My parents modeled good financial habits when I was growing up, and I'm working on doing the same for my kids. The three most important things I'm teaching my children are to avoid debt, use a budget, and save and invest.
Avoid debt
I grew up in a frugal family, and my mom taught me to avoid debt if at all possible. My parents were modest homeowners, and they drove two older cars that were paid off. They didn't have any credit card debt, and if we didn't have the money for it, then we didn't buy it. My mom was the boss of buying secondhand items. I remember waking up early with her to scour thrift stores and garage sales for toys, clothes, and comic books.
As an adult, I have credit cards, but I pay them off at the end of every month. In terms of student loans, I was fortunate enough to earn an athletic scholarship to pay for my undergraduate degree, and I paid off my loan for my graduate degree using the debt snowball system . Between my husband and me, both of our cars are paid off. The only debt we have is our mortgage, and I would like the same for my kids.
In order to minimize the amount of debt that my kids take on, my husband and I have been putting money away in a 529 saving plan . Research has found that 85% of black bachelor's degree students will carry student loan debt, compared to 69% of white bachelor's degree students. Helping my children graduate debt-free will allow them to build wealth early on and pass that down to their own children one day.
Make and use a budget
Another lesson I learned growing up was how to budget . I saw my mom balance her checkbook after each grocery trip or after any check that she wrote. And now I do the same thing. I use a physical paper register and record all of my purchases. I like the John Maxwell quote that says, "A budget is telling your money where to go instead of wondering where it went." Since my first job babysitting, I always kept a ledger of how much money I had and where I wanted to spend it.
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We teach our kids lessons in budgeting in a few ways. My husband and I have open conversations with our kids about money. For example, my kids often get to choose between having a birthday party with friends or a small weekend getaway with the family. We will sit our kids down and let them know that we will spend X amount for their birthday, and they get to be involved in the decision. Our aim is to show our kids that making decisions about money should be logical and planned out. We also want them to see firsthand the outcomes of their financial decisions.
Save and invest
Lastly, I saw my parents save and invest. They are now retired after working blue collar jobs, and it's likely due to their commitment to putting money away every month. While it never seemed like we had a lot growing up, behind the scenes they were always planning for their eventual retirement.
Like my parents, my husband and I have been able to put money away every month in 401(k)s , Roth IRAs , CDs , and regular savings . While saving and investing isn't always easy, it has paid off. Even with a few dips in the stock market, I'm confident we'll come out ahead.
With my kids, whenever they are given birthday money or Christmas money, we sit down and explain that they can spend it now or they can save it and possibly buy something more valuable. I want them to know that saving and investing means delayed gratification, and the payout can be bigger in the end.
Looking back, my parents did a great service by raising me to be financially literate, and I want the same thing for my kids. My hope is that my kids will make the same wise decisions and continue the cycle for the next generation. While I do want my kids to have wealth, it's not just about a sum of money. Wealth is about living comfortably, having stability, and being generous towards others.
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