In honor of Father's Day, a personal finance expert shares five crucial money lessons that parents can teach their children early on to set them up for a future of financial success.
Father's Day is a special occasion to reflect on the invaluable lessons we've learned from our dads and consider the essential wisdom we wish to impart upon our own children. My father's life and actions, even though he passed away almost 35 years ago, instilled in me a deep understanding of what to do and avoid with money.
Teaching children smart financial habits at a young age can profoundly impact their future prosperity. Here are five fundamental concepts I've shared with my three children since they could comprehend them:
Pass on Financial Wisdom This Father's Day
Decide whether to give your children an allowance or have them earn it. In my opinion, the crucial factor is not the allowance itself but whether they receive it as a gift or through effort. When kids earn something through their own work, they appreciate its worth. They realize that effort translates into income, laying the groundwork for a future as an "earner."
You might be thinking, "Lose money?" Yes, lose money. No matter how many personal finance courses they take, there's no better teacher than real-life experience to teach them what not to do with their money. Open accounts with platforms like Robinhood, Acorns, or Coinbase and encourage them to save and invest. Even if they lose money, it's a learning opportunity that teaches them how investments operate and how to make informed decisions.
Pass on Financial Wisdom This Father's Day
Introduce your children to the power of compound interest as early as possible. Explain how investing money earns interest on both the initial amount and the accumulated interest, significantly increasing their wealth over time. Use clear examples and graphs to illustrate how savings can multiply over the years, instilling in them the importance of saving a portion of their income.
Emphasize that money doesn't grow on trees and that social media companies target them with spending advertisements. Teach them the valuable "acid test" concept: before making a purchase, ask yourself three crucial questions: Do I want it? Do I need it? Can I afford it? If the answer to any of these questions is no, refrain from spending the money.
Pass on Financial Wisdom This Father's Day
Instill the value of generosity in your children. Encourage them to donate to charities or volunteer their time, instilling in them the importance of helping others and enriching their own lives in the process. With the growing wealth gap in America, it's crucial to educate children about giving back to their community and country.
Father's Day is an ideal opportunity to transmit these valuable financial lessons to your children. By embracing these principles, you'll equip your kids with the tools they need to navigate their financial journey confidently and wisely throughout their lives.
Pass on Financial Wisdom This Father's Day
