Financial Literacy For Kids

Dear Reader,

I am often asked, “At what age should I start teaching my child about money?”

My answer is, “When your child becomes interested in money.”

Then I say, “I have a friend with a five-year-old son. If I were to hold up a five-dollar bill and a twenty-dollar bill and ask the child, ‘Which one do you want?

“Which one will the child go for?”

The person who asks me the question often says without hesitation, “The twenty-dollar bill.”

I reply, “Exactly. Even a five-year-old child already understands the difference between a five- and a twenty-dollar bill.”

Different educational psychologists have told me that the ages between nine and fifteen are crucial in a child’s development. This is not an exact science, and different experts will say different things.

I am not an expert in child development, so take what I say as a general guideline rather than the words of professional experience. One expert I spoke with said that at approximately the age of nine, children begin to break away from their parents’ identity and seek their own. I know that was true for me because, at the age of nine, I began to work with my rich dad. I wanted to break away from my parents’ reality of the world, so I needed a new identity.

Another expert has said that between these ages, children develop what is called their “winning formula.” This expert described the winning formula as the child’s idea of how he or she will best survive and win. I knew by age nine that school was not a part of my winning formula, especially after my friend Andy was labeled a genius and I was not.

I thought that I had a better chance of being a sports star or being rich than an academic like Andy and my dad. In other words, if a child thinks that he or she is good at school, his or her winning formula may be to stay in school and graduate with honors. If the child is not doing well in school or does not like school, the child may seek a different formula.

This expert also had a few other notable points on winning formulas. This expert said that conflicts between parent and child begin when the child’s winning formula for success is not the same as the parents’ formula. The expert also said that family problems begin when the parents begin to impose their winning formula on the child without first respecting the child’s formula. A parent needs to listen closely for the child’s winning formula.

Before we continue with the idea of giving your child power over money, there is something worth mentioning for adults. This expert also said that many adults get into trouble later in life when they realize that the winning formulas they came up with as kids are no longer winning for them. Many adults then seek job or career changes.

Some continue to try to make the formula work even after they realize it is not working. Still, others go into a depression, thinking they have failed in life, instead of realizing that it used to be a winning formula that has just stopped winning. In other words, people are generally happy if they are happy with their winning formula. People become unhappy with life if they are tired of their formula, or if the formula is no longer winning, or if they realize that their formula is not getting them where they want to go.

Winning Formulas with Power

When it comes to money, many people develop a winning formula without any power. In other words, people often set up a losing formula for money because they have no power. As strange as it may seem, they set up a formula that loses them money because that is the only formula they know.

For example, I recently met a person who is stuck in a career he now hates. He runs a car dealership for his dad. He makes a good income, but he is unhappy. He hates being his dad’s employee, and he hates being known as the boss’s son. Yet he stays there.

When I asked him why he stays there, his only reply is, “Well, I didn’t think I could build this Ford dealership on my own. So I thought I’d best stick it out until the old man retires. Besides, I’m making too much money.”

His formula is to win with money, but he loses finding out how powerful he could be if he broke free from security.

Another example of a losing winning formula is a friend’s wife who stays at a job she loves, but where she is not getting ahead financially. Instead of changing her formula by learning some new skills, she takes on odd jobs over the weekends and then complains that she does not have enough time with her kids. Obviously, her formula is: “Work hard at what I love, and endure.”

An Ounce Versus A Ton

My poor dad often said, “I’ll never be rich. I’m not interested in money,” or “I can’t afford it.” Maybe it was having all those medical bills to pay or struggling financially for much of his adult life that caused him to say these things. But I don’t think so.

I think it was his ounce of perception that helped bring on many of his financial problems.

It is parents who can most influence a child’s perceptions of life. As mentioned before, Kim and I do not have children, so I do not tell parents how to be better parents.

I write about how to help mold a child’s perceptions of money. The most important thing a parent can do when it comes to money is to influence the child’s perception of money.

I want parents to give their children the perception that the child has power over money, rather than the perception that the child is a slave to money. As my rich dad said, “The more you need money, the less power you have over money.”

Possibly the best gifts I have received came from my two dads in the times when I was in the most trouble. When I was flunking out of high school, my schoolteacher dad always reminded me of how smart I was.

When I was losing my shirt financially, my rich dad kept reminding me that truly rich men have lost more than one business. He would also say that it was the poor people who lost the least money and lived in the most fear of losing the little they had.

So one dad encouraged me to take my academic failures and turn them into strengths. And my rich dad encouraged me to take my financial losses and turn them into financial gains. They may have taught different subjects, but in many ways, both dads were saying the same thing.

It is when children see the worst in themselves that it is the parents’ job to see only the best. You may notice that this works not only on little kids but on grown-up kids also.

When things are the very worst in your child’s life, you as a parent are presented with a great opportunity—the opportunity to be the best teacher and friend your child will ever have.


Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

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Robert Kiyosaki

Robert Kiyosaki, author of bestseller Rich Dad Poor Dad as well as 25 others financial guide books, has spent his career working as a financial educator, entrepreneur, successful investor, real estate mogul, and motivational speaker, all while running the Rich Dad Company.

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