On a popular financial planning forum, someone shared that they are the parents of a two-year-old child and are looking for the best ways to arrange their financial future.
The poster explained that they live comfortably, have little debt, don’t pay their mortgages, and are saving money for retirement. So how can middle-class families best prepare their children for success? Here are the proposals that received the most votes.
1. Add them to your credit card
The number one answer with the most votes is to authorize them on your credit card. Then, when they turn eighteen, they will have good credit. But of course, this only applies if you pay your bills and maintain a good credit score.
Someone admitted that even though it was a ridiculous system, it worked, and that their credit goes back to when they were five years old. However, another woman warned that it was her mother who didn’t take care of her bills and doesn’t have a good credit history.
As a result, she insisted that her mother be released as an authorized user of her card and claimed that her credit score had increased by 100 points.
2. Teach your kids about finance
Teaching your children to manage their finances is critical to future financial success. For example, someone explained that they need to understand financial agreements, interest rates, how the credit rating system works, and “how to use your financial activities to manage your credit ratings.”
As they mature, they need to understand what the Federal Reserve does and how to interpret and understand it to their advantage. They suggested giving your kids money to manage at an early age and talking to them about keeping track of expenses, saving money, and setting financial goals.
Keep money in their bank account and teach them how to save up for something, postponing gratification but learning the value of hard work and money management that pays off.
3. Provide a good education
One person suggested that education is linked to financial success. So get your kids into the schools you can afford and take full advantage of the developmental activities like music lessons, sports, dancing, summer camp, etc.
They continued by inviting you to become a scout leader, coach, etc., as well as involving them in daily tasks such as grocery shopping, meal planning, cooking, directions, vacation planning, and housework.
Finally, they encouraged educational programs as they grew older, including school year abroad programs: NOLS, United World College, The Traveling School, Chewonki Semester, and Semester at Sea. “Encourage them to be leaders in the organization and teach them that volunteering is a way to give back to society.”
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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 to make sure you are financially secure; that way they won’t have to worry about your pension as many people have to worry about their parents.
5. College Savings Plan 529
Investing in 529 received several votes. Set them up to graduate without debt. 529 is a great option. Someone remarked, “They may decide college isn’t for them, but give them that choice.”
6. Three buckets
Someone shared what their parents did to help her understand money. She explained that they divided her modest allowance into three parts. Others have discussed jars and envelopes as viable alternatives.
They then took “1/3 (the equivalent of our age each month) was given to us for expenses, 1/3 went to savings, and 1/3 went to a charity of our choice.”
She continued that this practice has helped her become an excellent tax-paying saver, elaborating that 2/3 of her money goes to her savings or to people who need them more than she does throughout her life, ” thus contributing to my retirement accounts and paying taxes has never bothered me.”
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7. Spend quality time with your kids
Another noted that by spending a lot of quality time with their kids, they set them up for success more than a fully funded 529 account (not that you shouldn’t do both).
They encouraged parents to read to their children and develop healthy habits and daily routines. Also, be authoritative, patient, kind and warm. “These investments will also increase.”
8. Involve them in budget and spending discussions
Someone has stated that engaging them in your budget and spending conversations helps them understand real-world finance. Discuss limited earnings, paying bills, savings, and planning a vacation with savings. Letting them participate in the decision-making process is a great way to learn responsibility for money.
9. Teach them how to make money
Don’t just hand your kids an allowance. Teach them the value of work for the dollar. One voluntarily declared that everyone was delegated housework, and then general cleaning or other work that is not daily, where her children can earn money.
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10. Teach them how to save
Someone confessed to instilling a savings mentality in her child by equalizing her allowance. “I gave her allowance once a week. Then I told her that I could give her five dollars, or if she put five dollars in the bank, I would give another five dollars.”
We hope you enjoyed this Reddit discussion on how to set your kids up for financial success. This article is inspired by the Internet and does not necessarily represent the views or opinions of Wealthy Nickel.
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