It’s no secret that many Americans are struggling financially. Many of us are stuck in a paycheck-to-paycheck cycle or are so submersed by debt that it’s hard to imagine another way of life.
And no one wants their kids fall into the same financial traps that many find in adulthood. You want better for your children. You want your kids to confidently earn, save, and manage their money when they go out into the real world. So what exactly should you do to raise money smart kids who will thrive as adults?
Teach them the value of money early
It’s really easy for children to think that money is easy to come by. They watch as we use credit cards to purchase whatever we need. They observe the ATM magically hand us money whenever we need it, not understanding that we have to work for that money in the first place.
That’s why it’s so crucial they learn early that money comes through work. I encourage parents to provide their children with an allowance that’s tied to the completion of certain chores. If the chores are not completed, no allowance should be given. By working to earn money, your children will learn to value it.
Encourage them to track their money
The biggest mistake adults make with money is that we do not keep very good track of it. Few of us know exactly how much we’re bringing in or how much is going out the door. This is why tracking your finances is the first step to financial success. Give your children a head start by teaching them this valuable lesson early.
Have them write down in a notebook how much money they receive from their allowance, birthday gifts or other sources of income, as well as how much they spend on toys, candy and other items. This simple habit will serve them well for the rest of their lives.
Instill the importance of saving
Our national savings rate hovers around a dismal 5.7 percent, meaning we save only 6 cents of every dollar we earn. Unfortunately, the way to build wealth is through savings.
The wealthy understand that you have to live below your means, while saving and investing what’s left over. Business magnet W. Clement Stone once warned, “If you cannot save 10 percent of all that you earn, the seeds of greatness are not in you.”
Help your child create a lifetime habit of saving. Every time they receive money make sure they save some, spend some and give some of their money to their church or charity of their choice.
Teach them the value of stock ownership
Although volatile over the short term, stocks over the long term are one of the surest paths to wealth creation. Just ask Warren Buffett, one of the richest men in the world, who built his wealth through investing in stocks.
What better way to teach children this lesson than when they are young. Find something they are interested in and then make them save to purchase stock in a related company.
Perhaps they love Disney movies. Purchase a share of Disney stock and have them follow the stock throughout their childhood.
By investing early, they learn to appreciate the benefits of ownership and can watch as the power of compound interest multiplies their initial investment.
Nurture their entrepreneurial fire
At the ripe young ages of 9 and 11, Mallory Iyana and Madison Star are founders of a line of beauty and body care products designed for young girls. Their company, Angels and Tomboys, was recently featured on Shark Tank, where the girls made a deal with Daymond John and Mark Cuban.
Don’t be afraid to nurture the inner entrepreneur that might reside inside your child. They may be interested in larger pursuits like forming a company such as Angels and Tomboys or interested in smaller side hustles.
My nephew, for instance, collects plastic bottles after large public events and returns them to the recycling center to earn money. By nurturing their endeavors while they’re young you’ll create a passion for entrepreneurship that could serve them well as adults.
BMWK, what do you do to nurture money smart kids?