Growing up in a family with only parents, I was always taught to have a thrifty mindset. My mother cuts coupons every week, and her money concerns often become mine.
I thought that going to college and getting a high paying job would solve all my financial problems. But even as my wife and I advance in our careers, most of our income goes toward basic living expenses and paying off student loans.
But last year, at the age of 37, I hit a net worth of $1 million. We take charge of our finances by saving more, starting a part-time job and investing in real estate.
We also want to be an example of being financially responsible for our two young children. In 2020, my wife and I debuted mother portfolio to help families learn how to build generational wealth and raise financially savvy kids.
Here are the top five money rules I teach my kids:
We live within our means. So even if our income increases, we never increase our spending. That’s not to say we don’t enjoy the fruits of our labor – it’s more important to be mindful.
For example, when my kids want to buy a toy, I ask them three questions:
- “Is this what you really need?”
- “Do you find yourself using it often in the future?”
- “Are there less expensive options that provide the same purpose?”
We also guide them through our own decision-making process and show the value of the items we buy and use regularly.
Many people see a budget as a constraint, 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 wanted money for a school book fair, we gave him a budget of $40. For him, it became a game of seeing how many books under $40 were worth to him.
Another important lesson: Budgeting is not a “set it and forget it” way. We review our budget monthly to make changes based on our current situation.
It’s easy to forget that social media is often just a reel of highlights. When people post pictures of lavish vacations or fancy new cars, that’s only part of the story.
We handle this kind of pressure by limiting our children’s use of technology. We only allow them to use the tablet on weekends and for no more than two hours a day.
We also strive to set a good example. We never pull out our phones when we eat together, and we use apps that disable social media to limit our daily activity to one hour a day.
We use age-appropriate language, tools, and real-life examples to teach our children about more complex money topics.
For example, to give them a tangible sense of what we do with our real estate business and where the money we make comes from, we take them to project sites and recommend them with the contractors we work with.
We also use a lot of images. To illustrate how transactions between banks, borrowers, tenants, and landlords work, I drew a simple sketch with arrows pointing to each group.
One of the stories that I love to tell my children is about the tortoise and the hare. The lesson is that it’s wiser to do things slowly and steadily.
Building wealth is very similar in that it doesn’t happen overnight. When our kids receive monetary gifts, we deposit them into their bank accounts.
I told them, “Right now, your mother and I are responsible for providing for your needs and wants. “A bank is a safe place for you to deposit money because banks allow the amount to grow over time. And when you’re big enough, you can use that money for your own goals.”
In a world of instant gratification, it’s more important to teach kids the value of patience and getting started early.
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