Before you get ready to shove those kids of yours out of the nest, here are what I consider to be (based on my experience as a person, a Mom, and a Grandma) the most important things you (or someone) should teach them about personal finance.
I’m following a long range plan for camp content in my Grandma Rie’s Money Camp and it includes all of these, focusing on different things at different ages.
Here, told as I would tell it to my Grandkids, are my top 5 lessons.
No one owes you a living.
Nope, not even Mom and Dad will support you forever. You are expected to leave the nest and become self-sufficient (hint, that means pay your own way). You are expected to stay off the dole from charity programs, instead, you should consider contributing to them.
To become self-sufficient, you not only need to learn the basics (like brushing your teeth and washing your hands), but you also need to pay attention in school, be aware of your environment, take care of your health (and stay away from drugs!) and learn a trade or profession that will allow you to support yourself and a family should you decide to have one.
Try out different things to see what you like to do. Watch what others are doing, how they do it and what they may be getting from it.
Make friends, not only with people your own age and from your own neighborhood, but with people older and younger than yourself and with folks who may be richer or poorer or live in a different geographic area.
Check out different schools to see what they specialize in and what kind of jobs or businesses their graduates have or run. Prepare for getting into the ones you think you might want to attend – by studying the right subjects, participating in the right activities and working the right kinds of part time or summer jobs. Try for internships to get a feel for what the work is really like.
How to manage life activities.
I hope to show you how to use debt wisely. There are lots of ways to get into to debt. Some of them can help you, others will bite you. High interest credit card debt can really drag you down, yet you might want to take out a business loan to start up a really great business idea.
Let me show you how to get a loan, buy a car, purchase a home, live within a budget, save/invest, prepare tax returns, use a contract and more. You will need to do each of these things once or twice (or even as ongoing activities) in your lifetime.
I want you to know how to track your income, expenses and net worth. You need to be able to balance savings and investment accounts back to what the bank or financial institution thinks you have. You wouldn’t want to make a mistake and pay hefty fees. Neither would you want the bank or institution to rip you off.
I will try to show you how to sell and negotiate. Everything in live requires sales skills. Every transaction has room for negotiation. Unless you learn how to do both, and practice doing them in ever tougher situations, you may lose out on a future salary increase, promotion or great business deal. You may pay way to much for a house or car or sell your things for much less than they are worth.
I want to help teach you how to strive for financial freedom.
Work should be fun, but you probably won’t want to (and might not be able to) work until you die. Financial freedom means that you can continue to support yourself and your families and causes even if you aren’t running a business or hauling in a paycheck.
To become financially free, you need to understand that you can’t trade your time for money and get ahead. You need to find ways to generate passive income.
To remain financially free, you can’t depend on only one source of income. If that one fails, it would be back to work with you. You need to understand what multiple income steams are and how to go about building them.
You need to learn how to talk money.
Not everyone has the ‘same money personality’ as you do. Maybe you love to save money, but if you marry someone who loves to spend money, there will be arguments unless you figure out how to talk about money. Maybe you don’t mind putting some money into the stock market, but perhaps your spouse is terrified of the market going down and causing you to lose that money.
The best way to learn how to talk money is to do it. Calmly, as logically as possible and with foreknowledge of how to figure out what kind of money personality each of your family members have.
I want to teach you what to do with a windfall – just in case you should get one.
You wouldn’t want a gob of money to take you off your chosen life course or put your life in danger or make you lose the ones you love. Even if the possibility is remote, you need at least an introduction to what you need to think about and do if you should inherit, win the lottery, get a huge insurance or lawsuit settlement or come into large amounts of money all of a sudden some other way.
What do you think are the most important money lessons for your kids to learn?
That wisely invested money compounds over time, and carelessly invested money compounds over time … in the wrong direction!