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Value Creation Blog

5 Ways Your Children Can Become Financially Independent – Wealth Management

Posted by Josh Patrick

wealth managementI’ve often written about my concern that we have developed an entitled generation with our children.  They haven’t learned how to lose and they often don’t handle constructive comments (otherwise known as criticism very well.)

I often see parents put a great deal of pressure on themselves to make sure their children have all of the things their neighbors have.  I’m often not sure whether this is for the parents well being or their children’s.   None-the-less that’s a situation I see on a regular basis.

I spend a fair amount of time thinking about how we can support our children and at the same time help them become not only intellectually independent, but financially independent as well.  For me, financial independence is not parents writing a check to their children.  It’s having the children being able to support themselves financially, learning through money mistakes they might make.

We can start with allowance

Instead of just giving allowance because our children exist, why don’t we have them earn their allowance? I know that when I was younger allowance was only given when I did activities that felt an awful lot like work.  For some reason, this has disappeared in many families.

Next we move to philanthropic activities

I’ve written about this before, but I believe the having a family council make decisions on budgeting and appropriate use of family resources for charitable activities makes a lot of sense.  We can teach our children some strong and lasting money skills by including them in who, how and the way we involve ourselves in making charitable contributions. (both monetary and with our time)

When children are teenagers have them get jobs

Yes, there is lots of competition for jobs in this age group, but learning to work and save money is a good thing.  In some instances it might make sense to even stop an allowance and have it replaced with a job your children might get.

When it’s time for college have children pay for extra things

When your children go to college have them pay for all expenses that are above and beyond tuition, books, room and board.  When I went to school, my father wrote us a check once a semester for these things.  We were expected to budget and pay for our life out of these funds.  I learned a lot about the world of budgeting and through mistakes learned to manage my own money.

Be clear with your children about paying for their life after college

In the Millionaire Next Door, Tom Stanley talks about the only good things you can do for your children with money is provide funds for education and capital to start a business.  I agree with this.  I think it’s important that after a particular period your children start to pay for their own living expenses.

There will be times when you want to “rescue” your children from financial mistakes, but more often than not this is not a good thing to do.

Not everyone will agree with these ideas.  I believe we have a problem with creating children who become economically disabled.  Some of the ideas above just might help with this issue.

Josh Patrick

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Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

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Topics: financial planning, wealth management, financial independence planning

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