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Posted almost 4 years ago

How to Set Your Kids (or Grandkids) up for Financial Success

My parents made one thing very clear for me from the beginning. Whenever I moaned and groaned at having to do something, they would say, “We are giving you the skills to not only go out into the world but also to make your mark on that world.”

I’m so grateful that they taught me self-reliance, gave me a solid work ethic, and (this is the icing on the cake) taught me about real estate investing. My parents and grandparents all owned rental properties. Eventually, I was inspired to get into the business myself, and I was prepared to do so. They involved me and took the time to teach me how it worked. Fast forward all these years later, I am financially free, living in one of the warmest states in the country, and my children have learned so much about real estate that they’re now teaching me.

Although many people don’t grow up surrounded by real estate investing, there are many resources out there to learn, including all the valuable content here on BiggerPockets, networking groups, etc. Once you gain the knowledge, whether learned from family or on your own, maybe it’s time to think about getting your children involved, engaged, and learning about money.

How did my parents teach me about finances and real estate investing? Better yet, what little changes and habits can you implement today to share knowledge with your own kids and/or grandkids?

What I Learned from Previous Generations

Teaching financial concepts to your children or grandchildren is not an easy task, and it won’t be accomplished by sitting them down and lecturing to them one time. It is much better to tell them about a concept, have them complete a task, and then discuss what they learned from it. This three-pronged approach is what worked in my family, although the concepts and tasks themselves varied.

Doing a Service / Having a Product

One of my very first experiences dealing with money was returning coke bottles. Grocery stores used to accept returned coke bottles for five cents each, so I would find bottles around the neighborhood. My mom would drive me to the store, and then let me keep the money. Through this small task, she was teaching me the value of doing a service and/or having a product.

There are many ways to get this lesson across, whether it’s performing tasks / services for an allowance, selling lemonade, or raising money for their sports team or youth organization by washing cars.

Budgeting / Frugality

As I got a little older, my mom would involve us kids in grocery shopping. She would have us make up a grocery list based on what we wanted for dinners that week, and she would then take us to the store, and let us handle payment. We would discuss whether we got the right change, the receipt, and budget for the next week. This was one of my first lessons in evaluating the cost of items and making conscious decisions as a consumer.

Today, something similar could be done online from home. Parents could sit down with their kids to review items on Instacart, for example.

Investing in Real Estate / Enjoying Financial Freedom

At fifteen years old, my dad started involving me in some tasks to support his real estate business. For example, he had me collect the rent checks that were left in our mailbox (i.e. mailbox money) and take them to the bank to be deposited.

Every summer, my family would enjoy the full three months of summer vacation, my parents included. We would travel down to another state to visit family.

I learned early on that not everyone was able to do this, but passive income afforded us the opportunity to take that time and spend it together as a family. I valued that, and it inspired me to also create passive income later in life so I could spend more time enjoying sunny weather with my own kids.

Taxes

Many of the stories shared above related more to teaching your kids and grandkids self-reliance or how to “be a fountain instead of a drain.” If they seem to be grasping this, it may be a good time to introduce them to taxes. This concept can be tied into the broader subject of community and being a good citizen (i.e. what taxes are used for and why we pay them). For example, you can explain to them that you pay XYZ in taxes, but something does come out of it. The government uses it to build roads, take care of the homeless, support law enforcement, etc.

You can sit down and show them your pay stub, but of course, the message really hits home when a teenager gets their first job and sees taxes taken out of their own paycheck. You can also have them sit with you as you file your taxes.

Getting Your Kids Started Financially

Beyond teaching your kids or grandkids about the concepts above, there are also more tangible ways to get them started financially, and many of these actions come with lessons as well.

Before your child or grandchild is old enough to create their own accounts, you can create some in their name (i.e. HSAs, ESAs, etc.)

Once they’re old enough, you can help them set up their own checking and savings account at the bank, where they are responsible for it. This is often the beginning of conversations about compound interest, and eventually even about credit cards.

I would often ask my kids:

“Do you want to be the gambler, or do you want to be the house?”

“Do you want to be the renter, or do you want to be the landlord?”

“Do you want to be the borrower, or do you want to be the bank?”

I asked these questions so much that my kids could probably recite them as well. I do hope some of my lessons stuck with them just as my parents’ lessons stuck with me.

What were some of the biggest financial lessons you learned from previous generations? Better yet, what knowledge would you like to pass down to your kids or grandkids? Will you set up specific accounts for them, if possible?


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