Becoming wealthy by the time we retire is a goal many people strive for. But due to the scarcity of time, few of us ever achieve this feat. Our children, however, have plenty of time to let compound interest help their money grow. And parents can significantly increase the chances that their children will become wealthy in their lifetime. Here are five ways to help your children build wealth.
Develop frugal habits yourself. It's not enough to tell your kids what to do, because they will emulate what you do. If you are frugal, you will not only become financially free yourself, but your actions will also teach your kids the freedom that comes with not spending excessively. Any inheritance you leave them as a result of your frugal habits is an added bonus.
Fund a Roth IRA for your children. Many of us wish we had started saving for retirement years before we actually did. Yet, seldom do I hear of people helping their kids start early by funding a Roth IRA for them. As soon as children have earned income (part-time work counts), why not help them get tax-free growth for the rest of their life? Even $1,000 could turn into a million dollars if we give it enough time to grow.
Teach them the excitement of improvement. There are always better ways to make our money work for us and to waste less money. We can look for a better deal on our next trip, negotiate our monthly bills, or find better interest rates on our accounts. Teach your kids the art of continuous improvement so they can keep making their finances more efficient.
Fund a 529 account, and help your kids get out of college debt free. On average, a college graduate earns more than those who don't hold the same degree. At the very least, a college degree provides more career choices for your kids, increasing their chances of having a satisfying career. But graduating with five or even six figures of debt puts a huge burden on a young graduate, which will affect the choices that he or she makes down the road. Help your children complete schooling without taking on debt so they can begin to build a future right after college.
Help nurture a drive for achieving in life. Most self-made wealthy people made their millions from months and years of earning much more than they spend. Whether it's through a business or successful career, the drive and willingness to work hard comes from within. You should do everything you can to help, nurture, teach, and encourage such behavior. Unless you are extremely wealthy and a huge estate is already waiting for your heirs, the best way to help your children to be financially successful is to teach them how to build wealth.
David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.