Although it is becoming more commonly taught, personal finance is a topic largely lacking in our public education system. That leaves the responsibility on families and kids themselves to either learn about personal finance or repeat the mistakes that millions of people make every day. If you’ve made financial mistakes, and you probably have, do you want to let your kids make the same mistakes, or teach them so they don’t make those same mistakes?
Where to start
Teaching kids can be challenging, and so can finding where to start teaching them when you are unfamiliar with a topic. Earlier this year, I wrote three posts about Kids and Money (Part I, Part II, and Part III). Overall, they cover compound interest, college savings accounts, and trade-offs. These are three topics to start with when it comes to teaching kids about money. You can also talk to them overall about the basics of income, spending, debt, and saving.
Our Big Mistakes: Overspending and Under Saving
The biggest mistakes most of us make as adults is overspending and under saving. Overspending can come in many forms:
- Taking out too much in student loans for college.
- Buying or financing too expensive a car.
- Buying too big or expensive a home.
- Living beyond our means by using a credit card to “keep up with the Joneses”
- Spending money without really thinking about it
Under saving is probably just as common as overspending. Saving money is a way to buy time for your future self (and family), even if you’re only saving small amounts to start. Under saving has two major components: Time and Amount. The sooner you save, the more time you give your money to compound. The more you save, the larger base you have to compound from.
Wrapping Up
We’ve all made mistakes with money, but as parents, grandparents, aunts, uncles, any other family and friends, we can make a difference with the children we are raising to help them learn the basics now. How much would it be worth to them, their future, and their families?
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