I believe we live in the greatest country in the world, but I do not believe that success comes without hard work, commitment and some degree of risk. If our children grow up thinking that success, particularly financial success, is a guarantee they will more than likely fail. The earlier we instill the correct beliefs, thought processes, and behaviors the more chance our children have of achieving financial success.
So in Wayne’s world, here are eight ways you can help maximize your children’s financial potential. None of these are easy, but they are all worthwhile.
1. Walk the talk. What is the best way to teach your kids to not get into credit card trouble? Use cash. See, when your kids become 18 all they know about money is what they’ve seen you do. If you buy everything with credit, if you borrow to buy what you want, but cannot afford, this will become their norm too. Teach your children that cash is king and patience to buy is prudent.
2. Hand over the reins. Somewhere around the age of 13 give your children some of their own money to spend. This may give you a few gray hairs, but children need to learn that if they run out of money there is no more. So slice out their clothes allowance- or some other area that you think is practical – and hand over the reins. You can advise them, but the end decision is theirs and so are the consequences- good or bad.
3. Teach them a work ethic. As Sam Ewing said, “Hard work spotlights the character of people: some turn up their sleeves, some turn up their noses, and some don’t turn up at all.” Assign your kids chores so they learn how to work. If you don’t need them to do anything for you, assign them tasks for the neighbors, or other family members. Coach them along the way so they understand the importance of having a positive attitude when it comes to work.
4. Teach them to save. With work comes the benefit of earnings. Teach your children to save 20% of everything they earn. I think our children will have to start saving earlier and be smarter about their money than we had to be. There are more things for them to buy, higher taxes, and they’re constantly bombarded with financial pornography convincing them they need to spend money to be happy. Teach them to pursue true happiness and to save their money!
5. Life happens. Teach them to be prepared. Help your children to start a savings plan that is exclusively for emergencies. This account should be off limits and for unexpected events only. The money is not for a pair of sneakers, or a new tech gadget, but for when an emergency occurs. If they save into the account regularly they’ll be financially prepared for life’s unexpected events from the start.
6. Teach them to be Unemotional, Diversified and Systematic with long-term investing. Open a stock mutual fund with some of their savings. Let them experience how market fluctuations impact their investment. Watch the news with them to dispel the myths and emotional reactions being broadcast. They need to learn to be contrarian to the financial pornography to be successful. Help them become familiar with investing!
7. Teach them to be charitable. Encourage your child’s giving heart by teaching them how to give responsibly. Some young people…I suppose some old people too…would gladly give everything they have away. Teach your children to make charitable giving a part of their budget. This will enable them to give consistently without sacrificing their other financial goals. Be creative with your lessons. Simple conversations can leave lasting impressions.
8. Support their dreams with a plan for their future. Start a 529 plan for your children’s college education and be systematic about saving. Talk to them about their career aspirations. Demonstrate the importance of being proactive and having a plan to reach a goal. Show them that you believe in their potential by having a plan, a process, and the interest to help them make their goals turn into reality.
Remember that they are children. Let them play, study and compete but somewhere if you intertwine these eight lessons I believe they will grow into financially successful adults!