The biggest reason people are working towards obtaining financial freedom is to rid themselves of the burden of DEBT. Why? Because debt is a shackle that hinders many from experiencing life, prevents them from doing what the love causing many to live in a constant state of stress and worry; however, once debt has been eradicated, people are able to freely enjoy their lives without the constant fear of “not having enough”.
Financial freedom provides people to live a life of passion, travel the world and honestly, allows them to not have to make decisions based purely off of money (or the lack thereof). Living a life of passion, however, should not be the only reason people are working to be FREE. Building and leaving a financial legacy should be at the top of the list.
In reading the Bible, one should notice the emphasis God continuously placed on “generations” and leaving something behind He always spoke, particularly in the Old Testament, about preparing the next generation and leaving blessings. And honestly, as Christians, we are still benefiting from those blessings…We are the seed of Abraham; however, when we look at current statistics, we do not live our lives to ensure it benefits our heirs.
So, in analyzing statistics, we owe a ton of money in credit cards and student loans, we do not have life insurance (or very little) and because of debt, particularly for African Americans, our net worth (what we own vs what we owe) is not even a tenth of our White counterparts. Is this the legacy we want to pass down to our children? Well, I certainly do not!
So, to ensure that my children have a better financial start in life than I had, I want to not only build a financial legacy, I want to leave one. Here are five ways we all can ensure we leave a legacy.
#1 Leave Minimal Debt
I do not want my children spend their adult lives trying to pay off the debt their father and I incurred if something were to happen to us. Neither do I want them to enter into adulthood having to contend with mounds of student loans. So, it is our goal to get out of debt as quickly as possible so that we can fully fund their “college fund” and reduce the amount of debt they will have after graduating from college. Having minimal debt as a young person will put them steps ahead in their personal finance portfolio.
#2 Model better financial behaviors
Breaking bad spending habits is extremely difficult, particularly when it is deeply engrained in our everyday lives. Whipping out the credit card for food, entertainment and vacations for most have become a natural habit; however, I now realize that our children observe not only what we say about money, but what we do with our money. They see if we are making it a priority to get them the new Jordans versus making it a priority to ensure they have adequate school supplies. They are watching and in turn, will follow the same spending habits we modeled before them.
#3 Teach them about money
We are teaching our little ones that Mommy and Daddy will not give them everything; some things they will have to work for (even at the tender age of 8, 7 and 4 years old). So, we have adopted the “Give, Save, Spend” method. They earn money by “doing” like keeping their room clean, cleaning up the kitchen, taking out the trash, etc… If they do not do their job, they will not earn the money. No work, no pay! it’s called establishing a work ethic. If they work, they collect their earnings (based on the number of days they completed their job) and they have to divide their funds into three categories: Give, Save, Spend. This method allows them to work for their money while teaching them the principles of giving, saving and managing how they spend.
#4 Obtain Life Insurance
“1 of 3 families with children under 18 do not have life insurance.” Do you fall into this category? If something were to happen to you or your spouse, will the person(s) taking care of your children be able to adequately provide for them through their college years? Or will they, along with your children’s lives be worse off than before. Obtaining adequate life insurance affords your children (and their guardian) the opportunity to not have to struggle if something unfortunate happens to you or your spouse. Some financial gurus suggest purchasing at least 10 times your current salary of Term Life Insurance that will cover the cost through college. For example, if you earn $50,000 annually and your youngest child is 10 years old, many suggest purchasing a $500,000 Term policy for a length of 15 years. Of course, the amount and term length is completely up to each individual, the goal is to ensure, if something were to happen, your children would be taken care of.
#5 Teach them the spirit of giving
Because we live in the “me” generation, as a parent, I find it imperative to teach our children the importance of giving. I want them to understand the principle of being a blessing to others and not just believe they should be on the receiving end all the time. It is for this reason why we ensured they have a “Give” bank. This allows them to give to our local church and give to those in need and takes the focus off of “me” and places emphasis on being a blessing to others.
We may not always get parenting right, however, I pray our children will take some of these principles we are attempting to do and model before them and enhance it so they too can pass it down to their next generation. I want to not only build a financial legacy, but leave one? How about you?