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Following our path to Financial Independence and then Retiring Early!

Monday, September 14, 2020

Create the path for 2nd Gen FI


 As a parent of two first graders I was thinking what I could do to help them along there life path.  The first and easy is to build credit history. If you didn't know this, but adding someone as an authorized users helps them build credit history. You are responsible for there spending, but they are building the history. Mean by the time the kids turn 18 they will have over 10+ years of credit history.  I know this work because this is what my parents did for me.  


2nd Gen Life Hack #1

 This is really the easiest this you can do for you kids.  I wouldn't not recommend this if you are working through credit card issues and have trouble paying them off.  There you have two options:

  1.  Take an existing card that you plan to never close and add them as an authorized users. Note some cards that have a membership fee add a fee for each authorized user. This will create a card in there name. Once it comes in activate it and then shred it. 
  2. Open a new card like an airline card to get the points, and then hit you spend limit and lock away the card or shred it.   

 

That's it.  So easy!! The kids will now have a head start on all there peers.   I am sorry Dave Ramsey. I know credit cards are bad and you should never get one.  Maybe it's just me but it seems credit/credit score all one of the key points used by everyone and are become more important everyday.  Employers to applying for an apartment look at your credit history to determine if you are a good candidate.  To me having good credit and credit score is an easy win in life.  I don't want to missing out on good rate, travel rewords, and getting that apartment.

 

The best example I have on this is a comparison with my friend. We both work similar jobs and pay.  He grew up in a household of Dave Ramsey devoted people. Which is awesome to live by all dept is bad and pay everything is cash.  He lived with no debt, bought car in cash, and only open a credit card in the last couple of years. While I on the other hand and not debt, could of bought car in cash instead tool a very low interest rate loan (.9%) and kept 2 years to build credit, and has a credit card since 18 and history of a card since I was 10. Both in the same place but got there in two different ways.  This difference came in when looking at mortgage rates.  I was able to qualify for best rates possible with good credit scores and credit history. Which he was able to get a good rate, but was told this credit history made it more difficult to get the best rate. I know this is a small difference and for some it doesn't matter, but how easy was it for my parents to give me a leg up by doing this small step.



2nd Gen Life Hack #2

Building a good family money philosophy.  My friends parent build a great philosophy that dept is bad and get ride of it as fast as possible.  I can see internal conflict with my friend when I talk about credit card reward and traveling for free and having a 30yr mortgage to build cash for opportunity gain.  He was told to pay off as quickly and aggressively as possible. Which is good and many should do this.

I feel for kids building in a foundation of responsible saving and spend early helps balance the two worlds.  It is important for kids to feel responsible about there money and not just get what they want. To not here no or telling them we can't afford that.  Build in delayed gratification and find what they value.  This can be done through allowance or chores.

What I've started to do is give them allowance equal to there grade level.  So first grade they get a dollar a week. They are required to save 50% in a jar and 50% is theirs free to spend.  They way they save and buy those Pokemon cards and can see there savings grow for the future.  Throughout the year I will introduce investing and compound interest.  Probably using some of chooseFi foundation education program. 

 

If you know anymore let me know.  I know there are what I can elite hacks. These usually take dedicated time and effort to pull off.  An example of this would be to have your kids help in your business and get paid for it. Then they can open an IRA to fund there future.

 Remember it isn't just that you found a way to live and are working toward FI it is you are creating a framework that is easy for you kids to follow.  The things that motivated you to start this path may not exist for them. You family may have struggles with money or you got into huge debt and decided you didn't want to live that way.  You kids may not have those obstacles and may see and feel that life is easy. They get what they want when they want and doing see that foundation behind the scenes.  I fully believe that is why 2nd and 3rd generation FI is so hard.

 

 

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