Navigating through adulthood and making sound financial decisions can be a complicated thing. But have you ever wondered whether your poor money habits might have been due to how you were raised? More importantly, you might be passing on these money mistakes to your own child.
Children are more aware of their spending and saving habits than you think. They can even adopt your relationship with money and take it with them to adulthood whether consciously or not.
We all want what’s best for our kids. We know, we’re parents too. That’s why in this article, we want to share with you the most common money mistakes that you might be teaching your kids in hopes that you might avoid them in the future. Let’s get started!
Kids today are lucky to live in a world where all the information they would ever need is just a few taps away. The landscape of financial literacy is gradually changing as well. Yet while we are more open to talking about money now, it wasn’t always so and old habits die young.
We get it, you might not want to talk about money in your household because you don’t want family members to worry. However, you will also be missing a lot of opportunities to discuss essential financial lessons in the process. To make it worse, you are also going to imply that the state of one’s finances is not something you share with other people, even the ones you trust the most.
We know that you probably just want to discuss things in a positive way. However, saying that money will always be around can also nurture a way of thinking that excessive spending is okay because you’re simply going to earn money later on anyway.
While we’re not suggesting that you to become a naysayer, it is more ideal to teach your kids the value of earning money. You should also stress that there are circumstances in life that can sometimes prevent you from earning money even if you want to. Unemployment and sickness for instance are harsh realities that a lot of people face every day.
Here’s another common mistake that parents make when teaching children about money. Financial literacy is not just a grown-up thing. Age is not a factor that can hold one back from learning more about money.
In fact, there are a lot of kids that have their own small businesses. Putting up something as simple as a lemonade stand also presents you with an opportunity to teach your children basic financial terms such as income, expenses, profit, and loss.
At the very least, they can help out with money management by minimizing their expenses. You will be surprised by how understanding your child can be. Who knows? You can probably even prevent his next meltdown at the toy store.
Speaking of expenses, a lot of parents think that teaching kids that lower prices are better is a good thing. It will prevent overspending, right? Plus, who doesn’t want a good deal?
The problem is, cheap is not always better. It might not even be the option that saves you the most money in the long run. For instance, a lot of cheap things are simply more affordable because of their poor quality. Buying them will lead to countless repurchases in the future. Isn’t it smarter to invest in better quality products that can last you for several years…or even a lifetime?
That being said, you also don’t want to say that expensive things are always better in quality because that’s also not necessarily true. Instead, you want to teach them to do their research and find the solution that gives them the most value for their money.
Here’s a money mistake that even adults can relearn. Credit cards are not bad. When used wisely, they can be a powerful tool to teach financial responsibility. It can also give them a head start in building their credit score that can then lead to a less expensive future.
After all, a good credit score can land you lower interest rates and better payment terms on purchases like residential properties and cars.
Aside from that, credit cards can also present opportunities that would otherwise prove unavailable. For example, a credit card can make it possible for you to purchase a piece of much-needed equipment that can help you establish a business.
Finally, we all want to teach our kids how important saving is. We agree with you. After all, we believe that building an emergency fund is one of the most important financial goals that people should accomplish as soon as possible.
However, we also want to stress that saving money is not the answer to everything. Just consider the average interest rate of a savings account these days. It’s roughly 0.05%. Now assess how much you can potentially earn by investing that money wisely instead.
We know that investing is a more advanced lesson that your child might find more complicated to understand, so what better way to teach it to them through a hands-on approach. We recommend starting by buying a few shares of a company that your children may already be familiar with. Disney and Netflix are good places to start. You can then let them watch price fluctuations and learn more about stocks, mutual funds, and other common financial products.
It is also a good opportunity for them to learn by trial and error in a controlled environment.
And you know what the best part about teaching your kids about money is? You can use this as a way to review and refine basic financial concepts as well! You might even stumble upon new lessons you haven’t learned yet along the way.
Author Bio: Jim Hughes has significant experience covering financial and business topics. He also worked as a financial advisor at a bank and provided consulting and advice about budgets, savings, insurance, stocks, retirement funds, tax advice, etc. At the moment he is the Director of Content at OpenCashAdvance.com.
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