How many times have you said to yourself as an adult…if only I knew about that 30 years ago? Those moments of hindsight are the lessons we should be teaching our children. Especially when it comes to making their money go further!
We all have some past financial regret lurking in our history and there’s good reason for that. Most of us were never taught how to manage money. Our parents were generally reluctant to share their mistakes with us and Money Management 101 wasn’t big on the school syllabus.
Nevertheless, one of the most important life tools we can equip our children with is an understanding of how the world of finance really works.
I’m not suggesting you sit down over dinner and quiz them on the latest Fin Review. But there are ways you can prepare your kids to take responsibility for their finances and manage them effectively. What’s more, these lessons should start as soon as they earn that first shiny dollar (or $2 with inflation) from the tooth fairy!
I’m sure you can add to this list when reflecting on your own financial journey, but here are 6 simple lessons you can impart to set your child up for future fiscal success:
I budget and I know it!
How old were you when you first started budgeting? Did you have a balance sheet to keep track of your pocket money, or was it when your finances required resuscitating that you finally faced the realities of your incomings and outgoings?
As soon as they have their own money – even if it’s $5 for washing the car – and indicate a desire to save up for the latest loom banding kit that all their friends have, you need to teach your children the art of balancing a budget. Just think of the math’s skills they’ll acquire along the way!
Save, save, save!
We all want to help our children get further in life. But giving them everything they desire is setting them up for a fall. This is the type of attitude credit companies profit from. Thinking reward comes with no effort at all is a massive and potentially deadly financial trap.
The child who patiently saves a dollar a week to buy a $50 toy at the end of the year, is the adult who squirrels away something from each pay cheque to accumulate a 20 per cent deposit towards their first home.
There’s no such thing as ‘easy credit’!
This lesson goes hand in glove with the above gem. If you want it, you have to be able to afford it. If you don’t have the money for it right now, be patient and save. Credit spent on luxury items, holidays or a new car is like a bad tattoo – far too easy to obtain, incredibly painful to get rid of and the cause of many sleepless nights fuelled by regret and anxiety.
Teach your child the difference between ‘good debt’ and ‘bad debt’, with the former allowing you to invest in order to increase your net worth and the latter bleeding your bank balance dry.
Know how to score!
Everyone has a credit file that documents your last five years worth of fiscal history in detail. Tardy payments, defaults, bankruptcy and any other transgressions are recorded and available to loan assessors.
Encourage your children to be organised, reliable and pay all bills on time whenever possible. Likewise, urge them to address any problems they might encounter trying to meet their financial commitments, rather than hiding from the issue. This is a big lesson in responsibility.
Remember, the cleaner their credit history, the more power they will have when it comes to seeking a home loan later on.
Don’t be a paper shuffler!
You know the kind I mean. You ask them for a document and they start scrimmaging around in a mountain of paperwork looking all flustered. They break into a sweat and mutter, “It’s here somewhere…I’m certain…”
When it comes time for your child to apply for a home loan or even do their taxes at the end of each financial year, they will thank you for instilling the need to maintain a neat and tidy paper trail and properly manage their financial affairs. And who knows, it could mean a cleaner teenage bedroom!
Surround yourself with the right people
The world of finance is riddled with ‘advisors’ and ‘experts’. But as I’m sure you well know, they are not all created equal! Be your child’s first wealth of important knowledge by teaching them how to qualify anyone they consider employing to assist along their financial journey.
Another critical lesson that aligns with this is ‘if something seems too good to be true, it most likely is’. There are numerous opportunists just waiting to take money from unsuspecting targets. Educating your child around the questions to ask, qualifications and credentials to look for and referrals from past clients as confirmation of the person’s know-how and professionalism, will go a long way to protecting them from scammers in the long run.
Understanding and adopting these lessons could be the difference between your child thriving financially and spreading their wings, or living at home for the rest of their lives. How’s that for motivation to start teaching them today!