The lottery winner trap: How to protect your Bar Mitzvah child from making the same mistake!

Receiving lots of money without learning the basics on how to manage it can be a recipe for trouble.

The "lottery winner trap" is a common phenomenon where 70% lottery winners end up broke within a few years of winning due to poor financial decisions (Source CNBC).

But did you know that a similar trap occurs to many Bar and Bat Mitzvah kids who receive large sums of money as gifts but are never taught how to manage it?

Imagine your child gets several thousand dollars from friends, family and loved ones, only to have that potentially life changing sum slowly whittle away over time with little to show for it.

So, how can you protect your Bar Mitzvah child from falling into the lottery winner trap? Here are a few tips:

1. Set a budget Help your child understand the importance of living within their means by setting a budget for their gift money. This can include setting aside money for saving and investing, as well as setting limits on discretionary spending.

2. Teach kids about saving and investing Encourage your child to think about the long-term by teaching them about the benefits of saving and investing their money. This can include opening a savings account or helping them research investment options, such as mutual funds or index funds. If a Bar Mitzvah child received $5,000 in gift money and invested it with a normal market rate of return of 10% per year, that money would compound and grow to over $225,000 in 40 years (I explain how they can do this here).

3. Enroll your child in the Bar and Bat Mitzvah Investing Course If you want to give your child a more in-depth understanding of financial responsibility, consider enrolling them in a course specifically designed for Bar and Bat Mitzvah kids. The Bar and Bat Mitzvah Investing Course was voted #1 gift and teaches kids about budgeting, saving and making smart financial decisions. Plus, it's filled with interactive activities and games to make learning about money management fun and engaging and makes for a great gift.

Financial responsibility is a crucial life skill that will serve your child well into adulthood. By teaching your Bar and Bat Mitzvah child about money management, you can help set them up for financial success and avoid the pitfalls that plague so many lottery winners. Don't let your child fall into the lottery winner trap - teach them not only to conserve their money but how to grow it! Watch a sample class from the Bar and Bat Mitzvah Investing Course here