I feel incredibly grateful that my parents were always diligent savers, which allowed me to start my journey in the US. Their hard-earned savings secured me a one-way ticket, packed my luggage with essentials like pots and blankets, and $400 in my pocket about 35 years ago. However, throughout my career, I've often encountered people expressing sentiments like, “My parents didn’t teach me about money,” or, “My parents weren’t the best role models when it came to finances.” These conversations have deepened my appreciation for my parents' lessons and the values of my cultural background. Sadly, our schools fall short in teaching kids about money matters as well. That’s why I want to share some practical tips for parents who are eager to help their children build strong financial habits.
1. Start early. I think it’s much easier to build good habits right from the beginning than to try and fix bad ones later on. Kids are incredibly observant and easily influenced. Even a toddler can figure out how easy it is to get a new toy, whether it’s from their parents or grandparents. They might not fully grasp the ideas of value or price yet, but they definitely pick up on the patterns around them.
2. Teach our children a healthy relationship with money. Keeping relationships is often more valuable than letting them go easily. It's important to model the behaviors you want your children to adopt—like saving money and living within their means. Over time, you'll likely be pleased to see your kids embrace these habits, which can greatly benefit them throughout their lives.
3. Differentiate needs vs. wants. Keeping relationships is often more valuable than letting them go easily. It's important to model the behaviors you want your children to adopt—like saving money and living within their means. Over time, you'll likely be pleased to see your kids embrace these habits, which can greatly benefit them throughout their lives.
4. Get them a job. I think helping kids learn to make good decisions is really important. One way to do this is by considering allowances or giving them age-appropriate chores so they can earn their own money. In addition, give them more freedom to decide how to spend it, and allow them to make some mistakes so they can learn firsthand from them. I also admire parents who motivate their kids to save up, and celebrating milestones when they hit their saving goals. These practices can play a vital role in fostering a healthy relationship with money and instilling good saving habits from a young age.
5. Building Credits Early. With a time-tested, healthy outlook on money established, the next step is to start building credit. Remember, the length of time have a big impact on your credit score, so it’s best to begin early! Do your homework to find credit cards that report to a minor’s credit, allowing them to start building their credit profile sooner rather than later.
6. Making compounding growth work for your kid’s favors. Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” Understanding how to earn higher growth over a long period is essential for building long-term wealth. Learning to invest in the market is crucial, as well as better understanding one’s own risk tolerance. I’ve found that market simulation games are an excellent way to introduce this concept to kids. They can even involve their like-minded friends, fostering some friendly competition!
7. Take advantage of tax-benefits. I often mention tax strategies in my articles because I believe in using tax-efficient plans and accounts to pursue long-term financial confidence. I also think it’s beneficial to introduce these concepts to children when they are old enough to understand them. Who knows? If they join you during tax season, they might even offer insights that could be helpful to you!
By practicing mindfulness and engaging in daily conversations, parents can involve their children in financial decisions without dedicating excessive time to formal teaching about money. This approach can significantly benefit children's long-term financial well-being and may also provide immediate and lasting advantages for parents themselves.
If you have any questions, or success stories to share, please reach out! I’d love to hear them. My email is: li.tian@lpl.com, or DrLi@theintegritywealthgroup.com
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. Li Tian, Ph.D., CFP® and LPL Financial do not provide tax or legal advice or services. Please consult your tax or legal advisor regarding your specific situation. Past performance is not indicative of future results. CFP Board owns the mark CFP® and CERTIFIED FINANCIAL PLANNER®" in the US.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
No strategy assures success or protects against loss.
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