What exacerbates this is knowing the fear which children themselves feel when they are surrounded by people they don’t know, and when they can’t fully understand just how much love their parents have for them.

Put these steps into place…and you’ll eliminate at least some of these dangers…

#1: Identify a Clear Plan for the Care of your Children.
Did you know that 74% of parents have not named guardians? Worse, of the 26% who have, most have made 1 of 6 common mistakes that leave their kids at risk.

When you name short AND long-term guardians for the care of your children, you must give clear guidance to your caregiver and everyone you’ve named to care for your children, in written form. Just by naming these guardians (both short and long-term), your children never have to be put in a situation in which they would be taken out of your home and into the hands of strangers if something happens to you.

An even better step, if your children are old enough for this discussion, is to tell them this plan. Don’t make a big deal of it…you don’t want to frighten your kids at the prospect of your loss. But they’ll feel better knowing that you’ve selected people they can trust and love to care for them well.

#2: Properly Document Your Decisions
Parents often have discussed and agreed upon a guardian for their children and have even made their wishes known to their families; however, not documenting these decisions can result in your wishes not being followed when it really is too late.

You see, if you don’t communicate your wishes in a legally-binding document, you are placing your children in a "free for all". Without clear, legal guidance, every family member has equal priority of guardianship and the decision about the care of your children will be left in the hands of a broken-down court system and some judge who doesn’t know you or your kids.

This legal documentation is particularly important if you intend for a friend to care for your children as courts will almost always choose a family member over a friend.

Also, don’t forget to be sure to leave behind specific guidance about how you want your children raised.  Education decisions, healthcare decisions, discipline decisions … these are all things you care a lot about and would want made consistent with your opinions for how your kids are raised.
 
#3: Don’t Neglect Their Financial Future
Sure, there’s different schools of thought on this issue. Some parents don’t want to overwhelm their children with too much in their bank accounts at once, which is understandable.

But, regardless of how you structure this provision, providing sufficient financial resources for your children’s care is your responsibility. And, as a responsible parent, you must take steps to protect what your children will receive … whether it’s through life insurance, savings or some other means.

To do so, establish a living trust to receive any life insurance benefits your children would receive so that they don’t get access to your assets at the age of 18, and make sure your living trust holds on to the title to any assets that would go through probate in the event of your death. And, if your estate is large enough, you will want to plan to avoid estate taxes as well.

But if you want to raise kids who can create and manage wealth, there are a handful of critical rules that are foundational.

Here’s the main one: Postpone spending.

In economics, "deferred consumption" is the very definition of wealth and capital. So … defer your consumption, kids! Everything you don’t spend today is wealth. Only what you don’t spend today is available for investing. And since money makes money, what you don’t spend today can provide a lifetime of income to spend in the coming days.

Teach them this: Wealth is what you save, not what you spend.

Most of the younger generation is under the false impression that wealth is based on the luck of a big salary. Nothing could be further from the truth. According to the book The Millionaire Next Door by Thomas J. Stanley, the affluent tend to answer ‘yes’ to these three questions:
1.) Were your parents very frugal?
2.) Are you frugal?
3.) Is your spouse more frugal than you are?

So how did they build their wealth? According to Stanley’s research they did it slowly, living well below their means and investing about 20% of their household income each year. And because money makes money, over time, they grew gradually richer and richer.

Imagine you purchase a pair of shoes for $50 every year. The person that makes do with the old ones and only buys shoes every other year will be able to save and invest the difference. After seven years, their savings will be earning enough interest to pay for a new pair of shoes every other year. After eleven years, the interest from the investment will pay for the cost of buying new shoes every year, forever.

Because being frugal early in life produces great wealth later in life.

Due to the affluence of American culture, it is difficult to learn to distinguish between needs and wants. Very few purchases are needs. Other than food, shelter and clothing, everything else is optional. In the United States, we show our extravagance even in these three essentials.

Practically speaking, you can learn to postpone spending one purchase at a time. When our children were very young, we required them to wait one week before spending money on a toy. Often, after waiting a week, they wanted a different toy instead. Then, they had to wait another week for that purchase.

Simply learning to delay and avoid impulse buying can cut your children’s spending in half.

I hate to see those with resources squander them, simply because they fell prey to the rampant fear.

Watch out for it in your own heart, in that of your children and spouse — and avoid these behaviors of the poor:

*They use credit habitually for "lifestyle" purchases: Delayed gratification isn’t something that they’ve heard of, and if they want something they just put in on credit.  After all — it’s at a 0% interest rate for the first 3 months!   One purchase leads to another, and before they know it they’ve got thousands in credit card debt.

Debt loads in the wealthy can look different, but the principles remain the same. Avoid leverage these days; keep your powder dry. Your lifestyle isn’t worth expensive cashflow.

* Always pay more than they have to: Often people who are broke have gotten there because they don’t know how to shop for a deal, negotiate or ask for a discount.  You can get a discount on just about anything — from electronics to health care.  Never pay more than you have to.

Why is it that the wealthy take perverse pride in paying full retail? It goes before the fall, as they say … so don’t become pennywise/pound foolish — but neither should you eschew effective negotiation in multiple categories.

* Fall prey to lifestyle inflation and "keeping up with the Joneses": This is a biggie for the wealthy. Even people with higher incomes have problems with staying ahead in their budget because they fall prey to lifestyle inflation.  Instead of banking and saving raises, they raise their standard of living — buying a bigger better house, a new car and a new wardrobe.  They feel like they have to keep up appearances with everyone in their neighborhood.

Take a good hard look at what motivates your purchasing, and clean out the dustbunnies of comparison, lest they fill your brain with poverty-thinking.

 * They rely on others to fix their problems:  We’ve probably all known someone who is always going to their parents, family or friends to bail them out.  They create a pile of debt, and then rely on the kindness of others to get them out of their bind.

* They forfeit future gains for fun today:  These people often have a hard time visualizing how saving and hard work will pay off down the road, and instead live for the fun and pleasures of today.  They don’t realize how saving for tomorrow can improve their quality of life today.

Don’t sacrifice your retirement (or your eventual estate) on the altar of present-ease.

Obviously, I’d like to help you move past these behaviors, if any apply. You may not carry every one of these traits, but just one or two can get you into hot water.

Now, as I do so, I also run into people’s attitudes about their wealth.

I’ve made a close study, over the years, of how money "works", and just what it is that propels certain individuals and families into great quantities of resources … and what also brings them down.

You see, sometimes the very wealthy begin to act like they’re poor.

It’s the beginning of a bad problem. And, it’s also something to watch out for in your children — because it will give you a clear picture about what might happen should you bequest your resources to them without a clear estate plan, for example. I’ve compiled a group of behaviors characterizing the financially-strapped.

You may have resources NOW … but are you:

* Spending money on things you really don’t need:  I’m sure we’ve all got one of those friends who just loves to spend money, and buy things just to say they have them.  The newest iPhone just came out? They buy it even though they already have an older version.   A new TV came out with a higher refresh rate than their current one? They buy one so they can say they have the newest and latest technology.

That may be fine for a certain amount of time, but there is something deeper happening in the heart, there, which if left unchecked, can signal a decline in wealth. Because it starts with the iPhones … but where does it end?

* Ignorant about where your money is going: Far too often people who are broke find themselves short because they’ve never tracked their monthly cash flow and their small expenses are adding up to consume everything they bring in.  They really need to track their expenses for a month or two so that they can set up a plan.

But the wealthy sometimes begin to believe that they’re immune to such proletarian concerns, and allow the same bad habit to encroach into their portfolio. Don’t let up — but, of course, don’t fall into obsession (e.g., are you checking your accounts every day? That’s also a problem!).

* Blaming your problems on outside forces:  People don’t like to see themselves as the source of their problems. While people certainly have problems that aren’t caused by something they’ve done, far too often they will also try to shift blame when they should be looking at themselves.  They blame their friends, family and the government.  They believe that "the little guy just can’t get ahead".

Are you doing the same thing? "It’s the market’s fault!", "My investments advisor screwed me!", etc., etc. … again, signals of a deeper problem.

* More interested in having others think you are wealthy, than actually being wealthy: People who are always broke like to be seen as wealthy and successful, even if looking that way to others means that they’re actually forfeiting the possibility of being wealthy in reality.

Are you pumping your resources into an image? Are you "investing" in items which, really, are more about how people will see you than how they will help your net worth?

* Not planning ahead: For the poor, money is short because they haven’t set up a family budget, and a saving and spending plan.  When they set up a monthly cash flow forecast, and know exactly what they’re going to spend in what categories–they’ll do much better.  If you fail to plan, you can plan to fail, right?

Again, many resources can lead to laziness in this area. Don’t let up with it.