How to Raise a Millionaire – Show Your Child That You Spend Time on Finances

If you are reading my efforts you probably want to become a millionaire or you already are one.

If you want to become one, and if you have children, you probably are trying to instill your values in your children – the values that are driving you to want to be a millionaire.

If you already are a millionaire, and if you have children, you may be wondering how you need to raise your children (or maybe your grandchildren) differently than you were raised – because they are being influenced by wealth in ways you weren’t.

To address these questions, I will be writing a series of posts (interspersed with posts on other topics) with ideas on how to raise children to be millionaires.

Money Is the Last Taboo
Many parents fear that sharing their personal financial situation with their child will have a bad result. Maybe the kid will spread it all over the neighborhood! Maybe he will brag to his friends about how much money the family has. Maybe knowing that he will receive an inheritance will make him into a lazy bum.

Show Your Child That You Spend Time on Finances
Your child learns most by soaking in the actions you demonstrate. This is true of everything, including what you do with your finances. To raise a millionaire, you need to demonstrate that you do indeed spend time on your finances, but you also need to let them see, hear and participate in the time that you spend.

How Much Time Do You Spend Each Month on Your Finances?
In the book, The Millionaire Next Door: Surprising Secrets of America’s Wealthy, the authors state that millionaires ‘allocate their time, energy, and money efficiently, in ways conducive to building wealth’. They spend twice as many hours (10 vs 3 hours a month) as the non-millionaires planning their investments. They place management of their own assets above any other activity.

I spend about 15 hours a month on our personal finances and another 10 on our little businesses.

What Do You Do When You Spend Time on Your Finances?
Learning about, tracking and managing your finances all involve different activities.

Learning
In a past monthly tip on Family Money Values.com, I gave this tip:

Go to seminars, read books and articles, take classes, talk to others and LET YOUR CHILD SEE YOU, or let them participate with you! 

Millionaires are life long learners. Millionaires do not stop studying once they are out of school. They read, attend classes, observe and study the successes and failures around them, hire appropriate advice, use mentors and strive to grow personally. They don’t waver at spending money on learning activities. They understand that the money spent may allow them even greater future successes. When they experience a setback, they ask what they can learn from it, instead of asking why these things always happen to them.

I focus on books and articles, but I also talk to our long time broker regularly – he loves to explain financial concepts!

Tracking
How often do you figure out your net worth? Do you always know the balance in your most used account? Do you track the stock prices or real estate values in your portfolio? How often do you check on your asset allocation? Are you staying within your budget?

When you do this kind of tracking, involve your child, let them see how you do it and explain to they why you are doing it. Involve your child in the business of your household – tracking income vs expenses, paying bills, reviewing your planned vs. actual expenses. It will give your child first hand experience with personal finance.

I use Quicken and update all of our accounts (assets and liabilities) once a month. I then print out a net worth report for my hubby’s viewing pleasure. I track asset allocations once a year right now – probably should do that more often!

Managing
Do you and/or you and your spouse sit down and think about your financial future, your cash flow, your budget. How do you go about making changes to your portfolio and finances to deal with the results of your tracking?

How often do you discuss your finances with your financial planner or adviser?

Let your child participate in these discussions, taking the opportunity to explain concepts in age appropriate manners. If they soak in the experience, they will consider it to be a normal, routine way of running the family when they are older. When you follow through and take action (sell or buy, start saving more, set goals and etc), show your child the results of your actions and help them take age appropriate actions of their own.

Use Time Spent on Finances As Teaching Opportunities
In Silver Spoon Kids : How Successful Parents Raise Responsible Children, the Gallos, suggest that parents use teachable moments in everyday life to prepare the rich kids for their financial responsibilities.

Start giving an allowance at about 7 years old and let your child allocate that money between spending, saving and giving. Talk about their allocation when you talk about your financial planning.

At about 8 or 9, help your kid open a bank account. Let them track their account when you are tracking yours.

Between age 13 – 18, they suggest that you should involve your child in researching major purchases the family intends to make. They could also research financial options. They should have their own checking/debit accounts and maybe a limited credit card so they can track cash flow when you track yours. They can set goals for their own financial future as you talk about the family’s financial planning and they can act on their tracking and goal setting as you help them through the process.

Increasing amounts of financial responsibility and broader time frames for managing money should occur as the child matures.

Be a Role Model
Spending time with your child as you learn, track and manage your own assets provides an excellent role model for them to use as they become more financially self-sufficient.

What financial tasks do your kids see you do?