I recently read a post by Mr. Money Mustache that resonated with me on the topic of teaching kids about money. Though, his post was more on the how and no so much on the why.
As I enter a time in my life where becoming a parent is as much a reality as ever, I often think about how I will raise my children. For the record, I completely agree with MMM’s post and have gotten a few really great ideas.
This ‘how’ comes up often in my thoughts, as I want to be the best example as possible for my (future) kids. But, again, how do I make this possible? What will I teach them? What areas do I focus on?
Note: This is another post by our guest writer D.
What should we teach our children about money?
I think we all struggle with the thought of teaching our children and it can be further broken into many categories of life; the least of which is financial health and what it means to “handle your money” well.
I know I was never really conscious as a youth when it came to finances. I do remember, however, being conscious of what it meant to spend and have nothing left in my early teenage years. Unlike most kids at that age, I don’t really remember asking for much from my parents because I began to see their financial struggles (I was the 4th out of 5 kids).
However, being aware of things like being frugal versus actually learning proper management of money and becoming financially healthy are far from learned in unison. An example would be a person who is extremely frugal in one category, but manages their money poorly in every other category.
It took me years to learn on my own the ways of the force…of financial health, that is (yes, I’m a Jedi). Please don’t misunderstand this as me saying I’m a master now, far from it. Even Jedis have more to learn!
I learned of FIRE and all the awesome people in the community only recently. I’ve taken what little I knew before that point in my life and hit the big red button to travel through hyperspace; at least, that’s what it felt like to get to this point in the financial learning curve so quickly.
Why it’s a must to teach our children about finances.
Anyway, back to the main point (and steering clear of any more Star Wars references) – personally, I feel that teaching my children about finances is a must.
As MMM mentioned, and I whole-heartedly agree, as parents we are supposed to ensure our children are better prepared than we were at their age. Even if you had it great as a child, there are probably some things you’ve learned that you may want to show them that are improved.
This becomes even more evident as society and our world change; case in point – technology. As technology begins to change our world and hasten the pace of everything, we’ll need to decide how that affects the ways in which we teach our children.
Here are 10 lessons to teach children about money
1. All cash is green
Young people can get caught up in the prestige of certain jobs but at the end of the day, all cash is green. I don’t want my kids to think they are too good for any job and that they must have a prestigious career in order to be successful.
2. Save more than you spend
This one is fairly obvious but in order to increase their net worth, they must save more than they spend. Simple as that. (By the way – we track net worth in our family with the free mobile app Personal Capital).
3. Invest early
Time in the market is a huge advantage and people who invest in their twenties have a much longer span for compound interest to grow. I hope my kids invest early.
4. Invest often
I want them to get in the habit of investing regularly. Setting up automated investments that pull from their checking accounts monthly is one way.
5. Think before you buy
Avoid impulse purchases by taking a second to slow down and think before you buy.
6. Understand needs versus wants
This is a huge lesson that kids need to learn. What do they really need to live and what do they want to have in their life. Two entirely different categories.
7. Buy used
I hope to take them into consignment stores and on trips where I’m selling or buying used items so they get an understand that you don’t have to buy everything brand new.
8. Know the impact to the environment
I want them to understand the basic connection between consumerism and detrimental effects on the environment.
9. Understand how good they have it
The United States has 3 percent of the world’s children but over 40% of the world’s toys. Enough said.
10. Give generously
I believe in karma and that the good you put out in this world comes back to you. Give to those in need and give generously.
What are the top lessons you are teaching your kids about money?
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