How to raise a millionaire – developing your child’s entrepreneurial aptitude

<em>This is a guest post from Eric at Narrow Bridge Finance as part of the Yakezie blog swap. Eric writes about investing, budgeting, entrepreneurship, and taxes.  This week, we are discussing How to raise a millionaire – developing your child’s entrepreneurial aptitude. You can see my post on the same topic at Eric’s site.

While I am single and kids are not going to be in my future anytime soon, I occasionally think about our education system and what I might do to ensure my kids have a successful future. Raising the next generation of millionaires will be a challenge, but I think I might be up to it.

Be Open

The first step to ensuring that kids grow up knowing how to handle their finances is to be a positive role model for them. How should a kid be expected to know how to properly use credit cards and bank accounts if they never see how they should work.

My parents took me with to the bank and taught me how checking and savings accounts work at a young age. I never thought credit cards were mysterious, because my parents told me that when you use them, you still have to pay the money back right away.

While I never knew the details until high school and college, I always knew how our family finances worked. Even now, I still discuss my parent’s investment strategy with them, though usually now they are asking me for stock advice.

Teach Through Experience

When my piggy bank was full or I received a check for my birthday or Chanukah, I always helped count it up and went to the bank with my Mom to make the deposit. Even when I was five years old, I was making the deposits into my own account.

While I am sure the teller thought I was just a cute kid going along to the bank, I always understood that the bank held my money until I needed it back. I learned how the accounts work and how to save rather than just spend everything I had.

Independence

When I got my first job and first car, it was time to open my first checking account. I always had savings, but never needed a high volume transaction account until I was sixteen. My parents were always there to help me manage the account, but I did it on my own.

I deposited my own paychecks and setup direct deposit. I paid my parents every month for my car insurance and bought my own gas and paid my own car repairs. Starting with something like a car was a good way to learn financial independence. If I wanted to use it, I had to pay for it responsibly. It gave me an important lesson on the value of money and how to manage my cash flow.

Teach the Tough Lessons

When I was in third grade, my mom had to stop me from spending every dollar I had on Power Rangers action figures. She let me get a few, but told me that the money would be worth more to me later on and that I should keep it for when I really needed it.

That money became a college fund (which I never needed) and later a down payment on my house. Sure, I didn’t have as much back then. I now make more per month than I had in total when I was in third grade, but the lesson was learned.

You can’t always make sense to an eight year old, but you have to be firm and teach your children while letting them be independent and make a few of their own mistakes. That is the only way that they will grow up to be successful and independent when you are not there to help.

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