__LINK__As Robert Kiyosaki stresses in his book Rich Dad, Poor Dad, there's a significant difference in the way the wealthy and the not-so-wealthy teach their kids about money.
From a young age, the way you handle money, and the messages you send to your children, are shaping their relationship with money, so instilling good money management habits in them is a gift that really does keep on giving their whole life. Here are a few of the things we should all be teaching our kids or any young people we have influence over.
This may be the most basic of financial principles, but many young people are reaching adulthood not having grasped it.
It's become a stressful old world, even for kids and teenagers. Parents in affluent households may think they're doing their kids a favor by relieving that stress, in one area at least, and constantly topping up their allowance or buying them expensive gifts they could never afford with their part-time job.
Teach your kids the simple skill of keeping their outgoings lower than their income (even if that income is just a weekly allowance) and saving for things they want. Maybe then they won't hit adulthood and immediately become the ‘average' American, who currently carries over $6,000 of credit card debt.
To put this into practice, consider rewarding them for saving.
"I love the idea of matching a child's savings account contribution similar to how an employer match's an employee's retirement plan contribution – you can have a lot of fun with this," Ayad Amary, CFP and Founder of Wealthcare of The Lehigh Valley.
"It provides a great incentive for children to get into the habit of saving. For example, if a child gets $10 a week for allowance and they put $5 into their savings account, the parent can offer a match on the amount saved."
Many young adults, and a lot of older ones, don't seem to have grasped the basic truth that, unless you have the cash to buy something outright, the sticker price is not what that item costs you.
Too many people think their car is ‘costing' them whatever their monthly payment is, without ever working out how much they'll pay off in the end. Too many people put something on a credit card because it's on sale, never considering it will cost them way more than the original non-sale price by the time they pay it off.
Sit down with your kids and use an online credit card calculator to show them the true costs of those ‘small' purchases over time.
As we mentioned in this article, Americans are impulsively spending an average of $450 a month, or $5,400 a year. And this adds up to around $324,000 over a lifetime. I'm not a huge fan of telling people what they can and can't spend their money on. Everyone's values are different. I am, however, happy to give blanket advice to my kids and anyone else to always consider why they are purchasing something.
Generally, we purchase something because we need it or want it. Neither of those is wrong, per se, if we can afford it. The problem with impulse spending is, we often don't need or want it. We really do just act on impulse because something catches our attention. Many impulse buys, from online subscriptions to fancy outfits, go unused, representing a true waste of money in every way.
Impulsive spending always seems like such a small problem because it happens in small increments, so talk to your kids about the figures above to help them see the big picture. Kids are often naturally impulsive, but helping them to start getting that under control at a young age will pay off later, in real money.
Part of curbing impulses comes down to delaying gratification.
"One of the most important tips children should be taught regarding money is delayed gratification," said Michael R. Acosta, CFP and Founder of Genesis Wealth Planning.
"I often remind my 5-year-old daughter that if she doesn't see a toy that she'd like to buy with her money, she can always save it and look again next time. In the moment, all children understand is that I get to buy a new toy, so they need the additional coaching through those experiences."
So much of personal finance is tied to mindset. As Ben le Fort points out in this article, it takes confidence to be frugal, and never more so than when you're young. A recent survey found that 78% of young adults allow their friends' financial habits to influence their own, feeling pressure to ‘match' their spending on things like fashion, gadgets, and entertainment.
Don't expect too much. You're not going to stop the average teenager from caring about what their friends think or buying the same things they do, but slowly building strong self-confidence in your kids and teens may be an even bigger gift than you realize. Learning to keep your own counsel and have faith in your own ability to make good decisions, even if they're different from other people's, is actually a trait at the heart of a lot of wealth-building activities.
"There's so much influence on my kids that I can't control, especially when I think about them starting their first real job or leaving the house for college," said Kelly Klingaman, CFP and Founder of Kelly Klingaman Financial Planning. "What I can do is model and teach them basic financial concepts and encourage healthy money behaviors so they're better prepared once they're on their own."
"I want them to understand that money is something that requires responsible stewardship but which can also allow us to live a great life aligned with what's most important to us in the world."
There are reasons kids from middle-class households can quickly end up in debt as soon as they fly the nest. One is simply that they haven't adapted to their new circumstances. They think they can live as well as they did within their family, forgetting that their parents spent decades getting to where they are now.
If you've done well for yourself financially, you can do your kids a favor by not hiding where you started. Talk to them about being a student or struggling in your first job, how hard things can be financially when you're young, and how to make decisions that prevent that from being a permanent situation. Do it with humor and humility, though. We all know how quickly kids tune out if they feel they're being lectured.
This is perhaps the most obvious, but many kids graduate high school and leave home without ever really learning the basics: how to make to budget, how compound interest works, the difference between an asset and a liability, how to shop around for a bargain on anything from college textbooks to a new cell phone plan.
The younger you start, the better. Young kids often actually feel you're teaching them something very ‘grown-up' when you talk about money. Older teens think you're nagging. These basic principles aren't going to change, so the earlier your kids start to absorb them and practice them, the better chance they have of financial security in the future.
I'm a freelance writer specializing in online business, personal finance, travel and lifestyle. I also work as a content creator for hire, helping brands and businesses tell their stories, grow their audiences, and reach their ideal customers. I've lived, worked and studied in six countries, across three continents. Stop by my blog TheSavvySolopreneur.net to learn how to run your own (very) small business on your own terms. You can also connect with me at my website KarenBanes.com or follow me on Medium.com.
The post What You Need to Teach Your Kids About Money Management appeared first on Wealthtender.
An Accredited Asset Management Specialist (AAMS) is a designation for financial professionals who specialize in asset management and investments. Administered by the College for Financial Planning, the AAMS provides them with the extensive knowledge they need to assess and recommend a variety of investment opportunities.
Those who hold an AAMS often support clients with retirement, college, and taxes so they can meet their long-term financial goals.
An Accredited Estate Planner (AEP) is an estate planning professional recognized by the National Association of Estate Planners & Councils (NAEPC). An AEP commits to estate planning in their career and collaborates with other professionals to provide their clients with comprehensive estate planning services.
The Accredited Estate Planner (AEP) designation is a graduate-level specialization in estate planning. The NAEPC awards this designation to an estate planning professional after thoroughly reviewing the prospective AEP's education, experience, credentials, professional reputation, and character. An AEP is significantly engaged in estate planning in their current profession, and most importantly, they commit to the team concept of estate planning.
An Accredited Financial Counselor (AFC) is a financial professional who teaches their clients sound financial principles so they can achieve their short and long-term financial goals.
AFC certification is earned through a combination of experience and educational requirements set forth by its issuing organization, the Association for Financial Counseling and Planning Education (AFCPE).
The AFC curriculum helps candidates become experts on topics such as budgeting, debt management, mortgages, estate planning, retirement, stocks, bonds, mutual funds, and personal income taxes. The curriculum also ensures candidates are well-versed in consumer debt and gain a strong understanding of financial counseling, consumer fraud, and debt reduction strategies. And deeply personal and emotional topics including bankruptcy and divorce-related financial issues like child support are also covered.
An Accredited Investment Fiduciary (AIF) is legally obligated to always act in the best interests of their clients. They offer recommendations based on each client's unique goals rather than prioritizing commissions, kickbacks and referral fees that solely benefit them.
Designees receive the knowledge and skills they need to evaluate the fiduciary practices of investment vehicles such as 401(k) plans and defined benefit plans. They also support those who manage endowment and foundation assets.
An Accredited Portfolio Management Advisor (APMA) is a finance professional specializing in creating, managing, and growing investment portfolios. APMA credential holders are recognized in the industry as top experts in asset allocation, investment analysis, risk analysis, and other facets of investment management.
Professionals who pursue the APMA designation are typically highly experienced, with a background in financial planning and advice.
A Behavioral Financial Advisor (BFA) is a financial advisor who goes beyond asset selection and offers practical advice to positively influence their clients' saving and spending habits. This individual is motivated to craft a financial plan and grow their client's portfolio through a keen focus on behavioral finance and investment products.
As the name suggests, BFAs go a step further to offer value-added service by considering your behavioral patterns and emotional triggers regarding money. By understanding your relationship with money and investing, they can provide well-rounded advice and construct a plan that is more likely to bear fruit for you.
The Certificate in Blockchain and Digital Assets (CBDA) is a designation awarded by the Digital Assets Council of Financial Professionals (DACFP) and the New York Institute of Finance (NYIF). The Certificate is earned by financial professionals who are interested in and passionate about learning about the growing fields of blockchain, cryptocurrencies, non-fungible tokens (NFTs), and other digital assets.
The Certificate in Investment Performance Measurement is administered and awarded by the CFA Institute. While the primary certification issued by the CFA institute is the Chartered Financial Analyst (CFA) designation, many financial professionals who have earned their CFA credentials choose to pursue CIPM certification as well.
CIPM certification holders often work for asset management firms and financial institutions. You will also find financial advisors and wealth managers who have earned their CIPM certification, predominately those who serve higher net worth individuals with more complex and varied investment portfolios.
The Certification in Long-Term Care (CLTC) is a designation administered by the Certification for Long-Term Care Institute, an independent third-party administrator unaffiliated with any insurance carriers. The designation accredits professionals in various fields with the proper skill set to discuss the consequences of long-term care with their clients.
CLTC accredited professionals work closely with families to help mitigate the physical, emotional and financial consequences of long-term care, including care provided by nursing homes, personal caregiver agencies, home health agencies, hospitals, and more.
A Certified College Financial Consultant is a financial professional who specializes in education funding. They're well-versed in student loans, tax consequences and education credits.
You can think of CCFCs as education finance experts who understand the challenges of covering the cost of college or trade school. CCFCs support students before, during and after the college planning process.
A Certified College Planning Specialist (CCPS) is a finance professional who specializes in helping clients with financial planning for college. CCPS members are certified by the National Institute of Certified College Planners (NICCP) to provide advice, education, and ongoing support to prepare families for the financial implications of college.
CCPS holders are finance professionals with extensive experience in guiding students and families through the complex financial implications of attending college.
A Certified Credit Counselor (CCC) takes a holistic approach to credit counseling and is well-versed in banking and credit fundamentals to help clients eliminate debt and improve credit scores.
Their primary objective is to provide clients with the knowledge and resources they need to resolve financial issues and take control of their finances. CCCs are known to educate those who are financially stressed so they can avoid common mistakes and make smart decisions in the futu