Kids have the biggest advantage in accumulating wealth, time. If you teach kids about money while they are young, then they have more years of compounding wealth to enjoy later in life. Less money saved now, but for longer, is the secret formula.

Every time your kid gets a dollar from the tooth fairy, a few dollars in a birthday card, or money for doing chores, they immediately want to spend it. Instant gratification is exactly what drives most kids behavior. Your role is to teach your child the value of money and the power of money when it is used wisely. When you teach kids about money effectively enough to have them reconsider buying that pack of baseball cards, you’ve done well.

Hypothetical Summer Lemonade Stand


Let’s pretend you earn $60 per summer every year from age 6 to age 59. That small investment of $3,240 over 59 years actually grows to $102,523.17!

Time is the most valuable element of growing wealth

Encouraging Entrepreneurship

Early entrepreneurship is a very effective way to help children understand the economics of society. At early ages you will demonstrate how selling a product or service can be a time trade business. Little entrepreneurs will quickly see that for every lemonade they sell they could have had their little sister doing the work while they sat inside in the air conditioned house.

As your youngster tries different income producing activities such as baby-sitting, lawn mowing, selling Girl Scout cookies, or making a craft to sell – you will notice them trying to efficiencies. They will try to rope other kids into doing the hardest work or find a way to automate some elements of the tasks at hand. These are all great lessons if you can help them see the value of all their ideas.

Once your child starts to recognize how much time and effort it takes to earn $5 and that combined with the iPhone they have been begging for being $999, business efficiencies will become even more important.

Focusing on the Future

Helping your child to see the value in delayed gratification will make parenting so much easier. Correlate their business activities and income to future plans. If you can get them excited about saving up for a life size Barbie or trip to Disney Land, you’ve got a lot better shot of them not throwing a fit about spending the money as soon as it hits their piggy bank.

Let the child be in charge of how big to set their future goals. If your kid wants to save up to go visit where Belle grew up in France or visit a Pikkachu cafe in Tokyo, let that be their goal. The little bit of money they earn now has more value in the future than it does now as long as you properly invest it.

Read More About: Setting Family Goals

Rewarding in the Present

Teaching kids about money is a balancing act. You can’t just take all their dog walking money and invest it without allowing them to enjoy any of those funds in the present. Cue the minimalist mom in me. Try to guide your children to spend their hard earned money on something that will give them value beyond just the excitement of spending money.

It might be a little confusing in our consumer culture on how to objectively understand if an item will matter to us in 2 months or a year down the road, but my fall back is to always focus on experiences. It won’t always work, sometimes that stupid plastic doll will win the hard earned money from your kid. But, sometimes you can show your child that going for a princess spa day or seeing a limited time art exhibit is the right path. Experiences will create memories that are another kind of value in-itself.

teaching kids how to earn money

Taxes for Kids

Be willing to seek legal advice, particularly when it comes to filing taxes for your children. For the most part your child will likely be under any income thresholds to make taxes a problem, however if they are a hustler….

Another key factor to consider is if your child will be contributing earned income to a ROTH IRA, SEP IRA, or other similar investment account. For certain accounts the money contributed is only allowed to be income and not gifts.

Be careful if your child starts accepting credit cards on an account you’ve opened because that income can be reported under your tax ID. Don’t let any of these potential pitfalls deter you from encouraging your kids to create an income. The lessons your child will learn from young entrepreneurship far outweigh any extra paperwork you will have to endure.

Generational Wealth

If you get to the point where your child is earning enough money to file taxes, open new accounts, and make a business plan, congratulations. Creating generational wealth can happen in one generation if you start young enough.

A bench mark that I like to keep in my head is the number $10,000,000. If you can get 10 million dollars into an account then the beneficiary is able to pull out $300,000 per year indefinitely with very little risk of affecting the principal balance. Did that make sense?

What that means is, money grows long term at around 10% per year if you invest in index funds. That means pulling out 3% of a ten million dollar investment won’t make it go down from the ten million mark. Every year you can pull out the $300,000 to live off of and the ten million will keep growing and growing.

You’re probably rolling your eyes thinking that it’s impossible to get that much money into an account. If you have a child younger than ten, indeed you just might be able to make that number happen. $1,000 per month invested in index funds from the time a person is ten years old, will be ten million dollars by their retirement at 59.5 years old.

I am not a tax consultant or investment advisor or money expert, this is just the plan I have for my own kids to grow generational wealth.

teach kids money investing

Kids Financial Literacy

Children learn money habits from their parents. Take the time to study money and how you can leverage your income into assets and turn those into generational wealth. Our financial futures are a whirlwind of uncertainty which is why knowledge plus time is your best opportunity for massive wealth.

Teaching kids money isn’t something you need to wait for high school or college to do. Of course you can start including your kids in discussions about financial decisions today.

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