Teaching Kids Financial Literacy with Robin Tobe

Jun 6, 2024

Lecture with Robin Tobe on Teaching Kids Financial Literacy

Guest Introduction

  • Robin Tobe: Personal finance speaker and best-selling author.
  • Book: The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money Smart for Life.
  • Background:
    • Former work at KPMG, Ernst & Young, and Citibank Canada.
    • Graduate of the University of Toronto (CPA and Chartered Accountant designations).

Motivation Behind the Book

  • Interest in Financial Literacy: Sparked post-global financial crisis (about 10 years ago).
  • Research: Many parents struggle with teaching kids about money.
    • 80% of parents tried to teach about money but over two-thirds felt they failed.
    • Over half didn’t know the necessary information to teach.
  • Goal: Provide a robust resource using personal and professional experience.

Unique Insights

  • Deep Financial Background: Extensive experience in accounting, tax, and derivatives marketing.
  • Practical Experience: Raised two kids and applied principles of financial literacy.
  • Definition: Financial literacy is the knowledge, skills, and confidence to make responsible financial decisions.

Challenges in Teaching Kids About Money

  • Common Challenges:
    • Lack of time and opportunities.
    • Lack of knowledge among parents.
    • Potential personal struggles with finances.
  • Avoidance by Parents:
    • Uncomfortable questions from kids (e.g., “Are we rich or poor?”).
    • Preferred avoidance due to a busy household.
  • Importance:
    • Mitigate long-term negative consequences on financial independence and responsibility.

Characteristics of Successful Financial Education

  • Parental Role Modeling:
    • Parents as good financial examples: financial house in order, conscious behaviors.
    • Awareness and communication of values.
  • Teachable Moments:
    • Integrating money lessons into daily activities.
    • Making use of natural opportunities to discuss financial activities (e.g., budgeting, paying bills).
  • Personal Values:
    • Using personal and family values to guide financial decisions and instill these values in kids.

Observing Financial Literacy in Kids

  • Financial Milestones:
    • Kids developing knowledge in earning, saving, spending, sharing, and investing based on their age.
    • Practical applications vary by age group (e.g., piggy banks for young kids, debit cards for teens).

Appropriate Ages to Start Financial Education

  • Starting Age: Around age 5; can start earlier if interest is shown.
  • Developmental Stages: Concepts become more complex as children grow and mature.

Financial Education by Age Ranges

  • Young Kids (5-8): Simple concepts (saving in a piggy bank, learning about money through family activities).
  • Pre-Teens (9-12): Youth bank accounts, understanding earning through small jobs.
  • Teenagers (13-17): Managing simple budgets, savings for larger goals.
  • Young Adults (18-21): Investment accounts, handling more complex financial responsibilities.

Focus on Different Financial Pillars Over Time

  • Earning: Different jobs and sources of income based on age.
  • Saving: From piggy banks to formal savings accounts.
  • Spending: Mindfulness and budgeting relevant to age.
  • Sharing: Philanthropy and understanding the importance of giving.
  • Investing: Basic concepts introduced in teen years, more complex as they mature.

Common Mistakes by Parents

  • Delay in Financial Talks: Waiting too long deprives kids of early practical experience.
  • Importance of Proactive Education: Better to start early and gradually increase complexity as kids grow.

Best Practices for Parents

  • Diligent Financial Management: Kids will observe and emulate good behaviors (paying bills, saving, investing).
  • Engaging Conversation: Involve kids in financial discussions appropriate to their age and maturity.
  • Role Model Self-Assessment: Evaluate one's own behavior and its impact on children’s financial understanding.

Intrinsic Motivation in Kids

  • Linking Money to Goals: Connecting financial lessons to things kids care about (e.g., saving for outings).
  • Work Experience: Encourage jobs to understand the effort behind earning.

Handling Difficult Questions

  • Honesty with Confidentiality: Be truthful but stress the importance of privacy about family finances.
  • Age-Appropriate Disclosure: Share general principles if specific details aren't appropriate.

Delayed Gratification and Impulse Control

  • Work for Wants: Encourage working for non-essentials to understand the value of effort.
  • Philanthropy: Engaging in charitable activities to foster perspective.

Budgeting Skills

  • Introducing Budgeting: Start in teenage years; involve kids in managing aspects like phone bills and transportation.
  • Practical Application: Use real-life scenarios to teach budgeting.

Avoiding Spoiled Behavior in High-Income Families

  • Reasonable Allowance: Keep it modest to prevent lavish spending.
  • Work and Philanthropy: Encourage earning and giving to understand financial responsibility and gratitude.

Conclusion