5 Lessons Parents Should Teach Their Children About Finances

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Published by Andrew Rogers

Every year, millions of young adults graduate from high school and embark on a new journey in life. Many are headed to college, some leave home to travel the world and others get ready to enter the workforce. But are they ready for what lies ahead?

Many parents worry about whether their son or daughter will get of bed on time to go to class, if they will remember to study for their midterms or if they will even call home to talk to their parents anymore. While these are all concerns most parents eventually move past, the nagging question in most parents’ minds is, “Did I teach my son or daughter everything I was supposed to? Did I remember to tell them that really important piece of information?” Well the truth is, you won’t, you can’t and you never will teach your children everything there is to know about everything. What you can do is prepare them the best you can for the world that lies ahead.

One topic I have noticed that young adults today seem to have little or no education about is personal finances. Their entire lives they have worked jobs here and there, gotten money from Grandma and Grandpa for their birthdays and holidays, but do they truly understand the meaning of money and what it is? Probably not. When they get to their next stop in life, away from the safety net of mom and dad, they are suddenly thrust into a world where people eat Ramen noodles at the end of the month because they ran out of money or can’t shower for a couple of days because the utility company called and the bill they sent last month wasn’t optional and payday isn’t until Friday. Here are the five lessons my Dad taught me before I left for college that have made a world of difference in my life:

  1. Save early and save often.
    • Every year since I can remember, I received money for my birthday, Christmas and sometimes just because Grandma wanted me to have something nice. But in my family, the tradition was you put whatever you got into the bank. The point was, if the money was in the bank, not in my wallet or dresser drawer, when I wanted to buy something, I had to think about it before I could get it. It was delayed gratification at its best. If I really wanted something, I had to wait to get my money and then go buy it. I still got the new football I wanted or video game that everyone was playing, but it meant I didn’t waste my money on things I didn’t really want.
  2. Open up a savings account.
    • There is something powerful about being able to go to the bank with mom or dad and seeing how much money you have in YOUR bank account. At 10 years old, I am pretty sure I thought $200 meant I was as rich as Warren Buffet. The fact that the money was mine and it was in my bank account was powerful.
  3. Investments aren’t just for old people.
    • Many families have 401(k)’s, IRA’s, Mutual Funds, etc. and kids hear mom and dad talk about “the market” or “the portfolio” and never really know what that means. When I was 13, my uncle and I sat down and started talking about what investments were and how I could own a piece of a company. The idea blew my mind, but I began to learn about investing and soon realized the power of investing. We opened an educational savings account and I used $2,500 I had saved to buy my first shares in a mutual fund. Investments stopped being this idea for old people and became a reality.
  4. Teach your kids how to budget.
    • Most families operate on an annual budget. Mom and Dad sit down every year and decide what they are going to do with the money they are going to make, but do you ever think to sit down with your kids and make a budge with them? Most kids have some sort of income and expenses, but without a budget, it is difficult to understand where the money is going. Once children get out of the house, they are often living on a fixed income and a budget can help them plan for monthly expenditures, major expenses and see where they are spending more and where they are saving money.
  5. Transparency.
    • Many families choose to keep their finances private and not involve their kids in the often stressful and difficult task of managing their personal finances. But transparency can be a very powerful educational tool. When money is tight, it is important to tell your children that they cannot get a new Xbox right now. Every parent wants to give their children the world; you never want to disappoint them. If you grow up knowing that sometimes you can afford to get a new toy and sometimes you can’t, you begin to appreciate the value of money much earlier in life.

These are some tips that my parents made sure I knew before I left home for college and they have made all the difference in the world as I have grown up. I have taught countless friends how to build a budget and they have been incredibly grateful. To all the moms and dads out there who are worried about their kids’ next step in life, give yourself one less thing to worry about and teach them how to manage their own finances.

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