Habits
Much of what happens in your kids’ lives will be driven by habits. You teach them
to wash their hands, clean their teeth, tie their shoelaces, brush or comb their hair
before they go to school and so on. The force of habit can be huge.
Habits can protect us, and they can restrict us!
Some important habits that you need to instil in your kids are: –
• Spend less than you earn
• Pay Yourself First
• Set goals
Let’s look at these.
SPENDING LESS THAN YOU EARN
When you first started work and received your first pay it is quite likely that you had
very few responsibilities or commitments at that time, so your income, while small,
quite possibly included surplus money you could do with as you liked.
You may well have wondered what to do with all that money, but you managed to
find ways to spend it, and when your next payday rolled around you were more prepared for making the decisions of what to do with that surplus.
Before long you had developed habits. Maybe it was to go to the Pub on a Friday
afternoon and shout your mates a drink. Maybe it was to go to the bank on payday
and put away 10% of your income to save up a deposit for your first home. Maybe it
was to purchase an item of clothing every payday.
Whatever it was, you became comfortable doing it, and from that day to this, you
have continued the process of deciding what you would like to do with your money,
acting on those decisions to see what would happen, and then turning those
decisions into habits if you liked the outcome.
Your kids will do the same.
Now that money has become invisible and is perceived as little more than numbers
in a phone app, it has become harder and harder to connect reality and money.
Between peer pressure, personal expectations, perceived needs and marketing
pressures, your kids will struggle to spend less than they earn and save, unless they
develop healthy money habits right from the start!
The wisdom you impart to them before they receive their first pay, and the attitude
they have towards money is crucial! It will determine the kind of habits they develop,
and the good news is that with all of the technology that is available today, it is
possible to automate good money habits very easily.
Paying Yourself First
As was mentioned in Chapter 3 on the topic of ‘Flow’, the Richest Man in Babylon
always paid himself first.
Who was this ‘Richest Man’?
‘The Richest Man in Babylon’ is one of the most recognised ‘best-selling’ books
relating to accumulating personal wealth, and it is recommended reading for both
parents and older kids alike.
The book makes the point that most people receive their pay and then start handing
their money to the grocer, the baker, the service station owner, the butcher, their phone service provider, their landlord or the bank for mortgage payments, and so
on. I.e., We prioritise paying everyone else, with the intention of saving and investing
what is left over. Of course, there is never any left over!
You must pay yourself first or it is highly unlikely you will ever pay yourself at all.
So, if you haven’t worked it out yet, ‘Paying Yourself’ is a fancy way of saying ‘putting
money into savings’ for your future.
Teaching your kids the principle that ‘payday’ is ‘savings day’ regardless of whether
they think they can afford to save or not is the first step. Teaching your kids to turn
that principle into a habit is the second part that will guarantee their positive
financial future.
A habit that goes with this is the habit of always recognising the forces of human
nature that say “You need more money this week.” and “You can’t afford to save this
week”.
Over the 25 years that I have been writing about and teaching money principles,
every person who took the advice to habitually save a percentage of their income
before anyone else got their hands on it, regardless of whether they thought they
could afford to save or not, has come back to me and said that ‘magic happened’.
Somehow, they managed to get through each week without the money they saved,
and they got so excited to see hundreds, thousands and in some cases, tens of
thousands of dollars had accumulated as a result of developing that one habit.
SETTING GOALS
Setting Goals
Your kids could achieve amazing outcomes in their lives because you are going out of
your way to give them great foundations to build on. However, they could also
achieve very little despite your efforts to give them great foundations.
One of the habits that successful people all have in common is the setting of goals.
If you plan nothing you are very likely to achieve just that – nothing.
You should train your kids to set goals and then help them to achieve those goals.
The goals should be appropriate for their age, interests, and skills.
Some appropriate goals might be: –
- If they love running, encourage them to set a goal to run a certain distance in a set time.
- If they ask you for a particular toy, encourage them to set a goal to save up the money and help them by offering to add to their savings if they reach certain targets in a set time frame along the way.
- With their schooling, encourage them to set a goal to achieve a certain resultand offer incentives to achieve the goal. Then take an active interest in helping them to achieve the goal, helping them with homework and with tutoring.
You should actively foster the habit of setting goals and you should set a good
example by doing likewise.
As a parent you can help by:
• Getting your kids into the habit of banking some money every week right from
when they are young. This might be via school banking if that is available to
them, or using piggy banks to physically save money, and then taking them to
the bank to deposit it every time the Piggy Bank is full.
Some commentators recommend the use of a clear container for savings so
the kids can see the money accumulating. This may well be good advice!
- Showing your kids how you have a habit of automatically saving money eachpay and the benefits of that habit (discussed in Chapter 3 – Flow).
- Let your kids see the systems you have in place that are based on habits thatensure you do not spend more than you earn.
- Create a Spending Plan and let your kids see that you regularly check on thatplan so they can see the benefits of getting into the habit of planning their spending and following the plan.
- Including the entire family in a plan to achieve a goal by regularly puttingmoney aside for that goal E.g., a Cruise Holiday.
Create a system that lets everyone see the savings target being reached, maybe via a money thermometer on the fridge door, and get everyone involved in the excitement.
By the time your kids reach adulthood they should:
Already have money in savings
- Already have a savings habit and be looking forward to saving some of their income every payday. Having a savings goal and a goal for that savings is huge help here. When you have a goal to do or buy something you really want, saving for that goal is much more attractive.
- Understand that to a large extent, habits and goals create a positive direction for their life and their finances so they should be very deliberate about the habits they create and the goals they set.
- Understand that it is a really good practice to review their habits and goals at least twice a year. Sitting down with a partner, a parent, or an adviser and reviewing goals will be one of the best habits they ever create!
The best things in life and the worst things in life are usually the outcome of a gradual and slow journey or process. It takes time, and in either case, the journey becomes easier and easier, regardless of whether the direction is positive or negative.
E.g., Almost nobody becomes wealthy in one day and nobody becomes a drug addict in one day. A goal and/or a habit is often at the beginning of a wealth journey, and a lack of goals and habits leaves the door wide open for the journey to drug addiction.
