MintFamily with Beth Kobliner: How Parents Influence Their Child’s Future Income

Parents often hope that their kids will surpass them when it comes to success. But is there a way to guarantee it?

Previous studies have shown that one key influencer on kids’ success is their parents’ income: the more you make, the more your kid will earn. But a new study from Brigham Young University shows that a mere paycheck isn’t everything.

The Human Capital Factor

After tracking nearly 25,000 Swedish father-son pairs, researchers estimate that a father’s income does indeed affect his son’s income—but it only accounts for one-third of it. The real kicker for your child’s success is what the study’s authors call “human capital,” the often-intangible traits you pass down to your children.

This includes everything from genetics, to education level, to social skills, to the examples you set. (Moms: Same goes for you! David Sims, an economics professor at Brigham Young University and one of the authors of the study, says that although moms weren’t tracked, he believes that a mother’s “human capital” influence is “at least as strong” as a father’s.)

Money Only Goes So Far

The good news is that parents have far more influence over their kids’ financial lives, regardless of the measure of their bank account. The study proves what intuitive parents have known for years: Money only gets your kids so far. The rest is refreshingly up to you and your “human capital,” which I believe includes exposing your kids to key values, like the importance of making smart choices and delaying gratification.

The study couldn’t have come at a better time. In this economy, parents are finding it tough to stay hopeful, especially when it comes to their kids’ futures. A recent Gallup poll shows that only a third of parents expect that today’s kids will have better lives than they did. We’re betting against our kids before they even start out on their own.

How to Help Your Child Succeed Financially

With this study, I hope that every parent will consider the opportunities they can give their kids. Here are a few ways to help your children succeed:

Teach them the importance of saving. Whether it’s saving 10 cents of every dollar earned through an allowance, or investing the money they earn in a Roth IRA or 401(k), starting this habit early will make them savers for life.

Help them compare college costs to avoid drowning in student loan debt. Go online with your child and find the “net price calculator” on each school’s website. This will give you pretty good idea of the cost of attending that school, since the calculator estimates potential grants, scholarships, and student loans. Then talk about what you can afford as a family.

Let them stay on your health insurance for as long as you can. Now that the health care law safely passed through the Supreme Court hearings, take advantage of one key perk: young adults can stay on their parent’s health insurance up to age 26 (up from age 18). This is particularly helpful for today’s college graduates, who often need more time than in years past to find a job—especially one with benefits like health insurance.

© 2012 Beth Kobliner, All Rights Reserved

Beth Kobliner is a personal finance commentator and journalist, the author of the New York Times bestseller “Get a Financial Life: Personal Finance in Your Twenties and Thirties,” and a member of the President’s Advisory Council on Financial Capability. Visit her at bethkobliner.com, follow her on Twitter, and like her on Facebook.