It’s not what we leave our kids that matters – it’s what we leave “in” our kids that matter.
As adults we learned most of how we “do money” from our parents.
Many of our money habits come from what we heard our parents say about money, wealth and rich people when we were young.
They also come from how we saw our parents behave in the arena of money when we were a child as well as from our early experiences with money.
The money habit strategies the wealthy learned from their parents as children:
Best selling author Tom Corley conducted a 5 year study on how rich people think differently to the average person and found that parents who mentor their children by teaching them good daily success habits, set their kids up to achieve far more than 95% of their peers and go on to achieve great success in life.
Here’s what he found:
1. Chore Income
Corley says don’t give your children pocket money or an allowance because that implies entitlement.
Instead he suggests you give them money in exchange for doing their chores and explain to them that this is income they “earned.”
Make a list of all of the chores that can be done – the more chores they do, the more income they make.
Then pay them a bonus when they do chores not on the list.
You can expand this Chore Income strategy by paying your kids for certain good behaviour, such as reading 30 minutes or more each day, volunteering, limiting TV and Internet use to less than 1 hour a day, getting their homework done by a certain time each day, doing well at school, exercising, good etiquette, achieving goals, not eating junk food etc.
2. They should work for their “Stuff”
In his study Corley found that parents of kids who grew up to become wealthy and successful, made their children work for what they wanted.
In today’s world, that includes computers, iPads, iPhones, designer clothes, computer games etc.
Having to work for what you want creates a work ethic and helps your kids understand the value of money.
Corley suggests that a good age to start teaching this rich habit is age 14; the age when they can work.
3. They must understand the importance of saving
The majority of the wealthy in Corley’s study had a habit of saving.
He advises that you help your children form good savings habits by taking half of any money gifts your child receives and put this 50% in a savings account for them.
Then what your children do with their 50% is up to them.
Corley believes this teaches them responsible spending because when the money’s gone they’re on their own.
4. The 50:50 Budgeting Rule
Corley suggests that this rule teaches children to save for their “stuff” when they are too young to have a job.
He says that when children reach age 10 parents should start teaching them to budget and save for things like iPhones, video games, trendy clothes etc.
One way to do this is for parents to agree to match whatever their kids save from their chore income or their share of their gifts savings.
5. The evils of credit cards
Corley says that children need to learn that credit cards are bad and should only be used for emergencies.
In his study he found that the wealthy were taught by their parents that if you have to use credit cards for your ordinary living expenses you’re living beyond your means and you will wind up poor.
He feels that form age 14 and up is a good time to start indoctrinating your children about the evils of credit cards.
What have you been teaching your children about money, wealth, savings and investing?