Teaching Them Money Milestones
By Aaron Andrew
Have you heard of the 20% habit?
It’s something my wife, Heather, and I started with our girls when they were younger. The idea is to teach your kids (or grandkids) early about the value of saving at least 20% of any money earned.
Starting Young
Young Shelby and Sienna doing dishes to earn money for savings
For our daughters, Shelby and Sienna, it started small — very small — with just a few dollars deposited in a local bank savings account when they would earn money doing chores around the house.
Several years ago, my brother, Emron, and his son Ethan (still in elementary school at the time) started a neighborhood business and invited our girls and others in the community to join them.
The idea was simple: sell annual subscriptions to set up and take down flags in front yards on relevant holidays like Memorial Day, Flag Day, Fourth of July, and Veteran’s Day.
All the kids were incentivized to set aside 20% of their earnings in savings, with the business matching their savings (giving them their first taste of the advantages of an employer matching program).
That flag business is still going strong, and the girls have learned so much through the annual effort. They’ve experienced the highs and lows of going door to door to sell new and renewal subscriptions. They’ve developed their work ethic, showing up on holiday mornings and evenings to work the flag crew.
And they’ve also experienced the financial confidence that comes from setting aside 20% of their earnings in savings, as well as the excitement of having fun money for things like treats and shopping.
Taking It to the Next Level
Shelby and Sienna now, who have been saving for college and/or missions
Now as our older daughter, Shelby, is getting ready to head into her senior year of high school and get her first W2 job, we’ll continue reinforcing that 20% habit, but with a twist.
Rather than using a bank savings account, we’ll be helping her open her first properly structured, maximum-funded Indexed Universal Life policy (what we call an IUL LASER Fund).
With an IUL, she can not only continue to benefit from setting aside 20% of her earnings, but she’ll also experience the liquidity, safety, predictable rates of return, and tax advantages of IUL. What’s more, we’ll match her IUL contribution each month.
This way, by the time she’s well into her 20s, she’ll be at a point where she can access money via policy loans for things like buying a car or putting a down payment on her first home.
Setting Them Up for Success
I’ve watched our clients instill the same kind of healthy money habits with the young people in their lives.
One client, for example, recently referred me to her nephew. She’s spent time teaching him about finding financial vehicles that can optimize saving, tax planning, and flexibility.
He’s now opening his first IUL LASER Fund with a good sum that he’s saved over the last few years. He’s close to graduating from college and plans on increasing his contributions once he’s into his career.
His first goal with his IUL? Accessing the cash value for a down payment on his first place within the next few years.
While most people think of IUL as an ideal financial vehicle for significant wealth (because it is), it can also be used for much more modest circumstances, like setting aside as little as $300 to $500 a month from your young adult years on.
So if you have young people in your life, I’d recommend teaching them the 20% habit. And when the timing’s right, consider helping them start their own IUL LASER Fund so they can get on the path to their own brighter future!
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Watch Aaron Andrew share more insights on this topic here…
Click here to see magazine pg. 20-21 that Aaron is referencing.
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