Some people say the next best thing to being personally financially successful is having rich kids. However, teaching children good financial habits can be challenging. Here’s where Tom Corley and his book Rich Kids comes in handy. This is a great resource for teaching children (of all ages) about money.
The three paths to wealth
There are three paths to wealth:
1. Live below your means. If you put 20% of your monthly salary into savings, as well as save all raises and bonuses, you are setting yourself up for a safer future. This is because not only do your savings increase with compound interest, but you avoid increasing your lifestyle beyond your means.
2. Expand your means. Find efficient ways for generating more income, such as a side job.
3. Use both strategies together. By saving properly and increasing your earnings you can effectively build your wealth.
Starting young
While these paths sound like they may only apply to adults, children can – and should – acquire these habits. If you give your children an allowance or if they have a job, they should save part of their income.
Your wallet shouldn’t be the sole source of your kids’ income; encourage them to work and learn the powerful life lesson of self-reliance. Whether your child babysits, walks the neighbor’s dog, or gets a regular part-time job with a tlush (paystub), he or she learns personal and financial responsibility. Children who internalize these lessons are less likely to grow into dependent adults… who expect their parents to pay off their debts.
To find out more about rich habits and how to teach them to your children, listen to my discussion with Tom Corley on The Goldstein on Gelt Show by clicking here.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published August 2, 2016.