Without a doubt, my favorite thing about life in the last two years has been being a father. If you’ve been around me in the last two years, then you know this because I’ve probably shown you a picture of Ollie. I want badly to be a good parent. I want badly to provide Ollie the opportunity that she needs to have a fruitful life. And since children learn so much so early from watching us, I thought I would help you understand what the 5 best things you can do, from a financial perspective, to be a better parent.
1. Get your child a piggy bank or a bank account – Children must develop the habit of saving from an early age. Despite all the great tools that technology has brought us, the ceramic piggy bank is still the most effective tool to teach savings. Once your child is old enough, get them a savings account at your local bank. Do not skip this step. Yes, I realize that it seems cliche’, but it works. Paying your taxes is cliche’ too, but it keep you out of jail.
2. Make a college decision – Do you have any idea whether your 2 year old will go to college? Absolutely not. Do you make it harder for them to go to college when you refuse to make a decision about college savings? Absolutely. President Obama was only able to pay off his student loans after receiving significant proceeds from sales of his two books right before he took office. The cost of college will continue to be a major problem for our children. That doesn’t exactly mean that you have an obligation to pay for 100% of their schooling. It just means that you need to make a real decision. If your child has to get student loans to fund college, then fine. But don’t let that be the result based on your laziness or unwillingness to put together your savings strategy. Please be clear, I’m not saying that you HAVE TO pay for college, I’m saying that you need to have a plan.
3. Get life insurance – I have had 6 clients (in their 20s and 30s) die in the last twelve years. The circumstances surrounding each of the untimely deaths were unique, but the importance of providing money for their survivors’ needs were not unique. Your death will not be a blip on the radar. Your death will be a very significant event for your loved ones. You have the opportunity to make sure that it is not a significant financial event. Do you want to feel like a great parent? Buy life insurance to provide a future for your family in the event of your untimely death. I try not to get too opinionated when it comes to the life insurance topic, but any parent that doesn’t have significant life insurance coverage isn’t taking their role as a parent seriously. As a baseline rule of thumb, ten times your income is the proper amount of life insurance to have. I’ll hit the details of why in a future post.
4. Show restraint – No matter how bad of day I have, the second I get home and see Ollie smile, my heart and mind get back in balance. This smile of hers often drives me to “smile creation” techniques. These are things that I know will make her happy, which in turn, makes me happy. The older a child gets, the more expensive these techniques get. The more a child sees that it costs money to make them happy, the more you have ruined them financially. You must show restraint when it comes to “buying them a smile,” not only for your financial situation, but for their future financial psyche.
5. Employ teamwork – If you are a two parent household, then you must show a unified financial front. Want to jack up your kid when it comes to gender roles and financial responsibility? Then just have one person deal with the money. One of the biggest problems that Gen Y faces is the lack of parental financial leadership. If your child sees that your spouse is never privy to financial decision-making, then they are going to think that there is some hidden reason behind it. Your child is going to take YOUR baggage into their financial relationships. Work together, not only for your financial future and relationship, but for your child’s financial future and relationships.
Do you have a financial parenting tip that you’d like to share? Leave a comment.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.