This might seem like a strange article coming from an accounting firm. Yet, it’s an important topic, more for those who should be doing it than for those who need to be taught the lessons.
Kids don’t understand money; goodness, many adults don’t understand money! Regarding kids, they know how much they can buy with whatever you give them, but they have no clue on how to save it, invest it, or budget it. Once again, that aligns them with many adults unfortunately. But since the idea is to try to make the next generation better, we should try to help them along. And if we as adults can learn some of these lessons, even better.
1. Life insurance isn’t only for married couples. Too many people believe it’s best to wait to get married before having insurance. In today’s world, where more people are getting married later in life, it means missing an opportunity to start purchasing insurance at a lower rate because you’re younger and healthier. It also means missing out on the opportunity to save money that you can borrow, interest free, if needed for emergency purposes later on.
The other part of life insurance is that it’ll cost less to get better coverage the younger you are when you purchase it. There’s also the possibility that, depending on what type of life insurance is purchased, they’ll reach a period of time where they can stop paying premiums because it starts paying itself; who could be mad at that?
2. What you earn isn’t actually what you bring home. You give a kid $10, that kid gets to spend $10. As an adult, you know that if you earn $500 a week you’re actually bringing home, if you’re lucky, $350 or so. This is important because many young people move out thinking they can afford to live on their own and get slapped with reality within a few months. Many never figure out on their own why their pay doesn’t seem to match what they have to spend.
Have you ever wondered why so many professional athletes end up with money troubles, even before their careers end? No one taught them that million dollar contracts means a lot more goes into taxes, and you’re not set for life unless you’ve learned how to take care of your money. The problem with many of them is that they didn’t learn the lessons when they were younger, so even when they’re told as adults they don’t always listen to the advice they’re given… like kids would.
3. Getting into a pattern of saving or investing money early is always wise. If you can teach your child to take $2 of his or her allowance and immediately put it away into savings of some kind, even a jar in the closet, you’ll teach them the power of building wealth. When, after a year, they see how much money they have saved, it’ll encourage them to keep doing it into the future, and they’ll learn that they’ll never miss it.
That’s the over all power of investing something every week when you’re younger. If nothing bad happens (like a pandemic; let’s hope never again!), a weekly deposit will never be missed, and it builds wealth without realizing it. Wouldn’t it be nice if more people retired with a nest egg they could live on for the rest of their lives?
4. Just because you see something you want doesn’t mean you should always give yourself instant gratification. If they’re at a store and see something they want, you should teach them the art of shopping around to see if that same item can be bought at a lower price. Sometimes time makes them see things in a different light and they may not really want it. Other times they may see something else they want that’s less costly. In any case, it’s a great lesson of controlling one’s impulses.
Teaching these lessons when they’re young is easier because it costs less money to show them a better way to handle their money. As they grow older, they’ll learn they don’t need the fanciest clothes, the fanciest car, and feel the need to impress others. They’ll feel better having money for things they might enjoy just as much for less money.
5. Those willing to give some of their money to charity will see their own funds increase. There’s something fulfilling about being able to give money to charities when requested. Even if it’s not a lot, everything helps. Once people get used to giving money away they find that they have something else to work towards, thus their income grows because they love having enough to donate. No idea why it works but it does, and it’s one of the nicest lessons to learn.
What do you think? Did you learn any lessons about yourself along the way?