I’ve always believed that one of the greatest gifts a parent can give their child is the wisdom they’ve gathered. That’s especially true when it comes to financial understanding. As a father, I’ve been fortunate to watch my son grow from a wide-eyed boy into a young man on the brink of adulthood. With this transition comes the opportunity to share what I’ve learned about managing money, which will set him up for a successful future.

The Foundation: Understanding the Value of Money

My son’s journey towards financial wisdom began at an early age, in a place you might not expect – the toy aisle of our local store. Yet, I still remember the day vividly. He was seven years old, wide-eyed, and had fallen in love with a shiny new toy. He looked at me with those pleading eyes, silently begging me to buy it. But instead of just purchasing it for him, I saw this as an opportunity. This teachable moment could serve as his first lesson in the value of money.

It began with a simple conversation about where the money comes from. Then, I explained how people worked to earn money; it wasn’t just freely handed out. I remember the confusion in his eyes, trying to grasp this new concept that stood starkly against his clear perspective of the world. But that was just the beginning. The real lesson lay in what came next.

We established a system of ‘earning’ at home. He was assigned small tasks – making his bed, tidying his toys, and helping with simple household chores. For each completed job, he would earn a small amount of money. The toy he wanted was transformed into a goal to be achieved, a target to save for.

Days turned into weeks, and his excitement didn’t wane. Instead, he watched as his savings slowly accumulated, each coin bringing him one step closer to his goal. He learned patience and experienced the thrill of seeing his hard work pay off. And the day he finally had enough money to buy the toy he wanted was a significant milestone. The joy and satisfaction he experienced that day were far more critical than if I had simply bought it for him.

This experience was his first brush with the value of money, but it was far from the last. As he grew older, he began to appreciate the value of the money he earned. As a result, he would think twice before spending, evaluating if what he wanted to buy was worth the effort he had put into making that money. This sense of assessment and critical thinking was a significant step in understanding the value of money.

Moreover, he learned the importance of making choices. Often, he would find himself torn between two toys. Finally, he realized he couldn’t have everything he wanted – he had to make a choice. He learned to weigh his options, to understand the difference between ‘want’ and ‘need’, and to make decisions accordingly. This was an invaluable lesson in prioritizing, a skill that would serve him well in the future.

As the years passed, these early lessons on the value of money evolved into more complex financial concepts – budgeting, saving, and investing. But the foundation was laid in those early years, in those simple lessons learned from yearning for a toy in a store.

They say the best time to plant a tree was twenty years ago; the second-best time is now. I was planting a seed in teaching my son the value of money at an early age. A seed that I would nurture over the years that would eventually grow into a tree – a tree of financial wisdom and responsibility.

The Next Step: Learning to Budget

As my son grew older and his understanding of money deepened, it was time to introduce the concept of budgeting. The lessons from his younger years—earning, saving, and making choices—had laid a solid foundation. Now, it was time to build on that foundation.

Our first budgeting lesson occurred at our kitchen table, often the stage for many critical father-son discussions. I remember pulling out an old budget planner from one of the drawers. Its pages were filled with numbers, charts, and notes – a living testament to the years of financial decisions and lessons learned.

I explained to him that a budget was a plan for his money. It was a way to ensure that he was using his money wisely, allowing him to have enough to spend on the things he needed and wanted while saving for his future.

We started with the basics. The first step was to track his income. This included his allowance and the money he earned from doing extra chores. Next, he needed to know how much money he had to work with.

Next, we discussed his expenses. These were the things he spent his money on. It included necessities like school supplies and things he wanted, like video games, books, or outings with friends.

We subtracted his expenses from his income to see if he lived within his means. If he spent more than he earned, we discussed ways to reduce his spending or increase his revenue. If he had leftover money, we discussed how he could save or invest it to grow his wealth.

This exercise of budgeting wasn’t a one-time thing. It became a monthly ritual. We would sit down at the kitchen table, budget planner in hand, and review his income and expenses for the month. He learned to anticipate upcoming costs and adjust his spending accordingly. He understood the impact of his financial decisions. He saw firsthand how small changes could lead to significant savings over time.

As he became more comfortable with budgeting, we introduced more complex concepts. We talked about setting short-term financial goals, like saving for a new video game and long-term, like saving for college. We discussed the importance of saving for emergencies and the role of investments in growing his wealth.

My son uses a budgeting app today, but the principles remain the same. He understands the importance of living within his means, saving for his future, and making informed financial decisions. He knows that a budget is more than just numbers on a page or a screen; it’s a roadmap to financial success.

Budgeting is an essential life skill, one that has the power to transform one’s financial future. By teaching my son to budget at a young age, I’ve given him a tool that will serve him well throughout his life.

Growing Up: The Importance of Saving

As my son transitioned into his teenage years, characterized by growth and increasing independence, it was time to introduce another critical financial concept – saving. While he had been saving money since his early years to buy the toys he wanted, this was different. We discussed saving for immediate desires and his future needs and goals.

We started off by setting up a savings account for him. I remember our trip to the bank, his excitement palpable as he filled out the forms and handed them to the teller. This was not just any ordinary account; this was his savings account, a symbol of his growing responsibility and independence.

I explained to him the importance of saving a part of his income, no matter how small. Whether it was his allowance, the money he earned from his part-time job or the cash gifts he received on his birthday, a portion always went into his savings account.

But more than understanding the importance of saving was needed. I wanted him to see the impact of his savings over time. So I introduced him to compound interest, using The Little Book of Common Sense Investing by John C. Bogle as a guide. I showed him how the money in his savings account would grow from his deposited funds and the interest it earned.

As with budgeting, the process of saving required discipline and consistency. Sometimes, he was tempted to spend money on the latest video game, trendy sneakers, or a night out with his friends. But he learned to weigh his short-term desires against his long-term goals, often choosing to save his money for something more substantial.

Saving money also taught him resilience. Sometimes, he had to forego immediate pleasures or make do with less to save for his future. These were not easy decisions, but they taught him the value of sacrifice and delayed gratification, lessons that will serve him well.

Furthermore, he learned about financial security. He understood that having a savings cushion gave him peace of mind, knowing he had funds to fall back on in an emergency. This sense of financial security was empowering and gave him the confidence to make decisions without worrying about financial constraints.

Today, my son’s habit of saving is deeply ingrained. He understands that saving is not a chore or a sacrifice but a step towards financial independence and a secure future. He sees his growing savings not as a restriction on his spending but as a testament to his hard work, discipline, and foresight.

Investing in the Future

As my son approached adulthood, I realized it was time to introduce the next financial concept – investing. Until then, he had learned about earning money, budgeting, and saving. Now, he was ready to learn about growing his wealth through investing.

I began by explaining the difference between saving and investing. While saving is about preserving money for future use, investing is about growing that money over time. I stressed that while investing involves risks, it also has the potential for higher returns compared to saving alone.

Our first lesson in investing centred around the stock market. I remember pulling out an old copy of The Intelligent Investor by Benjamin Graham from my bookshelf. This book was my guide when I started investing, and now I am passing it on to my son.

We spent countless hours discussing different investment concepts – stocks, bonds, mutual funds, risk and reward, diversification, and more. We talked about the importance of investing for the long term and not getting swayed by short-term market fluctuations.

Next, we set up a brokerage account for him. With his savings, he made his first investment. It was a small step but a significant one. He was no longer just a saver; he was an investor.

Investing opened up a new world for my son. First, he began to follow the news, keen to understand how economic events affected his investments. He learned to analyze companies and their financial health before investing in them. Finally, he understood that investing was not about making quick money but building wealth over time.

More importantly, he learned about financial independence. He realized he could build a financial future through intelligent investing without relying on a paycheck to meet his needs. This understanding was empowering and changed his perspective on money and wealth.

Today, my son is a confident investor. He understands the markets, makes informed investment decisions, and is comfortable with the risks associated with investing. He sees investing not as a gamble but as a strategic move towards financial independence.

As he continues his journey towards financial maturity, I am confident that the lessons he has learned – about earning, budgeting, saving, and investing – will serve him well. He is well on his way to building a secure financial future, and as his dad, I couldn’t be prouder.

Preparing for the Unexpected

As my son transitioned into his early adulthood, we had one more financial lesson to explore – preparing for the unexpected. Life is full of surprises, some pleasant and some not so much. While we can’t predict these surprises, we can certainly prepare for them, at least financially.

One of the first steps in preparing for the unexpected was setting up an emergency fund. I explained to my son that this fund was a financial safety net. It was money to cover unexpected expenses like car repairs, medical bills, or job loss.

We started by determining how much he needed in his emergency fund. The general rule of thumb is three to six months’ living expenses. Next, we reviewed his budget to decide on his monthly expenses. Finally, we multiplied that by six to get the target amount for his emergency fund.

Next, we discussed the importance of making this money accessible, like in a savings account. While the interest rate may not be as high as other investment options, the primary purpose of this fund was not growth but liquidity and safety.

Building an emergency fund required discipline and patience. It was something he could only achieve after a while. But by consistently setting aside a portion of his income, he was able to grow his emergency fund over time.

Another part of preparing for the unexpected involved getting the right insurance. We discussed different types of insurance – health, car, renter’s, and later on, life and disability insurance. I explained to him that insurance was a way of protecting himself financially from unexpected events. We reviewed different insurance policies together, discussing their costs, benefits, and terms.

We also discussed the importance of a will and a power of attorney. While he didn’t expect to discuss these topics at his age, I emphasized that it was never too early to start planning.

Today, my son understands the importance of preparing for the unexpected. He has a fully-funded emergency fund and the necessary insurance coverage. He knows that while he can’t predict the future, he can certainly prepare for it.

Preparing for the unexpected may not be as exciting as investing in stocks or as tangible as saving for a goal. But it is a crucial aspect of financial planning that provides peace of mind and financial security.

And now, in true dad fashion, let me end with a dad joke: Why did the tomato turn red? Because it saw the salad dressing!