Personal Finance

5 Ways to Teach Your Kids About Finance & Investing

Expertise: Business Management, Mortgages & Creative Financing, Landlording & Rental Properties, Real Estate Investing Basics, Personal Finance, Real Estate Deal Analysis & Advice, Commercial Real Estate, Personal Development, Real Estate News & Commentary
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After I completed my formal college education and entered the "real world," I went on to work in real estate, insurance, housing, and eventually mortgages and private equity management. Through each of these work experiences, I learned more about financial and investing topics that directly relate to everyday life.

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Surprisingly, even for an accounting major like me, “real world” financial management hadn’t come up much very often in school. Where were discussions or lessons on budgeting, taxes, financial planning, insurance, investing, etc.?

Personally, it worries me. If some of these topics aren’t covered early on, especially those related to personal finance, what negative habits will our youth form by the time they’re adults?

As I mentioned in my last article, “My 3 Favorite Real Estate Investing Strategies (and a Plug for Old-Fashioned Discipline),” I also owe a lot to my mom, who instilled certain principles in me at a very young age and taught me to be disciplined and prepared.

And so, my approach with my own children was to try to engage them with these subjects as early as possible in hopes that some of it would be retained into their adult lives. It’s tough, though. As parents, we’re often busy, overwhelmed, and downright exhausted.

Here are a few ways I’ve tried to teach my sons (and now my grandson) about real estate investing and personal finance.

kids-money-lessons

Related: Teaching Kids to Be Entrepreneurs is Key to Addressing the Wealth Gap: Here’s Why

5 Strategies for Teaching Your Kids About Finance & Investing

1. Learn by doing together.

As a real estate investor, I’m continually pursuing education. In fact, after 30 years in the business, I’m still learning every day.

Over the years, I’ve tried to involve my kids in what I was learning or what I was doing. For example, when my youngest son was in high school, I was taking a class online on how to trade options, and I asked him to take the class alongside me. I even had him invest some of his money alongside me, and he was able to see firsthand how to trade.

2. Hire your kids.

I also employed my youngest son to help me do my taxes, mainly by sorting receipts and assisting with bookkeeping (paid labor, of course!). He would often ask questions like, “Is all this work worth it?” and I would then proceed to show him how much money was saved through legal deductions.

As you can imagine, he became even more curious as to how I invested that money from the tax savings to increase my passive cash flow. Luckily, by the time I was 42, I was able to show my kids the real path to financial freedom since I no longer needed earned income to get by.

3. Relate games to real life.

When my eldest son was younger, I was running my own painting business and would often take him with me on job sites and to renovate my flips and rentals. So, he was no stranger to the construction world, and today, he runs his own construction business.

Now, when I get to babysit my grandson, I’ll sometimes take him over to visit his dad at work. Sometimes, this is after we’ve just played Robert Kiyosaki’s Cash Flow for Kids game, which models things like how to invest in  rental properties. He’ll ask me questions like, “Pop Pop, is this a good deal? Will this make me money?” Needless to say, I love those conversations.

When we visit his Dad, I’ll tell him, “See, your dad fixes up houses just like in the game.” Or maybe I’ll take him by one of my rentals and say, “Look, I bought this house as an investment. The money I make from those who pay rent to live there is more than what I pay the bank.”

In all of this, I’m showing my grandson that the rules of the game he enjoys are also real.

4. Encourage good habits.

I don’t think it’s ever too early to start encouraging good saving habits. For example, I’ll even pay my grandson to do certain chores for me, and then I’ll follow up with him to see if he paid himself first.

I’ll be asking how much he saved or invested, how much he donated at church or to charity, and what he did with the remaining balance. He may have spent some of it on video games, but then I ask him how much all those used video games are worth, and more importantly, were they really a good investment? At least it gets him thinking about it.

5. Invest on their behalf.

When my youngest son was entering college, he asked my wife and I to cover the cost. We could have easily done so, but I thought that maybe it was another learning opportunity. Instead, I told my son that I would help him pay his student loan back. To do that, after graduation we bought a mortgage note with a payment that was equal to the payment amount of his student loan, but we paid a fraction of the total balance, and he used the passive income to cover his monthly payments.

Related: How to Teach Your Kids All the Money Lessons They Won’t Learn in School

The other great thing about this note investment is that the loan term is much longer than that of his student loan, so he’ll continue to receive payments even after his student loan is paid off in full. In turn, he’s also learned more about how to use investments to cover expenses.

How About You?

[Editor’s Note: We are republishing this article to help out our newer readers.]

So what strategies have you employed to teach your kids about personal finance and investing? If you haven’t yet, maybe it’s time to start thinking about it.  

Please share your experiences below!

Since 2007, Dave Van Horn has served as president and CEO of PPR Note Co., a $150MM+ company managing funds that buy, sell, and hold residential mortgages nat...
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    Zachary C. Property Manager from Huntsville, AL
    Replied almost 3 years ago
    Well done, I always enjoy these posts about ways of getting started early. The 1 for 1 exchange of buying a note to cover the school debt was a new one for me and extremely interesting.
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied almost 3 years ago
    Thanks Zachary! I actually talk about it more in depth in my upcoming book for BiggerPockets that’s due for release in April!
    Kenny Durrant New to Real Estate from Grants Pass, OR
    Replied almost 3 years ago
    Great article Dave! I’m learning how to invest, and the main motivation for me to figure it out is my wife and kids. I really want to be able to teach my kids how to be financially responsible at an early age. I am interested to learn more about the strategy you mentioned in #5. I bookmarked the article you mentioned in a few other comments above, and look forward to reading that. I have played the Cash Flow game myself, and will have to look into the kids version and get that out at our next game night. We have a “family council” every Sunday night and one of the things we have started discussing is our family budget. We are hoping to teach our kids more about managing finances, and want this to be a more open subject in our home. I appreciate all of the tips in this article, and will definitely be implementing them in our home.
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied almost 3 years ago
    Hey Kenny, Thanks for reading. And glad to see the game has been helpful to you and your family. I talk more in-depth about strategy number 5 in my new book coming out for BiggerPockets Publishing in April! Happy investing! Best, Dave
    Ashley Wilson Rental Property Investor from Radnor, PA
    Replied over 2 years ago
    As always, great article!!! Our kids are 3 and under, so just laying the foundation now by taking them to our jobs, and teaching them about working together to complete tasks, but we will be deploying these great tips in the immediate future!!! Can’t wait to encourage the next generation of investors!
    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied over 2 years ago
    Great article and important subject! It’s embarrassing how uneducated most people are about finances and investing and critical to teach your kids about them.
    Steve Vaughan Rental Property Investor from East Wenatchee, WA
    Replied over 2 years ago
    Thanks for this article, Dave. I never considered hiring my 2 boys to do/help with admin and receipts. They have only been hired by us to mow, weed, shampoo carpets, clean and paint only so far. Great tips! Mine have been LLC members in 2 apt buildings since they were very little. They understand the difference between contributions as owners like picking up the parking lot and paid labor. Their k-1 income flows to their mutual funds. Talk abo8t competition and questions! Great topic!
    Sarah Pursell Flipper/Rehabber from Charleston, South Carolina
    Replied over 2 years ago
    My kids have all invested their birthday money and savings in bullion. My daughter (11) recently pulled some out, and invested it with the investor her dad works with who flips houses. All my big kids earn money by cleaning our Airbnb. And most recently I’ve been taking classes on Cryptocurrency, and their interests have been piqued. I didn’t think I was doing very well in teaching them, but when I stopped and thought about it after reading your article, I felt encouraged. I wasn’t taught any of this stuff, and had to figure out so much as an adult (I still am!).
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied over 2 years ago
    Wow! This is amazing, Sarah. Your kids sound like they are already well on their way to success!
    Ellamarie Taylor from Fairfield, California
    Replied over 2 years ago
    This was A really great read! At some point I’ll learn how to same these articles so I can easily get back to them. I have 4 children 12 being the oldest and the youngest is 4, all the tips Solly to the rich education I need to instill. Thank you