In a popular financial planning forum, somebody shared that they were a parent of a two-year-old and were searching for the best ways to set up their financial future.
The poster explained that they live comfortably, have little debt, are on top of their mortgage, and are saving for retirement. So what are the best ways for middle-class families can set up their kids for success? Here are the top-voted suggestions.
1. Add Them to Your Credit Card
The number one voted response is to authorize them on your credit card. Then, when turning eighteen, they’ll have good credit. But, of course, that is only applicable if you’re on top of your bills and maintain a good credit score.
Someone confessed that despite being a ridiculous system, it worked and that their credit goes back to when they were five years old. However, another woman warned that her mother had done that and didn’t take care of her bills or have good credit.
As a result, she nagged her mother to be released as an authorized user on her card and claimed her credit score went up by 100 points.
2. Teach Your Children Finances
Teaching your children to manage their finances is critical for future financial success. For example, someone explained that they must understand financial agreements, interest rates, how the credit score system works, and “how to leverage their financial actions to manage their credit scores.”
As they grow older, they should understand what the federal reserve does and how to interpret and understand it to their benefit. They suggested giving your children money to manage at a young age and talking to them about tracking spending, saving money, and establishing financial goals.
Keep the money in their bank account and teach them how to save up for something, delaying gratification but learning the value of hard work and money management paying off.
3. Ensure Good Education
One person suggested that education is tied to financial success. So put your children in schools you can afford and take full advantage of enrichment activities, such as music lessons, sports, dance, summer camp, etc.
They continued by suggesting you become involved as a scout leader, coach, etc. While also involving them in everyday tasks like grocery shopping, meal planning, cooking, directions, planning a vacation, and chores.
Finally, they encouraged educational programs as they grow older, including school year programs abroad: NOLS, United World College, The Traveling School, Chewonki Semester, and Semester at Sea. “Encourage them to be a leader in an organization, and teach them that volunteering is a way to give back to the community.”
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4. Make Sure You Are Financially Secure
Several people agreed that the best financial security you can give your children is by ensuring you’re financially secure; that way, they won’t need to worry about your retirement, as many do for their parents.
5. A 529 College Savings Plan
Putting money into a 529 received several votes. Set them up to get a debt-free college degree. A 529 is a great option. Someone noted, “They might decide college isn’t for them, but give them this option.”
6. The Three Buckets
Someone shared what their parents did to help her understand money. She explained they structured her modest allowance into three buckets. Others discussed jars and envelopes as viable alternatives.
Then they would take “1/3 (equivalent to our age each month) was given to us as spending money, 1/3 went into savings, and 1/3 went to a charity of our choice.”
She continued that this practice has helped her to become a great saver who happily pays her taxes, elaborating that 2/3 of her money has been going to her savings or to people who need it more than her for her entire life, “so contributing to my retirement accounts and paying taxes has never bugged me.”
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7. Invest Quality Time With Your Children
Another noted that investing a lot of quality time with your children sets them up for success more than a fully funded 529 account ever will (not that you shouldn’t do both).
They encouraged parents to read to their kids and set up healthy habits and routines. Furthermore, to be authoritative, patient, kind, and warm. “Those investments will compound too.”
8. Involve Them in Budgeting and Spending Conversations
Someone stated that involving them in your budgeting and spending conversations benefits their understanding of finances in the real world. Discuss limited earnings, paying bills, savings, and planning for a vacation with savings. Allowing them in the decision-making process is an excellent way for them to learn responsibility with money.
9. Teach Them How to Earn Money
Don’t just hand your kids an allowance. Teach them the value of working for a dollar. One volunteered that she has household chores delegated to everyone and then deep cleaning or other chores that aren’t daily where her kids can earn money.
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10. Teach Them How to Save
Someone confessed that they instilled a savings mentality in her child by matching her allowance. “I gave her an allowance once a week. Then, I told her I could give her five dollars, or if she puts the five dollars in the bank, I’ll match it with another five dollars.”
We hope you enjoyed this Reddit discussion about how to set your children up for financial success. This article is inspired by the internet and does not necessarily reflect the views or opinions of Wealthy Nickel.
