A Money Smart Kid is Smart Retirement Planning

 

The training wheels are off. You jog quickly alongside to keep him from tipping over. His eyes lock onto his handle bars. He doesn’t see the wall 20 feet in front of him. You:

  1. Let him hit the wall
  2. Correct his course

2), of course. But when it comes to our children’s finances, most of us are letting our kids crash.

I welcome—and encourage—my children falling. Bumps and bruises don’t bother me. I figure tender feelings lead to hearty character. But if they might break a bone, I step in. This is why I’m so spirited about teaching my children about money.

I want you to consider a few factors:

  • College Tuition Has Grown into a Monstrous Hulk: Private college tuition has enlarged 146% over the last 20 years. No slouch, public college tuition has expanded 225% over the same span. Over the last 10 years, college tuition has swollen twice as much as healthcare and three times as much as inflation.
  • Saving Isn’t Cool, Stuff Is: There’s no peer pressure to save. Saving won’t help your child become the Homecoming Queen. And since they don’t teach personal finance in school, their money journey is unguided.

Have you thought through the implications of these two things? These forces can swerve your child straight into a wall.

 

Implications

Since this wave of technology will probably wipe out more jobs than it makes, it’s vital to get into a cognitive non-routine career (like marketing, design, or strategic consulting) since they are the hardest to automate.* And a college degree is your child’s only ticket to squeeze through the narrow gate for cognitive non-routine jobs.

The cost of that ticket is enormous, leading to a heavy debt burden upon graduation. The average Class of 2016 graduate has $37,172 in student loan debt, paying $4,212 a year.

Since the average post-college starting salary is $50,651, take home pay is probably less than $35,000 after taxes, social security, medicare, and health insurance. Now layer in the cost of student loans, the allure of living in a luxury apartment, buying a new car, sporting the latest gadget, or sipping craft beer, and it’s no surprise why Millennials save -2%. Guess what fills that savings gap?

Well, it’s either a credit card or… you. Guess whose retirement plans just took a big hit? I’ve known more than a few friends who had to have family bail them out of at least $10,000 of credit card debt while they were in college. Teaching your kids about money is part of a good retirement plan.

Ready to Start?

Here are 3 tips:

  1. Have the “Money Talk” with your child. For young children, explaining “money” isn’t just saying “something that helps you buy stuff.” Read here for tips on having “the Talk.” 
  2. Develop a mini economy in your household where they can earn, spend, and save it. One suggestion is to pay for chores. They can then use their money to purchase a snack, screen time, or something else. They can save up for a bigger snack or more screen time. Letting them use it now converts it from head knowledge to experience. And experience is the best teacher.
  3. Help them start their first business. It’s much easier than you think. Read here for tips on how to help your child start a lemonade stand.

Skinned Our Hearts and Skinned Our Knees

School won’t teach your kid how to ride a bike. You do. School won’t teach your kid personal finance. You do. Don’t wait to teach personal finance. Take the training wheels off and let them ride.

As the one guiding your kid’s money journey, you can choose to let them hit a wall or correct their course—and correcting their course is easier the farther they are from the wall. Wait too long and they might collide.

Money mistakes when they’re young are a skinned knee. Money mistakes when they’re older are a broken bone.


(Want to get started? Sign-up for our email list and we’ll send you a FREE guide on how to help your child start their own business!)

*Even if you think stricter trade policy will bring gobs of jobs back, those jobs are mostly manual routine jobs, which can and will be automated.


FREE Guide to Help Your Child Start Making Money Download

Reading about helping your child start a business is a good start, but the real learning and habit formation starts by doing.  I’ve found it helpful to have a quick, easy-to-understand guide.  Just fill in the form below, then click “Download” and I’ll send you the FREE guide!

Help your child launch their first business the right way with this FREE Lemonade Stand Guide, exclusively for subscribers.  It’s a perfect, quick, and comprehensive companion to helping your child learn how to make money like a pro.

 

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