Teaching Personal Finance to Newborns

No, I still won’t tell you the gender.

The emotional journey of becoming a parent for the first time ranges from the highest of highs to plumbing the deepest depths of despair. You lay awake at night struggling to answer questions like, “What if I’m bad at it?” and, “How do I raise a person that’s resilient and strong, but thoughtful and compassionate?” Every other decision you’ve ever made in your life seems trivial by comparison, because you’re suddenly and keenly aware that sometime very soon, someone will hand you a fragile, helpless human being and say, “Here. Make this into a functional, happy, successful adult.”


All parents set out to meet the needs of their children, be they emotional, educational, nutritional, or otherwise. From day one, we are shepherding our newborns along a series of well-worn paths that– with a little luck– lead to the ability to survive and thrive independently. We bottle or breast feed them, which leads to baby food, which leads to solid foods, which leads to a normal adult diet. We place them on their stomachs to exercise their neck muscles, which leads to rolling over, which leads to crawling, which leads to walking, which leads to running.

Teaching Finance to Newborns Isn’t About Money…

Well,” you might say, “My kid’s going to be set financially. I’ll set up a 529 plan for his or her college savings, open a taxable investment account, and regularly deposit into a series of low-cost, passively-managed index funds. Without working a day in his or her life, he or she will be a millionaire by the time they’re 30.”

Amazing! Please do that! That said, what you’re describing isn’t financial success– it’s good financial fortune. If you’re anything like me, getting on the road to financial responsibility and/or financial independence wasn’t something that anyone else could do for you. In the absence of good financial habits, you would have spent any amount of money saved for you irresponsibly. Really achieving your financial goals required recalibrating your moral compass, because fundamentally, financial responsibility is about adopting an uncommon set of personal valuesIt’s about eschewing the conspicuous consumption common in society in favor of a focus on what really matters: time.

How can we train our babies from the beginning to have the values required to achieve financial success? How can we train them, from the day they are born, to be the wise stewards of whatever financial windfalls or opportunities come their way?

I might catch heat for even suggesting that such a thing is possible. Of course, teaching newborns about abstract concepts like saving prodigiously and spending wisely– or even about the concept of money itself– may sound a little like training a goldfish to do parkour. Newborns aren’t capable of abstract thought and an awareness of object permanence is still many months away.

… It’s About What Really Matters

The amazing thing about babies is that their needs are very simple: Food, shelter, love, laughter, and time with those who love them. Gloriously, frugality and FIRE are all about realizing that those same things are all that really matters.

Let that sink in! The needs of a newborn baby– what the baby inherently values— are 100% in common with the ethos of financial success and financial independence! That means somewhere along the way, we go from being perfect little minimalists with pure, uncomplicated needs, to prototypical consumers with increasingly complicated desires disguised as needs. If we want to raise a child that values experience over excess, and time over money, all we need to do is nurture the values they are already born with.

With that said, here are some of the principles we plan to adopt with our baby to try to nurture those critical personal finance skills (while hopefully also producing a well-balanced, happy individual):

  1. You cannot spoil a baby with too much love, so express love openly and constantly. In his book The Happiest Baby on the Block (affiliate link), Dr. Harvey Karp makes the point that it is literally impossible to spoil a newborn. There are many people out there– doctors included– who suggest that rushing immediately to a newborn when they cry will somehow “spoil” them, that they are devious little manipulators who will employ cries to elicit their desired response, and that we must break them of that habit for their own good.
    This is, of course, complete nonsense. A newborn doesn’t have the mental development required to be manipulative. The personal finance corollary to this is that by denying babies immediate comfort during those early months of development, we not only produce less secure children, but we risk turning love into a transaction. Love becomes a reward for desired behavior rather than an unconditional bond that is present regardless of the outcome. If we want to develop values of love and compassion, then it has to be entirely separate from discipline or good behavior.
  2. Deemphasize toys as rewards. Emphasize play. All too often (and we’re sure to do it ourselves), toys are given to a child as a means of distracting them so that we can get something done, or as a reward for good behavior. From a minimalist perspective, it establishes physical things (which will one day be purchases) as the reward, which is the opposite of what we aim for.
    That’s not to say that we plan to deprive our child of toys, we just hope to have the time and energy to direct the purpose of the play. Play should be all about strengthening valuable skills like imagination, linguistics, and socialization. Simple toys are more effective than high-tech electronics for that purpose. In fact, there’s even evidence that boredom itself is conducive to raising more creative children, and that the current societal reliance on screens-as-babysitter is to the detriment of child development.
    Simply put, we want play with toys to be about the experience, not the ownership of the toy or mindless stimulation. When play strengthens the child’s ability to interact with the world itself, it becomes easy to later teach the lesson of experiences in that world being more important than any possession.
  3. Present age-appropriate choices. Eventually, we have to allow our children to make their own choices. Whenever possible, rather than saying “no” to an unwise purchase, we will offer a choice between a valued experience and the sought-after trinket. We’ll ask questions like, “How long will this make you happy?” “Is this something you really want more than <blank>?” We won’t always like the outcome, but it will at least give us a chance to share our thought process and promote good decision-making.
  4. Display our appreciation for the important things, and prioritize family time above all other things. Of course, above all children are impressive mimics. They see everything: our words, our subtle tics, and especially our value system. Mrs. V and I hope to be examples of putting our family time first– above work, purchases, and everything else. Even a newborn perceives the difference between both parents being present and happy versus one or both parents being unhappy, or gone at work most of the time. We’ll make a point of spending time together as a family whenever possible.
    As our children grow (and as more and more time together is achieved through FIRE), we’ll emphasize that we are fortunate, and that we only have the opportunity to share so much family time because of our hard work, and our avoidance of impulsive or bad financial habits.

Of course, we’re at the very beginning of this parenting journey. We we try, fail, and try again. Inevitably, how our little one turns out is as much about who they were born as it is about our good intentions. Still, it pays to begin with a plan, and then to learn and adapt as necessary.

How do you think we can help children to make wise financial choices from the very beginning? If you have kids, did you give any thought to their financial education when they were extremely young? What worked, and what didn’t? Let us know in the comments below!

2 thoughts on “Teaching Personal Finance to Newborns

  1. GYM

    These are great suggestions! Our baby (not a newborn anymore!) is lucky enough for me to be on parental leave and his dad to work part-time, we shower him with so much love and attention, he gets both of us giving him a bath! When/if baby number 2 pops out the second child will definitely not get as much attention. Great idea about de-emphasizing toys as rewards but I think this will be more in the toddler stage or older when they can reason. Newborns don’t really like toys too much anyways, so that’s true- a smile from mom or dad I think is enough reward! 🙂

    Hope things are well in the Frugal Vagabond family (and you are getting sleep!)!

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