Try this 4 step plan to inspire financial independence in your family
Parents spend a great deal of time focusing on their child’s formal education. And rightfully so. But some of the most important lessons, like becoming financially savvy, aren’t taught in school.
It can be argued that having financial awareness supersedes formal education. What good does it do to have a highly educated child that is a financial mess? But teaching financial independence, like any formal course, requires a plan. So, here’s one you can use to begin guiding your family to one of the greatest lessons they can ever learn.
Step 1: Develop your own sense of financial awareness
This may be the most challenging step because it requires self-awareness, dedication, and humility. You can’t give what you don’t have, so make an honest assessment of your financial knowledge.
This can be done by checking out your financial situation against experts like Dave Ramsey and Suze Orman. They have a track record of learning from mistakes and helping others. Are you doing the things they advocate? Do you fully understand the principles behind them? It’s okay if you don’t. Financial self-awareness is difficult!
But making up your mind to understand sound financial principles and dedicating yourself to lifelong learning is easier. Oh, and that lifelong learning caveat is essential. It means you don’t have to feel like an expert to do this next step.
Step 2: Share knowledge with them
This step might be a little easier. It’s as simple as bringing children into your money conversations and sharing your resources. Start by letting them know you have a budget and explaining all the benefits of having one.
Notice there was no mention of how a budget works. That comes later. This is when you sell them on the idea of being financially savvy.
If they know you feel a sense of control and freedom about money, they will be more open to listening to the lesson. Money is a difficult challenge for most children at any age, so you’ll gain a captive audience if it can be demystified.
Step 3: Have them create a financial independence plan
Now that you have a captive audience, it’s time for some practical application. First, introduce them to the idea of making their own money. If it is young children, it can be an earned allowance or payment for jobs that go beyond their everyday chores. Teenagers that are old enough to work can find part-time employment.
Next, teach them how to budget. There are more ways to go about this than can be printed here, but here are some resources to help. Approaches to budgeting are different, but all of them require planning. First, have your child set short-term and long-term goals.
Then introduce them to the concept of investing toward those goals. Do they want to go to college? Then, they can help contribute to their own 529 plan. Do they want to save for something else that is ten years down the road? Teach them about investing in mutual funds and set them up with a custodial investing account.
Step 4: Follow up
Keep tabs on how your children are doing in their financial growth. Make plans to touch base informally on a near daily basis and formally on a weekly or monthly rotation.
Provide insight and advice you’ve learned from your own journey. Help them overcome the inevitable setbacks by providing encouragement, resources, and a living example of the importance of becoming financially savvy.
Now that you have the four steps put on that teacher hat! You and your children will be glad you did.