Your age-by-age guide to raising wealthy kids…

Learn how to raise wealthy kids whatever their age…

We partnered with Will Rainy from BlueTree Savings so Kids (and parents!) can learn about money in a fun way.

Here's what Will shares about raising wealthy kids…

In this blog I go through the different money topics I feel parents should be teaching their kids at different, indicative only, ages.

These topics don’t just cover the basics of money, i.e. save to spend later, they focus on training your kids to become wealthy by following the 'Three Rules of Wealth'.

Most people don’t think about building wealth until much later in life and miss out on decades of compound interest working in their favour. Also, by teaching kids about becoming wealthy, from a young age, they are more likely to look after their money, i.e. spend less on things they don’t really need, especially on things to keep up with the Jones’.

The added bonus is that by teaching your kids about money, it can increase your chances of being wealthy too.

Aged 4 and below

Being good with money is more about behaviours (temperament) than knowledge. So training your toddlers to have the behaviours which are aligned to being great with money is not a bad idea.

Patience - This is the super power of those who are good with money. You can train your kids from a very early age to be patient. The key is to keep it small and reward them when they are patient. This could be getting them to save the last piece of chocolate for the next day and giving them something extra as a reward (the next day). Read them the 'Rock and Hammer Story' before they go to bed one night so they learn about patience.

The reason to make sure your kids learn to be patient

Budgeting - I’m not talking about budgeting their money here. I’m talking about budgeting how much TV they have or how many treat snacks they get. Maybe give them TV tokens at the start of the week and get them to decide when to use them. For example, they could decide to watch a small bit of TV each day or to watch more one day and none the next. They will soon work out not to use all their tokens too early. It is important for parents not to give bonus tokens if your kid does spend all their tokens too early. This might be hard but it will pay dividends over the long-term.

Play Shop - Kids love playing shop so you should encourage them. It helps them to understand money. Where possible, highlight how good it is to be the shopkeeper (who gets the money) rather than the shopper (who is giving their money away).

Recommended Book: Save Your Acorns by Robert Gardner

Recommended Game: Shopping List (Orchard Toys)

Aged 4-7 (SUPER IMPORTANT AGE!!)

Research shows that we form many of our adult money habits by age 7. Therefore, this age is really important as we are helping our kids form brand new habits. After age 7, we have to re-program habits they have picked up which is harder.

This is the age to introduce POCKET MONEY, even if it is just a small about. Then consider Should pocket money be linked to chores?

Pocket money is the most underrated financial education tool there is.

Money like seeds - Introduce the concept of money being like seeds. They can give those seeds away (spend) or plant them (save / invest). This teaches them that money isn’t just for spending. Their job is to make sure they plant some of their seeds (money) so they grow a forest over time. If they start planting a forest now, they will be well ahead when they are adults, especially as most adults don’t have any trees (savings). The best ways to get your kids excited about this analogy is to read them the book 'Grandpa's Fortune Fables'

Whilst money doesn't grow on trees, it can grow like trees

Save before they spend habit - This is one of the most important habits for them to develop. Encourage your kids to save at least 10% of their money for the long-term (growing their forest) before they go out spending. They need to be doing this every time they receive some money (pocket money, tooth fairy, birthdays etc) so it becomes a habit. When they grow up and earn more, they will save more. This habit is the best defence​​ against the billions that is spent by companies trying to get us to spend our money. Here is a story you can tell your kids so they can see why it’s so important.

Saving up for toys - Instead of buying them toys during the year (apart from on their Birthday, Christmas/special holidays celebrated by your family), give them pocket money and say this is for them to buy their own toys over the year. This helps them learn to budget, consider what they really want, understand the value of things, make spending mistakes (my daughter spent weeks saving up for a dragon toy and then hardly played with it as it wasn’t as good as she thought!). I note that this should be separate from saving 10% for the long-term (growing their forest). Learn more about how to teach your kids to save money to spend later here.

Recommended Game: Monopoly Deal (My kids played this at age 5)

Recommended Book: Save Your Acorns (again) by Robert Gardner, and my new book Grandpa's Fortune Fables

Aged 8 - 12

Continue to encourage your kids to follow the points raised above, especially in terms of being patient and forming the habit of saving before they spend.

Money can grow (Investing) - Teach your kids that money can grow. You can talk about putting money in a bank account but the real value is teaching them about investing. This is how the wealthy grow their money. If you need some tips on how to do this then please check out my most popular blog ‘How to teach kids about the Stock Market’ and set up an investment account by following our 10-year investment plan for kids. By doing teaching them how money can grow, you'll be giving your kids an massive advantage in life.

Earning money - Teach your kids that by working hard they can earn money. You can create an extra jobs list for them to earn extra money (gardening, washing the car etc) - remember, this shouldn’t be for general daily chores (making their beds, dishes etc). Rather than just making the link between working hard and money, try to introduce the concept of starting a business and working smart (e.g. a lemonade stand). You never know, your kids might have a hidden entrepreneurial talent. Why not get them starting one of these 5 business ideas for kids? Even if they don't want to become an entrepreneur, it's important kids learn to sell.

On the topic of earning money, here’s a story which many parents have said they’ve told their kids to teach them the difference between working hard and working smart to earn money.

Charity - Teaching kids that they can use money to help others can lead them to avoid focusing simply on what they have and what their friends (and people on social media) have. To learn more about charity and the positive impact it can have then please see this blog.

Recommended Book: Kidpreneurs by Matthew and Adam Toren, Grandpa's Fortune Fables by me (Will Rainey).

Recommended Games: Game of Life, Monopoly and Monopoly Deal

Will