As parents, we all want the same thing in life. It is the same thing that our own parents wanted for us. We want our children to have a better life than we had growing up. We want our kids to be successful and have more opportunities to succeed than we were given. And, that is not a negative implication on the wonderful job that our parents did raising us. I am just saying that we always want more, better, greater amount of things and experiences for our children. It is the American way to constantly improve and want to improve whether it is our lives, station in life, financial situation, and other areas. And, it is just not solely restricted to Americans either. Adults from around the world want the same things.
There are a few things that we can do to help our children be successful financially…
Teach Them About Money. Your children need to know where your income comes from. That sounds simple, but there are too many children who think that money just comes out of the ATM machine anytime you go through the drive through. You may find a lot of success by working together as a family on the family’s budget and goals for savings on big ticket items like a vacation. Have a family meeting about money regularly. There are teaching points about money that present themselves every day in our lives. We just have to spot them and point them out to our children. We owe it to our children to help them become well rounded by learning the benefits of saving, spending, investing, and giving. Our schools do not do an adequate job teaching our children personal finance. So, it is the parents’ responsibility.
Open Up The Account Statements. Show your children how you pay your bills. Show them how much your bills really are. I can remember sneaking a peak at my mother’s checking account ledger and seeing $2,000 or so written down for the account balance. I thought we were rich! That was a lot of money even to a 14 year-old. But, then she started telling me how much of that money went exactly to bills: $700 mortgage, $200 insurance, $100 electricity bill, $400 car payments, etc. All of a sudden, that $2,000 didn’t seem quite so large any more. Sharing age appropriate financial data can be a great teaching point.
Open a Roth IRA. The power of compounding interest is the greatest financial tool that we have at our disposal. And, our children have the added benefit of extra time. By opening and contributing to a Roth IRA in our child’s name while still in high school, our children will earn hundreds of thousands of dollars more than someone who begins investing after graduating from college. If our children earn an income through a part-time job, babysitting, mowing lawns, etc., we should either encourage them to open a Roth IRA or open one for them in their own name. It is not the actions that we take in our golden years that dictate whether or not we will become millionaires in retirement, it is the actions we take in our youth.
Avoid Debt & Lead By Example. We can help our children get off on the right foot by telling them honestly about the dangers of credit cards and obsessive debt. Children who see parents that are freely spending more money that they have through the use of credit cards for every transaction run the risk of raising future spenders who will not think twice about reaching for the ease of plastic and a “I’ll pay it later” mentality. For example, most parents make great painstaking effort not to cuss around their children, but they will gladly reach for a credit card to pay for something. We are teaching our children even indirectly without realizing it.
Give Them Responsibility. As your children become teenagers, let them take on a larger role in the family with respect to money. Teach them about investing and help them learn how to buy stocks and mutual funds. Make them come up with a plan on how the family, you and the child, are going to pay for college. Make them responsible for filing all of the applications, FASFA form, and scholarship applications.
By getting our children off on the right foot with financial responsibility, they will be well on their way to having a better life that we did growing up. We owe it to them to try and make them more successful than we are, and we cannot forget setting them up for success with respect to the financial aspect of life as well.