One of the key determinants of wealth from a young age have been the level of influence a person have from a young age. It is not just for wealth but life in general. Subject them to certain negative influence and they learn fast. Before you know it there is no turning back.
While for some people like myself my accidentally turned out to learn the hidden lessons of wealth, parents can do better by following a few tenets of wealth.
Straits Times last week have a good article titled Piggy Back your Way to a Fatter Piggy Bank.
What is great about this article is that the author shared a list of things they implemented through out their children’s life, supporting them along the way
- Their children have piggy banks. The parents matches what they put in whether is 20 cents, 50 cents or $1 on a 1 for 1 basis
- When they are in their teens and have bank account, the same 1 for 1 basis still applies
- As an adult, they seeded the minimum sum of $30,000 for a 5 year structured fix deposit for their children
The important point here is that the guidance and participation of the parents and the children through the experience is probably the biggest determining factor to the child eventually becoming better than average in managing money.
It is not really useful that you tell your son eventually “I got $80,000 for you to study for university”. They would think that money just appear easily and would not cherish how it comes about. They learn that to get the money requires hard work and commitment.
I am on the fence about dangling carrots all the way. I am not sure if the kids will look at the monetary incentives and be too focus on growing money for the wrong reasons. Perhaps adding a gifting to charity component would be wise.
I sense that a particular module of how the stock market work can be in the form of investing in an exchange traded fund like STI ETF through POSB Invest Saver early in their life say 12 years old, and revisiting it yearly.
You may also check out some of my other articles on how to set up a plan to ensure your children grow up well money wise:
- To Parents: Why I was motivated to save when young and a 4 step guide to kick start your child
- 4 Fiscal Lessons to teach your kids