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Would you push or inform your children towards a specific direction? Or would you let them figure out when (and how) it's appropriate to invest & save their way into early retirement?
Just wondering how people's personal experiences and smarts would help them inform what they believe would make their own childrens' life much easier from young adulthood to retirement and beyond
When we lived overseas, we belonged to a club for american citizens. This was in the 70s and early 80s. Sometimes we could have soda. One day, soda in a CAN appeared. It was novel and interesting and I wanted that instead of in the bottle. I was about 7 years old. My father had me figure out how much the difference in price was per ounce (bottle vs can). He let me get the soda, but it was an exercise that stuck with me.
When I was 15, my father said he'd get me a car. He had me scour the used car ads in the paper (this was pre-internet), compile the various prices of the car I was interested in, and create (on Excel spreadsheet) a graph that demonstrated the prices. From that, he had me come up with the right price, call the lady selling the mustang I wanted, and haggle her down to what we had calculated.
Around the same time, my mother had me set up my own bank account. She showed me how to maintain a ledger and how to understand what the bank's rules were concerning keeping my money there, cashing my checks from my summer job, calculating interest, etc.
When I went to college, my dad gave me a credit card. He said, "Credit cards are for convenience only. Never spend any more money than you already have in the bank." THAT lesson has held fast for me. My mother, at the same time, showed me how to run the check book for my new account at college.
My parents diversified in stocks, cds, and several pieces of rental real estate. My mother taught me the ins and outs of property management and to this day keeps encouraging me to buy a rental property.
My parents' was a one income marriage. My mother took us around to value stores and showed me how to reuse things, fix things around the house, buy and store in bulk, etc. We had three hot fresh meals a day. We also learned that wasting things was just like throwing money away. Not to mention it was bad for the environment. I have saved THOUSANDS just by eating at home almost every single day and taking my food to work. Restaurants are for special occasions and except for the high end ones (that I really enjoy), most restaurant food tastes like crap anyway.
While I am somewhat obsessed with cars, my parents have owned (not including the cars they bought my brother and I) 2 new cars and 1 used car in the 27 years we've been back in this country. Right now, they are sharing the last new car they bought (in 2006). The minivan they got in 1987 was completely run into the ground, as was the used Honda they bought in 1985. I currently have 3 cars, but one of them is a 1999 and one of them is a 2002. The last one is my 'fun' car and is a 2011. But since there is nothing wrong with the first two cars, I can ditch this car any time I want and still have 2 functioning vehicles (which I intend to run into the ground).
These are many of the examples they gave me and taught me. There are many more little things here and there.
I've explained the time value of money to my kids. I advise them to start saving for retirement day one. My advice is for them to start putting 10% in a 401K the day they start a job and then to increase that by half of any raises they get until they max out their 401K contribution. You don't miss what never went into your checking account.
We started when the kids were little and they had piggy banks. We've talked a lot about getting a good value for your dollar. There are things we won't buy for the kids outside of Christmas and birthday presents (video games mostly). It's amazing how they suddenly don't want something when they have to spend their own money .
Our oldest just met with our financial planner to get started on his retirement savings. He is still living at home so he has very few expenses. Right now he is saving to buy a house. He is taking half of his take home pay and putting $400/month into a Roth, the rest is going into a money market account to save for his house. 1/4th of what is left goes to pay his bills and the left over goes into a regular savings account for an emergency fund. The rest is his to do with as he wants. Part of that he has decided to put aside for a trip somewhere, the rest gets spent on crap (video games mostly).
Career: I am going to advise both kids to learn a skill or trade beyond high school. In fact I already have. I advise a job with flexibility, especially if they plan on having their own family.
Money: the kids get an allowance and are learning the value of money by learning from their spending choices. Next year I am going to start teaching them about checking and savings accounts, investments and retirement.
They know that a fourth of their allowance goes into their savings accounts, and that their grandparents contribute to money markets for them. They also contribute some of their birthday and gift money to these. In addition, they save their allowance for trips to Disney or larger purchases.
They are 11 & 13.
This week I am sitting down with the 22 year old to help her establish a budget, make goals, and build up an emergency plan. She has agreed to meet with me once a month to go over it all.
Career: I am going to advise both kids to learn a skill or trade beyond high school. In fact I already have. I advise a job with flexibility, especially if they plan on having their own family.
Money: the kids get an allowance and are learning the value of money by learning from their spending choices. Next year I am going to start teaching them about checking and savings accounts, investments and retirement.
They know that a fourth of their allowance goes into their savings accounts, and that their grandparents contribute to money markets for them. They also contribute some of their birthday and gift money to these. In addition, they save their allowance for trips to Disney or larger purchases.
They are 11 & 13.
This week I am sitting down with the 22 year old to help her establish a budget, make goals, and build up an emergency plan. She has agreed to meet with me once a month to go over it all.
Wow! By 22, my daughter was doing that on her own. We have never looked at her finances since she became financially independent at age 22. (We would if she asked us.) Her financial advisor asked her once how she got to be such a good money manager, and she said her parents taught her by example. We did encourage her to start a 401K when she got her first job. She is intent on staying there 5 years, so she can get the matching employer contribution.
My other daughter is a great money manager, too. She was making $10/hr, living with a roommate in an apt, and managed to save several thousand dollars.
We did not talk a lot about money with them. As they got into high school, they had part time jobs that were expected to cover their own entertainment expenses such as lunches out with friends (it's amazing how much girls can "lunch"), movies, gas money when they started driving. They had checking accounts in HS to put their earnings into. We did not insist on savings, other than putting the money in the checking acct. and not overdrawing it.
Quote:
Originally Posted by stan4
As to the request of being more specific...
Examples...
When we lived overseas, we belonged to a club for american citizens. This was in the 70s and early 80s. Sometimes we could have soda. One day, soda in a CAN appeared. It was novel and interesting and I wanted that instead of in the bottle. I was about 7 years old. My father had me figure out how much the difference in price was per ounce (bottle vs can). He let me get the soda, but it was an exercise that stuck with me.
When I was 15, my father said he'd get me a car. He had me scour the used car ads in the paper (this was pre-internet), compile the various prices of the car I was interested in, and create (on Excel spreadsheet) a graph that demonstrated the prices. From that, he had me come up with the right price, call the lady selling the mustang I wanted, and haggle her down to what we had calculated.
Around the same time, my mother had me set up my own bank account. She showed me how to maintain a ledger and how to understand what the bank's rules were concerning keeping my money there, cashing my checks from my summer job, calculating interest, etc.
When I went to college, my dad gave me a credit card. He said, "Credit cards are for convenience only. Never spend any more money than you already have in the bank." THAT lesson has held fast for me. My mother, at the same time, showed me how to run the check book for my new account at college.
My parents diversified in stocks, cds, and several pieces of rental real estate. My mother taught me the ins and outs of property management and to this day keeps encouraging me to buy a rental property.
My parents' was a one income marriage. My mother took us around to value stores and showed me how to reuse things, fix things around the house, buy and store in bulk, etc. We had three hot fresh meals a day. We also learned that wasting things was just like throwing money away. Not to mention it was bad for the environment. I have saved THOUSANDS just by eating at home almost every single day and taking my food to work. Restaurants are for special occasions and except for the high end ones (that I really enjoy), most restaurant food tastes like crap anyway.
While I am somewhat obsessed with cars, my parents have owned (not including the cars they bought my brother and I) 2 new cars and 1 used car in the 27 years we've been back in this country. Right now, they are sharing the last new car they bought (in 2006). The minivan they got in 1987 was completely run into the ground, as was the used Honda they bought in 1985. I currently have 3 cars, but one of them is a 1999 and one of them is a 2002. The last one is my 'fun' car and is a 2011. But since there is nothing wrong with the first two cars, I can ditch this car any time I want and still have 2 functioning vehicles (which I intend to run into the ground).
These are many of the examples they gave me and taught me. There are many more little things here and there.
Would you push or inform your children towards a specific direction? Or would you let them figure out when (and how) it's appropriate to invest & save their way into early retirement?
Just wondering how people's personal experiences and smarts would help them inform what they believe would make their own childrens' life much easier from young adulthood to retirement and beyond
I think setting a good example is important. By the time a person starts saving for retirement, they are an adult. At that point, hopefully they already know they need to save, and won't need to be told. As far as pushing them into a certain career or telling them when or how to invest, no I don't think I'd go that far, unless I was specifically asked for advice.
I can't really remember getting an actual lesson from my parents about things like this, but I always knew they saved, for short and long term, and watched their spending. I learned by observing them.
When it comes to a career, I would only encourage them to pursue something that they love and have an intrerest in. Almost any interest can be made into a career. I would hate for my kid to become an investment banker just because that's a good way to make money when their real passion might have been being a dog groomer.
As for investments, I think the one thing I would want to teach them is to invest in themselves and their future first. Most "money gurus" start out with this advice and it is very valid. After you've set money aside for the future, then you can play with what's left over. What those investment vehicles are is anyone's guess. I could advise them what's worked for me, but for a lot of people that is a personal decision. For instance, rental properties can be a great investment, but you have to want to do it. I wanted to do it, I don't know if my kids will.
As for learning about money, I have posted our method here before. We start out very young learning how to manage our piggy bank. We learn about saving for the future as well as about saving for short term goals. A good way we do this is not buying "extras" for the kids, but by giving them the money, via an allowance and earning money by doing chores, and letting them make their own choices. It's amazing how quickly they stop asking for candy at the supermarket when the money comes out of their pocket and buying it means they are that much further from their goal of getting that new game they want.
A little while back we also introduced the concept of credit to our son. He really wanted something at the store one day and I gave him "credit" to buy it. Each week when I paid out his allowance I took a certain amount back, plus interest to pay off his purchase. He quickly realized that had he just waited to save his money he could have had the toy in a couple weeks and not had to pay extra for it. He started asking to do extra jobs so he could pay it off faster...lesson learned.
Another excellent method that we use in part is involving our kids in our household finances. We talk about needs vs. wants and how much things cost and where our money goes. We don't yet get into the nitty-gritty details (they are still young) but they are generally quite shocked at how much it costs to run the house and have food on the table.
Our 401K managers came to the office one day to giv a little seminar about savings/investments, etc. They gave strategies for investing in one's 30s, 40s, 50s, etc. They did not even mention the 20s. Aside from a 401K if it's available, and a savings account of some sort, 20somethings are not really in a position (usually) to be investing money. Most of them are trying to save to buy houses, trying to pay off student loans, buying their first new car, etc.
Also, whatever savings/investment strategy is in vogue now will likely not be by the time most of our kids get to the point where they can invest money. Social Security will likely be different. Our financial advisor, a real conservative dude, thinks there will be some type of SS around for years to come. However, there may be many changes in it over the next 50 years. While that sounds far off, an 11 year old will only be 62 in 50 years, probably too young to retire at that point in time.
I think the best thing one can advise a child to do is "live within your means".
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(video games mostly).
