6 Ways to Teach Your Children About Building Wealth

Teaching our kids about money and building wealth at an early stage is so critical.

Apr 26, 2014 at 1:00PM

Pigs

I normally talk about apartment building investing but I wanted to talk about another topic that I've slowly started to work on with my kids as they get a bit older.

I have four kids from 5 to 12, and while all of them are learning about money, I felt the two older ones (9 and 12) are ready for the next phase.

Here are the 6 ways I'm teaching my kids about building wealth.

Lesson # 1: Practice Delayed Gratification
Sit each of your kids down and put some kind of treat in front of them (I chose a HUGE marshmallow that requires a knife and fork to eat!). Tell them that they can eat the marshmallow now, or, if they wait for 15 minutes while you go off and do something else, they will get another marshmallow.

Then see what they do.

Some of my kids immediately ate their treat. The others sat there, looked out the window, or got a book, and they waited for their second marshmallow.

Use this exercise as a teaching lesson about instant vs. delayed gratification, and then look out for other opportunities to learn this important lesson in life and in business.

Lesson # 2: Learn to Handle Money
We give our kids a small allowance ($10 per month). While chores are expected to be completed and are NOT paid for, we do give the kids opportunities to earn extra money. We set a price for the project and if more than one wants to do it, we do a reverse auction: the lowest bidder wins the project!

We then use the 80-10-10 rule for handling that money: 80% of it they can spend as they wish, 10% is saved and 10% is to be donated. This teaches them the importance of saving and giving back, two lessons that even adults have great difficulty with.

Lesson # 3: Read Rich Dad Poor Dad
I read this book when I was 35 and I was like "where has this book been all my life?" and I vowed not to make that same mistake with my kids.

I made my daughter read this when she was 9 years old, and she wasn't ready for it ("It's boring, Daddy!"). But now she's 12, and I think I'll try again!

The important messages in this book are the difference between liabilities vs. assets, the importance of minimizing your expenses, and the idea of passive income. Wow, powerful lessons.

Lesson # 4: Live Within Your Means
This is such an important lesson from Rich Dad Poor Dad, but you also hear it from other places like your grandparents and places of worship. Unfortunately, our culture teaches us exactly the opposite, so instilling this value in our kids early on is so important.

You can teach this lesson in so many ways each day, you just have to be on the look out for opportunities. This involves delayed gratification, discipline and saying "no" every once in while. This won't be easy because most of the other kids get whatever they want.

Lesson # 5: Do a passive income project
This is a more difficult lesson to learn because it's a little more abstract. It will require time and more maturity for your children to really learn this. Use examples your kids can understand. For instance, one example of a passive income business could be a gum-ball machine. Let's say you buy it for $100 and put it into a busy grocery store. Ask your child to research the cost of the gum balls. How many gum balls do you think the machine could sell in a week? Have her calculate a profit and loss projection. Then talk about how much time this passive income business will require. Then talk about buying a second and third machine.

Lesson # 6: Make it Fun!
A lot of these lessons are so abstract and confusing to kids and so you'll have to look for ways to make it fun. One way to do this is to play games, such as Cashflow for Kids and Monopoly. Or help them start their first business, maybe a lemonade stand, cutting the grass, baby sitting or shoveling snow – or maybe even gum ball machines! All of these projects require planning, investment, marketing and execution. If you already have some real estate investments, begin involving your kids in the business.

Conclusion
Teaching our kids about money and building wealth at an early stage is so critical. Unfortunately, it's not taught in school (even college!) and so it's up to us.  Teaching our kids about building wealth is not only an important life lesson but presents us with great opportunities to spend more time with them.

Get started with The Motley Fool's top stock pick. It's free!
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with amazing potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303%! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

This article is Copyright 2014 BiggerPockets, Inc

Michael Blank's passion is being an entrepreneur and helping others become (better) entrepreneurs. His focus is buying apartment buildings by raising money from private individuals. He's been investing in residential and multifamily real estate since 2005. He is the creator of the Syndicated Deal Analyzer and the eBook "The Secret to Raising Money to Buy Your First Apartment Building".

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers