6 Ways to Teach Your Child the Value of Investing
April 20, 2018
You have worked hard and put in a lot of effort to get where you are in life, and you are proud of yourself. If you are like most parents, you want the best for your children and hope they never need to worry about money. Sadly, 70 percent of wealth is lost after the first generation. Children who don't learn to manage and invest money at an early age will have trouble maintaining their wealth.
Many of them will go broke before they know what hit them, and you don't want your children to fall into that trap. The No. 1 way to keep your children on track and to secure their financial future is teaching them the value of contributing to funds. This process helps children understand that money is a limited resource and that they need to make wise choices if they would like to hold on to it over the long run.
Teach Them the Value of Long-term Reward
By default, most people pursue short-term gratification because they want instant rewards. That path is dangerous when it comes to finances because it can cause anyone to go broke in no time. Showing your children that waiting for the long-term reward is the best option is a powerful way to keep them on track. Begin by giving your children a simple choice to get them moving along the correct path.
You can give them their allowance right now, or they can choose to wait one week and get 30 percent more. Allow your children to make their own decision, but do your best to explain why waiting for a higher payout is the smart move. With the right guidance, you can demonstrate how delaying gratification in favor of a better long-term reward is the right thing to do
Get Them Involved With Your Finances
A lot of parents refuse to get their children involved with their finances, which is a mistake you won't want to repeat if you care about your children's well-being. Have them sit down beside you when you are planning your budget and managing other areas of your finances. Show them how much money you earn and what bills you need to pay.
To set a positive example, teach them about investment decisions you had made in the past and how they paid off. If you have ever made a poor financial decision that hurt your budget, tell them about the mistake and what you learned from it. Although they won't always seem interested in what you have to say, ensure that they pay attention.
Explain Different Investment Options and How They Work
Depending on the age of your children, teach them about various investment opportunities and what each one has to offer. Go over how Roth IRAs and other long-term investment accounts operate and why they are vital to anyone who wants to sustain wealth over the long run.
If you have not already done so, now is an excellent time to set up investment accounts for your children, but you don't want to be the only one putting funds into the accounts. Rather than working for their money their entire lives, your children can learn to make money work for them. It's never too early to show your children how to make wise financial decisions, helping them set a strong foundation for the future.
Help Them Set Short- and Long-Term Goals
As far as investing is concerned, setting short- and long-term goals is essential. Sit down with your children and ask them how they want their life to play out once they become adults. Ask them where they want to live and about the type of house they would like to have.
If you want to get the most from the process, tell them to be as specific as possible so that they can create a plan to reach those goals. You can then help them decide what investment funds are the best match for their future goals. As your children look ahead, make sure the objectives they set are realistic so that they can achieve them and see the benefits of making smart choices.
Give Them Financial Responsibility
Giving your children financial responsibilities while they are young is a fantastic way to encourage them to make wise decisions once they get a little older. Give your children tasks to do around the house and yard to earn an allowance each week. Tell them that the amount of money they can make depends on how much effort they put into their chores.
As they become a bit more mature, offer even more responsibilities and increase their allowance. Rather than letting them spend their money as they please, encourage them to contribute a portion of their earnings to their investment funds. You can also teach children the value of donating money to support causes in which they believe.
Make Investing Fun
Many people consider investing a boring topic in which they quickly lose interest, but you don't want your children to lose interest in it. When you teach your children the value of contributing to their investment accounts, try to make the process fun. Use trivia cards to make it into a game, and you can offer prizes when they give correct answers. Speaking with enthusiasm is a good way to make the process fun so that your children will pay attention and learn something along the way.
Investing in the future is a critical part of life for anyone who wants to retain their wealth, and it's never too soon to teach your children how to be responsible with their money. Keeping them involved with your financial decisions, teaching them the importance of long-term rewards and finding ways to make investing fun will provide you with impressive results.
Getting started immediately to let your children earn as much compound interest as possible is a great decision of which you will be proud. If you teach your children to be wise with their money, they can retain their wealth and pass it on to their own children one day, creating a legacy that will last for generations to come.
Polaris Greystone Financial Group, LLC is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Advisory services are only offered to clients or prospective clients where Polaris Greystone Financial Group, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Polaris Greystone Financial Group, LLC unless a client service agreement is in place.
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