7 Ways You Can Set Up Your Kids for Financial Success
Vol 13 | Issue 25
As a parent, all of us want to set up our kids for all types of success – financial success being one of the most crucial ones.
Many of us limit ourselves to saving up for our children’s future, whether it be for their higher education or their weddings.
|Setting our kids up for financial success does not end with saving money for their future (Photos for representation purpose only)|
But while important, there is a lot more to financial success than just money. Here are 7 ways you can set up your kids for financial success, without saving up for them:
1. Healthy saving habits
Families that set financial goals, chip away at them, as well as communicate them to their children, raise kids that are skilled at this important life skill.
On the other hand, families that spend all they have or let their kids spend their entire allowance, raise kids who will struggle with saving. Something as simple as mandatorily saving some portion of their allowance, towards buying a more expensive gift for themselves, can teach kids the value of delayed gratification.
2. Using debt productively
There seem to be two extremes when it comes to debt. We either are overleveraged, or we avoid debt at all costs. In the first situation, we desensitize our kids to the stress that accompanies debt and teach them that their expenses do not have to be limited by their income.
|It is important to train your children to explore multiple opportunities to generate income|
In the second, we fail to teach them one of the most useful financial tools of the modern world. By leveraging debt to build income-generating assets, we teach our kids the right way to use the ample credit available, without falling into a debt trap.
3. Abundance or scarcity
Some families believe that they are stuck where they are. Others build on what they have and find opportunities everywhere.
An entrepreneurial parent raises entrepreneurial children. It doesn’t mean that we all have to start businesses. But showing that there exist other opportunities to generate income, like having another income stream, or buying cash-generating assets, will expand your kids’ worldview beyond the corporate rat race.
4. Risk-lover or risk-averse
Risk and return are proportionately related. If you are able to evaluate risk correctly and reap its rewards, children will learn the tolerable amount of risk too.
However, if you have taken unnecessary risks but still reaped the benefits, it may heighten the child’s risk appetite. You might have reaped the benefits, but it might be your children that pay the penalty. So, it is always advisable not to exceed limits while taking risk and provide yourself the space to bounce back if things go awry.
|Be open to discussing about money with your children. It is not a taboo topic|
5. Entrepreneurial spirit
Apart from following in their parents’ footsteps, children can also learn to think creatively in the right environment. In the beginning, it will be up to the parents to 'manufacture' income-generating opportunities for the kids?—?additional chores are an easy one.
Or lending books to friends. Or helping around the neighbourhood. It won’t be long before their brains start running on the same path, setting them up for life to create opportunities out of nothing.
6. Removing the taboo from money
Our treatment of money as a hush-hush topic can be one of the most harmful beliefs to pass down to the next generation.
Instead, healthy and open communication about money, including any problems that the family may be facing, can gift your kids with a lifelong skill of managing their money as a team, and realizing that money problems are all too common.
On the other hand, treating money as a taboo can aggravate problems, instilling the belief in kids that they are the first people in the world to be facing issues financially, undercutting their confidence tremendously.
|Train your children to learn to negotiate for the important things in life|
7. Negotiating well
Negotiation is a big part of the modern world. And it is important that we teach our kids this life skill. It is also equally important that we teach them the right time to negotiate, understanding that there are times when your time and effort is worth much more than what you would save by negotiating.
Instead, focusing on the right things to negotiate on, like your salary and benefits, or a home purchase, and communicating the same with your kids, will teach them the benefits of doing so.
Setting our kids up for financial success does not end with saving money for their future. Attitudes about earning money, and managing it after earning, are arguably more important than any inheritance you could leave your progeny.
Priyanka Mashelkar is Dy. Commissioner of Income Tax and Author, 15 Sure-shot ways to Hit the Jackpot