We all dream about early retirement, but many of us don’t start planning for it until we are in our mid-30s or 40s. One of the reasons may be that our parents didn’t spend time teaching us to plan for our financial future. Another reason is that young people often put it off for later, thinking that they still have a lot of time. 

This gives them little time to plan for unexpected events that set them back financially when they do start planning. So early retirement is less achievable. Statistics show that 64% of adults living in the USA have no savings for their retirement. And 42% of people aged 18-29 have no retirement savings at all, along with 26% of Americans in the 30-44 age bracket. 

This tells us that many adults are holding off when it comes to planning for retirement. And before they know it, they’re facing retirement without enough money. That’s why we believe that it’s never too early to start planning for retirement. 

And that’s why we believe that it is our responsibility as parents to teach our children to plan for retirement from a young age! The great news is that it’s entirely possible by teaching them to use the power of compound interest, to invest in the financial markets and by helping them to build their financial literacy skills. By doing so, not only will your child know how to have enough money to retire, but they will also have the opportunity to retire early. 

In this article, we’ll be talking about the ways that parents can help their children to learn to invest from a young age. And, ultimately, plan for their retirement.

The Magic Of Compounding Interest

Did you know that you can start an investment account for your child from the time that they are born? And, you can start by investing in the financial markets for as little as £25 or $25 per month. This allows you to help your child build their wealth, and although you’ll be in control of their fund until they’re 18, you can still use it as an opportunity to teach your child about how it works.

These days, there are apps that you can use to help your child learn all about investing. What’s exciting is that if you can afford to put £200 every single month from your child’s birth, they’ll have £1 Million by the age of 40. 

Read: Want to find out how we calculated this? Read our article How to Raise a Millionaire: Financial literacy for kids. 

So what is compound interest? Simply put, it means adding the earned interest into your principal balance so that you earn interest on that. That’s what makes compounding interest so powerful, and why investing in the stock markets, and teaching your child how to invest, is the best way to help your child to plan for early retirement. 

Teaching Your Child To Manage Money

We can teach our children how to invest in their financial future but it is just as important that we teach them how to manage their money. What’s the point of making enough money to retire early and not knowing what to do with it? 

Teaching your child to manage their money well is called financial literacy. Here are some important skills that you can focus on passing on to your children.

Teach Your Child To Budget And Save

Children need to learn how to budget and the younger they start learning the better. While early retirement is great, they need to have a good idea of how to plan how they are going to spend their money. This is where budgeting is useful. Knowing how to budget their money will help them to make smart decisions.

Teach Your Child To Invest

We spoke about the power of investing when it comes to early retirement. But did you know that you can start teaching your child about the concept of investing from as early as the age of three! By starting early, your child can start learning to invest in the financial markets by the time they’re teenagers. This means they’ll have all the foundations they need to be successful investors as adults.  

Teach Your Child About Debt

Debt is something that can set your child back in their financial future. It will also make early retirement less achievable. Studies have shown that when children and teenagers learn about financial skills at home or school, their credit scores remain high and they are less likely to have bad debt. As parents, we can also teach our children about good debt.

Practical Ways to Develop Your Child’s Financial Literacy Skills

Okay, so we know what we need to focus on to help our children with their financial literacy skills. The question is how? We’ve got some practical tips for you and will discuss these here.

Get Them Into The Stock Market

There are many ways to become an investor, but we recommend that you teach your children about investing in stocks. This is a great way for them to invest in their financial future and plan for early retirement. Start with the basics using an app and then move on to teaching them about investing in actual stocks. Again, the earlier they learn, the more practice they’ll get and the better they’ll be at investing when they’re adults!

Let Them Work For Their Allowance

When it comes to handling money, practice is important. Teaching your children to work for their money is an invaluable lesson. It teaches them to appreciate their money and the value of working hard for it. It can be as simple as agreeing on an allowance for the chores they do each month. When they learn the value of money from a young age, they’ll be wiser with their finances as adults.

Encourage Your Child To Create Earning Opportunities

There are so many ways to encourage your child to earn money. As parents, we can teach our children to look out for opportunities where they can make money. This means teaching them to be young entrepreneurs. It could be something like walking the neighbour’s dogs or selling lemonade. The point is to teach them that there are always opportunities available for them to earn money. This is a lesson that will help them to learn about the value of money and could even help them work towards early retirement!

Speak Honestly About Money

For some parents, discussing money with their children feels uncomfortable. This is especially true when money was a sensitive topic growing up. The reality is that we need to be talking about money honestly with our children. The more they know about how we handle money, the more they’ll learn about how to manage their own. Children are capable of understanding more than we believe, and involving them in honest conversations can be a great way to build their confidence in their financial literacy skills. 

The Bottom Line

There’s no better time to start teaching your children about planning for their future than now. Learning how to manage money and invest in their early retirement is not something that can be taught overnight. It takes years of practice. In this article, we discussed the different ways that you, as parents, can help your children to build their financial literacy skills. 

If you want to know more, you can watch our webinar replay for free where Dr. Aderemi Banjoko talks about how to teach your children about wealth, finance and investing.

“Compound interest is the eighth wonder of the world. He who understands it earns it; he who doesn’t, pays it.” –  Albert Einstein.

As parents, we want our children to have a sound financial future. But this isn’t something that happens without intentionally working towards it. Many parents don’t know where to start and how to go about saving up for their child’s future. That’s why we’re writing this article about teaching your child investing!

One of the best ways to make sure your children are financially stable is to start an investment fund. By investing in the financial markets, your child could be financially set from a young age.

However, many parents either worry that starting an investment account for their children or themselves is too difficult – that they need to have expert knowledge. They also worry that it is too expensive to start investing.

This is not true, and you can learn about investing starting today. We’re going to talk about how much it costs to start an investment account and the benefits of doing so. So, if you’d like to learn more about investing and how you can raise a millionaire today, then continue reading!

Step 1: Teach Them About Investing

Did you know that you don’t need a lot of money to start investing in your child’s future and that you can start investing in the financial markets with as little as £25 or $25 per month? 

Also, if you invest £200 every single month for 40 years, you could retire with £1 Million!

Perhaps you’re wondering how this is possible. Well, here’s the Maths…

£200 per month x 10 years x 9.2% compound interest = £39,000

£200 per month x 40 years x 9.2% compound interest = £1 Million 

And if you’re wondering how to get a 9.2% interest rate, here’s another fact for you – the USA S&P has averaged an annual return of 9.2% since its inception in 1926. 

What’s even more interesting is that using a compound interest calculator shows that you’d have only paid in £100,000 over the period of 40 years. You’d have earned over £900,000 in compound interest – It’s no wonder Einstein said that compound interest is the eighth wonder of the world!

So there you go! That’s the formula for raising a millionaire – It’s as simple as investing early and taking advantage of the power of compound interest!

Remember that investments are never guaranteed to go up, so you must always educate yourself and do your research before you make any financial decisions. The course does not guarantee that your child will retire as a millionaire, BUT it can definitely help them understand how to make financial decisions from an early age! 

By teaching your children about financial literacy, you are ultimately contributing to their financial success!

Step 2: Open an Investment Account For Your Child

Dr Aderemi, one of our recent guest speakers for our webinar – How to Teach your Child about Wealth, Finance & Investing – and instructor for the Young Investor Course, talks about planting and nurturing your money tree. 

He is an avid private trader and investor in the financial markets with over 20 years of experience trading and investing in the global financial markets. He is passionate about teaching financial literacy to kids. So, what does Dr Aderemi mean by planting and nurturing a money tree? 

To grow a money tree, you need seed money, water – which is the money you put into your investment on a regular basis – and time. The key to growing a healthy money tree is to nurture it consistently.

This means putting money into your child’s investment fund regularly and being mindful of what you take out in the long run. Remember that investing takes time and patience, and the reward is not immediate but rather long-term. It’s really important that we teach this to our children.

To keep your investments strong and healthy, you want to plant more money trees by reinvesting a percentage of the money you get out. And teaching your children to do the same when they’re older.

Step 3: Teach Your Child How To Spend

Remember, it’s not just about making money! What’s the point in having all of the money in the world but not knowing what to do with it? It is equally important that having money doesn’t impact our health or relationships in a negative way. 

That’s why being financially literate is just as important as knowing how to invest in the financial markets. What do we mean by financial literacy? As parents, we want our children to be financially literate, meaning they know how to handle their money.

This is something that we need to teach them. We believe that apart from understanding how to budget, save and invest, the following is very important.

Knowledge is More Important Than Money When it Comes to Investing.

Dr Aderemi emphasizes that knowing how to spend and save your money is more important. Without knowledge – financial literacy – we would not be able to make our money last. That’s why we should be teaching our children about things like budgeting and ways to spend work. 

It ultimately comes down to knowing what to do with your earnings and what percentage to invest, spend and give.

Investing Doesn’t Mean No Spending

Many people believe that it is bad to spend any of their money on things they like or enjoy doing. And that they should be putting all their spare money into savings or investments. 

This is not true, however. Life is also about compromising and enjoying the money that you worked hard for. The key is to teach our children how to spend in moderation and always keep an amount of money to invest or save.

Giving is Also Important

We need to be teaching our children to use their money for good too. We can do this by teaching them to give a portion or percentage of their earnings to a charity each month. By teaching them to give, too, you’re teaching them about generosity and humanity. 

It is an important lesson to teach when it comes to financial literacy.

The Bottom Line

And that’s it figured out – how to raise a millionaire! Anyone can do it, and it’s a lot easier than many parents believe. Even if you don’t know anything about investing, you can easily learn and become a successful investor in no time.

It will certainly be worth it, and you can make a huge difference in your child’s financial future. If you’d like to learn more about why investing is so beneficial for your children’s future, read our blog, 7 Reasons to Teach Your Child Investing!

Additionally, If you’d like to learn more about investing in the financial markets, you can watch our webinar replay for free on How to Teach Your Child about Wealth, Finance & Investing. 

We hope that this article will set you on the path to learning and teaching your children all about investing and securing a legacy of wealth and wisdom for your family!