Sometimes the biggest obstacle to making money is our perception. We believe investing is rocket science, or something that only professionals can do. By giving your children the confidence to manage and invest their own money, they can learn to be financially independent with the freedom to do what they want in life.
Do you want your children to be spenders or investors? In reality, they can be both. Before your children get their first credit card, show them how to make money work for them by investing.
Here are some actions you can take if you want your children to build wealth:
1. Teach them how to save: You can channel their cravings for material things like toys into an opportunity to learn how to save. You can provide piggy bank for them and encourage them to put out some amount of money periodically until the piggy bank is full. Then, they can go ahead to acquire whatever they want. I can remember vividly how we used to construct wooden containers popularly known as "save" mostly at the onset of the ember months. Then we save all the monies given to us by our generous uncles. During Christmas, we break open the "save" to know how much we were able to accumulate. Often we were astonished by the amount we saved. That singular act thought me the importance of savings. It equally increased my craving for investment. Kiddies find such ventures exiting.
2. Teach them with stories and pictures: Have you ever wondered why kiddies texts are filled with stories and pictures? The answer is not far fetched. They learn more when you tell them stories. To make the learning process more fun, you can use diagrams to illustrate the connection between savings, investment and financial prosperity.
3. Teach them the principle of compounding: the concept of money making more money was once regarded (by Albert Einstein) as the eighth wonder of the world. Kiddies should be taught how money "grows" through compound interest.
4. Keep it simple: It'll not make any sense to them if you start by telling them about stocks, bonds, mutual funds etc. Rather, you can start by teaching them how they can save money and how to use the savings to have ownership stake in the company that produces their favourite toys.
4. Practice what you preach: Children learn a lot by observation. So, you can't be teaching them how to save and invest when you're financially irresponsible. You can't teach them how to be prudent when your spending and indulgence is out of control. Your lifestyle should be a lesson to them.
Indeed, the confidence and knowledge to invest is a critical gift to your children.
