Welcome back to another edition of Business & Budgets! Today we are going to talk about how to teach your kids about money. This is a really touchy subject for many people for a variety of reasons, maybe your parents taught you a poverty mindset, maybe you don't manage your money well, maybe it's something completely different. Either way don't make money a touchy subject with your kids if you want them to achieve the highest levels of financial success. Teach them about your biggest money mistakes so that they don't make them.
If you want to set your child on a path to financially success, you must teach them about money early! The power of compound interest is definitely your friend, so the sooner you set them up, the better. I am working on a book, Breaking the Chains: Teaching Your Kids The Money Lessons You Weren't Taught, that is set to drop this winter that will go further into detail about this subject, though this blog will get the ball rolling. So let's jump into the 5 steps to setting your child up for financial success.
1) Teach them not to fear their finances.
The worse thing you can do to your kids is teach them to be afraid of money. To teach them that it's overwhelming and too heavy of a task to bear, will make them fear growing up and taking on that level of responsibility.
This of course could lead to an even worse outcome. Having an adult sleeping on your couch for ten years because I he ever heard was "bills, bills, work, work."
2) Don't teach your kids a poverty mindset
A poverty mindset is definitely taught by parents and other adults that children have close relationships with. If you always tell your child you don't have money for this or that, they will start to question the structure of things. Why are you always at work if they can never get something they want? They won't understand why you both don't just stay home and hang out everyday.
Explain to your children what you spend your money on. Talk to them about bills, taxes, mortgages, student loans, groceries, daycare costs, etc.
Talk to your kids about your goals. Are you paying off your debt? Are you saving money for a house? Making investments? Instead of focusing on the current sacrifices, focused on the future success and fun you have planned.
3) Teach them to earn their own money.
It is never too early for your child to earn their own money. You can even give them a kickstart before they enter this world. At your baby shower have a Baby's First Saving Account box for people to fill with dollars. Once your little person is old enough, open them a custodial account with your bank.
Pay them for their chores or whatever other responsibilities that you think are important. Rewards should be earned instead of just handed over, that's how it works in the real world.
Assist them with their business ideas. Whether it's cutting grass, selling lemonade or something completely new, support them. This is a great way for them to learn about expenses and profit.
4) Teach them how to manage their own money.
Once your kids start to earn money their eyes will quickly widen as they realize their new purchasing power. It is important that you teach them that money has more important priorities than just being spent on fun stuff.
This is an easy opportunity to teach them about savings. Encourage or automatically move some of their money into a savings account, 10-20% of all earnings is a great start.
The next lesson is investing. If you have not been investing yourself, now is the time to start your research on stocks, bonds, IRAs, REITs and any other opportunities that spark your interest.
5) Educate and empower them.
Teach them to expand their knowledge independently. Encourage this by taking them to the library and picking up some personal finance books for yourself while you are there. Apply the tactics you learn!
Communicate with them as openly as possible and answer all their questions regarding money and finance. If you don't know the answer, help them find it.
Thanks for reading my post and I help these tips are helpful as you kickoff your child's financial journey. Make sure to like, share and most importantly subscribe. I have some great Black Friday deals coming up for you and your little person to enjoy.