Harry Markowitz is the 1990 Nobel Memorial Prize winner in Economic Sciences, and a recipient of the 1989 John von Neumann Theory Prize.
Markowitz, who is known as the “father of Modern Portfolio Theory” for his work in portfolio construction, is a member Personal Capital’s Board of Academic Advisors, which works to devise innovative solutions to help millions of Americans reach their retirement goals and better manage their money.
He’s also a dad, which means at home, he faced the same challenge all parents do when his four kids were young: How do you teach them about money?
When asked in an interview how best to teach kids about finance, Markowitz shared his own experiences with Personal Capital:
Teaching your kids about budget constraints is crucial. The only teaching I did to my children about finance when they were growing up was to give them an allowance. They couldn’t just buy anything they wanted, and through that lesson they learned the value of money.
When we took family trips to Sea World or Disney Land, for example, I’d give them each a certain amount that they could spend in the gift shops.
If they hadn’t been used to the idea of a budget, I think they would have gone for the most expensive things in the shops. But because they learned to have a budget constraint, they were thoughtful about the things they bought.
Learning to spend only the money you have is a valuable lesson, and one that many people are still learning years after leaving the Disneyland gift shop.
If you’re considering broaching some money topics with your kids, take a look at the lessons you can teach kids as young as kindergarten — like the concepts of earning and spending — how to decide how much allowance to give them, and how to answer the five most awkward money questions they might ask.
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