Money Lessons for My Child
By Zeke Anders on April 18, 2022
Written by: Zeke Anders
My wife and I were recently blessed with our first child. She’s truly our bundle of joy, and we are trying to soak in every moment with her. I have started thinking about what money lessons I want to teach her as she grows up. So far, the lessons I want to teach her are to spend less than you earn, understand the power of compound interest, invest in your human capital, be patient, and to be charitable.
The foundation of finance is spending less that we earn. If our lifestyle exceeds our earnings in our working years, we won’t be able to save for emergencies or retirement. When she is older, we will find ways to talk to her about our financial choices and help her make some of her own.
Compound interest is another critical concept I hope to teach her. Warren Buffett describes compound interest as a snowball that you push down a hill, and you want the hill to be as long as possible. I want to show her that the earlier she begins to save, the longer her assets have to grow. I like the below chart, and maybe we can demonstrate this for her by giving her interest on a savings account. The Federal Reserve of Dad may have to start with a high interest rate to get her attention, then lower rates over time to prevent expectation inflation.
Human capital is an investment as well. Investing to learn new things and develop new skills is important for all of us. Early in our careers human capital is almost all we have. And like compound interest we can learn a lot given a long timeframe. Investing in herself early on will pay dividends for decades.
The Federal Reserve of Dad may provide low risk, high return opportunities, but the real world does not provide many of these. As she starts to learn more about investing, we’ll tell her that growing wealth takes a long time. Early on the amount you save is the most important factor, but over time, decades, her investment returns will eventually take over. The world is full of investments that promise high returns and/or low risk, and I want her to know that she doesn’t need to get rich quick, that a diversified portfolio is good enough.
We’re blessed to live in the United States, with the attendant stability and prosperity that has brought us. But not everyone here or abroad is as fortunate as we are. I believe we should give to help others find safety, health, and enrichment that they need. Looking for opportunities to help others makes us appreciate what we have and empathize with others. I hope she looks to make the world a better place with her time, efforts, and financial resources. This list will grow other time and finding ways to share these values with her will be an important part of the process. I’d love to hear from you. What money lessons did you pass on to your children and how? Or what lessons would you like to teach them?
Zeke Anders – Planning Specialist zanders@twickenhamadvisors.com
Disclaimer
Hightower Advisors, LLC is an SEC registered investment adviser. Securities are offered through Hightower Securities, LLC member FINRA and SIPC. Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.
