What grade would you give your parents for how well they prepared you to manage your finances? What grade will your kids give you someday?
There are six basic financial principles your kids need to know before they leave the safety net of home.
NO. 1: HOW YOU SPEND AFFECTS YOUR FUTURE
Kids need to know that if they spend their money without thinking about their choices, they will probably make bad decisions. Teach them how to stop and think before making any spending decision.
NO. 2: CREATE GOALS FOR HOW YOU WILL SPEND YOUR MONEY
A goal is like a roadmap. It shows where you are and where you want to go. When setting goals, think short-term, medium-term and long-term. Short-term goals might have something to do with tomorrow. Medium-term could be months or even a year away. Long-term goals are far away. Here’s a secret: Until goals are actually written down, they’re not goals at all. They’re dreams. It’s important to get into the habit of writing down goals and following with a plan for how to reach them.
NO. 3: YOUR VALUES INFLUENCE THE WAY YOU SPEND MONEY
Your kids’ values are more likely caught that taught. What you do speaks louder than what you say. Let them catch you in the act of saving, giving to others and saying words such as “budget” and “savings.” Instead of saying, “We can’t afford it,” say instead, “We don’t choose to spend our money that way.” Let the kids know that you save first and spend later and that debt is a cruel master.
NO. 4: UNDERSTAND THE DIFFERENCE BETWEEN WANTS AND NEEDS
Sometimes, it’s not easy to tell the difference between a want and a need. A need is something required to sustain life, health or safety, or to comply with a legal obligation. Food, shelter, clothes, medicine and paying taxes are needs. But it can get a little complicated. Are Levi jeans a need or a want? Clothes are a need, but paying a lot of money to get a certain brand crosses over to a want. There is nothing wrong with wanting things….
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