When my kids receive money, I now ask them “How will you invest or save it?” as opposed to “How will you spend it?“
My eldest is starting to make her own money with side jobs. So I want to give her financial tools that will help her grow her money all the way into retirement (spoiler alert: it’s not a regular savings account but a custodial ROTH IRA!) So the path to helping children to become millionaires is a long but straightforward one.
I may teach them good values, how to travel to luxury locations on points, but am also trying to teach them how to grow their money. I love my parents but but they didn’t teach me good financial and investment strategies. But I am trying to change that with my kids and create the best financial foundation for my own kids. Now it is easier than ever helping children to become millionaires, without starting with a million dollars.
Mindset Shift towards Investment
A millionaire mindset is the first step towards helping to create more millionaires. I took an investment course once which challenged me with the line I started off with here – when you receive money, start with an investment mindset.
Teach your kids to think longer term. Shift their thinking to an investment, rather than spending mindset. This is a harder concept to grasp. But it is an important perspective to have. We started explaining to my eldest how she also owned shares in companies she is familiar with like Apple. Kids are definitely excited when they feel like they have ownership in a company. They may ask more questions and be curious about how they can be owners in more companies. After they understand basic concepts, they will understand why investment can help them to truly grow their money.
Teach your kids the difference between keeping money in a bank account vs. in an investment instrument. While investments can be risky, investing in a variety will earn greater returns than a regular savings account.
Savings account vs. Investment account value in 25 years
Savings – $500 saved today at 3% interest rate = $1,044.51
Investment (S&P index) – $500 saved today at 10% annualized returns = $5,500
Financial Education
Why do schools teach math, science, and English but not teach basic financial concepts? Financial education is often just picked up through experience and maybe external courses. But a solid financial education helps to sow the seeds not just for financial stability, but to build wealth. Private organizations and even governments are starting to share the importance of financial education for kids. Maintain and use this education and the path to millionaire status is certainly within reach.
Teach your kids financial education consisting of:
– Percentage to save/spend/invest
– Budgeting for specific goals
– The importance of investing
– Savings towards the long-term
– Types of healthy debt
Look out for free courses (this Khan Academy one looks great but donate if you can!) to apps that teach kids everything from budgeting to the importance of insurance.
Adopt the right investment tools
Adults that use the right investment tools can both save (on taxes) and increase their wealth sooner. Help your kids understand different types of financial investment tools as well as their purposes. As your child picks up more financial education, you can choose the types of tools that would work for her including:
– Savings account
-Custodial brokerage account
-Custodial Roth IRA account
Once kids learn financial education and adopt the right tools, they will well be on their way to becoming millionaires.
Setting your kids financial futures and not having to worry about their financial stability is true luxury.
