There are some financial habits really worth knowing. In fact, most of us learn them either the easy way or the hard way. The hard way, unfortunately, can be very difficult. You might find yourself recovering from debt over years, or even having to go bankrupt. No matter who you are, struggling with an outcome like this can be demotivating to say the least.
As a parent, it’s always good to impart the lessons you learned for the betterment of your children, and financial literacy should be part of that. Strangely enough, financial management is rarely taught in any complexity within our schooling system, and so this often lands on your shoulders. As Alex Kleyner is clear to demonstrate, a little prevention can prevent a lot of debt later on.
So, without further ado, let’s consider some of the lessons to pass down here:
Never Taking Money For Granted
As simple as it sounds, learning to manage money early is going to pay dividends continually, as long as a respect for money is absolutely ensured. Encouraging them to save a portion of any money they receive, whether through allowance or gifts, can also help set the tone for long-term financial health. A good rule of thumb is to encourage saving at least 10-20% of what they make, so they get used to the idea of putting some money aside for the future. It might seem simple, but it’s a habit that will stick with them for years.
Understanding the Value of Credit
As children grow older, understanding credit and its impact becomes essential. Credit cards, loans, and mortgages are pretty confusing even for adults. and while it’s true a child or teen isn’t going to be approved for one, you can show them how you’ve integrated their principles in your own life, especially for those who don’t fully understand how they work. You could start by explaining how credit works and the importance of paying it off on time, and why this system even exists in the first place, or how a credit score is comprised. Making sure they know how interest rates can sometimes affect debt, or how good credit can often lead to better financial outcomes, will be beneficial.
Thinking Long-Term
It’s hard to think long-term with finances but nothing could be better for us. We often think of finances as daily budgeting and credit management, but teaching your children to think about their financial future may help them set longer term goals they save for, even if that means putting aside part of their allowance so a game console can come later. It’s never too early to start talking about savings for big goals. If you have a savings account of your own, perhaps let them see how small deposits over time can add up. This way you showcase how the financial lessons you’re teaching are being managed by your own daily admin.
With this advice, we hope you can more easily impart the financial lessons that any parent can influence their children for the better over.
