I grew up in a single-parent family and was always taught to be frugal. My mother clipped coupons every week, and her money worries often spilled over into mine.
I thought going to college and getting a good paying job would solve all my financial problems. But even as my wife and I progressed in our careers, most of our earnings went toward paying off basic living expenses and student loans.
But last year, at age 37, I achieved a net worth of $1 million. We took control of our finances by saving more, starting odd jobs and investing in real estate.
We also wanted to be financially responsible role models for our two young children. In 2020, my wife and I launched The Parents Portfolio to help families build generational wealth and raise financially literate children.
Here are the top five money rules I teach my kids:
1. Always reconsider outright purchases.
We live within our means. So as our income increases, we never increase our expenses. That’s not to say we don’t enjoy the fruits of our labor – it’s more about being mindful.
For example, if my kids want to buy toys, I ask them three questions:
- “Is this something you really need?”
- “Do you see yourself using it often in the future?”
- “Are there cheaper alternatives that serve the same purpose?”
We also go through our own decision-making process to attribute them to the value of the items we frequently buy and use.
2. Budgeting gives you more freedom.
Many people see budgeting as restrictive, but I actually see it as a tool to create more financial freedom; It saves you money by preventing you from overspending.
When my son needed money for his college book fair, we gave him a $40 budget. For him, it became a game of how many books he could get for less than $40 that were valuable to him.
Another important lesson: budgeting is not a “set and forget” exercise. We review our budget every month to make changes based on our current situation.
3. Don’t let social media influence your spending.
It’s easy to forget that social media is often just a highlight. When people post pictures of luxury vacations or fancy new cars, that’s only part of the story.
We deal with this kind of peer pressure by limiting our children’s technology use. We only let them use their tablets on weekends, and no more than two hours a day.
We also try to lead by example. We never pull out our phones when we eat together, and we use apps to turn off social media to limit our daily activity to an hour a day.
4. Know where money comes from and where it goes.
We use age-appropriate language, tools, and case studies to teach our children about more complex money matters.
For example, to give them a concrete insight into what we do with our real estate activities and the money we earn, we take them to project locations and introduce them to the contractors we work with. Hey.
We also use a lot of visuals. To illustrate how transactions between banks, borrowers, tenants, and landlords work, I’ve created a simple diagram with arrows pointing to each group.
5. Start saving early and don’t expect to get rich overnight.
A story I like to tell my children is about the tortoise and the hare. The moral is that it is wiser to take things slowly and steadily.
Wealth accumulation is very similar in that it doesn’t happen overnight. When our children receive monetary gifts, we deposit them into their bank accounts.
“For now, your mother and I are responsible for meeting your needs and wants,” I tell them. “The bank is a safe place to keep your money because the money can grow over time. And if you are big enough, you can use that money for your own purposes.”
In a world of instant gratification, it’s even more important to teach kids patience and the value of starting early.
Jonathan Sanchez co-founder of parent portfolio, a website that helps families grow their wealth and raise financially responsible children. follow him on twitter @TheParentPort,
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