The Family Money Blueprint: Building a Legacy of Financial Wisdom
A 7-minute read
- SKIP THE ANXIETY
- VOCABULARY OF ABUNDANCE
- BE WILLING TO TEACH
- SAVE MORE; SPEND LESS -- FOR KIDS
- RAISING YOUNG ENTREPRENEURS
"A map is the greatest of all epic poems. Its lines and colors show the realization of great dreams." -Gilbert H. Grosvenor
What we learned as kids about financial matters has impacted us for a lifetime. This underscores parents' crucial role in shaping their children's financial future through education and guidance.
Also refer to our Blog of June 25, 2024: Guiding Principles For Raising Money-Smart Children
As real estate investors and entrepreneurs, we are likely to experience some financial ups and downs. A windstorm blows the roof off your single-family rental on the hill. Well, there’s six-grand you may not have prepared for.
Depending on which State and City includes your rental, an eviction may last a few weeks in Texas or a year without rent in New York.
And, as you’re probably aware, this fear of economic uncertainty causes anxiety in many children, too.
While it is impossible to shield kids from all that goes on around them, money worries are one of those things we shouldn’t share with kids. There are several ways to do that -- some very specific and some more subtle.
SKIP THE ANXIETY
I’ll begin with this: When it comes to transferring anxiety over money to your children, there is no faster way than to fight over it with your partner. Asking couples not to argue over money is unrealistic, so when differences arise, at least try to do it in private and out of earshot of your kids.
Spenders and savers are bound to clash, but when they fight in front of kids, they give kids something to worry about beyond Mom and Dad fighting. Will we run out of money? Is Dad losing his job? Will we have to move? Will we have money for food?
Even if parents are unsure about the answers themselves, they owe it to their kids to exude confidence when it comes to money. If things do get bad, emphasize that you’ll all be together no matter what and that home is where you make it- wherever that may be.
VOCABULARY OF ABUNDANCE
As quickly as children seem to “grow up” in this digitally connected world, they still need to be brought into the broader world with care.
And I have more thoughts...
When kids ask to buy things, and money is tight, try rationalizing with them instead of simply saying, “We can’t afford it.” Tell kids that instead of spending money on toys this week, you need to focus on buying some basic things like food and gasoline for the car. Ask them to come along to the grocery store to help pick out a few favorites. If you say you can’t afford something, kids will begin to wonder what else you can’t afford, and that’s a psychological slippery slope for young minds.
In fact, I’d go so far as to say this: Don’t allow anyone in your house to use the word “poor” when describing your economic situation -- even when times are pretty lean in the household. Families might be broke-- but that doesn’t mean they’re poor! It’s more than semantics. The word “poor” seems to connote inferiority or some unfortunate circumstance. We don’t have to accept that paradigm. Sometimes, families spend more money than they earn and have to live on far less to turn things around. They may have been foolish, but they are not poor!
Now, let’s shift away from things ‘not to do’ around kids, and focus on some positive things to teach kids to help them with their financial futures.
BE WILLING TO TEACH
My dad was an entrepreneur and landlord as early as I can remember. However, I also knew that he was not a good landlord. He would let people take advantage of him, which meant he wasn’t getting money.
Lynn’s family was also landlords. They talked openly about money, but with the constant reminder that “our money is our business, no one else’s!”
Most of us have recognized that kids need to eventually become more aware of the potential financial pitfalls out there than we were in my generation.
Start giving kids an allowance to budget their savings, spending, and giving. Help them open a savings account and begin to teach the mechanics of a bank account -- completing deposit slips, balancing their accounts, and explaining how compound interest works. Parents can introduce older kids to increasingly more complicated topics like investing, borrowing money, and insurance. By the time they are teenagers, they should have a good grasp of Personal Finance 101 topics to better prepare them for life.
SAVE MORE; SPEND LESS -- FOR KIDS
As adults, it is prudent to put back a sizable emergency fund of several months (I recommend a full year) of basic, household expenses. Because kids are not responsible for everyday expenses, getting this message across to them can be hard. Instead of focusing on saving money for emergencies, teach kids to save money for opportunities.
RAISING YOUNG ENTREPRENEURS
My parents and grandparents were much like yours -- they worked 40-50 hours a week, punched a clock, and recharged over the weekends. After decades on that job, they got a cheap retirement gift, maybe a small pension, and a retirement send-off.
Well, times have changed. (Your parents may still be working!?!?)
The global economy and the hyper-connected marketplace have underscored the importance of developing an entrepreneurial streak at a young age. Chances are slim that your child will graduate college, pick one job, and stay there for 40 years. More likely, there will be many jobs with many employers, and many periods of being “between jobs” in their lifetime. Wouldn’t it be great if they developed a “side hustle” to get them through those periods of unemployment, or to supplement their full-time income all along? Lynn’s dad said, “Get an education and learn a trade, then you’ll always be covered.” So, he got a bachelor’s degree and retired as a locksmith for Glens Key and Safe in Salt Lake.
You may enjoy building things and have turned your one-time hobby into a side hustle, building decks and fences on the weekends. Get your kids involved; perhaps you can pass along a valuable trade. Even if they become tax strategists, like me, or a firefighter, like my dad, having the knowledge and experience of a trade to fall back on could be incredibly valuable to them over a lifetime.
The point is not to stifle your kids’ ideas by forcing them into some ideal career path you have selected for them. Allow them to cultivate their own ideas. Over the next few decades, personal branding and the branding of individual ideas will likely be hotter than any particular industry. Think about it -- an iPhone app may be the next lemonade stand.
In a way, social media and other new media have greatly expanded the opportunities for kids to create new products, explore new ideas, and push new content into the mainstream. There’s never been a better time to have an entrepreneurial mindset, and fostering that in your children at an early age is invaluable.
There are lots of resources to support you in raising a bold new generation. Do an internet search for: parents’ guide to raising entrepreneurs.
Being a parent in these times takes a lot of energy. We’re cheering you on!!!
BE THE ROAR not the echo®
Warmly, Janet, The Tax Wizard
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