Sunday, February 12, 2012

The Best Gift for Your Kids -- Financial Independence

  
One of the most valuable lessons we could impart to our kids is a good sense of financial strategies and skills for their lives. That's the critical success factor in achieving financial independence.  I'm hugely partial to a "how to" book for couples (or singles) just starting out -- The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich

I also suggest giving kids subscriptions to Money Magazine, the most practical, no razzle-dazzle investment guide for the average household I know of. Many Americans are now starting to talk about having to work 'till they're 80 - that's when they think they can afford to retire. According to a survey by the Employee Benefit Research Institute, 56% of Americans have less than $25,000 in savings. This is chilling, and the result of choices those same people made when they were 20. They never "figured it out" where saving and investing are concerned.

Why is that? Because nobody taught them. They made poor choices in their financial lives, and mostly at the early stages. They got behind the saving and investing curve early, spending all (or more than) they made, then having kids and continuing to float their lifestyle up to meet or exceed their income.

Michael Kiosaki's book, Rich Dad's CASHFLOW Quadrant: Rich Dad's Guide to Financial Freedom, makes the point that there are only 4 ways of generating household cash flow. The fourth quadrant -- "Investor", where your money works for you, is the one most Americans (and many business owners) don't get. In fact, the power of compound growth rates of your diversified investments over 60 or so years (from your early 20's to your early 80's) will prevail every time. Actually, it almost doesn't matter what you invest in -- just don't invest it all in any one thing (such as your own company, or anyone else's).

If you had only one strategy -- to max out your 401(k) plan every year, as early as possible in your career, you'd be a millionaire by age 50 (perhaps 40). Yet almost no one does so. Why? They don't "get it". Nobody taught them.

Add to that driving cars that are bought used and paid for, rather than carrying a car payment (or 2) for your whole life and you'd be a multi-millionaire by age 50.

The gift of a lifetime for your kids would be a start at understanding frugality, saving and investing. As Dave Ramsey says, "If you will live like no one else, later you can live like no one else".

Happy investing, and happy lifetime income from it.

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Terry Weaver

CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com
Chief Executive Boards International: Freedom for business owners & CEOs -- Less Work, More Money, More Freedom to enjoy it

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