Make Your Kids Millionaires by Loral Langemeier Book Summary
Make Your Kids Millionaires, The Step-by-Step Guide to Lead Children to Financial Freedom by Loral Langemeier and Kyle Boeckman
As a parent, it’s your responsibility to teach your children financial literacy, setting them up to have “millionaire mind-sets” later in life, explain finance experts Loral Langemeier and Kyle Boeckman. Schools teach children little about entrepreneurship, money or investment, so the authors urge parents to pick up the slack. Both Boeckman and Langemeier come from farming backgrounds, and understand that as you must slowly tend to your harvest, you must also take consistent, sequential actions to build long-term financial abundance. They offer a workable program for building your enduring legacy and intergenerational wealth.
- Overcome limiting beliefs about money and aspire to achieve financial freedom.
- Transform your relationship with money by adopting an investor mind-set.
- Establish your newborn to five-year-old child’s financial future, and teach her or him money basics.
- Children between six and eight can learn valuable money lessons through playing.
- Nine to 11-year-old children should develop their entrepreneurial spirit.
- Reinforce your child’s money beliefs between 12 and 15.
- At 16 and 17, children should start their real-world entrepreneurial journeys.
- Your children will be adults at some point, but they are still your children who need your guidance.
Make Your Kids Millionaires Book Summary
Overcome limiting beliefs about money and aspire to achieve financial freedom.
Help your children achieve millionaire status by integrating sound financial strategies and concepts into your daily life and modeling them over the course of their childhood. If you’re not financially literate, take time to educate yourself first, then share what you learn with your children. Don’t let the money stories from your past define your future relationship with money. Create a new narrative of financial freedom and abundance. Let that new money story reprogram your mind and guide you to creating a better financial reality for your family.
“If you want to help your child become a millionaire, then you have to take charge of your own story and take responsibility for your own actions.”
Leave the “lifestyle cycle” – a way of living dominated by expenses and liabilities – behind and step into the “wealth cycle,” where you focus on generating income and buying assets. Entering the wealth cycle requires transforming any negative beliefs about money. For example, stop villainizing the pursuit of wealth and, instead, discuss money opportunistically and let your children know they can earn from various sources. Encourage your child to talk about money.
Transform your relationship with money by adopting an investor mind-set.
Establish your financial freedom by creating passive income – money that comes in automatically, for example, through investments or assets. Your passive income must exceed or be equal to your future expenses (PI≥E).
To gain financial freedom, start by ensuring that your income surpasses your expenses (I>E), then invest some of your earnings. Millionaires grasp the importance of generating compound interest and growing their wealth. Use the “10X Tactic” to calculate long-term investment returns. The United States’ stock market return rate is 10% every 25 years, so simply add a zero to your investment to estimate how much it will grow. For example, a $6,000 investment in an IRA becomes, over 25 years, $60,000. If you make annual contributions, use the “100X Tactic”: Your annual investment of $6,000 will grow to $600,000 in 25 years. To think longer-term, use the “1000X Tactic”: If you make $6,000 in annual IRA contributions, you can garner $6,000,000 in 50 years.
Think like an entrepreneur, and aspire to start your own businesses, even if it’s a side hustle. Remember, Steve Jobs started Apple while employed at Atari. Entrepreneurs aim not for retirement, but for financial freedom and control of their working hours. Unlike employees, entrepreneurs don’t receive fixed incomes, so they want to see the income they get grow exponentially. As an entrepreneur, you can’t blame your success or failure on anyone else; your company’s growth depends on your hard work and initiative. If you’re a small business owner with no full-time employees, you can put the maximum amount the IRS allows per year into a so-called solo 401(k) account – in 2022, that amount was $40,500 – which far exceeds the amount any employer would contribute.
Establish your newborn to five-year-old child’s financial future, and teach her or him money basics.
To gain a head start in preparing for your children’s financial future, take these steps in the first five years of their life:
- Choose a legacy plan – Regardless of whether you can give your child a significant financial legacy, know that the best legacy you can leave is sharing the gift of financial literacy and raising hardworking children empowered to create their own wealth.
- Become an entrepreneur – Get your business incorporated.
- Pay your child for “work” – Find ways to pay your youngster for small “jobs.” For example, you might pay them to pose for a photograph you use on social media to promote your business. Encourage them to manage this money in jars you label as “Wealth Account,” “Charity” and “Long-Term Spending.”
- Open an IRA – As soon as your child has verifiable income from age-appropriate work, open a tax-exempt Roth IRA to start generating compound interest.
- Create an education fund– Open a tax-advantaged account to save for your child’s college tuition.
- Make a will – Decide how your assets ought to be distributed and plan for the care of your children in the unlikely event of your unexpected death at an early age.
- Make a trust – When you acquire assets, establish a foundation for generational wealth by creating a trust that clarifies how your descendants should divide your estate.
- Get life insurance – Make sure your family has the coverage they need to take care of the expenses they would face in the event of your death.
- Count money together – Teach your child to count with money.
- Teach children about commerce – Use repetition to help small children understand that money is something you can trade for things you want.
- Set small goals – Teach children the power of financial goal setting, by setting age-appropriate goals. For example, if they learn to count to five, set a goal to count higher next time. Celebrate their wins.
- Teach “opportunity costs” – Help children understand basic either/or financial choices. For example, tell them that your budget limits you to buying only one of two grocery items, and let them choose.
- Delay gratification – Teach your children the value of waiting for things they want. Don’t cater to all their whims immediately – such as demanding candy – or you will create entitled children.
- Avoid allowances – If you give your kids money at a set flat rate, you’re teaching them to think like employees, not like entrepreneurs.
Children between six and eight can learn valuable money lessons through playing.
When your child is between the ages of six and eight, help him or her develop a goal-setting mind-set. Begin to set age-appropriate goals that are specific, measurable and attainable. Include your young child in family goal-setting meetings when relevant to their interests, as an educational exercise. For example, if you’re saving for a trip to Disney World, let them listen as you discuss the financial details.
“Make money games a regular part of your family routine and your child will be better prepared for the game of life.”
When your child is ready, set up a bank account in both of your names, showing him or her how to make deposits. Teach your children about compound interest with a simple exercise:Ask them to imagine how many pennies they would have if the initial penny deposited doubled every week. Explain the difference between active and passive income, defining the active income they earn for tasks around the house, and showing them the small amount of passive income their bank accounts generate. Familiarize them with credit cards, ATMs and debit cards in simple language, explaining your actions when you make transactions. Play games, such as Monopoly, that involve money to teach your children memorable lessons while having fun. Help your child understand the value of teamwork and leadership by signing them up for team-based activities.
Nine to 11-year-old children should develop their entrepreneurial spirit.
Teach your children about stocks by bringing them up in conversation. For example, if they like a certain toy, ask whether they think it would be worth investing in the company that makes it. Children between the ages of 9 and 11 have the capacity to understand the following money concepts, if you explain them in simple terms and use real-life concrete examples: The difference between assets and liabilities; the perils of “bad debt,” such as credit card debt; legacy planning; ROI;and real estate investing. Also model the importance of charity and volunteering.
“Having income gives kids money. They need money so they can start learning how to earn, save, manage and invest it.”
Help your children create their own neighborhood side hustle. To develop their entrepreneurial spirit, brainstorm ideas together by getting them to reflect on their strengths, or to think about the tasks they did for you. Did they enjoy, for example, mowing the lawn or selling lemonade?
Now is also the time to designate an account to be their “Car Account.” Teach them to avoid bad debt, for example, by helping them bypass needing a car loan later by saving early for the vehicle. Also let them know what portion of the cost of their first car you’re willing to cover.
Reinforce your child’s money beliefs between 12 and 15.
Psychologists say children solidify their belief systems by age 14 or 15, so when your kids are between 12 and 15, focus on strengthening their millionaire mind-set. Set aside blocks of time each week to have money talks with your child, explaining difficult concepts, such as how to perform due diligence on investments. Make sure your child has access to a joint checking account, and correct any bad behaviors – such as incurring overdrafts – before it becomes habitual. Urge him or her to save before spending. Help children assess their revenue and expenses to create income statements for their side hustles.
“Your child’s speed toward millionaire status depends on a myriad of factors. The most important is how well you can lead them on their journey.”
Teach children about the Wealth Cycle and how to financially plan for their future. Show them how to measure their “financial baseline,” helping them set goals by assessing their current financial reality. Let your kids know about real-world costs of living by showing them cell phone and water bills, for example. Explain the basics of credit cards and credit scores. Consider giving your children small loans with interest to teach them hard truths about borrowing.
At 16 and 17, children should start their real-world entrepreneurial journeys.
Your child has newfound independence now that they’re driving. Relinquish control on certain aspects of their finances, too. Help your child start a real business that plays to their strengths, guiding them through the process of marketing and paying taxes. Discuss how they’ll pay for college, talking them through the risks of student loans and the benefits of scholarships. Encourage your children to start an entrepreneur or finance club, so they can learn together with their peers.
“It’s time for them to take the controls of their own financial flight and show off the money savvy you’ve been teaching them for so many years.”
Give your children a detailed overview on how you plan on sharing your wealth and how that transfer of wealth will occur. Explain how you set up your finances, for example, your trusts, IRAs, insurance policies and education funds. Let them know which of these you expect them to manage when they’re older. If you made financial mistakes and haven’t built up much wealth, share your mistakes as valuable teaching tools. Help your child set up a finance tracking program to build skills such as forecasting.
Your children will be adults at some point, but they are still your children who need your guidance.
Your children may be legally adults, but they still need your guidance to navigate the financial realities of adulthood. Encourage them to set long-term goals and connect with mentors who can help them achieve those goals. You cannot be your child’s only financial mentor. They should also have mentors who already have achieved their financial goals. Adult children can learn a lot from joining “masterminds,” groups of peers giving one another advice.
Guide your adult children in building a good credit score by suggesting they apply for two credit cards at once – when they have built up enough income – and urging them to use one for travel and gas and the other for personal needs and food. You may want to help them buy an income property, with you acting as a co-signer, which will positively boost their credit score. This doesn’t mean you should pay their mortgage. Your children should develop independence by earning income on the property via Airbnb, for example, and putting the millionaire mind-set into action.
About the Authors
Money expert Loral Langemeier also wrote The Millionaire Maker: Act, Think, and Make Money the Way the Wealthy Do; and Yes! Energy: The Equation to Do Less, Make More. Former Air Force Lieutenant Colonel and personal finance expert Kyle Boeckman achieved financial freedom at age 43.
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