Learning how to treat and manage money is a learned skill that takes time to develop. Learning finances is not a natural and innate ability that we’re born with, but instead is something that must be practiced and taught. Most people struggle with managing their finances due to the examples that they’ve had growing up, as many parents fail to teach their kids how to use their money wisely for the future. Here are some essentials parents fail to teach their kids that you should be aware of so you can remember to teach your children, which will set the basis for good financial habits:
1. Create a Budget
As kids grow and develop, it can be easy to think that all of their money is just in a big pot and that they can use to pay for different expenses periodically. This can often lead to overspending and late payments, making it difficult to save without organizing the money into separate categories. Every dollar should be accounted for, making it easy to save and never run out of money. Accounting software or a simple budgeting template will work to assist with budgeting each month.
2. Invest Money
One of the most common habits of the wealthy is knowing how to invest as it’s a practical way of growing money. There are many stock market investment tips and financial advice that can be found online that will make it easy for you to understand, so you can better teach your children. Although there is a bit of risk involved, parents should teach their children to buy the highest-quality of stocks with the most potential and how to create a diverse portfolio to minimize the amount of risk involved.
Saving is crucial for emergencies and to establish a secure future with extra money that is stored away and can continue to build with a set amount allocated out of the budget each month. Many parents fail to stress the importance of saving, ultimately leading to a dependency on credit cards or a lack of having the extra funds for retirement or financial emergencies. Parents should teach children early on to save a portion of their earnings each payday for an easy habit to form.
4. Avoid Debt
Although debt has become a normal part of our culture, it doesn’t mean your children have to go into debt to pay for bills. Far too often, parents don’t protect their children from the dangers of frequent credit card use or taking on auto loans for cars that quickly depreciate. Although home loans are often unavoidable, parents should teach their children how to pay for their assets with cash to prevent acquiring thousands of dollars in debt that can be difficult to repay and even lead to bankruptcy.
Parents often focus most of their energy on developing their child’s behavior early on or enforcing a hard work ethic, but teaching finances is often neglected and can lead to the largest consequences into adulthood. With a few simple lessons, children can learn the importance of treating their money wisely due and create good spending and saving habits.
Earnest Parenting: help for parents who want their kids to be financially wise.