Your kids will learn about money and financial preparedness one way or the other
Of the nearly 70 personal finance scholarship essays we’ve posted over the last two years, one theme has come up the most. Parents aren’t teaching their kids about money…but kids are learning anyway.
Most parents don’t sit down to teach their kids about the financial realities of being an adult. Where do you start? How would you even begin? It’s not something they teach in school and parents that weren’t taught have nothing to go on.
But you kids are learning from you even when you’re not teaching. Just taking a look at your own financial habits and getting on track will go a long way to teaching by example and giving your kids the headstart you never had.
Today’s scholarship essay is by Deana Washington, a student at Manchester Community College. She shares the money lessons she learned from her mother through examples and financial struggles.
Check out Deana’s story and please share on social media. The most-shared essay on how parents can teach their kids about money will win one of our two $500 personal finance scholarships, announced August 31st!
Not sure how to teach your kids money tricks or good financial habits? You’re not alone. It’s not something that’s taught in schools and few of us were ever taught by our parents.
Check out Dave Ramsey’s Total Money Makeover: A Proven Plan for Financial Fitness. A New York Times best-seller with more than four million copies sold.
The Money Lessons I Learned without Being Taught
“Financial planning” and “How to be a fiscally responsible adult” sound like classes everyone avoids taking in college, or that language you’ve been learning for five years but have yet to master.
These topics are often something that is avoided in conversation when growing into adulthood and don’t usually come up until the time comes for you to go out on your own. Growing up my mother never talked about finance and how to manage money. Like many parents, she was never taught so didn’t know that she needed to teach me.
As kids we learn from example and even though money isn’t talked about much there are lessons to learn if you listen closely. Even though we never had, ‘the money conversation’ I still learned five very important money lessons from my mom.
5 Money Lessons Kids Learn by Example
Pay Yourself First
This is one of the most important lessons I’ve learned that many people don’t follow. You put in so much into working for your money, why not keep some of it for yourself.
Growing up I listened to my mother complain about not having enough money at the end of the month for things that she wanted after paying bills. Paying yourself first allows you to be able to adjust your bills around you still getting the satisfaction from your money.
I’m not saying you go out and buy the new iPhone because you decided you can just make up the rent next month, but your attitude affects your work and taking care of yourself is more important than having all the premium channels.
This was one of my first money blunders, working so hard to save every penny and getting burned out. Don't be afraid to spend a little money to reward yourself, just keep it within your budget.
All Credit Isn’t Good Credit
A credit history is one of the most important things you need to establish yourself as an independent adult. Good credit is required for getting an apartment, a car and many employers look at your credit reports as well.
One of the easiest things to do is to go crazy with credit, many people advise paying with cash when buying big items because you have more of an emotional attachment to the cash than a piece of plastic, making you reconsider spending too much. My mother like many other people has opened many credit accounts because it allows them more spending power not knowing how irresponsible they come off to other creditors for having too many accounts.
Creditors begin to lose trust in whether you’ll be able to handle all the debt you’ve racked up. You become more of a risk.
Credit card companies are sneaky and use lots of tricks to make you overspend and open more accounts. Understand how credit works and how to use it without falling into a debt trap.
Budget, Budget, Budget
Debt is fundamentally simple, you spend more than you earn. Tracking your expense can get out of control real fast when you’re only tracking it in your head.
Having a fixed budget lets you see visually where your money is going and if you’re living above your means. People underestimate the power of a budget, knowing how much you make versus how much you spend allows you scale back in areas that may not be as important. It also helps with paying yourself first, you’ll be able to scale back on things that are not as significant to make room for budgeting you into the equation.
Every day I try to talk my mother into creating a budget so she can see where her money is going and where it doesn’t need to go, so she can see that we don’t need those premium channels either.
Retirement isn’t just a word
My mother has been retired now for about 11 years and we struggle to meet the bills at times. My mother retired fairly young (in her 40s) and it makes me think about how important it is to plan for retirement because the unexpected does happen.
Retirement is best planned for while you’re young, you’ll have more time to accumulate money to be able to live the way you want when you’re 65 but it’s better late than never. You’ll have more money if you save for 50 years than if you save for ten.
Invest in the stock – of YOU
This adds to the concept of paying yourself. When you work on getting the education, training or knowledge it takes to master something, it makes you more valuable to employers and they are willing to pay you bigger $$ in higher positions.
This education isn’t only an investment in your future, it will allow you to have the means to pay yourself first, maintain good credit, stay balanced in your budget and retire comfortably.
Although these are not direct lessons my mother taught me, these are the things that I’ve learned from seeing her struggle with finances while I was growing up. The best way to learn is by example and sometimes when we learn from examples in our lives, we learn what not to do. From learning what not to do, I’ve learned ways that I can be prepared financially and not have to struggle.
I want to thank Deana for her story of the money lessons she learned from her mother. Be sure to support Deana by sharing the article through social media and check in August for the winner of the personal finance scholarship.
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.