Kids are the future
When someone hears the word “affluenza” the first thought that typically runs through their mind is some type of infectious disease. “Affluenza” is the term used to describe the concern that raising children in a privileged environment could give them a distorted sense of value making them less motivated to work to build their own financial resources. Here are some strategies you can adapt for your children of all ages.
Provide a reasonable allowance
An allowance is more than a pool of money. It’s a simple way to instill the three “Ss” of money management: Save, Share, and Spend. Suppose a 12 year old is given $12 per week it could be allocated as follows. Spend $4 – figuring out how to stretch this amount over a week develops budgeting skills. Share $4 – charitable donations develop a social conscience as children decide which cause to support. Save $4 – Introducing the concept of paying yourself first at a young age will help kids manage expectations and recognize the value of saving.
It’s important to teach the lesson that we don’t always get what we want. One solution is to sit down as a family and develop a monthly budget that accommodates reasonable activities and purchases for each person. When a child invariably asks for something outside of the plan you’ll have the ironclad answer “No, that isn’t in the budget; maybe we can include it next time.”
Educate about money management
Instead of leaving your children a lump sum consider having your children sit down with an advisor to discuss strategies to invest an inheritance based on their own financial goals.
The basics of investing, banking, saving and borrowing aren’t taught in school – some would argue they should be. It is up to each of us as parents and grandparents to educate our youth to be ready for their financial future. It is never too early to start to learn.