Have you ever heard the statement, “Train a child in the way he/she should go, and when he/she is old he/she will not turn from it.” Though this can be applied to many areas of your child’s development, and is often used to refer to a child’s bent, learning styles, and obvious talents, in this day and age, when credit, debt, and economic issues are experiencing major and catastrophic problems, your child can be hedged against future struggles and heartache through sound financial mentorship and solid habit development.
A sound plan to helping your child grow a sound financial future must contain at least 4 basic truths in order for his or her financial future to have lasting stability:
1. It must be based on sound, time-tested financial knowledge
2. The applied knowledge must become “owned” by the child
3. The knowledge must be internalized, and applied to become practical wisdom
4. The wisdom must be transferable and transferred for optimum retention.
These 4 basic truths have been compiled into a solid 9-step plan to ensure your child’s financial peace and future. Following this plan will give your child the head-start and financial wisdom to hedge his or her future against many circumstantial and future economic shifts. Always remember, your child may never have to know the struggle it takes to get out of debt, if he or she can first learn solid financial principles and stay out of debt.
Step 1: Lay the foundation for success.
An ancient proverb states: “Wisdom is the principal thing; Therefore get wisdom. And in all your getting, get understanding.” Your child’s future financial plan starts with sound understanding. Initially, any plan to promote sound financial behaviors for a child (or anyone) must be based on sound understanding or knowledge of financial principles that work and have survived multiple cultures and markets. Without the right understanding or foundation, your child’s financial stability will be unstable at best. Consider his or her financial future like building a house. If that house is built on sand (poor or incorrect knowledge) it will not take much to corrode and destroy the house. If the house is built on solid financial knowledge and principles that span generations and cultures, then his or her house is built upon a rock-solid foundation and can survive many storms. Though it is never too late to begin sound financial mentorship, there are at least 3 reasons why it is best to start as early as reasonably possible, taking into account the child’s maturity.
1) Good habits are extremely powerful, and if started early, can have a positive compounding effect in future choices and behaviors, even in the midst of challenging external pressures.
2) Unfortunately, the real behavioral habits of budgeting, though available in many public schools, are usually not thoroughly and properly reinforced.
3) Budgeting with the kids can bring about more family unity and actually sharpen the parental skills, parental budgeting, and positive family goal achievement at the same time – enhancing the overall internalization and longevity of good behaviors through powerful, positive social and family dynamics.
Step 2: Help your child to understanding real marketplace value:
In order for a child to learn, he or she must have some personal investment in the process (whether it is time, talent or treasure). A simple analogy to shed light on this concept has to do with milk and solid food: A child who is bottle fed on milk forever will never appreciate the benefits and growth of solid food. Likewise, when the child is mature enough to do simple chores, he or she can be given a stipend or weekly “salary” for completing his or her specific tasks that are outside of common family chores.
However, as a note of caution: children must have certain household and family contributions for which he or she is not paid monetarily, as this is one of the strongest reinforcements for a child developing a sense of his or her intrinsic value to the family, and for the family. Let’s re-iterate this: If a child is always rewarded materially for his or her contributions, then it will be difficult for him or her to develop a sense of growing appreciation for the family, and intrinsic worth to the family.
Step 3: Allow the child to get paid for honest work (not allowance) so that he or she can learn the value of money in relation to work, effort, exchanged value and time.
With that in mind, certain important and valuable tasks can be “in-sourced” to a child or youth for a certain financial stipend, so you can begin to build in him or her the foundations of the economic value of his or her work, efforts, talents and time. For this process, money is the cleanest and most concise way to instill a clear understanding of the economic part of his or her relationship to society: You must use money to teach them how to grow in financial wisdom; both in knowledge and behavioral habits. Regardless of the paid tasks, a child must have a mix of both paid and unpaid tasks, so that he or she can learn the societal differences that will be in operation as they mature and move into adulthood.
Step 4: Use real world working systems to build normal, healthy social interaction.
In many banks, a parent can set up a joint checking account and savings account with the child (at banks - parents usually have to be the account owner - and often - banks will have a special kind of program to help parents help their kids – all you have to do is ask your local bank). Usually, in almost all cases, the child has no power to do anything with these accounts without the parent’s signature. With recent banking changes, certain account restrictions are more strict, yet many banks offer different kinds of products or educational material to help parents mentor their children on banking and sound financial stewardship. Even if banking changes drastically in the near future, there will be some sort of financial system in place that children will need to be mentored into, so that he or she can function normally within the society.
Step 5: Setting up healthy stewardship principles for the child:
As a foundational rule, a parent should make the commitment to NEVER allow the parents or child to take money from the account or savings outside the established plan and reward system, unless solid rules have been established for emergency withdrawals with parameters for acceptable pay-back periods and acceptable self-imposed penalties to prohibit violating the integrity of the checking and savings plan. Unless agreed rules of integrity are followed, parents who borrow money from the child's account can actually create credibility problems with the efficacy and positive reinforcement of this program, and can actually develop a sense of futility in being a good steward, thereby sabotaging your efforts and effectiveness.
Step 6: Implement an age old 80 -10 -10 rule:
Across cultures, the 80-10-10 rule has proven to be a solid strategy for allocating funds, whether it be for a child or for an adult, and even some businesses. Though these do not have to be the percentages you use, it is a fundamentally sound foundation, and is not difficult to do.
In this system, the child can spend 80%, give 10% to the church or charity, and must save 10% as his or her “untouchable future nest-egg” If you decide, you can actually make the savings a higher percent and the spendable cash limits lower, as many children do not need to spend at the 80% level. However, the 80-10-10 principle is a solid life plan to instill early - and is very achievable when the child enters the work force as well, as long as his or her spending and stewardship habits have become internal convictions.
Additionally, this kind of internalized wisdom can hedge a person against his or her temptations to buy non-essentials impulsively. In a day and age when we are inundated with commercialism and easy credit, this can be a powerful habit to build early into the integrity of any child for a more peaceful and solid financial future of saving and building instead of the lifelong burden of borrowing and owing. Many people who struggle getting out of debt have never built strong savings habits, because of the prevalence of easy credit, commercialism and the lack of mentorship. As you mentor your children to become responsible money-savers, their habits can protect them from future hardships caused from poor stewardship habits.
Step 7: Random interval rewards are the best reinforcements.
At the beginning (and throughout), a parent should create random-term rewards for the child for reaching certain short, mid and long-term goals. Additionally, to compound the reinforcement, a child should be able to have a menu or list of rewards that he or she has helped to develop. The rewards should be those that are chosen in advance by the child for different intervals of rewards, as these are the most powerful in helping him or her to adapt positive behaviors. A parent should help his or her child to develop several short-term rewards that are chosen and listed by the child. They must come from the child’s genuine desires if they are to have the power to reinforce the desired working, spending, and saving habits.
For example, a 7-14 day goal could be for the parent and child to go on short trip to the ice-cream shop to create his or her own favorite ice cream treat, if that is a solid desire of the child. A good 60-90 day goal could include a special trip to the movies with a lunch date, both reinforcing the behavior and good relationship dynamics. A solid 6 month to annual goal could be a 3-4 day trip to the child’s favorite theme park or mini vacation to another place the child would really enjoy.
Step 8: Make a Long-Term Commitment to Your Child's Financial Intelligence and Future
A child is a child, is a child . . . and it takes a committed parent or guardian to help him or her transition into adulthood, especially in financial stewardship. As there are so many factors, emotional, spiritual, and practical that can compound to challenge or tempt your child in violating his or her future integrity in the financial peace arena, you must do your best to continue your own education and financial intelligence. There are several ways to do this:
· Get involved in other sound financial mentorship groups
· Subscribe to trusted financial stewardship newsletters
· Buy books and programs from integrity base financial coaches or institutes
· Subscribe to financial podcasts that offer weekly wisdom
· Start your own grow and share group for parents or guardians
Any athlete who desires to grow and compete at his or her best hires a professional coach. Likewise, business owners who desire to grow for the good of their business will often hire an executive business coach. Your child’s financial development is no different. He or she will need mentored or coached to build solid fundamentals.
Regardless of which options you choose to invest in yourself and your children’s financial peace and future, it is best to use the principle of overlap. While subscribing to more than one financial expert, begin to listen to the principles that seem to be common. The principles that are repeated by several integrity based financial coaches are probably based on fundamental and wise principles that are time-tested.
Step 9: And finally, share and spread the success!
It has been said that one of the most powerful ways to ingrain and learn a new habit is to teach it. If you find this to be fun and successful with your family, consider starting a fun-with-money budgeting course for parents to learn and teach their children in your local church, parent group, home-school group, or other organization where parental mentoring is at the heart of the mission. Additionally, even if you do not have success at first, venture out and start the group as an act of accountability to yourself and your children. If you make the commitment to start a group, even if you have no success, your chances of winning the battle of financial peace for you and your children is compounded. As long as the group has identifiable goals and is done in a spirit of charity and contributed, positive learning and growth, this social system is a very powerful way to “sharpen iron” and can hedge against anyone’s natural bent to give up or quit when challenges arise. Besides, isn’t your child’s financial peace worth it?
About the Author Aaron Schulman is an Internet, Marketing and Business Coach / Strategist, Copywriter and Publisher who enjoys seeing other people grow their marketplace effectiveness, using their unique gifts and talents to serve others while learning to passionately pursue their purpose in the marketplace. He has a beautiful wife, Jennifer and two lovely daughters, Rachel and Linda Grace. He enjoys teaching, writing, learning music, helping people find their purpose, and life. He works with Brent Long and Long on Life offering Executive, Marketing and Sales Management Training for people who desire to serve their clients.
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