We all want to give our children access to a great education. You hear a lot about this all the time. You must get excellent grades. You must get into a great school. You must do all you can to “get on the path.”
Why? Most of the reasons behind this is so that your kids and my kids will be good employees. EMPLOYEES! The American Dream is often centered around our identity at work and getting ahead recognized as how much you make. The true look at building personal wealth over your lifetime (and the lifetime of your children) should have much more balance.
No, we are NOT against education. You should want your children to have a good education, but you should arm them with the sharpest knife you can give them: an education in personal finance and wealth-building.
The earlier we start having a personal finance plan and developing ways to build wealth, the better off we will be. You likely know this as an adult. With children, time is on their side.
If you have been reading this blog, you know that we are big to encourage you to teach your children that automatic savings from any paycheck and automatic monthly savings from checking are not a choice – THEY ARE ESSENTIAL to personal financial health over time.
Giving your children an education and really teaching them how time impacts money can give your children more than their education ever will. It is difficult to overestimate this potential.
We started with our boys in this way:
1. From paycheck one, each paycheck should have an automatic savings paid directly from your paycheck to an emergency savings fund (until you have 15 to 18 months of expenses in savings – 6 months in high-interest savings and the rest in rotating six month only certificates of deposit). This will help your children build a real safety net so they have more time to make any decision should they lose their job or have other issues that impact their ability to stay “flush with cash.”
2. See your checking account as a MONEY LAUNDERING ACCOUNT FOR OTHER PEOPLE’S MONEY. That’s right. Don’t get your value from a checking account. That money is a holding account and the money does not belong to you unless you REMOVE it to savings.
3. You cannot own credit cards – CREDIT CARDS OWN YOU. So many millions of Americans are chasing their credit score. How did this happen? The marketing “people” turned the truth on its’ head. They started showing how credit is your friend (credit is not your friend). While we don’t want you to harm your credit, the truth is that CASH IS KING….not credit. Limit your use of credit cards and always pay them off. If you cannot pay them off each month, get rid of them immediately (or put them in a safe) and pay them off. Credit cards are not your friend.
4. We like to say that in the old days there was Social Security. Then, people began to say, “Social Security isn’t enough and it might not even be around for you and me.” Now, people say, “get a 401k. But it isn’t enough. You should enroll in your companies’ 401k, but you should also have a Roth IRA or Traditional IRA that you give steady (again with that automatic word) savings to month after month and year after year.
5. It is critical that you teach your children that once they have secured the proper emergency savings fund (15 to 18 months of expenses), the should focus on purchasing assets that create their own income. This might be stocks. It might be real estate. However, the key is to have a dividend or income that comes from owning whatever it is. This is the true key to building wealth over time. For instance, if you choose stocks with dividends, reinvest those dividends for the LIFE OF THE STOCK and you will be building wealth.
Take our advice here and you will teach your children how to build real wealth over time by starting them off with an actual HEAD START over the other kids!
That’s where you want to be with your children, isn’t it?
Thank you for spending a moment with us today. Check out our main blog at http://www.stickyasset.com/blog if you want more.