6 Money Lessons to Help Boost Your Kids’ Finances

In a shocking reality check, I was going through my articles and files related to kids and money and came to this conclusion: My baby is now a college graduate and a registered nurse in a cardiovascular ICU. It seems like just yesterday, she was competing in the kindergarten bike rodeo. She goes fast.

When I was younger, I always appreciated when I mentioned her in my writing, so here I proudly check that box again. It may be too late for me, but my focus here is on several golden nuggets of advice/guidance that have the potential to make your children financially secure. I think we can all agree: That’s a good thing!

If I was just beginning my parenting journey, here are the money lessons I would try to instill:

Live the golden rule of personal finance. Spend less than you earn. The challenge of doing this is rooted in our consumer-centric society. This lesson includes the ability to differentiate needs from wants, delayed gratification, buying techniques, and budgeting skills. That brief overview should provide you with fodder to start this lesson hard and from the beginning. Think of a piggy bank with three sections: give, save, and spend.

Leverage the power of compounding. I’m not sure it’s a wonder of the world, but to continue my “I’m getting old” theme, it’s certainly been wonderful to see it work over the years. Part of running this home is about talking, but the most powerful teaching will come from showing them off. Gifts to fund custodial investment accounts (one in which an adult opens a savings account for a child and manages it) or 529 college savings plans can play a role. Stir up the excitement early on, and when they remember your role in helping them become financially independent, they’ll be all smiles. Incentivize and start saving early; compounding does not happen without time.

Watch your expenses. Naturally, this is closely related to my first two suggestions. Careful spending management can go a long way toward helping your kids live the golden rule. It’s also another way to help them harness the power of compounding. Think about it. If you fund an IRA at the current contribution limit and earn 7% over 50 years, you’d have about $2.6 million. All things being equal, if you spend an extra 1% on investment fees and expenses and only earn 6%, that number drops by about $750,000. My point? Get your kids to spend smart on all fronts.

Home runs are not the rule. A single life works well. When investing, that could mean low-cost, broad-based index funds instead of hot tips and penny bets that have a miniscule chance of amounting to a home run.

These things happen. Don’t overlook the importance of insurance strategies and emergency funds to protect our family and our finances. Not glamorous, but necessary for our children to understand.

And a final thought for you, master…

Walk your talk. In the money game, “do as I say, not as I do” is far less effective than sharing, displaying, and demonstrating good behaviors and positive outcomes. I don’t know about you, but in our family at large, I can clearly see how behaviors and beliefs modeled by parents flow not so miraculously to their children. Talk about creating a win-win.

Time flies, so help your kids get it right while you still have the (mostly) unquestioned clout.

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