We all want our kids to succeed (at least I hope so). Today let’s talk about financial success. Running out of money to pay for basic necessities like food, clothing, and shelter can be a real problem if it happens to someone.
From Small Beginnings
While earning money by having a successful career is important, even more important is saving and growing wealth. So let’s start our kids early with learning about how to save responsibly and invest wisely. For every dollar that your child earns or receives, encourage them to save at least a few cents, maybe 10, and invest it wisely. Taken over the course of a lifetime, that saved and wisely invested money can grow to provide a large nest egg for your kid’s future.
Diversify
Financial professionals will tell you to diversify, and I heartily agree. If you invested wisely in a mix of stock, precious metals, T-bills, and so on, then when the S&P 500 took a nosedive recently in response to Trump’s tariffs, at least your precious metals account would have appreciated significantly as well, offsetting the loss. During normal market times, if you pick several stocks, all of which careful analysis indicates are good risks, then maybe a few decline but others increase in value enough that overall, you come out ahead. Diversifying risk and dollar cost averaging allow you to mitigate risk and allow the law of averages to work in your favor.
An even better idea would be to diversify across nations i.e. investing in countries outside of the USA as well, for further diversity of investment assets. When the Japanese economy’s bubble burst, Japanese investors who had only invested in Japanese companies’ stock sustained heavy losses. If they had invested in a mix of Japanese and perhaps US or other nations’ stock, the losses and damage would have been at least somewhat mitigated.
Never Too Young to Start
“But my kid is too young for them to start investing.” Well, you can start an investment account for them, setting aside a small amount each month or each week, investing wisely in a diversified mix of assets with perhaps some guidance from a trusted financial advisor. When your kid turns 18 the funds can be used to help them pay for college, start a business, or whatever their future entails. We want to leave our kids something of value, but that means we should also teach them something of value as far as personal finances are concerned.
Time is the most valuable resource any of us have, and a young person has time on their side if they start investing young. The power of compound interest can work strongly in a young person’s favor, allowing them to start investing with just a little bit that will grow to a large sum of money by the time they hit retirement age.
Good Habits
Starting young also encourages a person to develop good habits in regard to saving and investing. This practice will also help teach kids about discipline and consistency, which are valuable traits in any endeavor. Good habits developed early will pay significant dividends later in life.
Every time I consciously restrain myself from an impulse buy, I put that bit of extra money saved, toward investing instead. For example, when I see a cool new multi-tool or knife, instead of spending $40 on it, I put that $40 into investing. Why not teach our kids this same strategy?
Good habits, learned early in life, will help set our kids up for success as adults.
What do you think about this? Please leave a comment below. Thanks for reading!