The Untold Secrets to Raising Kids Who Will Be Financially Successful
Many of us were raised by parents who handled bills without explaining the process. It’s crucial to equip kids with financial knowledge as they navigate money matters throughout their lives.
Ensure a brighter future for your kids with these five strategies to set them on a path to greater success than your own:
- Speak Freely About Finances and Money At Home: Discussing money can often be considered taboo within households. However, the key to becoming comfortable with financial matters is through open communication. Clarify that money isn’t a daunting or negative force but rather a tool for crafting the life one desires. Delve into conversations about credit, saving, debt, budgeting, and the role of money within the household.
- Engage Children In Making Some Financial Choices: While your kids may not handle tasks like paying the electric bill or deciding on house renovations, there are day-to-day financial decisions they can participate in. Have them decide at the grocery store what item is better value, or during a visit to the bank, explain the deposit withdrawals and account balances. Consider opening up an education savings account with them and keep them informed about its growth and the implications for university expenses.
- Open a savings account, an In-Trust For Investment account for them, and then put them to work: This year, when they receive holiday money, open a savings account for them, and then open an In-Trust For investment account for them. Consider implementing a system where your children earn money for completing chores around the house. When they get paid, move some of the money into an investment account and invest the money with them. Assigning a monetary value to their efforts not only teaches them the concept of working for money but also instills a sense of responsibility. Encourage them to save and invest a significant portion, say 30 or 40%, of their earnings by paying themselves first. This practice not only fosters the habit of saving but also imparts the valuable lesson of living beneath their means. By experiencing the correlation between effort, earnings, and savings, your children develop a foundational understanding of financial responsibility that will serve them well in the future. Consider taking financial education a step further by opening an “in-trust for investment” account for your children. This type of account allows you to manage the investments on their behalf until they reach a certain age. Use this opportunity to teach them about the basics of investing. Explain how investing in companies works, the concept of stocks and bonds, and the potential for their money to grow over time. If these concepts are unfamiliar to you, it’s worth considering collaboration with an investment advisor or portfolio manager. Working with a professional can not only help enhance the financial literacy of your children but also contribute to your own financial knowledge. An experienced advisor can provide guidance tailored to your family’s specific needs, ensuring that you make informed decisions for both your children’s financial education and your overall financial well-being. Introducing your children to the world of investments early on not only imparts valuable financial knowledge but also instills a sense of long-term planning and the potential benefits of strategic financial decisions. It’s a powerful way to set them on the path to financial literacy and future success.
- Instill the Practice of Saving in Them From a Young Age, Starting as Early as Possible: As a financial expert, I consistently emphasize the significance of initiating savings at the earliest opportunity. This is where it all begins. It’s crucial to ensure that your children grasp the importance of saving and the reasons behind it. Engage in conversations with them about opting for an education savings account rather than relying on student loans, building an emergency fund instead of accumulating credit card debt, and prioritizing savings for a substantial down payment on a home over incurring high mortgage debt. Instilling the understanding of the advantages of saving money early on can shape their financial decisions for the better.
- Become A Role Model For Your Children: This is a crucial step — if your children witness you effectively managing money, they’ll likely adopt similar habits. A positive financial example at home can significantly influence their approach to money management. Conversely, if children are exposed to financial anxiety during their upbringing, it may carry over into their own financial experiences later in life. Demonstrate the right way to handle money by showcasing responsible financial practices, and setting the stage for your kids to develop a healthy relationship with finances.
Taking the initiative to teach your children healthy money habits not only sets them on a path toward financial success but can also have a profound impact on your financial well-being. By instilling positive financial values, leading by example, and seeking professional guidance when needed, you create an environment that fosters financial literacy and responsible money management. The process of educating your children about finances becomes a two-way street, influencing their habits while simultaneously enhancing your understanding and approach to money. In investing time and effort in their financial education, you may find that you, too, reap the benefits of improved financial habits and a more secure financial future.
We’ve assisted our clients through every stage of life. Even when you’re not aware that something might impact your financial future, it likely will to some extent. Engaging in a conversation with your investment advisor about any financial changes is an excellent approach to keeping your financial goals in focus.
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Joe A. Macek, FMA, CIM, DMS, FCSI
Investment Advisor, Portfolio Manager
iA Private Wealth | iA Private Wealth USA
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1 年I disagree with paying children to do chores around the house. They live there thus they should contribute to the household work. My step-sons always wanted money to do anything to help and it turned me off because I felt they should be helping anyhow without being asked and without expecting compensation.