March 2022 | Lina Banytė-Surplienė
This is one of the questions that I am asked very frequently. Most parents think that if we want to take care of a child’s financial well-being, we should start by saving for his or her future (education).
Um, no.
My friendly suggestion is this – if you have to choose whether to save for your child’s future or teach your child how to handle money, start by teaching him or her how to manage money. First things first.
Why teaching about money is more important? There are several reasons:
Reason #1 – Your child may not need your money if you teach the right skills and habits
If you give your children the right baggage of financial knowledge, teach entrepreneurship, and show how to create value for others from an early age, it is likely that by the time they turn 18, they will be ready to earn enough money for a living. In this case, your kids will not even need the money you saved up for them!
Reason #2 – Your kids will need less money while studying if they know how to handle it
There are still plenty of studying opportunities that are free of charge, so the cost of child’s education may not be very high. Yes, if a child goes abroad, then his or her living will be costly, but in that case, again, it is much more important to teach your child the right spending (and saving) habits.
When I graduated from school, I went to study to Stockholm School of Economics in Riga. At that time I used to get about 200 euros per month from my parents and I managed to live well (although I had to pay for the rent of the apartment from that money), as I had good money management skills and I knew how to look for cheaper alternatives (e.g. how to travel cheaply in Europe, how to entertain myself without spending loads of money, etc.).
However, I know many kids who caused a lot of frustration to their parents while studying abroad – they needed a lot of money per month and they frequently ran out of money and thus regularly asked for additional cash.
Whose parent would you like to be?
Reason #3 – Your child will appreciate his or her own money more
Your child might not appreciate the money you saved for him or her and spend it in a way you do not like. Let us say that you do you best and save 70 or 100 euros per month for your kid. In 10+ years you accrue large amounts of money. And your child is really happy when you handle that money to him or her… and decides to buy a brand new car! How would that make you feel?
Think about it – maybe it would be better to provide your kid with knowledge and skills, instead of money? As Robert Kiyosaki once said, education is more valuable than money, in the long run.
Education is more valuable than money, in the long run.
Robert Kiyosaki
Reason #4 – Challenges (not money) will make your child happy
It is better for the kids if we challenge them to create a life they desire rather than give them a golden spoon. Why? Research shows that happiness comes from efforts and satisfaction that comes as a result of these efforts.
Maybe this is the reason why so many rich people do not intend to give inheritance to their kids?
A well-known singer Sting explained that he didn’t raise his children with the expectation that their father’s wealth meant they didn’t have to work.
“My kids are fiercely independent,” he told once. “They’re not sitting there waiting for a handout at all, and I wouldn’t want to rob them of that adventure in life: to make your own living.”
Sting is not the only celebrity with the same attitude towards raising kids. Elton John, Bill Gates and Mark Zuckerberg are of the same opinion. Parents who earned a fortune themselves know that we have to give skills and challenges to our kids (not money) to encourage them to achieve more.
Bottom line
So the answer to the question “How to save for the child’s future?” is this: invest into your kids’ knowledge about money and skills.
If you have not got it yet, get your free copy of “10 signs you are raising money smart kids” here: