Everyone hopes their child will grow up to be happy, successful and, let’s be honest, rich. Not only does champagne and caviar in the French Riviera sound delightful, but so does access to quality healthcare, building a dream home and food security. And, it turns out that while there’s no guaranteed formula, you could still have a significant impact on your children’s future earnings, based on what you teach them when they’re young.
Here are three things you can do to help set your child up to earn a six-figure salary in adulthood according to Mindful Financial Partners founder Melissa Murphy Pavone and personal finance expert Rachel Cruze.
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Financial Education
Knowledge is power and beginning young can empower individuals to make wise choices later in life. For instance, “teach how giving is linked to financial freedom,” stated Cruze. This will help shape the people children ultimately become.
Giving cultivates an abundance mindset as opposed to a scarcity mindset where the focus is shifted from what one lacks to what one can contribute, thereby incentivizing higher earnings. Taking deliberate steps to instill financial literacy is essential, supported Murphy Pavone. Don’t wait until early adulthood to educate individuals on concepts they will need to put into practice five minutes later.
Early on, introduce concepts like the value of money, compound interest, the difference between a need and a want, budgeting and saving. Simple financial literacy language and videos like those offered by Kidsville are a great place to start.
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Skill Building
Concepts in and of themselves are meaningless without real-world application. This is why Cruze suggested making kids earn money through chores instead of simply giving them an allowance in order to establish the relationship between working hard and generating income.
“Encourage saving, spending and giving by dividing their money into jars or accounts for each purpose,” Murphy Pavone explained. “Use simple examples to show how saving and investing early can lead to long-term wealth. For instance, open a custodial Roth IRA for a teenager with earned income to jumpstart their savings.”
Good money habits are muscles that must be built. Putting what you are teaching your children into practice will help them build and reinforce the skills necessary for a successful financial future.
Emotional Support
Cruze said there is a fine line between empowering and enabling and it’s important to let kids spend money and make mistakes. “Better to do it now than in the real world,” she said. Learning what not to do in a safe environment can be just as important as learning the correct steps to take, especially since resilience will be crucial to their financial journeys.
So don’t yell or cajole; simply provide constructive feedback on how to do better next time. Separately, Murphy Pavone told parents to let kids be kids and to encourage the development of their own identity.
“The ultimate goal is to help them discover and pursue a career that aligns with their strengths, passions and value — six figures will follow naturally when they excel at what they love,” she said.
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This article originally appeared on GOBankingRates.com: 3 Things You Should Do Now To Help Set Your Child Up To Earn 6 Figures as Adults
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