Set stage for kids to have healthy fi­nan­cial habits as adults

South Florida Sun-Sentinel (Sunday) - - People On The Move - By Scott Mautz |

hen we think of all that we want for our chil­dren, for them to be suc­cess­ful, to do well in school or to just be happy, it can feel lofty and even daunt­ing. But there are plenty of prac­ti­cal, ev­ery­day things we can do to help them thrive in sim­ple, but pow­er­ful ways.

Teach­ing them how to be good with money is just one. In­still­ing in them solid fi­nan­cial habits is a gift that keeps on giv­ing. It’s of­ten not pri­or­i­tized and some­times it’s even over­looked by par­ents, but it’s vi­tal and I’ve found some ways to make it an easy add-on.

We try to teach our kids to be po­lite, kind and re­spect­ful. We want them to ex­hibit good man­ners and de­velop habits of punc­tu­al­ity and hard work.

Their mind­set to­ward money is a habit too, one that can lead to al­ways hav­ing enough money on hand to face mi­nor or ma­jor emer­gen­cies and to have a com­fort­able re­tire­ment down the road. The prob­lem with de­vel­op­ing bad habits with money is that they are qui­eter and more in­sid­i­ous than your av­er­age, daily bad habit.

In­vest­ment su­per­star War­ren Buf­fett is a fan of a quote that he’s adapted and used in speeches: Chains of habit are too light to be felt un­til they are too heavy to be bro­ken. You can have any habits, any pat­terns of be­hav­ior that you wish. It’s a mat­ter of what you de­cide.

So step one is to view money man­age­ment as a habit that needs to be built, early. I know it’s hard to pri­or­i­tize when you’re still try­ing to teach the im­por­tance of not wait­ing un­til the last pos­si­ble minute for ev­ery homework as­sign­ment to be done. But re­mem­ber, this is a gift that keeps on giv­ing.

Start small. First, teach the ba­sics and se­cure lit­tle vic­to­ries. Our 16year-old daugh­ter had her own sav­ings account and credit card pretty

early on and is set up to talk to our fi­nan­cial ad­viser when she is ready. She re­cently got her first pay­check for a part-time job and is learn­ing about taxes.

Money lessons start with ba­sic choices. If you buy this now, you won’t have enough to buy that later.

Buf­fett, who clearly has a lot to teach adults and chil­dren, be­lieves the key is to start with a small habit, a se­ries of con­sis­tent choices, and keep at it un­til the im­pact be­comes no­tice­able and it be­comes a part of your life.

How is it that child A was able to save up enough to buy her own car in high school while child B can’t swing that? It can start with sim­ple things, such as choos­ing not to buy a toy or video game or ear­rings and sav­ing the money in­stead.

It also means say­ing no when your kid wants you to buy some­thing for him or her. Ex­plain the dif­fer­ence be­tween needs and wants.

Teach them how money can be earned. They will learn about the value of money and how earn­ing it leads to self-suf­fi­ciency, in­de­pen­dence and re­source­ful­ness.

“Don’t save what’s left af­ter spend­ing; spend what’s left af­ter sav­ing.”

This is a quote from Buf­fett, one that speaks to the need to save from the top, or to set aside a per­cent­age that comes out of your pay­check and goes into sav­ings (be­fore you buy a sin­gle thing).

Show your kids how to be smart by talk­ing about hav­ing a small goal of sav­ing, say, 2 per­cent of ev­ery pay­check, de­velop a bud­get that tracks ev­ery cent spent, make lit­tle choices and keep adding to them to get to 5 per­cent saved a month, or more.

Of course, this re­quires liv­ing within your means, at a level that’s com­fort­able but that chal­lenges the def­i­ni­tion of what’s re­ally needed to be com­fort­able.

Let your kids see you role-mod­el­ing this, call­ing it out when you’re choos­ing a cheaper al­ter­na­tive or are choos­ing to not buy some­thing. Let them know you’re set­ting aside money each month for an emer­gency fund or to add to your re­tire­ment nest egg.

From day one, teach the dif­fer­ence be­tween bad debt and good debt.

You can never start too early here be­cause you can quickly get too far be­hind. Your child might soon be tak­ing out stu­dent loans or maybe a busi­ness loan to get his or her bud­ding busi­ness idea off the ground.

While Buf­fett says no debt is al­ways pre­ferred, at least loans like this are in­vest­ments in the fu­ture, as op­posed to maxed-out credit cards or cash ad­vances.

Sit down with your child to make sure he or she un­der­stands the dif­fer­ence to help pre­vent mak­ing a bad first move that soon be­comes an al­ba­tross.

So while you’re work­ing on help­ing to form all those other good habits in your kids, don’t forget the one that will pay div­i­dends some­day.

Scott Mautz is the CEO of Pro­found Per­for­mance and an ad­junct pro­fes­sor at In­di­ana Univer­sity.

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