Do you feel like you’ve missed the boat when it comes to educating your kids about finances? It’s not too late to teach them these four basic principles.
- You can’t turn a ship that isn’t moving– Teach your child how to create movement with their finances. In other words, how do they get money? Money comes from working, so help your child think of a way to turn their skills or passions into a service or product that can earn money. Working around the house, serving as a babysitter, or raking leaves for neighbors are all simple options for kids. Remember the adage, “Teach a man to fish, and you’ve fed him for a lifetime.”
- Let the wind do the work– How can kids make their money work for them? Teach your child to always, always save a portion of what they earn, and to put those dollars to work earning a return. Like sails on a ship, this moves the boat without needing to row. Start with a simple savings account at the bank. Later, you can teach them about investing by purchasing one share of a mutual fund or exchange-traded fund, and eventually they could open their own ROTH IRA. After all, the greatest advantage a child has with investing is time. If they saved $50 a month in a ROTH IRA that earned 10% annually, after 50 years they would have almost $700,000 of tax-free money!
- Don’t let anchors drag you down– Another principal kids should learn (and this is a big one) is to not get bogged down with expenses that can hinder their financial progress. Make sure they are careful to never spend more than they earn and warn them about the dangers of debt, especially high-interest-rate credit card debt. Help them see where financial progress can take them and understand how quickly unwise decisions around spending and debt can throw them off course.
- Enjoy the journey, not just the destination– While focusing on finances can be beneficial, the pursuit of money can also become a trap. Teach your kids the importance of building lasting relationships, being generous with their finances, and how to enjoy life no matter their financial position.
If you’re like me, you worry about your kids and want the best possible future for them. You won’t always be there once they grow up and leave the nest, but if you give them the right principles, you can rest assured they have what they need for a successful voyage.