As part of our business we work with individuals and families helping them to develop an investment and financial plan. We are often asked “what and how should I teach my children about money?”. We hear that question frequently enough that we thought we would share some of the advice we give our wealth management clients. Because, regardless of whether you are a 401(k) client or a private wealth management client, these principles have application for each of us.
Money is not Evil – We have all heard the saying, “Money is the root of all evil.” Let’s take a step back and truly examine that statement. The same dollar can be used for delivering aid and comfort to someone less fortunate or for buying destructive drugs or supplying the means for vengeful acts of harm. It is not the money that harms or does good; but, the action of the one who holds the money. Money has value; but not greater than moral rights. Teach children the responsibility of money not as a burden; but as an opportunity to do good, not only for them; but for others. Let children see and feel the passions you have in using your money to benefit others – encourage them to participate with you in your charitable uses of money.
Budget Discipline – Critical to Financial Success – Distinguish between needs and wants. Start with your needs and then teach that work, ingenuity and patient discipline will allow wants to become reality. Make your money work as hard as you do; this is done by tracking your money activities – a budget. Finally, use debt wisely – use it for needs and keep it under control. Credit is all too accessible and easy to accumulate. Be an earner of interest and not a payer of interest. Share with your children from your own experiences and help them to earn self-confidence and self-reliance from their opportunities to work and earn their own money.
Pay Yourself First – This concept should be woven into a budget discipline and compliments the idea that money can be used for good. One of the certainties of life is that change will happen. Sometimes that change is beneficial and sometimes it is not. Create an emergency savings to offset those changes that are disruptive in a bad way. Again, sharing examples of how putting money aside for the proverbial “rainy day” has helped you will instill within your children the essence and need to prepare for the unexpected. Opportunities are realized when we have the means to recognize them and act upon them. Opportunities often require money, paying yourself first will allow you to see opportunities that others will have to pass by.
Rule over your money – don’t let your money rule you.
We enjoy and are grateful for the opportunity to work with each of you. Enjoy the upcoming Spring weather.