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If anything is becoming clear about today’s young adults, it’s that they lack the proper financial understanding to make smart decisions with money. This isn’t a knock on them, but rather a strike against their parents and educators. As a parent of a young child today, you should do everything within your power to teach your kids about smart money management.
4 Smart Money Lessons Worth Teaching
The American primary education system is broken. It doesn’t matter your political beliefs, ideology, or socioeconomic class, it’s pretty easy to see that something is wrong. And while we can talk all about equality, zoning, teacher-to-student ratios, and other hot button issues, one of the most glaring problems is that today’s children don’t learn about money.
Considering that money management is a massive part of what it means to be an adult, this is a costly oversight. Ultimately, we need an education system that gives personal finance as much weight as memorizing geography and doing math equations. Until then, it’s up to parents to teach their kids financial truths.
Here are some smart money lessons we’d recommend beginning with:
1. Money Doesn’t Grow on Trees
No child truly believes that money grows on trees, but many have the mentality that it does. Typically this mentality is developed out of a lifestyle of being handed everything they need and never being allowed to face tough circumstances. Do you children a favor and don’t just tell them that money doesn’t grow on trees – show them!
Instead of giving out allowances, give your children commissions for work that they do. Instead of buying your child a brand-new truck when he turns 16 (even if you can easily afford to do so), have him work summers to save up just enough cash to buy a 10-year-old truck with a dent in the door. Instead of giving your child a $20 bill every time she wants to go to the movies with her friends, tell her she has to save up her own money.
These may seem like harsh lessons when you have the money to help your child live comfortably, but there’s something to be said for forcing them to work hard, miss out, fall down, cry, etc. It shows them that money isn’t something to be taken for granted.
2. Not All Debt is Created Equal
Somewhere along the way, society has led people to believe that debt is normal. And while some debt can be useful, you need to teach your kids that all debt is not created equal.
While debt on an appreciating asset is a good thing – such as a house, investment real estate, or even a business venture – debt on a depreciating asset – like a car or living room furniture – is not. They need to realize this early on.
3. Don’t Get Overleveraged
Speaking of debt, it’s easy to get overleveraged and have too much of your monthly income going toward payments. While things might work out for a while, what happens when you lose a job, get a pay cut, or have a sudden expense pop up out of nowhere?
Have your child open up a savings account as soon as they understand what money is and have a need to use it. Then teach them the importance of always having cash on hand in the form of an emergency fund. When combined with smart debt management strategies, having cash reserves on hand will help your child remain as financially flexible as possible.
4. College Isn’t for Everyone
With the cost of college rising and the average graduate leaving college with tens of thousands of dollars in loans, it’s smart to rethink college. Your child needs to understand and believe the fact that college isn’t for everyone. There are alternative routes, and they should at least be explored.
Give Your Kids a Head Start
Want to know the best way to give your children a head start in the world? Teach them how to manage money. Seriously – it’s that easy. With so few of their peers learning about how to make smart decisions with their money, your child will end up far ahead in almost every respect. This will help them make intelligent choices, carve out a successful career, and build a comfortable life that’s happy and healthy. If you want to give them a gift, financial education is the answer.
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This content is sponsored by Larry Alton.
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