Children Learn Poor Money Habits from Their Parents

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TOM@RICHHABITS.NET

According to a Brown University habit study by Dr. Pressman, we pick up most of our adult habits from our parents. If parents are bad at managing money, their adult children will be bad at managing money.

No parent wants their kids to grow up to struggle financially as adults. Yet, since most people do struggle financially, it’s clear parents have been and are failing to be financial success mentors to their kids.

Well, let’s put an end to this.

Below are a few smart money habits to teach your kids. These were extracted from two of my books – Rich Kids and Effort-Less Wealth:

• Teach Automated Savings – Saving is a habit that must be forged right out of the gate, with your child’s first adult job. Advise your adult child to start small, say 5% of net income. As their income rises, advise them to increase their savings rate to 10%. The ultimate goal should be saving 20% or more of their net income by the time they are age 30.
• Teach Immediate Investment of Savings – Teach your adult children the importance of immediately investing their savings. 
• Teach Frugality – Don’t mistake being frugal with being cheap. They are two very different things. Being frugal requires three things:
  1. Awareness – Being aware of how you spend your money.
  2. Quality – Spending your money on quality products and services and
  3. Bargain Shopping – Spending the least amount possible, by shopping around for the lowest price.
• Teach Delayed Gratification – As your young adult child’s income rises make sure they do not fall into the very common trap called Lifestyle Creep. Lifestyle Creep is by definition: increasing your standard of living in order to match your increased income. It’s a common Poor Habit among many who suddenly find themselves making more money. The Rich Habit is to forgo the desire to spend your money today and, instead, sock it away into investments that grow in value and eventually generate passive income – income you don’t have to work for.  That Rich Habit is called Delayed Gratification – putting off something you want today for something you want tomorrow – financial freedom.

Tom Corley is an accountant, financial planner and author of “Rich Kids: How to Raise Our Children to Be Happy and Successful in Life”, “Effort-Less Wealth”, “Change Your Habits Change Your Life”, “Rich Habits Poor Habits”, “Rich Habits: The Routines Millionaires Use Daily to Build Wealth” and “Rich Habits Wealth Academy.”