Five Simple Tips to Teach Your Kids About Wealth
History has shown us that wealth of any size can disappear, yet a surprising number of families, including those of ultra-high net worth, don’t engage in succession planning. There are various reasons for this, but the biggest obstacle is a lack of communication between principals and their heirs. Creating a stellar plan is only one part of the process – in order to successfully transfer wealth to your children you must first impart vital knowledge and tools about money. Here are some healthy lifestyle management habits that can help them build financial literacy and implement that plan when the time comes.
- Examine your own relationship with money. Whether you inherited your wealth or created it, before teaching your children healthy financial habits it’s important to understand your own beliefs about money and its role in your life. These beliefs have likely been passed down from your own parents – perhaps discussing finances was considered crass, or maybe you’ve moved past your early hardships and have no desire to rehash them with your kids. Either way, you must be aware of and release any hang-ups so you can communicate with your heirs more effectively.
- Put them on a budget. Your children need to understand that the amount of money you have is irrelevant – when there is more going out than coming in, you have a problem. Give them the magic number for the week or month, and when they ask for something that exceeds this amount firmly tell them that the request will be revisited during the next cycle. Creating and sticking to a budget will teach them to live below their means and always have something around for a rainy day.
- Make them work for it. We all love to see our families enjoy the fruits of our labor, but if you’re letting your kids coast through life you’re not doing them any favors. Make a part-time job a condition for getting what’s on their wish list, whether it’s their first car or a forty-day teen tour with their friends. You might even have them contribute a percentage of their salary to the cost, or pay for incidentals such as gas or souvenirs. If your kids are too young to work, set standards around their academic performance or chores around the house, with clear consequences if they fall short. Bottom line: whether they are collecting a paycheck or not, they should know there are no free rides.
- Foster Philanthropy. You have made giving back a priority in your life, and it is a value you’ve tried to instill in your children – not only because it helps others but because it teaches them to appreciate what they have. It’s also important to let them know that this is not just about their money, but their time. Let your kids see who and what they are contributing to; for example, helping to revitalize a community park will show them how green spaces enrich communities, and filling backpacks with donated school supplies will give them greater awareness of the hardships faced by others. And don’t just pass down your favorite cause; let them find what speaks to them. This will make giving not just a responsibility, but a passion.
- Give Them (Digital) Access. One of the greatest benefits of technology is that it makes all sorts of information available at our fingertips. Lifestyle management solutions allow you to share your financial picture with your children, whether you are in the same room or on the other side of the world. Let them see where your family’s money comes from and the decisions you make to keep it secure and growing. This will not only give them a fuller understanding of wealth, but get them accustomed to discussing it and developing their own healthy lifestyle management habits.
Security is a priority for every family, and one that must be tended to regularly regardless of your current financial picture. We all want to give our children the world, but taking a few simple steps now will ensure that you also give them the tools to navigate life’s ups and downs and protect your legacy for generations to come.