Are You A Good Financial Model?
Are You a Good Financial Model?
In the last post, I talked about my financial independence legacy that was passed down from my parents. I have also written extensively before about how I have my kids on a budget. This idea of teaching our kids about finances and smoothing the pathway to financial freedom comes up over and over again. Questions abound. To give an allowance or not? If so, how much? To pay for college for them or have them take out loans? While I think the fear of not educating our children about this important life skill is well founded, my impression is that most of the tactics we are employing are utter rubbish. You can explain the stock market to your offspring until your face is blue. You can teach them how to budget. My bet is that most of it won’t stick. The single best indicator of whether your kids will be financially savvy or not is you. Are you a good financial model?
Financial modeling can take many forms. Your children are watching everything you do. They are interpreting your attitudes toward money and purchasing. Your behaviors will become ingrained in them. Long after they have forgotten your dry lectures about responsibility, they will remember your actions.
Value
There are many ways to be a good financial model. Primary, among these, is your attitude towards stuff. Kids pick up quickly on how their parents treat material objects. From the beginning, in our household, we have tried to instill the idea of value. We spend money on things that have value and optimize that value over the long term.
A few simple techniques will model in your children a healthy relationship with stuff:
- Buy second-hand when possible, on sale when not
- Fix broken objects before replacing
- Shop for quality in an effort to make stuff last
- Sell used toys and clothes when you are done with them
- Take a few days after deciding on a purchase to make sure you really want it
Although not all-inclusive, this list contains just a few examples of how we create a good financial model for your children.
Hustle and Side Hustle
We work. Hard. And we value the opportunity and economic return that works provides us. From the beginning, it was decided that both parents would continue to work during early childhood. We wanted to instill in our children that both men and women are equal, and can provide.
We also wanted to model, for our children, that front loading and sacrifice have their place in a financial plan. While one should always enjoy their work, there will be unenjoyable moments. Or even years. This is part of being an adult.
If you want to reach financial independence, there are going to be some tough moments.
And that’s OK.
What Money Can’t Buy
Part of being a good financial model to your kids is teaching them that money and things are never a substitute for people and experiences. This is a much harder lesson to teach. You must try to focus your priorities on other aspects of life outside of what can be purchased. How to do this?
Spend a lot of time outdoors, in nature, walking by the lake.
Exercise, jog, and ride bikes.
Have the kids hang out with grandparents and cousins.
Final Thoughts
The best way to teach your child economic responsibility is to be a good financial model. More than any didactic teaching, your kids soak up your actions and attitudes. if your relationship with money is healthy, it is likely that your offspring will follow suit.
So stop worrying about allowance. Stop struggling to find a job for your kids so they can start a Roth IRA.
Lead by example.
And they will follow.