How this physician parent teaches his kids about money

Let’s be honest — what I don’t know about parenting is astounding.  I’m a pediatrician and have three kids, and it’s amazing what I still don’t know.

Every so often I hear a parenting idea (or come up with one) that seems perfect.  Easy to implement and imparts both clear short and long-term lessons.

Implementing new-age parenting techniques makes me feel good, even if in reality I spend most of my parenting time turning around in circles yelling, “Stop it!” as they beat each other senseless.

The Ramadan effect

Ramadan is behind us.  As I’ve mentioned before, as a child I usually received money, not toys/gifts, for Eid.

I generally saved it and used it to buy something I wanted — the first major purchase I remember was a Super Nintendo, at age 12.  Possibly the best purchase I ever made.

I’m now 38 — my mother still gives me money on Eid.  While it’s completely unnecessary and it makes me feel 12 again, it’s great. My wife has married into this tradition, and also receives money.

I continue to squirrel it away.  I did recently spend a few hundred dollars buying a used audio-visual receiver for our living room, but that’s it.  Most of it is hidden away in a super-secret location, also serving as my emergency cash fund in case Russia finally manages to disable the banking system.

The oldest, age 9, is only recently starting to grasp the power and failings of money.  He’s never had to truly worry about money, but he and I are both fortunate, as I never truly had to worry about it either.  Not in the “how am I going to pay my rent and eat” at the same time kind of worry.

While we’ve decided to treat Eid a bit different and purchase gifts for our kids, they receive gift money from my parents and family friends.  It’s a windfall for young children.

Since he receives money as a gift, when our oldest wants a toy/object outside of holiday time, he has to spend his own money (he also occasionally has to give us money as a punishment, i.e., the 19th time in a row he leaves his lights on).

The 50% rule

Because he’s accumulated enough gifts from both Muslim and Christian holidays (and relatives), he hasn’t needed to save the way I did.  It makes the monetary gifts feel a bit more like funny money.

So to help him understand how to value money, saving, and charitable giving, we’ve implemented the 50% rule.

Whenever he receives a large monetary gift (i.e., holidays/birthdays), he gets to put 50% into his wallet.  The money in his wallet is his — he can spend it on what he wants.  Legos, books, remote controlled cars, whatever.  We give some advice, but generally, he is picking out the purchase.

The other 50% is equally split between a charitable contribution and savings account.

He chooses the charity, and I put his cash into an online savings account that has his name (which I control).

Does the strategy “work”?

I am not sure yet.

Taking away 50% of the money still leaves him enough to buy lots of things that 9-year-old boys enjoy.  Even expensive Legos are relatively inexpensive compared to many other things some kids want (no gaming systems).

This year he’s decided to give his charitable contribution to a homeless shelter.

Charitable giving feels a bit abstract at times — he takes money he just received, and usually gives it away to an organization or people he will never meet.

A few years ago when he donated to a dog shelter we drove to the shelter and let him donate in person.  He got to hand them the money and pet a dog — he still remembers it and talks about it.

I do think giving him the opportunity to see in some concrete way where his money is going will help him feel a personal reward and make him want to give more.

It’s not quite as easy to do that for the homeless — I don’t think shelters want their guests to be trotted out like pets, nor do I plan to let him hand out money to homeless people on the street.

However, I believe the concept is solid — removing the abstraction and making it concrete will help his connection and hopefully engender more desire to give in the future.

Saving for the future

Speaking of the future — he has no idea how much is in his savings account.

He’s been receiving some money since before he was old enough to spend it, so he’s certainly saved more than he realizes.  We’ve intentionally avoided telling him the balance (it’s not some insane amount of money, but more than he needs).

In the past, we’ve let him dip into the online savings for splurge purchases — such as a robotic dog.

Some of these purchases are duds — the dog has been on a shelf for most of its life, batteries drained, waiting for an electronic ball to chase.

However, I’ve realized he is the same age I was when my father began teaching me about investing.  Soon it may be time to start doing the same, and using some of his savings money to invest may be the best way to do so.

When my father began teaching us about investing, I recall him periodically quizzing me to see if I could recall the difference between a load and no-load mutual fund (it made for enthralling car rides).

I’m sure 30 years from now my son will cherish the memories of me quizzing him on the difference between Vangaurd and DFA index funds.

All our investments are in boring old index funds that take almost no thought to purchase.  To interest a 9-year old in investing it may require more than letting him purchase a few shares of VTI.

More helpful may be letting choose one or two things to invest besides index funds — a toy company, a sports company, etc. (in addition to a share of VTI, of course).

Future Rogue plans

Our 4-year old is going to make a charitable contribution this year for the first time.

Given his competitive nature, perhaps he can do some stock picking and compete against his older brother.

So we’ll see how this goes and I’ll report back when I have some results — if any of them can consistently beat the S&P 500 over the next few years, I’ll let you invest your money with them as well.

“Rogue Dad, MD” is a physician who blogs at his self-titled site, Rogue Dad, M.D.

Image credit: Shutterstock.com

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