It’s challenging for parents to know which advice to give their children about their financial futures. Many parents pass along advice that their parents gave to them, or they think is common wisdom without really diving deeper into it.
Not all money advice is sound, however, particularly if you’re not a financial professional. Times change, too, so what worked for you might not work for your kids. With this in mind, GOBankingRates asked some self-made millionaires for misguided money tips that parents give to their kids that are not useful — and what advice they should give instead.
Only Take High-Paying Jobs
One common piece of not-so-great advice parents may give kids is to focus solely on getting a high-paying job, according to self-made millionaire Dillon Morrison, co-founder, author and editor of Outlighter.com. “While it is important to pursue a fulfilling career, solely relying on a paycheck may limit one’s financial potential.”
Instead, he recommends advocating for developing multiple streams of income and exploring entrepreneurship or investment opportunities. “By diversifying income sources, individuals can build wealth more effectively.”
Frugality Alone Leads to Financial Success
Another common misconception parents may pass on is the belief that simply being frugal leads to financial success. Morrison said, “Instead, individuals should prioritize financial education, learning about investing, and developing a strategic mindset for wealth creation. By understanding how to grow money wisely, one can achieve financial freedom more effectively.”
Don’t Take Risks
Parents sometimes discourage risk-taking and encourage a conservative approach to finances, Morrison said. This is understandable as nobody wants their kids to do foolish things with money.
However, Morrison countered, “Taking calculated risks can often lead to significant rewards. Encouraging kids to develop a growth mindset, embrace calculated risks, and learn from failures can be far more beneficial in the long run. It’s important to teach children the value of calculated risk-taking and resilience, as these traits are often found in successful entrepreneurs and investors.”
He argues it’s crucial to “challenge conventional wisdom and guide children toward more effective strategies for wealth creation.”
Only Pursue Traditional Career Paths
Parents may unknowingly give bad advice to their kids by discouraging them from exploring non-traditional career paths or pursuing entrepreneurial endeavors, said Robin Mathew, founder of KISS Investments. He made his first million running an SAAS business in the home services niche. Instead, Mathew feels parents should encourage their children to think outside the box and embrace innovation.
You Only Succeed by Working Long Hours
Another misguided notion is that wealth is solely achieved through hard work and long hours, Mathew said.
“Parents should emphasize the importance of leveraging resources, building networks, and creating passive income streams. Additionally, parents should encourage their kids to embrace failure as a stepping stone to success and teach them the value of financial literacy from an early age, ensuring they have the knowledge to make wise financial decisions.”
Don’t Worry About Financial Education
If parents think their kids are going to just pick up financial education on their own without actively seeking it out, they’re probably mistaken, according to Robert Andrew, a self-made millionaire and financial expert with reloadUX. “Many kids grow up without a solid understanding of basic financial concepts such as budgeting, investing, and managing debt. Instead, parents should prioritize equipping their children with financial literacy skills early on,” he said.
This can include teaching them about budgeting, investing and the power of compound interest. “By instilling these essential skills, parents can empower their kids to make informed financial decisions and set them on the path towards financial independence.”
Focus on Your Career, Not Your Finances
Your career is important, but it shouldn’t be your only focus, said self-made millionaire Zac Yap, the founder and IT manager of Any Tech Stuff. “A promising career is a great way to secure your financial future, but you should also consider other investments and savings.”
Debt Isn’t a Big Deal
Too often, people look at debt as a necessary evil, but this isn’t always the case, Yap said. “Debt can be extremely expensive and often have long-lasting negative effects on your financial situation. If you think you need to take on debt, make sure it’s your right choice.”
In summation, parents might have as much financial education to obtain as their kids do — and everyone will benefit from increased financial literacy.
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