Paycheck Independence Day
Learn How to Use Your Paycheck to Stop Needing a Paycheck
Thomas P. Rood
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Financially Smart Kids

Parents Are Ruining Their Kids' Financial Future
by Giving Them Work to Do Around the House and an Allowance
Good News: It Can be Fixed

Thomas P. Rood
Every kid reaches that age where they want to walk into a store, pick up something off the shelf, walk over to the checkstand and pay for it with their own money.

The question is "Where will they get that money?"

Most parents agree that you should not just give kids money. They should have to earn it. The obvious solution is to give them work to do around the house and pay them an allowance at the end of the week so they will have their own money to spend.

As usual, the obvious solution is the wrong solution. It's not just wrong. It's incredibly harmful to your children. Why?

Let's look at what your good intentions are actually doing to them. Look at the pattern of activity for a four week example in the table below.


1st weekDo some work around the houseGet your allowanceSpend it
2nd weekDo some work around the houseGet your allowanceSpend it
3rd weekDo some work around the houseGet your allowanceSpend it
4th weekDo some work around the houseGet your allowanceSpend it

What you have just taught them is the "Living Paycheck to Paycheck" model of money management. You taught them that they work to get money so they can spend it. When they grow up, their source of income is different but the pattern stays the same.


1st weekWork your jobGet your paycheckSpend it
2nd weekWork your jobGet your paycheckSpend it
3rd weekWork your jobGet your paycheckSpend it
4th weekWork your jobGet your paycheckSpend it

From the first time you gave them an allowance and all of the way up to when they got their first job, you have reinforced the "Living Paycheck to Paycheck" model of money management. It's the only way they know how to manage money.

Parents wonder "Why are my kids living paycheck to paycheck?" Well, it's because that's what you taught them.

But, it can be fixed.

When my daughter reaches the age where she wants her own money to spend, I'm going to buy her a dividend paying stock. When we get the money from the first dividend, I'm going to tell her "You got some Free Money this month. Spend it on anything you want."

Naturally, she will want to know where the Free Money came from. I'll tell her "I bought you what is called a dividend paying stock. Because of that, the company whose stock I bought is going to send you Free Money for the rest of your life."

Now that she knows that she's getting Free Money, her next question becomes obvious. "How do I get more Free Money?"

I will explain to her "You could take this Free Money and reinvest it to buy more stock but then you wouldn't have any money to spend and that's no fun."

"Why don't we do this. I'll give you some work to do around the house and I'll pay you an allowance at the end of the week. You can invest that money to buy more stock so you can get more Free Money for the rest of your life."

My daughter will learn the Paycheck Independence Day money management system which looks like this:


1st weekDo some work around the houseGet your allowanceInvest it
2nd weekDo some work around the houseGet your allowanceInvest it
3rd weekDo some work around the houseGet your allowanceInvest it
4th weekDo some work around the houseGet your allowanceInvest it

She will learn that you work a job to get money to invest it so you can get more Free Money for the rest of your life. Her spending pattern looks like this:


1st monthGet Free Money from my investmentsSpend it on anything I want
2nd monthGet Free Money from my investmentsSpend it on anything I want
3rd monthGet Free Money from my investmentsSpend it on anything I want
4th monthGet Free Money from my investmentsSpend it on anything I want

Next, she will learn that her Free Money can be used to pay bills. The more she invests from her paycheck, the more bills she will not have to pay from her paycheck. Sometime around when she's 35 year's old, she will no longer need a paycheck to pay her bills and that includes having her home paid off.

My daughter is going to have a huge advantage over the other kids she grows up with. Don't you want your kids to have that same advantage?

Now, you might be thinking that her allowance won't buy a lot of stock and that's true. At first, I will have to supplement her stock purchases but that's an investment in my daughter. And, that's the best investment I will ever make.

Are you ready to make an investment in your children?

Do you want your kids to become Financially Smart Kids?

Financially Smart Parents raise Financially Smart Kids. Are you ready to become a Financially Smart Parent?

Read Paycheck Independence Day and become a Financially Smart Parent. Solve your money problems and give your children a chance at the Financial Future that they deserve.

Do it for yourself.

Do it for your kids.


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