COVID-19 has changed our lives to a different normal that many of us never imagined would happen in our lifetime.
From not being able to leave our homes without masks to schools shutting down and forcing everyone into homeschooling for the foreseeable future, most of us can’t imagine things going back to our old normal.
However, when you start back with your homeschooling sessions consider adding in some finance lessons to help your kids get a step ahead of the game finance wise.
Here are the essential finance lessons I’ve been teaching my kids at home.
Always Have an Emergency Fund
One of the first finance lessons to teach your kids is the importance of saving to create an emergency fund.
It’s estimated that 38% of Americans couldn’t face a $500 emergency without selling something.
Even if your kids are little (I have three elementary school-aged kids) encourage them to save as much of the money as they receive or earn instead of spending it as soon as they get it.
This can be done by them saving money in a bank at home or you opening them up a children’s savings account.
To help you create a savings fund we recommend using the Pigly savings calculator. It can take into account interest and the annual inflation rate to help you meet your savings goals.
Stay on Top of Your Credit Report
Like it or not, your credit score is one of the primary foundations of your financial health. Anytime you want to take out a car loan, mortgage, business loan, or even rent a place your credit score will be analyzed.
The three main credit reporting agencies Experian, Equifax, and TransUnion are similar, but sometimes they do make errors. This is why it’s important to teach your kids the importance of staying on top of their credit reports and to teach them how to maintain a healthy credit score.
There are Free Things You Can Do to Enjoy Yourself
It’s easy to look at the TV and believe that everything costs money. This can lead to a phenomenon where you’re trying to ‘keep up with the Joneses’. Sadly, this is the trap the majority of people fall into.
Teach your kids that life doesn’t always have to cost. There are free things you can do to enjoy yourself in life. Show them how they don’t have to break the bank to take advantage of what the world has to offer.
Don’t Loan Out Money Unless You’re Okay with Not Getting it Back
Loaning out money to friends and family can ruin an entire relationship. Approximately two-thirds of people who lend money to friends never see it again. Even if they do, the relationship is rarely the same again.
The number one rule to teach kids about loaning out money to friends and family is to only do it if you’re okay with not getting it back.
Have Multiple Streams of Income
If the 2008 Financial Crisis and the Coronavirus Pandemic have taught us anything it’s that the world can be turned on its head in the blink of an eye. For those with just a single stream of income (typically a job), they’re vulnerable to whatever the world decides to throw at them.
The average millionaire has seven streams of income for a reason. Of course, they don’t need to be equal and not everyone needs as many as seven, but the principle of not relying on your day job remains the same.
Smart people are always looking at how they can create multiple streams of income.
Plus, it seems like the kids of this generation already have the entrepreneurial spirit, and it’s good to encourage kids to try as many different money-generating ideas as possible.
Credit Cards are for Building Credit
We as a society rely on our credit scores more than ever. Unless you come from a rich family, there’s no getting away from it.
Your primary means of building credit is to use a credit card. But never teach your children to look at credit cards as free money. Show them that they should only be used for building credit.
Instill healthy habits such as paying off credit cards in full each month, only using credit cards for purchases you can afford to pay off within a month, and not going overboard with the number of credit cards you apply for.
Start Saving for As Soon As You Get Your First Job
Around 64% of Americans don’t have enough money for their retirement. This shocking figure has been growing in size for many years now, and it’s not getting better.
The earlier you start saving for retirement the less you need to put away per month on average.
Consider utilizing the Pigly retirement calculator and plugging some numbers in. Your kids will then be able to see the huge difference to how much they’ll need to save each month based on the age that they start saving at.
Avoid Taking Out Loans When Possible
When your grandparents couldn’t afford something they saved up until they could buy it. The lack of patience in America today means people will take out a loan for anything. Personal loans from the bank, credit card loans, and even payday loans are many people’s go-to for purchases that are considered wants and not immediate needs.
There are just two exceptions to this rule: car loans and mortgages. For big, essential purchases like these, a long-term loan is acceptable.
Save Up for Large Purchases
Again, learn the value of patience. Don’t get taken in by those supposedly cheap loan offers and the desire to have the latest gadget.
Teach your kids to step back, consider if they actually need the item, and then save for it to see if once they have accumulated the cash if they still find the purchase to be worth it.
Don’t Attempt to Live Above Your Means
Most kids love watching YouTube these days, which can lead to them thinking when they are adults that they need to live a certain lifestyle, regardless of if they can afford it or not.
Teach your kids that every household should have a budget, which means carefully recording income and expenses.
If expenses start to become more than the income that’s being brought in, it’s time to either make more money or get rid of nonessential expenses.
Conclusion: Consider Adding These Finance Lessons to Your Homeschooling Curriculum This School Year
By teaching your kids these financial lessons as part of their homeschool curriculum, you’re giving them a lifetime of good financial habits.
A lack of parental intervention when it comes to finance is responsible for causing so many kids to learn financial literacy from their television screens and friends. Get started early and you’ll give them the positive habits for a lifetime.
What are you teaching your kids about finance?