The most important example you can set is for your kids. Parents have an innate desire to set a proper example for their kids. This is true in almost every aspect of life. Parents want to show their children to be kind, courteous, ambitious, hard working, compassionate and a million other things.
I’ve written in the past about the need to teach your children to be financially successful and different strategies to do so. The best way to do so though is to set an example. Kids watch their parents and pay attention to everything. We all want to show kids how to work hard and have a great career, we need to show them how to handle money as well. For many parents this means we need to learn these traits ourselves. There has been a phenomenon throughout history that wealthy and successful people are likely to produce wealthy and successful offspring. In modern culture there is a misconception that the wealthy people mostly inherited their wealth or were all handed the keys to the family business. Or my favorite, the wealthy parents purchased a high status job for their child by paying for a academic degree. The fact is that most of the economically successful people are first generation. While the you can certainly improve the odds of success with higher education, the successful people of the world are there because they possess traits that made them successful. They learned these traits from their parents. So despite what you do for a living or how much money you make, you can set an example for your children and teach them to be an economic success.
This starts with good spending habits. Growing up I was involved in everyday financial decisions and was taught how to make them. Simple chores like going to the grocery store are opportunities to show your child how to maximize a budget. A fun activity might be to give a them a certain about of money, $10 should work depending on the size of your family, and let choose all the ingredients for a dinner. For less than $10 they can make a lot of different dishes. Then tell them if it cost less than $10 they can keep the change. If they get to keep the money they’ll probably go the entire shopping trip without asking for a single extra unhealthy item. They will also pick out food that they will actually eat so there is not a fight at the dinner table. When a couple extra dollars are on the line, they won’t want to waste it on food they don’t really need.
Parents are often hesitant to discuss money with there kids, which is totally understandable. But you need to talk about your budgeting plans and investment strategies. You can do this without ever revealing how much money you make or what your net worth is. Just talk to them about you strategies and then family budget. When you involve them, they’ll want to contribute. Kids like to help with things, they’ll want to help with the budget. Make good financial decisions and then explain why made a certain decision. For example my dad has used cash to pay for everything his whole life. Other than when purchasing items online, I’ve never actually seen him use a credit card. He uses cash for two reasons, he’ll never have credit card debt and there is a psychological effect of paper money in your hands that makes you spend less. This practice has saved him tens (if not hundreds) of thousands of dollars throughout his life. I’ve adopted a similar strategy of only using a debit card with a weekly limit that saves me thousands every year.
You can also set the example on bigger purchases. Avoid high priced luxury brands when possible. I’m not suggesting that you make major sacrifices to your standard of living, just make sure you aren’t brand dependent. When you wear clothes or buy cars because of a brand name, you are teaching your children to do the same. The nicest car your kids ever need to ride is is a Chevrolet Tahoe. Even if you can afford it, buying a Range River or Cadillac sets a bad example. If possible, you should also avoid leasing and debt, even if it means buying a used car. Show your kids is ok to drive a used car and explain the benefits of living without a car payment. Growing up most of my friends families had nicer cars. Today those friends all have nicer cars than me, they also have a lot of debt. If you commonly buy high priced luxury branded items, it will teach your kids that they must do the same. They’ll connect their self worth with their clothing or car, that’s probably not a precedent that you want to set.
Setting the example for your children is just as important with money as any other aspect of their life.