Let Kids Learn Money the Fun Way: FAFO!

Introducing Financial Literacy Through Early Investment Experiences

When Cara Macksoud had five children aged between 5 and 10, she made a conscious decision to start teaching them about investing by depositing around $250 into brokerage accounts for each of them. She also allowed her grade-school-aged kids to make their own stock purchases. This early exposure to the world of finance was not just about building wealth; it was about instilling financial literacy and resilience from a young age.

Macksoud, who previously worked as a trader and now serves as a financial counselor and behavior specialist, emphasized that starting with small investments is key. “The best thing you can do is open up an account where you feel comfortable, put in $20, $50, or $100, and let the kid just start to play,” she said. Her oldest child bought $25 worth of JetBlue stock, while others invested in Apple, Microsoft, Scientific Games, Visa, Zoom, Disney, Invitation Homes, Ford, and Sony. These experiences helped her children understand the basics of investing and the importance of making informed decisions.

The FAFO Approach and Its Implications

Although Macksoud does not explicitly label her parenting style as “F— Around and Find Out” (FAFO), she acknowledges its value. FAFO is a parenting approach that allows children to experience the natural consequences of their actions, which has gained attention on social media and in publications like the Wall Street Journal. It contrasts with more traditional methods such as gentle parenting, which emphasizes empathy and emotional development.

Financial therapists highlight that parenting styles have long-term effects on how children relate to money. Macksoud believes that exposing children to real-world investing at a young age helps them develop emotional tools for financial resilience. “A parent’s role is to set their children off into the world as financially sensible adults,” she said. However, many parents indulge their children, leaving them unprepared for financial independence.

Understanding Different Parenting Styles

There are four main styles of parenting, according to mental-health experts:

• Uninvolved: Undemanding with little support or guidance.
• Permissive: Loving with few boundaries and expectations.
• Authoritative: High expectations with sensitivity to children's opinions.
• Authoritarian: High expectations with strict punishment.

FAFO parenting is sometimes considered a subgenre of authoritative parenting, incorporating elements of other styles. Jasmine Ramirez, a financial therapist, explained that FAFO can be seen as a reaction to overly protective approaches, but it requires careful balance.

How Parenting Styles Influence Money Habits

Research shows that children often adopt financial behaviors based on what they observe from their parents. Rahkim Sabree, a financial therapist, noted that internalized patterns from parental behavior significantly influence a child’s relationship with money. He emphasized the importance of consistent conversations about saving, investing, and spending.

While many parents teach their children about money, only a fraction discuss family finances or require savings. Macksoud pointed out that just as parents prioritize extracurricular activities, they should also prioritize financial education. “Why are we so willing to go out of our way to get our kids to practice, but not to teach them about money?” she asked.

Impact of Authoritarian, Permissive, and Uninvolved Parenting

Authoritarian parenting, characterized by strict rules and high expectations, can lead to challenges in financial confidence. Ramirez noted that some clients raised under this style may struggle with self-discipline and financial planning.

Children of permissive or uninvolved parents may lack clear boundaries and impulse control. They might prefer to earn more rather than manage their spending, but they often seek support from financial professionals.

Authoritative parents, who combine high expectations with emotional support, tend to foster resilience and critical thinking. Ramirez described how these children learn from mistakes and build confidence in their ability to recover.

Balancing FAFO with Guidance

Sabree warned that FAFO parenting could be an overcorrection if it lacks sufficient guidance. He stressed the importance of using mistakes as learning opportunities rather than allowing children to face serious financial hardship. Ramirez suggested that higher-net-worth clients often ask how to teach their children that not everything is handed to them. She emphasized that this can be done without putting children through unnecessary stress.

Real-World Examples of Financial Education

Travis Sholin, a financial planner, shared his own experience with budgeting and investing. At 12, he received $100 monthly to manage, including saving for the future. His first mistake was buying expensive shoes and skipping meals. This taught him the value of budgeting.

Sholin now applies similar principles to his own children, introducing them to investing concepts and letting them review their statements. He encourages parents to provide a budget and guide their children toward financial responsibility.

Conclusion

Financial education is essential for preparing children for the future. Whether through FAFO, authoritative, or other parenting styles, the goal is to help children develop the skills and confidence needed to manage their money effectively. As Macksoud and Sholin demonstrate, early exposure to investing and budgeting can have lasting benefits, shaping how children view and handle money throughout their lives.