A couple of years ago, a USAA community reader shared her success story with me. As a parent, she focused a lot of energy on teaching her son about finances, helping him learn about making smart choices. It paid off. Her son and daughter-in-law have a beautiful home, no credit-card debt, robust Thrift Savings Plan accounts and a solid financial foundation. It didn't happen by accident; it was the result of a parent who laid a solid financial foundation.
Nearly a year into living the empty-nest dream, I'm getting a bit further from the years we spent nurturing and preparing our children to be successful, productive, happy human beings.
However, even without periodic reminders like I received from that proud mom, I'm not so far away that I can't see the value of preparing them to manage money. How much time do you spend teaching your kids about money and how to use it wisely? They probably won't just figure it out once they leave home.
Here are five ideas that I hope you'll consider building into your effort to help equip your kids with the financial tools they'll need to be successful:
- Differentiating needs from wants. Understanding the difference -- and knowing to satisfy the former before the latter -- will prove essential in day-to-day financial decisions.
- Avoid falling victim to peer pressure. You've certainly hit on this as it relates to other areas of your kids' lives -- drugs, alcohol and the like -- but there's also a money slant to it. Whether it's buying the latest gadgets, a slick vehicle or trendy fashions, kids shouldn't blindly follow the herd into financial problems.
- Capitalizing on the power of time. Time and compound returns are your child's best financial friend. Make sure they know it. Matching what they save, setting up a Roth IRA with their part-time employment income and sharing your own experiences with long-term investing can help drive home this message.
- Make saving and investing a priority. There's not a right or wrong here, but they are different and there's probably a place for both in their financial life. It's important to create strategies for saving for short-term goals and emergencies and invest money for longer-term plans like retirement and, here's the kicker, not only with what's left over at the end of the month.
- Understand the rules of the credit game. Credit can be a useful financial tool and a dangerous temptation. How our kids manage it can affect them in a lot of different areas. Getting a job, renting or buying a house, insuring a car, receiving a government security clearance or being approved for a competitive loan are all examples of where effectively managing credit can yield positive results. Be proactive in ensuring your kids don't get caught with less than stellar credit.
Outfit your kids with the tools they need to succeed. And remember, the parenting doesn't stop after their initial venture into adulthood. It's a lifelong endeavor. The good news: If your kids are like mine, the older they get, the more receptive they become.