Kids and Money

By Steve Beaman, Contributor, USDR.

As Father’s Day 2013 came and went, like many of you I had the chance to reflect on my children and their futures.  Like us, they will face retirement for themselves, education for their children and the myriad costs of just living just like we have experienced.  But can we help them avoid the pitfalls we’ve run into and build truly prosperous lives without struggling more than they already will?  The answer is yes but it does require knowledge and action together!

Oh the challenges of raising kids (it seems like it gets tougher with each passing generation, or do I just say that because I’m showing my age?)!  This generation of young people will face both opportunities and challenges like never before; globalization, national debt and changing social morays are on the challenging side while technological development; longer and healthier lives, and improved communication can be positive things.   But regardless of the good or bad attributes of our time, their need to understand money and its use as a medium of exchange and a method of storing wealth will be critical to their well-being.

Perhaps then, we as parents can teach our children nothing more important than the lesson of being responsible with the money they earn.  From the age of 18 until their expected retirement at probably 70, they will have earned on average around $3.6 million dollars depending of course on their field of study and personal work habits.  That’s a lot of income and it really does state clearly that our nation’s financial problems are not built by a lack of INCOME, but rather by spending.  Here’s roughly where that $3.6 million goes; $1.2 million to taxes; $720,000 to housing; $360,000 to transportation; $700,000 to food & spending, $50,000 to paying back the school loans they accrued to be able to get that average job and all of the other costs of living.  With all of those embedded costs, they’re lucky if they save just 5% for themselves!  But if they did save 5%, over their lifetime they would have saved around $196,000.   If that is their result, they should be congratulated because they’ve done far better than most people by saving just 5%.   So the first step is to teach children to pay themselves first!  Take at least 5% right off the top and put it away.  The second step is learning what to do with it!

Let’s make the dangerous assumption that our child did save their 5% and they wanted to use the magic bullet of compounding to watch it grow.  Well that disciplined child would have in excess of $1.3 million dollars when they retired assuming an average return on their investments.  Here’s where knowledge in action comes into play.  Saving an additional 5% so they increase their payment to themselves to 10%, they would retire with over $2.1 million dollars – a multi-millionaire.   Can we as parents give our children any greater gifts than this knowledge?  Is it not worth teaching our children basic financial literacy to help them understand how they too can become part of the millionaire class and that’s assuming an AVERAGE INCOME and AVERAGE RETURN.  And which of our children think they’re average? Should either of those variables rise, their outcome would be demonstrably better.

Parents frequently tell their children they love them right?  But if we really do, if we really care about their future, can we do any less than teach them the importance of managing their money correctly and building wealth for themselves?  The current news is filled with gloom and doom scenarios of government debt at the state and federal levels and the difficulty governments will have meeting their funding requirements going forward.  With that knowledge, can you look your kids in the eye and tell them that they’ll enjoy the same Social Security or Medicare benefits that have been enjoyed?  The answer of course is NO.  They won’t enjoy those benefits because the money simply won’t be there.  For the kids today, they WILL have to provide for themselves and we must teach them how to do it!

Steve Beaman is the President of the Society for the Advancement of Financial Education. Or you can email

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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