Kids Who Were Taught These 15 Things About Money In Childhood Often Grow Into Wealthy Adults
Teach your kids these things so they can live a life free of financial worries when they grow up.
Carolin Voelker | Canva Money and finances are very taboo topics, although they shouldn't be, and it's never too early to start teaching basic financial literacy. Money and your finances are key to creating the life you want, and it certainly takes a lot of trial and error to figure out what works, like how much your credit card limit should be and whatever an IRA is.
Parents can (and should!) set their kids up for monetary success by teaching them these things in their childhood to set them on a course for financial stability, and perhaps even true wealth, as they age.
Kids who were taught these things about money in childhood often grow into wealthy adults:
1. Buying coffee every day does legit add up over the year, so maybe dial it back with the lattes
A $5 coffee a day is $1,200 a year. Love your pumpkin spice? Then look for places where you can cut back without feeling the pain, suggests Joe Duran, author of The Money Code. For example, keep the AM coffee, and ditch the random Saturday night takeout order.
2. Try to put something in savings every week, even if it’s just $5
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“I hear so many people say it’s not worth it to just save $20 from a paycheck. What people don’t get is it’s not just the money you save, it’s the habit you’re getting yourself into,” says Kathleen Hastings, CFP, a portfolio manager in Bethesda, MD.
3. Keep track of your credit score
Find yours at the Annual Credit Report. Not only do you know where you stand, but it keeps you on guard for unusual activity that could signify identity theft.
4. Put a 401(k) and a Roth IRA to work
A 401(k) is work-sponsored with pre-tax dollars, a Roth is an individual retirement account set up with an investment firm. If your work offers it, you should contribute to your 401(k) no matter what. A Roth IRA can be a smart choice if you want to diversify. Unlike a 401(k), a Roth IRA allows you to withdraw funds penalty-free for certain things, like a down payment on your first house.
Since both accounts have annual contribution limits and potentially different tax benefits, contributing to both could boost your annual savings amount and reduce your tax bill now and down the road. According to Fidelity Investments, while most people work 30 or 40 years until they retire, kids who open a Roth IRA could benefit from 50 years or more of tax-free growth due to compound growth.
5. Don’t assume that just because you’re making more money now, you need to upgrade everything in your life
As your income rises, so do your expectations, explains Manisha Thakor, financial advisor and co-author of Get Financially Naked. Were you fine with DIY manicures in college but now find yourself going to the salon a few times a month?
That’s lifestyle creep. If it was good enough for you in college, it’s good enough for you now.
6. Understand what your dollar is worth
Take a look at this map from the Tax Foundation. There are low-price states and high-price states, and knowing where you live will give you a real idea of the relative value of your paycheck.
7. Make a budget and try to stick to it
Financial experts often recommend beginning with the 50-30-20 rule: 50 percent toward expenses, 30 percent to discretionary spending, and 20 percent to savings, says Duran.
8. Add up what you’re spending on food because it’s probably a lot more than you think
This is one super-sneaky expense that can add up. “So many people think they’re spending $100 a week on food when they could easily be spending five times that amount,” says Duran.
For a week, write down exactly how much you’re spending on Seamless, snacks, or juice runs, and add it up. Then try cutting back—ideally, you should only be spending 10 percent of your paycheck on food, including restaurant meals.
Social Finance, Inc. (SoFi) reported Americans spent an average of $6,053 per year, or about $504 monthly, on groceries in 2023. In 2020, Americans spent an average of 8.6% of their income on food, with nearly half of that on food outside the home. You can create a budget by tracking your spending and planning to cut back. You can also record what you eat and analyze the data to see if you can make changes.
9. Use credit cards but in a smart way
Financial experts agree: Used right, plastic is a tool. Learn how to use it to your advantage, including how to pick the one that’ll give you the biggest perks (cardratings.com can help you begin to suss out the differences between offers).
10. Work on your negotiating skills
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The more you practice, the better you’ll be at talking the talk in your boss’s office. Nervous? Experts suggest beginning small and outside work: Asking for a discount on the slightly misshapen muffin at the corner café in the AM will give you that much more confidence to talk money with a hiring manager.
11. Get all your money into one central location
Have a few forgotten 401(k)s in your past? Bad move, say experts. Instead, roll them over to an IRA. Same with any lingering bank accounts. Close them out and make sure your money is in one central location.
12. Make sure you’ve got all the necessary insurance coverage
Health insurance, renter’s insurance, and disability insurance are musts, says Duran. And consider life insurance as well: Even if you’re single without dependents, buying a life insurance plan now is far less expensive than it would be down the road.
13. Sign up for a financial planning workshop
Head to a financial planning workshop (often run by local banks), read a book, or listen to a podcast, but learning the language of investing —index funds, mutual funds, portfolios, etc — can help make things seem less overwhelming.
14. Be honest and upfront with your partner about money, and expect the same in return
Money-related disagreements are the leading cause of stress in relationships, according to a study from Kansas State University. Regardless of whether or not you’re pooling your cash or keeping it separate, you’ve got to be able to talk about debts, goals, and paychecks with your partner.
15. Know what you want from your money
“At the end of the day, I ask clients to think about how they want to use their money,” says Gretchen Cliburn, CFP, a senior wealth manager in Springfield, MO. "When we know that, not only do we have more incentive to save, but we also know what we’re working toward.”
Yes, it sounds New-Agey, but write down what you want to use your money for — whether it’s your dream home, exotic travel, or making sure you never have to stress again, it’ll help keep you on track.
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