If you have teenagers, and you just hand them money when they need it, you are doing them a big disservice. This is the prime time in life for them to learn about financial independence and how to take care of themselves when they are on their own. Teens should have their own money, but they should also learn to value it. If you just give it to them for no reason, which is different than allowance, they are not going to value what they have very much. Not only should they have a set amount for allowance, they should earn extra from you and they should work when they are old enough to do so.
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An allowance is a good idea for financial independence, even if you don't give them a lot. They will soon learn that if they go through that money they are out and have to do without something they want. If you just give them more than what they are supposed to get from you, they are not learning the right lessons. Instead, for extra money, have a list of chores that are not a part of their normal chores that they can do for more money. If they work for this money by cleaning the garage, wedding the garden, or detailing the car, they learn good lessons about financial independence.
Some experts agree that an allowance is a great idea for any child. You should come up with an amount that your kids get at a certain age, and then stick with it so your kids know what to expect. Make it clear that if they go through that money, you are not going to give them any more. The extra chores, like those listed above can be used to earn more money, but don't waffle on the price. You can even make a list of chores and how much they pay so they know what they are going to get for doing each extra chore for financial independence. Don't forget?they should have chores they do without pay just because they are a part of the family.
When your children are old enough, they can learn financial independence by getting part time jobs. Make sure you set up the rules for them before they start looking for such a job. There are often rules that children of school age can only work so many hours a week, so find out about that. Some have to have 'working papers' so find out if that applies where you live. Tell your kids that they have to maintain grades or they will not be able to work. They can learn financial independence as well as how it feels to be an adult when they make their own money and have to keep it in balance with the rest of their lives.
Along with earning their own money, teaching your children about financial independence is teaching them how to save and when to spend. Teach them to put a certain amount away and then how to spend the rest so that they have all they need first. This shows them responsibility comes before fun, but if they are good with their money, they can have savings as well as fun money left once they have paid their bills. These lessons don't always stick, but most children who have these financial independence lessons early on are better with money later on in life. It is a great lesson to teach them that can make a huge difference to their future.
Financial independence is possible. Unfortunately, it is often never achieved - much like all of our goals and dreams - because we don't desire it enough, believe it is possible, or work hard enough for it. Just as detrimental, we become comfortable with mediocrity, allow others to dictate our decisions, become unwilling to put in the effort required to achieve our dreams, and never learn and implement the necessary steps that result in financial independence, time freedom, passive income, and our full potential being realized. Desiring financial independence is perhaps the first step; but we also need to change our thinking and learn how to not only achieve it, but be willing to put in the work necessary to obtain it.
Financial independence is actually more of a mentality than it is a dollar value in a bank account. It is more about not worrying and having time freedom than it is about being capable of always paying the bills. It is about overcoming fear and taking risks as much as it is about saving for retirement. And financial independence is all about passive income, not the balance of an IRA or 401(k). Unfortunately, the majority of people do not think this way - and this is made evident in the masses who get excited about pay raises and promotions, develop the typical employee mindset, and live far below their potential because they are unwilling to take risks, think and act differently, and understand the essential laws of success that also produce financial independence.
Thankfully, we can change! But even an understanding of the essential steps below is not enough - it is when knowledge and consistent action are combined that our goals, dreams, and financial independence will be realized.
1) Never Fall Victim to the Typical Employee Mentality: Stop thinking in terms of 9-5, manager and employee, weekends and holidays off, that is not my job or responsibility, etc. Doing more than you are paid to do will not only result in success on the job, but will undoubtedly carry over into other aspects of your life. But if you continually trade time for money, believe that job security is actually security, become content with mediocrity and being average, do just enough to keep your job, and actually think that a pay raise or promotion is the solution to your problems... then the only real hope you have is that your IRA and 401(k) will have sufficient funds to keep you alive after you've given 40+ years of your life to a company. And by all standards, that is not my definition of financial independence (or happiness).
2) IRA's & 401(k)'s... Not a Recipe for Financial Independence: I find it ironic that our culture successfully convinces us that our family's financial future will be taken care of by handing over our money to unknown (and often greedy) investors and companies who essentially are only interested in making a dime now - not in 40 years. And yet, what is more surprising is the masses of people who actually believe that financial independence is obtained by devoting (a better word would probably be enduring) 40+ years of our lives to a company, and think that an IRA or 401(k) will be the solution to their retirement and financial problems. Anyone who has ever achieved financial freedom has independently created it themselves, took risks, and was extremely proactive - never did these people depend upon a company or a retirement account to fully reach their goal.
3) Leaving Your Job to Start a Business is Actually Not the Answer: Realizing that a job, being an employee, and trading time for money will not produce financial independence is the first necessary change in mentality we must obtain. However, do not fall victim to the thought that being the boss, starting or running your own company, or even being an entrepreneur is the solution. Financial independence is not defined by having more power or larger pay checks - it is measured by time freedom, no financial worries, being the manager and investor and not the boss, and especially creating passive income. The goal is not to become the boss, the goal is to be the owner and hire a boss to do the work. The goal is to not earn more to be able to spend more, but take the excess money and buy appreciating assets that make you money.
4) Passive Income is the Key: Job security is not the same as financial security. Independence within your job is not even similar to financial independence. And trading time and effort for money is the exact opposite approach as making money work for you. The goal in all of your pursuits, and the key to actually achieving financial independence (hopefully long before the age of 65) is to take every extra dime and invest it into assets that actually make you money on a continual monthly basis. Whether it is cash flow from properties, interest from accounts, or even profits from the work of others from your own businesses - the goal is to create and buy assets that continually bring in a monthly passive income.
5) Change Your Mentality About Retirement: Our culture's unfortunate perception of retirement entails working hard for 40+ years, trading our time for money in hopes of promotions and pay raises, trusting complete strangers to manage our retirement accounts, and sacrificing pleasure now in hopes of living our dreams in years to come. Truthfully, I want nothing to do with this type of retirement. And because of this, I am thus willing to put in whatever effort necessary, take risks, change my mentality, and learn and implement the principles that will result in financial independence - long before I reach the age of 65.
6) Recognize What Keeps You from Achieving Financial Independence: There are multiple reasons why people do not achieve their dreams and goals in life, but they all can essentially be summarized into three categories: fear, mediocrity, and inaction. Do you fear taking risks, and possibly failing? Do you fear because you think you lack the necessary knowledge or abilities to be successful? Are you content with mediocrity and being average? Is 'just getting by' or 'that's good enough' or 'it's not worth it' common thoughts (and thus actions)? Are you unwilling to put in the effort required to achieve success? If so, then financial independence most certainly will be forfeited, and the result may be a good life - but good is the enemy europe podcast of great!
7) Being Rich is Not the Same as Being Financially Independent: True wealth is not determined by the size of a bank account, the house we live in, or the car we drive. True wealth is a state of mind more than it is an actual dollar figure. The individual who has no financial worries or obligations, has assets and employees working for them, has created a continual monthly passive income, and has resources sufficient to create time freedom and be in a position to help others - this is true wealth (regardless of how much income or profits are actually made). Comparatively, the individual who makes millions of dollars and drives the fanciest car and lives in the greatest mansion, is actually not wealthy at all if their expenditures exceed their income, they are trading time for money, they live in fear of their debts, their lives display being 'rich' only to keep up with the 'jones', they are entrenched in the 'rat race' in hopes that the next promotion will produce more time freedom (which never happens), and most importantly - they have no continual monthly residual income. Financial independence should be the goal - not being rich.
8) Understand That it is Achieved by Implementing the Laws of Success: As essential as all the principles above are, the reality is that no goal or dream in life is ever achieved unless and until we implement the laws that are foundational to all success. We must first desire financial independence, believe it is possible, have faith that we are capable of achieving it, change our mentality (as described above) and think big, overcome our fears and doubts, work hard every day in pursuit of our goal, and never quit until it is accomplished.
The goal should not be to get rich in life, it should be to enrich your life. Achieving financial independence is much more than not worrying about finances, creating time freedom, having passive income, and being in a position to live your dreams and help others - it is about reaching our full potential and not letting others define or determine it.