The family 401(k): Teaching kids and grandkids how to build wealth paid Impact_Partner
“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” —I often hear from clients their concerns over the future of the market.
In our family, we decided early on that the best way to educate our children is to offer them the Douglas Family 401 plan. Starting when our oldest was only four years old, we determined that our kids should have a wallet and a piggy bank; we wanted them to make decisions and see immediate rewards for each.
While not nearly as fun of an option as the wallet and the toy store, the 401 plan has perks of its own. When the child receives money and chooses to put it in their piggy bank, the company will match it with no limit. If Grandma gives them $20 and they want to put it in the piggy bank, I give them $20 immediately, and they get to put it in the bank. This has resulted in a few late-night runs to the ATM or grocery store for cash, but the lessons are valuable and worth the inconvenience.
Every year on their birthday, we empty the piggy bank and count the money. While the financial advisor in me wants them to save it all and one day swim in it like Scrooge McDuck, they are allowed to take money out on this one day with no penalties. Once the anniversary passes, that money is locked-in until the next birthday. It has created healthy competition between the kids, as they strive to have the most in their piggy bank, every time putting a bigger smile on Dad’s face.
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