While you would think that knowledge about money and finances would be common sense, it isn’t. This article offers some simple knowledge that can be extremely helpful for you and your family.
5 Lessons About Money To Pass Down
It is never too early or too late to learn about finances and money. These lessons can offer a lifetime of rewards in your financial world that will continue to offer exponential rewards. These are lessons that we can all learn and will be able to pass on to our children and grandchildren. This will offer more value than gifts, presents, candy, toys or other material things. Knowledge is power.
Lesson #1: Delay Gratification
We live in a world of immediate gratification. Whether it is video games, TV, impulse items at the store etc., we are used to getting what we want now. This is because credit is readily available. We no longer must save up to buy things we can simply charge it! That however isn’t the way people who are successful financially do things.
It is far better to set a goal for something and then work to gain it. You can save money in a savings account and then buy it when you have saved enough. With our children and grandchildren, we can create a savings jar. When they complete chores, make good grades etc., we can add money to the jar. This will allow them to see progress as they work towards their goal.
Lesson #2: Don’t Be Afraid Of Work, It Won’t Kill You
When you can start something and then finish it, you will have a sense of accomplishment. Because of advances in our society, technology and child labor laws, we no longer have children working in factories. Still there are plenty of chores, odd jobs etc., that teenagers and even younger children can do.
There is nothing wrong with tying financial rewards to work. All children should have weekly and even daily chores that if completed properly and on time will give them financial rewards. This teaches children valuable lessons about money and work. Lessons learned in this realm will serve them throughout their lives.
Lesson #3: Learn About Investing, It’s Risks And Rewards
Learning to invest involves more that just putting money into the stock market, a retirement plan or a jar and forgetting about it. You must understand that investments have risks that are associated with rewards and even “passive” investments require some involvement on you part.
You can do some self-education via the internet, library, seminars etc., that will be very helpful. That will take you only so far. You need to find a professional that you trust and who fits your investment style. Professional advisor have a code of ethics that they must adhere to. You can research them online as well as ask for current clients that you can interview. Not every style or advisor fits every investor. You need to do your homework and find your best match.
Lesson #4: Avoid Credit Cards Like The Plague
Credit has a place in your financial world, but credit cards should only play a minor role at the most. Credit should be used to purchase a home, buy investment property or start a business not to finance a vacation.
Credit cards offer ease at a price. The interest rates that credit card companies charge is something that destroys your ability to build wealth. As we mentioned in Lesson #1, you should save for things rather than use credit. This is not the approach that most people take. You will be far ahead of the game if you learn to use credit cards for emergencies and only for things that you could payoff. It is ok to charge something as a convenience but only for emergencies or things that you can pay off before interest charges accrue. This will help you to collect interest rather than pay interest.
Lesson #5: Pay Yourself First
We hear people say all the time “I wish that I would have started saving sooner.” While for most people this is something that they think about later it is never too late. Learning to put yourself and your family ahead of others, financial institutions, banks, credit card companies etc., is important. You should always pay yourself first.
The average American only saves 2% of their income. This is horrible. We feel that 15% to 20% is a rate that will help you become successful financially. Initially, just putting money in a box is better than nothing. A savings account is even better but you want to start somewhere where your money is accessible. This will help you weather the financial storms that life will throw at you. You will find over time that savings rate will trump rate of return every time.
Now that we have gone through these “5 Lessons About Money To Pass Down” you have a basis for starting down you path to financial success. These lessons should be implemented in your personal life and then taught to your children as well as grandchildren. This is a financial legacy that will not be impacted by changes in the estate taxes but will be a financial legacy that will stand the test of time.