Schools are great for teaching our kids a lot of things that they need to know to succeed in life. However, when it comes to certain life skills, such as financial lessons, it’s up to us to do our part to make sure they are ready to successfully function outside of our care when the time comes.
If Covid 19, has taught us one thing, it’s that we always need to be prepared financially. Therefore, today I wanted to discuss some important financial lessons to teach your kids while they are still young.
Let’s get started!
Create an emergency fund ASAP
One of the first financial lessons to teach your kids is to create an emergency fund ASAP and the importance of having an emergency fund.
An emergency fund will allow them to be prepared to handle unexpected financial emergencies and not have to panic in the event that they lose their job or have to take time away from work.
In fact, you can help them start their emergency funds now, while they are still under your care and don’t have expenses by starting them a bank account and encouraging them to save the majority of the money that they earn/receive instead of spending it right away.
As they get older you can teach them how to use a savings calculator so they can see how their money will grow over time.
See Also: Ways to Add to Your Emergency Fund Fast
Develop good credit habits
If your kids are anything like my boys, they have goals of becoming homeowners at a very young age.
However, in order to achieve that goal, unless by chance they strike big, they are going to need a mortgage, which is going to require them to have good credit.
As adults, we’re hit with credit card offers in the mail almost daily. Typically they’re tossed in the trash without thinking about it. However, for young adults, it can be tempting to accept some of those credit card offers and go on a shopping spree with the pay it back later mentality.
Set your kids up for success by discouraging them from taking and utilizing a ton of credit and instead coach them on how to utilize credit as a way to develop good credit habits to obtain a great credit score, which will allow them to get great interest rates on the large life investments that they want such as houses.
Find free ways to have fun
Television and the media make it seem as though the only way to have fun is to spend a lot of money.
YouTubers influence kids by showing their lavish lifestyles and expensive outings.
While there’s nothing wrong with taking vacations and going out and enjoying some of the perks available to us that do come with a fee, it’s also important to teach your kids that there are free ways to have fun.
Be active with your kids and take them on walking trails, nature hikes, and even get-togethers at home to create fun memories with them that they’ll always remember and will get to experience that they were able to have fun without it costing mom and dad anything.
Don’t loan out money unless you’re okay with not getting it back
Loaning out money can ruin a relationship.
Kids are typically nice by nature and we do teach them to share. However, as they get older it’s important that we teach them that they should be picky about who they loan out money to.
Even if they do feel comfortable loaning out the money to a friend or relative, they should be prepared to be okay with not getting it back.
Have multiple streams of income
As Covid 19 showed us all, it’s so important to have a backup plan when it comes to your income. Tons of people were laid off or couldn’t work due to the pandemic and many people are still recovering from the effects of it today.
Don’t let your kids be caught off guard.
Teach them that while it’s okay to be comfortable with their day job, they should always have other income streams working for them too.
This may be a side hustle, investing, or a part-time job in a field that is always needed.
Start saving for retirement as soon as they get their first job
When you get your first job, no one is typically thinking about starting a retirement fund. However, you should be.
The problem many people run into now is that they don’t have enough money for their retirement since the cost of living is always going up and they waited until their 30s or 40s to start saving for retirement.
When your kids are in high school start discussing the importance of starting a retirement fund. Even have them use a retirement calculator so they can predict how much money they should be saving each paycheck to cover their expenses when it’s time for retirement.
By starting early they’ll be able to have a nice nest egg when they retire and they’ll be able to keep more of their paychecks each pay period.
Educate yourself about different loans
It’s not uncommon to take out a loan at some point in your life.
You may need a same day loan, personal loan, business loan, or working capital loan (if you’re self-employed).
However, like credit cards, they’ll be a ton of loan offers coming your way and you want to make sure that your kid doesn’t just go for it just because.
Even in the event that they are in the market for a loan, it’s important for them to be educated about the different types of loans so they know what types of loans to stay away from.
Save up for large ‘wants’
Understandably a loan will be needed for large purchases such as houses and cars.
However, having the latest gadgets and clothing is something that you want to teach your kids not to put themselves in debt for.
While they’re young teach them the importance of saving up for large wants.
They’ll learn to value money more, and most importantly, they’ll also learn the valuable lesson of taking care of their belongings since they had to wait weeks/months to get what they wanted vs mommy or daddy purchasing it for them.
Live within your means
Most kids like watching YouTube, mine included, but it gives them the false sense that they need to live a certain lifestyle at any cost.
Teaching your kids the above financial lessons should all sum up to teaching them the importance of living within their means and budgeting to reach their financial goals while also saving for a rainy day.
Final thoughts: These are the financial lessons to teach your kids
By teaching your kids these financial lessons, you’re setting them up to be adults who will be able to function successfully on their own without your help.
This sets them up to achieve goals such as homeownership at a young age so they don’t have to make some of the financial mistakes, and learn from them the hard way, that we made in our teens and early twenties.
Send them out into the world with positive financial habits that will stick with them for a lifetime.