Looking back, at 67, one of my biggest parenting regrets is not prioritizing my kids' financial literacy. (It's a bit ironic, given that my entire career has always revolved around personal finance.)
My children are all grown up now, with kids of their own. But if I could go back in time, these are the lessons I would have instilled when they were young:
Kids need to learn that if they really want something, they should wait until they've saved enough money to buy it on their own.
The problem is that we all want the best for our children, which is why a common trap for parents is to give their kids everything they feel they missed out on growing up. Trampoline in the backyard? Check. Brand new clothes every season? Check. New toy every weekend? Check.
If that's your style, what you might end up with is an entitled child with an impatient attitude geared toward instant gratification.
Patience is key. Instead of buying a $20 toy for your child immediately, have them save $5 per week for one month. They will appreciate and value that toy so much more because they worked extra hard to earn it.
We all like having things. But expectation is a dreadful enemy of money management.
We see so much of how "the other half live" in glossy magazines and on social media. Their lifestyles are glorified, making many of us think that life is all about working hard — just so that we can be one of the "have mores" of the world.
But possessions don't make for a rich life. It's the experiences and people — the things that money can't buy — that make you truly wealthy. In my mind, "true wealth" is what you're left with if you lose all your money and possessions.
Using compound interest to grow your wealth relies on more than just money — it relies on time.
In fact, given enough time, compounding (which happens when you earn interest on both the money you've saved and the interest you earn) is so effective that Albert Einstein called it the most powerful force in the universe.
When you encourage your kids to start saving and investing as early as possible, they'll be more likely to secure their financial future.
Not all income is created equal. Some streams are linear and some are passive.
Linear income is what you get from a job. You might work for an hour and get paid every other week for the hours you worked. That's it. If you don't show up for your job, you don't get paid.
Passive income is when you work once, but continue to get paid over and over again from work that you're no longer doing. The way to become wealthy is having passive income coming in, whether you go to work or not.
This is how property investors think: Initially they work long hours, save up a deposit, and then invest it. Now their money starts working for them and keeps giving them sound investment returns "passively" in the form of capital growth and rental returns.
When we're young, we tend to think about what will make us happy today, not tomorrow or 10 years from now. Unfortunately, this is what leads many to credit card debt or a lack of retirement savings.
Teach your kids that today's debt will rob them of tomorrow's earnings, because they're sacrificing money they don't yet have. Limiting debt obligations when you're younger will mean having more control over your personal finances later on.
Many of us like to attribute the success of others all to "good fortune." Maybe those successful people were "in the right place at the right time" or maybe they "knew the right person." But truly successful people do the hard yards to reach the pinnacle of their chosen field or endeavor.
If you can find something you're passionate about and make a living out of it, you'll be far more likely to achieve great things, including financial freedom.
Michael Yardney is the best-selling author of eight books, including "Rich Habits, Poor Habits" and "How to Grow a Multimillion-Dollar Property Portfolio." He is also an investment consultant and the host of the Michael Yardney Podcast. Follow him on Twitter @michaelyardney.
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