I’ve done everything wrong and have no idea how to fix it now. Not to mention that even with only two kids I’ve had my hands full–with ADHD, Aspergers, anxiety, depression, etc., the skills I had to teach my kid was how to stand in line with other people, not too close, not to far, move up as they do, etc. No excuses, but even shoe tying was at the bottom of the list. If having spiderman sneakers gave the kid a bridge to strike up a conversation with another kid, then it was a good investment. Thus my kid got a heavy dose of popular culture to lube the social gears that creaked noisily on. But now he’s 18 (still socially awkward as heck) and all the lessons I ignored or didn’t have time to teach are manifesting themselves in unproductive habits and attitudes. I wish I could go back in time to the moment of his birth and do everything over again. Short of that, how do you raise your child over when he’s practically an adult? I feel sick to my stomach.

  • Erin November 19, 2018, 6:25 am

    Any recommendations for kids’ books on financial freedom/saving money? My seven year old nephew is expressing interest in the topic. He’s already got over $100 in the bank and weighs his decisions heavily when faced with the opportunity to buy a new toy. He seems much more focused on his account balance than the latest new gadget!

    • Mr. Money Mustache November 19, 2018, 2:37 pm

      Hey Erin, depending on your nephew’s preferences you could either just read more adult-style books together (like Your Money or Your Life) or host discussions about life choices (draw some graphs, give relevant examples, etc.)

      There’s also a book by a fellow MMM reader called Pirates of Financial Freedom that is pretty entertaining and appropriate for that age range: https://amzn.to/2DKhFIg

  • Hannah November 22, 2018, 2:12 pm

    Whike I think it’s great for teenagers to work over the summer, I never understood why the urge to work part-time during the school year. I don’t agree that “their only job should be getting good grades”, but the school year is such a perfect time to get involved in the activities that interest you (team sports, band, debate team, chess, choir, school plays, student government or whatever “floats your boat”), that I feel it’s a real waste to pack in a minimum wage part-time job into the non-studying time. Kids can see what the daily grind of a minimum wage job is like and learn to budget during their summers. This is what I will encourage my kids to do when the time comes…

    • Mark Schreiner September 25, 2021, 10:43 pm

      If a young student applies his/herself seriously, seeing school as “the main job” with good grades and good test scores can be much more remunerative per hour worked in terms of “merit” scholarships than any job a teen could get. In addition, my kids know that any of the college savings that I have for them will be transferred to them upon graduation, should they find a way to get to that point without spending all (or any) of it.

  • Chelsea April 10, 2019, 4:34 am

    Great advice! I have been buying rolls of dimes and stacks of 1s for my son’s chore payments. This seems much better, as I can carry his balance using Sheets on my phone and manage his funds electronically like I do my spending using Mint.

    My credit union has a kid-financial app, MNCuJr. You can create a chore chart with designated amounts for each chore, ex clean room $0.10, clean pet poop $0.25. My sister with 5 kids gave the advice to have kids earn a maximum of their age in dollars a month until they are 12, when they can open a business babysitting, lawn mowing, snow shoveling, or dog walking or do a paper route. I give opportunities for my son to earn extra money for vacations by reading challenging books. I’ll have to try the running and biking miles too! Great ideas Mr $ Mustache!

  • Chris March 15, 2020, 1:35 pm

    Ah, this solves the frustration I’ve had since opening up bank accounts for both of our girls (10YO & 8YO) last year.

    Nothing available pays enough interest to illustrate the point and they’re not old enough to have login credentials to manage an online account on their own. Running to the bank to deposit $8.32 gets old pretty quickly.

    The Bank of Dad is a great workaround.

  • Andrey February 24, 2021, 9:55 pm

    I don’t know whey I’m coming back to that web site every 12 month, just to realize that I can’t find find anything useful of it, but to help you build wealth from daily visitors.

    “By making the right moves and the right arrangements with other people, you could theoretically live for free”
    No you can’t don’t fool people. There are million things you can’t produce yourself or get for free.

    Image yourself being in a country where you can’t use your name, Papua New Guinea for example. Go there with no money, and try to live for free, not as an English language teacher or a Financial adviser, but for free in a true genuine way, without our own house or land, without savings or dividends.

    • Minnow February 25, 2021, 2:26 am

      What are you looking for Andrey? I am not sure MMM is saying you can live for free? His advice is for middle income Americans and others who earn enough money to live comfortably but waste it. I don’t think anyone could go to a country or even a city where they have no resources or skills that are valuable in that society and survive. I have not lived in Papua New Guinea but I would imagine it is precisely the type of place you could survive without money – but not without working very hard to have a subsistence living – you certainly would not get rich or be able to retire early.

  • Angie August 24, 2021, 3:23 pm

    This is such an awesome post. I’m not a parent yet but I feel like this is the exact type of financial practicality that isn’t really seen in a lot of parenting.

    I also personally have never had an allowance growing up for anything, so I had to take summer jobs to earn money for the school year. Since money was so hard to come by, I’d hoard it and probably contributed to my current obsessive mentality with earning more and saving more nowadays.


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