A couple of weeks ago my six-year old daughter was playing with my wife’s engagement and wedding rings that were lying on her desk. We asked my daughter to set the rings down because they were expensive and we did not want them to get broken. I can’t say that I was surprised when she asked with her slight British accent if we could buy her some beautiful rings like “Mummy’s”!
At six-years old, I wasn’t too excited to walk into the conversation and tell her that if she waits about 20 years, a nice young man might buy one for her! But I did jump at the opportunity to implement one of the financial lessons that I’d had in mind for a little while. So I told her that I wasn’t going to buy her rings, but I would show her how to invest her money so that she could buy her own.
And while I honestly hope that she uses her money for something other than diamond rings (there are better investments!), I couldn’t help my excitement at her eagerness to learn to get the money! Surely she’ll forget about the rings right?
I’ll come back to the most recent lesson that this conversation provided the opportunity to implement. First, I want to share a couple of others methods that we have focused on in the past few months.
Reading and Discussing “A Baby’s First Business Book” written by my friend, Andrew Dorazio.
READ FINANCIAL OR BUSINESS BOOKS TO YOUR CHILDREN
Did you know that reading aloud to your children can result in calmer parents? Most of us that are parents could use that benefit right?! Actually, the kids probably could as well.
Additionally, reading aloud can satisfy four of the five love languages to include quality time, physical touch, words of affirmation (throw in a “you’re becoming such a good reader” or “you ask really intelligent questions”), and service! And if the book was a gift, you might have hit all five love languages!
Our children ask a lot of questions in general and that is no different when we are reading. If you want to spark interest in financial education with your children, add a few age appropriate business or finance books to the collection.
Our kids have hundreds of books and love to read, so when my friend Andrew Dorazio published “Baby’s First Business Book”, I was quick to add it to the library. This book is written in an A to Z format and introduces young children to words associated with business such as Accountant, Entrepreneur, Joint Venture, Quality, Value, & Wealth.
Exposing them to these words they may not be familiar with opens the door for them to ask questions and to explain them in a way that resonates with them. Don’t worry if they ask questions that you don’t know the answer too. It’s a great opportunity to demonstrate humility and show that you don’t have to know all the answers and research it together.
Rich Dad’s Cashflow For Kids
PLAY BOARD GAMES THAT TEACH AND REINFORNCE FINANCIAL CONCEPTS
Maybe your child has a hard time sitting still while you read to them or if they are a little older just don’t seem interested in any book about finances? Another option is to play a game with them! Very few kids wouldn’t love for someone to get on the floor or sit at the table and play a game with them.
Having read Rich Dad Poor Dad years ago and a number of Robert Kiyosaki’s other books including Cashflow Quadrant, I was aware of the Rich Dad Cashflow game as well as Rich Dad Cashflow For Kids game, but had never really looked into them. At some point sitting at home during COVID lockdowns, I was inspired to incorporate something different into our kids activities and decided to look the games up.
The children’s version is a relatively basic game of rolling the dice and moving around a circle board. The object of the game is for your cashflow to exceed your monthly expenses. On the board there are paydays, liability spaces, and assets spaces.
Some of the liability spaces include expenses with the option to pay it off immediately or to add to your monthly payments, which in turn will require greater cashflow to win.
Some of the assets spaces include the opportunity to purchase real estate, a business, or intellectual property . They vary in purchase price and the cashflow they produce each month. And some do not even produce cashflow.
While our son enjoys playing, at 3, he is a bit young to really grasp the concepts yet. However, after only a couple games, our daughter quickly started picking up on them. When given the option, she almost always chooses to pay her expenses immediately vice increasing her monthly expenses. And she knows to consider the cashflow of the asset in making her decision.
It’s not so uncommon for the kids to ask to play the “game in the purple box”. And while it is admittedly not the most inexpensive children’s game, it is only a small investment in the financial education of my children.
USE A HOUSEHOLD ITEM TO TEACH CHILDREN HOW AN ASSET PRODUCES CASHFLOW
So back to teaching my daughter how she can invest to make the money to buy her own diamond ring (not so secretly hoping that she doesn’t buy a ring!).
She knows that I spend a lot of time focused on real estate investing. I am on calls frequently as virtual communication is my primary means since I am currently investing from overseas. She asks who I am talking to and how I work with that person in my business.
By playing Cashflow For Kids, she is beginning to grasp the concept of cashflow and relate it to our discussions about real estate. I thought that it would be useful to take it a step further and turn this ‘need’ for cash into a tangible lesson about the benefits of investing in an asset that will create it.
When we moved to England, we bought a few used small appliances from the person that I was relieving since we would only need the appliances with United Kingdom plugs for three years. Among these small appliances included our microwave and toaster.
I thought using these small appliances would be an inexpensive way to replicate a real estate or other business that owns tangible assets to create cashflow.
I offered to sell the microwave to our daughter for £10 (~$12) and the toaster to our son for £5 (~$6) to ensure that he was included in the lesson as well. Once they owned the “assets”, my wife and I would be charged 10 pence (~12 cents) for each day that we used their asset as a rent.
I don’t keep a lot of cash in the house, so we decided to make the chart above to track the number of days the assets were used and pay at the end of the month. You can click on it to download your copy!
Example Income and Expense Tracker
We all know that owning an asset isn’t all income without expenses!
The kids own the assets now so it is their responsibility to ensure they remain clean. They have the choice whether they want to clean themselves or pay someone else to clean them! We also incorportated a small per use or per month expense for electricity, insurance, and property tax.
We made the excel file above to track their income, expenses and be able to see when the asset has paid for itself. I have filled the numbers in here as an example.
And when their cash flow begins to roll in, you can see the how they divide their money into saving/investing, spending, and sharing in this article.
Regardless of their age, how are you introducing your children to financial concepts? Let us know so that we can leverage each others ideas!
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