Teach Your Children Well

Jim Collins over at jlcollinsnh recently lamented how he is fearful that he has failed his daughter because she is not greatly interested in managing her money.

I’m with you, Jim, I often worry I failed my son in the same way. Although it sounds like you did everything right to instill financial savvy, I know I did a lot wrong.

While you, Jim:

I started her early.  Allowance.  Envelopes for spending, saving and charity.  “The Richest Man in Babylon.”  Checking account.  Saving account.  Mutual fund.  Endless conversations (ok lectures) on the subject.  What child wouldn’t love this stuff?

I, in my son’s formative years, saved too little, spent too much and invested almost no time or effort in learning or teaching sound financial principals.

Disinterest in financial matters is absolutely the norm. We spend 40 hours a week making money and another 20 spending it. But most of us would prefer not to spend any time thinking about it. The 9 basic concepts you spelled out for your daughter are definitely worth consideration.

JLCollinssnh-The simple path to wealth

It starts with nine basics.

1. Avoid fiscally irresponsible people.  Never marry one or otherwise give him access to your money. (Wow, this is a great point. Do everything else right except this and you still may end up with nothing!)
2. Avoid money managers.  It’s your money and no one will care for it better than you.
3. Avoid debt.
4. Save a portion of every dollar you get.
5. The greater the percent of your income you save and invest, the sooner you’ll have F-You money.  Try 50%.  With no debt, this is perfectly doable.
6. Put this money in the Vanguard Total Stock Market Index Fund (VTSAX)   This is the fund you already own, so just keep adding to it.
7. Realize the market and the value of your shares will sometimes drop dramatically.  People all around you will panic.  They’ll be screaming Sell, Sell, Sell.  Ignore this.  Even better:  Buy more shares.
8. When you can live off the dividends VTSAX provides, you are financially free.
9. The less you need, the more free you are.

Since my son left home, I thankfully have learned to live without debt and I’m freer (but not yet free) from the shackles of consumerism.

I still worry if his money decisions will be influenced by my new clearer thinking or by all the times when he was growing up when I was quick to flash that American Express card.

Then I remember he is  smarter, more aware and more self-disciplined than his mom so I think he’ll be fine.