Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.
A prominent nutritionist once explained our obesity problem by pointing out that for thousands of years, humans struggled to find enough calories to meet their minimum daily requirements. Today we can walk into a convenience store and come out two minutes later with 1,000 easily obtained calories.
We face a similar issue in raising our kids to be fiscally responsible adults. Every generation is motivated to provide their offspring with a secure, comfortable childhood and the tools to achieve greater economic success. But in today’s affluent society, it’s too easy to over-indulge our kids. And children who get too much, too early are at serious risk of becoming unproductive, unaccountable and unhappy adults.
This may seem like an “uptown problem,” but even parents of more modest means can make things too easy for their offspring. Parents at every income level wrap their children in material comforts – iPads, lavish vacations, new cars at 16 — regardless of the cost or the terrible message it sends about fiscal responsibility. The result: children who don’t know what it takes to replicate their parents’ lifestyle.
Here are some ways to make sure your success is a blessing and not a curse to the next generation:
Make them wait. If you expect to transfer significant wealth via trusts, block access to that money until your children are well into adulthood. This will force them to develop self-reliance rather than simply waiting out the clock. It’s OK to allow your kids limited use of the trust to pursue an education or invest in their future. But remember, as George Clooney’s old-money character observed in “The Descendants,” the object is to give the next generation enough money to do something, but not enough to do nothing.
Make them work. Be sure your kids understand from an early age the relationship between working and having money. Give them small chores around the house when they are young. As they get older, encourage them to take jobs to earn money for things they want.
Make them financially literate. Teach them about saving and investing. Show them the power of compound interest; explain the stock market, checking accounts and the value/dangers of personal credit.
Make them save. Show your children the importance of setting financial goals – both short-term and long-term – and working toward those objectives.
Make them give. Teach your kids the importance and rewards of giving back to society. Urge them to do more than just donate money; get them involved in hands-on projects. It will broaden their worldview and open their hearts.
Kids often rise to the expectations and examples we set for them. If your kids see you living these lessons, there is a good chance they will internalize them.
How are you teaching your children about money?
– By Wes Moss, for Atlanta Bargain Hunter