We all want our kids and grandkids to have a better life than we did. Proverbs 13:22 says, “A good man leaves an inheritance to his children’s children.” No matter where you are on your financial journey, you can start building generational wealth today.
In this blog post, we will explore six teaching points and six practical ideas to help you equip your kids with the tools and mindset to build a substantial financial future. From fostering early financial conversations to investment strategies, we will show you how to make your kid a millionaire.
6 Teaching Points to Make Your Kid a Millionaire
1. Have Conversations About How to Make Money from an Early Age
To lay the foundation for financial success, involve your children in discussions about money from an early age. One effective way to initiate this conversation is by inviting your children into family meetings focused on planning and managing household finances. Explain the budgeting process and involve them in decisions related to expenses. By doing this, you provide them with a real-world understanding of how money works and the importance of responsible financial management.
Another way to teach your kids about making money is by providing them with an allowance in exchange for completing age-appropriate chores. This approach helps them learn the value of hard work and financial rewards. It also serves as an opportunity to teach them how to budget and save.
In addition to allowances, take the time to explain the concept of assets and liabilities. Help them differentiate between items that appreciate in value (assets) and those that lose value over time (liabilities). This foundational knowledge will guide their financial decisions in the future.
As your children grow older and develop an interest in investing, involve them in the investment process. Show them how to research and make informed investment choices. Gradually, empower them to make their own investment decisions.
2. Encourage Your Kids to Make Money in Different Ways
It’s essential to introduce your children to the idea that there is more than one way to make money. This understanding can start with traditional jobs, where they exchange their time and skills for a regular income. They can also explore freelance opportunities, such as babysitting, lawn care, or other services. These activities teach them about personal responsibility and managing income they have earned.
When they are ready, show them the difference between earning money (trading your time for a paycheck) and making money (investing in assets). Starting a business and investing are great avenues to show your kids how to make their money work for them. Teaching your kids that there are multiple pathways to making money shows them that there is no cap on their earning potential – an essential understanding that millionaires have.
3. Encourage Your Kids to Bring Value to Others
The best way to make money is by solving problems that positively impact others. So, teach your kids to view life through a lens of service. As Christians and wealth builders, our question should always be “how can I add value to others?” Show your kids that money and making a difference go hand in hand.
This business philosophy aligns with various biblical principles that highlight the importance of helping and serving others. Mark 10:45 says, “For even the Son of Man did not come to be served, but to serve, and to give his life as a ransom for many.” Similarly, we should aim to serve others in everything we do, including our financial pursuits.
4. Promote Delayed (Not Instant) Gratification
Patience is a virtue that extends to various aspects of life, including finances. Teach your children the concept of delayed gratification, which involves resisting the temptation for immediate rewards in favor of long-term goals.
As Proverbs 14:29 says, “Whoever is patient has great understanding, but one who is quick-tempered displays folly.” This verse emphasizes that patience leads to greater understanding and wisdom. Apply this principle to financial decisions, showing your children that saving and investing for the future requires discipline and patience.
5. Share an Abundance Mindset
The way you talk about money has a significant impact on your children’s perception of it. Promote a positive and abundance-focused dialogue about money. Avoid expressing fear or scarcity when discussing financial matters. Instead, communicate a sense of trust and faith in God’s provision.
Share the importance of casting your anxieties on God, as emphasized in Philippians 4:6-7, “Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus.” Explain to your children that faith and trust in God can alleviate financial worries and create a peaceful relationship with money.
Remind your children that an abundance mindset sees opportunities and possibilities rather than limitations. Encourage them to believe that there are always more opportunities and money available for those who seek it.
6. Bring Your Kids to Rich Learning Environments
We thrive in community, so it is crucial to expose your children to environments where they can see financial possibilities and learn how to attain them. Money is everywhere, so we need to disciple our kids around money within a faith community. If we don’t, the world will. Events like The WealthBuilders Conference offer a valuable space for learning, networking, and gaining insights into financial success from experts and peers who share your values.
6 Practical Ideas for How to Make Your Kid a Millionaire
1. Start a Family Business and Employ Your Child
One practical way to introduce your children to entrepreneurship is by starting a family business. Depending on your interests and skills, you can choose a business that aligns with your family’s strengths. For instance, a family restaurant, a home-based online store, or a service-based business such as landscaping or cleaning services can provide valuable opportunities for children to get involved.
Employ your child in the family business and assign age-appropriate responsibilities. Your child will learn hard work, dedication, and responsibility. They will also receive an income that you can invest. The earlier, the better, because the money will have more time to compound. Here’s a hint – technically, you can employ a baby in your business if the job makes sense. For example, if you post pictures of your baby on your website or blog, it could count as modeling! Which brings us to point #2…
2. Open a ROTH IRA for Your Child
A ROTH IRA is a tax-advantaged retirement account that allows your child’s contributions to grow tax-free over time. This powerful investment tool is an excellent way to secure your child’s financial future. You can open a ROTH IRA in your child’s name when they have earned income, such as from a part-time job or their involvement in the family business.
Contributions to a ROTH IRA are made with after-tax dollars, which means your child’s earnings and investment gains can be withdrawn tax-free after the age of 59½. This provides them with a significant financial advantage, and the earlier you start, the more time their investments have to grow.
3. Buy an Investment Property When They Are Born
Consider purchasing an investment property early in your child’s life. If the numbers make sense, put the property on a 15-year note to ensure it is paid off by the time your child graduates high school. This property can serve as a rental income source, housing during college, or a means of funding their education or entrepreneurial endeavors.
4. Build Credit Early
Building a strong credit history is essential for financial success. You can help your child establish good credit from an early age. One way to achieve this is by opening a credit card in your child’s name and teaching them responsible credit management.
Start with a low-limit credit card and set clear guidelines for usage. Explain the importance of paying the balance in full each month to avoid interest charges. Over time, responsible credit card use will contribute to your child’s credit history and pave the way for favorable interest rates on loans and financial opportunities in the future.
5. Open a UTMA Custodial Account at a Brokerage
A UTMA custodial account is a versatile financial tool that allows you to invest on behalf of your child. As the custodian, you manage the funds and investments until your child reaches the age of majority, which varies by state (usually 18 or 21 years old). This type of account provides flexibility in how you invest and manage the assets.
You can contribute to the UTMA account, invest in stocks, bonds, mutual funds, or other investment vehicles, and watch the account grow over time. Once your child reaches the age of majority, they gain control over the account, including any investments and assets it contains. This can be a valuable asset to kickstart their financial journey as they become responsible for managing their financial resources.
6. Open a 529 Savings Account
As part of your active financial legacy planning, consider opening a 529 savings account to save for your child’s education expenses. A 529 plan is a tax-advantaged savings account designed to help families save for education costs, including college and K-12 expenses.
Whereas this is not the most efficient or liquid way to build generational wealth, contributions to a 529 plan grow tax-free and can be withdrawn tax-free when used for qualified education expenses. These accounts offer flexibility in terms of investment options and can be used for a variety of educational institutions and programs. By funding a 529 savings account, you’re taking a significant step toward ensuring your child has access to quality education without the burden of student loans or debt.
Take Your Family to The 2024 WealthBuilders Conference!
Do you want to learn more about how to build generational wealth? Do you want to take your loved ones to a fun, faith-filled environment where they can learn financial wisdom? Then register for The 2023 WealthBuilders Conference! Join us February 16-18th in Denver, Colorado, or online via livestream. Click here to learn more and register.