There are multiple dimensions you’ll need to consider and help your kids prepare for the future
Banking:
Open a bank account for your child. Teach them about the
importance of savings. Let them put their earnings (chores, gift money, …) in
the bank and see it grow. Allow them to use it for buying (not blowing the
entire savings). They will see and feel how easy it is to spend and how much
effort it takes to earn / build. This in itself is a key life lesson.
Show them how to use a debit card to withdraw money and make
purchases. It will open them up to how money works in real life.
Teach them the importance of PIN. Help them understand how
important privacy is (when logging on the computer / app via the phone).
Credit Cards:
Once they are older, add them to your card as an add on
user. Educate them on the differences between credit cards and debit cards as
well as pros and cons. Few examples below:
1.
Credit cards are safer to use as they have fraud
protection
2.
Using Debit cards means, the money is
immediately out of the account
3.
Spending on credit cards means that you are purchasing
on borrowed money. You will have to pay it back once the cycle ends. If you
delay the payment, there will be late fees and interest charges
Insurance:
Talk to them about different insurances you have (health,
vision, dental, homeowners / renters, car, trip, …). Give them an overview of
premiums and at what frequency do you pay them. Talk about installment fees
that gets added on (if you are paying monthly).
Also talk about coverage (what each insurance provides and
why that is important), deductibles – what they are and how they work, out of
pocket for individual and family.
When you add kids to your insurance, be prepared for prices
to jump (as a new driver is seen risky by insurance).
Very important to educate them that kids will be off your
insurance by their age of 26. Knowledge is power. This will empower them to make
the right decisions and steps to help stay insured.
Best Practices:
1.
Summer / part time jobs will help kids
understand the value of money. If they want to do it, encourage them to.
2.
Instead of paying their credit cards / college
fees, where possible, transfer the money and educate / hand hold them to ensure
they pay it on time. This will help them form right habits, take responsibility
and ability to do independently.
3.
Here are some useful checks to ensure before
your kids own a car (buy on their own / are handed down a car)
a.
They earn and are able to pay for insurance,
gas, tolls, registration, maintenance and repairs (apart from other living
expenses) by themselves
b.
They’ve demonstrated good driving / following
all rules and understand driving car is a privilege
c.
They know they will be on the hook for any
tickets (speeding, parking, etc.)
My comprehensive LEADERS (Living
Expenses, Emergency Funds, Accidental Death, Effective Retirement, Sunset)
framework helps you create a sustainable plan (for the current and the future)
and will enable you imparting more valuable lessons to your kids.
Don’t forget, for the first 10 customers,
I will help you ensure this is a cost neutral proposition (minimum of 1X
savings in year one) through comprehensive portfolio review.
What other advice / best practices have you shared
with your kids? Share your thoughts and comments.
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