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Provide incentives when your loved ones are financially responsible
Does a younger sibling count? To me, it does. I have a little sister in her early 20s that is the closest thing to a human child I possess.
Over time, my sister has started to connect with her future self, which means she now accepts that financial preparation is a critical component of her future financial well-being.
Currently, she has several goals, but two of her goals are perfect for incentivizing.
Goal 1: Pay off Car By December 2022
One of my sister’s goals is to pay off her car by December this year, so here’s what I’m offering: I will match her monthly payment so that she can pay off her car in 6 months versus 12.
Because she is focusing on her financial goals, I want to reward her by helping her reach her goals faster. The benefit that comes from this is she will correlate paying off debt faster as good, instead of holding on to debt longer than necessary as most Americans do.
To ensure my sister remains accountable to this incentive, I will require four conditions:
I will not make more than six payments.
I will make the payment directly to the account.
I will only make the payment after she makes her payment.
I will not contribute past July 2022 if she decides not to follow through.
Goal 2: Invest for Retirement
One of her other financial goals is to invest more aggressively and consistently for retirement. She wants to become a millionaire in her 50s, and hopefully even earlier. The good news, she has enough time to do that with minimal monthly savings since she is so young.
My mother and I have offered to reward this healthy habit by matching her monthly retirement contribution (as would an employer).
You Need To Incentivize Healthy Financial Habits
Kids won’t learn about personal finance in school, though society would be much better off economically if this did happen. Instead of your kids waiting until adulthood to learn about money, they can learn about it while they’re still within your grasp (living at home with you, going to college, or still in their 20s).
As your kids become more educated about money, you will notice, because they will make smarter financial decisions such as:
Consistently investing
Avoiding consumer debt
Paying their car off early
Living below their means
Building an emergency fund
Responsibly managing credit cards
Taking as few student loans out as possible
Whenever your kids or loved ones make responsible decisions with money, reward them. You will perpetuate financial responsibility for your kids and potentially future generations by doing this.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.