It’s the American coming-of-age:

After high school graduation, proud parents send their kids off to college, the service or the wider world, with one simple instruction. Go figure it out.

“Johnny, Jane: At long last, it’s time to start thinking about your values, your beliefs, your work ethic. Finally, you can begin to explore life’s most important truths.” Not!

…Good parents just don’t do that. We spend years nurturing and preparing our children, cultivating the qualities they will need to be successful, productive, happy human beings.

Too often, though, we forget about preparing them in a crucial area that will have lifelong effects: personal finance. How much time do we spend teaching kids about money and how to use it wisely? Do we think they’ll just figure it out once they leave home?

A reader recently shared her success story. She focused on teaching her son about finances, helping him learn about making smart choices. Now, years later, her son and daughter-in-law have a beautiful home, no credit card debt, robust TSP accounts and a solid financial foundation. Their good position didn’t come by accident; it came from sound financial training that began during childhood and has continued over the years.

Here are five lesson plans I hope you’ll consider building into your effort to help equip your kids with the financial tools they’ll need to be successful:

  1. Differentiating needs from wants. Understanding the difference – and knowing to satisfy the former before the latter – will prove essential in day-to-day financial decisions.
  1. Avoid falling victim to peer pressure. You’ve certainly hit on this as it relates to other areas of your kids’ lives – drugs, alcohol and the like, but there’s also a money slant to it. Whether it’s buying the latest gadgets, a slick vehicle or trendy fashions, kids shouldn’t blindly follow the herd into financial problems.
  1. Capitalizing on the power of time. Time and compound returns are your child’s best financial friend. Make sure they know it. Matching what they save, setting up a Roth IRA with their part-time employment income and sharing your own experiences with long-term investing can help drive home this message.
  1. Make saving and investing a priority. There’s not a right or wrong here, but they are different and there’s probably a place for both in their financial life. It’s important to create savings for short-term goals and emergencies and invest money for longer-term plans like retirement and, here’s the kicker, not only with what’s left over at the end of the month.
  1. Understand the rules of the credit game. Credit can be a useful financial tool and a dangerous temptation. How our kids manage it can affect them in a lot of different areas. Getting a job, renting or buying a house, insuring a car, receiving government security clearance or being approved for a competitive loan all are examples of where effectively managing credit can yield positive results.

Outfit your kids with the tools they need to succeed. And remember, the parenting doesn’t stop after their initial venture into adulthood. It’s a lifelong endeavor. The good news: If your kids are like mine, the older they get, the more receptive they become.

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