Growing up in a single parent family, I was always taught to have thrifty mind. My mom clipped coupons every week and her worries about money often became mine.
I thought going to college and getting a high-paying job would solve all my financial problems. But even as my wife and I advanced in our careers, most of our earnings went toward basic living expenses and paying off student debt.
But last year, at the age of 37, I reached a net worth of $1 million. We took charge of our finances by saving more, starting side businesses and investing in real estate.
We also wanted to be financially responsible role models for our two young children. In 2020, my wife and I launched Parents’ portfolio to help families learn how to build generational wealth and raise financially literate children.
Here are five basic money rules I teach my kids:
We live within our means. So even as our income increases, we never increase our costs. That’s not to say we don’t enjoy the fruits of our labor—it’s more about being mindful.
For example, when my kids want to buy a toy, I ask them three questions:
- “Is that what you really need?”
- “Do you see yourself using it often in the future?”
- “Are there less expensive options that achieve the same goal?”
We also walk them through our own decision-making process and point out the value of items we buy and use frequently.
Many people think of a budget as restrictive, but I actually see it as a tool to create more financial freedom; it saves you money by preventing you from overspending.
When my son requested money for the school book fair, we gave him a budget of $40. For him, it became a game of how many books of value to him he could get up to $40.
Another important lesson is that budgeting is not a set-it-and-forget-it exercise. Every month we review our budgets to make changes based on the current situation.
It’s easy to forget that social media is often just the headline. When people post pictures of luxury vacations or fancy new cars, that’s only part of the story.
We deal with this peer pressure by limiting our children’s use of technology. We only allow them to use the tablets on weekends and for no more than two hours a day.
We also strive to set good examples. We never pull out our phones when we have dinner together and use social media blocking apps to limit our daily activity to one hour a day.
We use age-appropriate language, tools, and real-world examples to teach our kids about more complex money topics.
To give them a tangible idea of what we do, for example with our real estate business and where the money we make comes from, we take them to project sites and introduce them to the contractors we work with.
We also use a lot of visual aids. To illustrate how transactions between banks, borrowers, tenants and landlords work, I’ve drawn a simple sketch with arrows pointing to each group.
One of the stories I like to tell my children is about the tortoise and the hare. The moral is that it is wiser to take things slow and steady.
Building wealth is very similar in that it doesn’t happen overnight. When our children receive cash gifts, we deposit them into their bank accounts.
“For now, your mother and I are responsible for your needs and wants,” I tell them. “A bank is a safe place to put your money because it allows the funds to grow over time. And if you’re old enough, you can use that money for your own purposes.”
In a world of instant gratification, it’s even more important to teach children the value of patience and early starts.
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