Top 10 Things I’d Like To Teach My Children About Money

I have 4 children, the oldest is 32 and the youngest is 16.  I sincerely wish that I was not financially adrift when the oldest ones were growing up, however, I had little or no financial sense.  There were times when I had plenty of money and there were times when I had little or no money.  It really didn’t matter, I spent whatever I had.

When I had a job, I automatically had money put into a 401(k) plan.  It was thoughtless savings and when I left that job or fell on hard times, I ransacked the account, paid the penalties and counted my blessings.  If I had only known then, what I know now.

I watch my children, young and old, making the same mistakes that I made.  If they don’t have money, they spend it anyway.  When they do have money, they spend it like there is no tomorrow.  I cringe when I see the way that they spend money.  Don’t get me wrong, most of them are grown and have the right to buy what they want and live the way they want but I feel like I should have taught them better.

These few things took me 52 years to learn.  I wish that I could teach them to my children, it would make such a difference in their lives.

#1 – Save, Save, Save

Kids, I can’t tell you how long it took me to learn this lesson.  Save a small percentage of your money and protect it from yourself like a mother protects her nest.  When times are good, saving is comparatively easy and while it’s easy to save, it is also easy to rob that savings because it was so easy to accumulate it.  When times are hard and you can still manage to save a little, your savings are harder to come by and will give you security.   You will also value whatever small amount you can save.   It’s hard to remember that times might not always be good and you might need that savings at some point in your life.  So when times are good, save as much as you can; when times are bad, save as much as you can and remember when you dip into that savings for something that you might need it more tomorrow than you do today.

#2 – Debt Has Eternal Life

Most of the things that you buy today will have no value in 5 years.  That new phone or new car or new tv will not be worth a tenth in 5 years.  Quite a few of them will have no value in a year.  Yes, they are cool today but you will get bored with it quickly and want a newer model.  If you go into debt for it, you will probably still be paying for it long after it is gone.   Save credit for a house and a car as they are probably the only things that will outlast the payment. Even after paying your debt off, it lives on in your credit report.  If you have a 5 year loan, it will stay on your credit report for 12 years.

#3 -Learn About Money

No one teaches you about money.  There is no class in school that teaches basic finance much less about saving and investing your money.  You are pretty much on your own when it comes to budgeting, investing, saving and planning.  There are tons of good books out there that you can read about finance.  Take the time to learn about it.   Investing is fascinating and it was a total mystery to me until a few years ago.  I am still not sure I totally understand all the facets of it.  If you don’t know what a zero based budget is, find out.  You may not want to do it but at least learn about the choices you are making.

#4 – Don’t Put All Your Eggs In One Basket

What led to my own financial troubles was relying on the equity in my house to be the biggest part of my financial plan.  The unthinkable happened, real estate values dropped like a stone and I lost all that equity.  In six months, equity of over $100,000 dropped to $0.  I wish now that I had invested some of that in other things so that I might have had a chance to save some of it.  If you invest your savings in one thing such as the stock market, and it falls, you can lose it all.  Diversify.  Keep some in a savings account, some in CDs, some in stocks, etc.

#5 – Budgets Are Not Evil

A budget does not mean that you can’t spend money on what you want.  It is simple a decision making process to determine where you really want to spend money and how much money you will have to spend.  It is a process that allows you to prioritize your spending so that you have money to spend on the things that are important to you.  It gives you the security of knowing what you have, what you owe and what you will be getting.  Budgets aren’t set in stone, you can change them easily.

#6 – Credit Cards ARE EVIL

The single most devastating thing that you can do to your finances is buy things with a credit card.  Almost all credit cards charge ridiculously high interest rates even the best charge more than you would pay at a bank.  If you pay the minimum payment, you will be primarily  be paying the interest charge and you will pay it forever.  If you are late, most credit cards will not only charge you a late fee but raise your interest rate.  It is extremely difficult to pay off the balance especially when your budget is tight.

#7 – Emergency Fund

A credit card is not an emergency fund.  You need to have some amount of money in a savings account in case of an emergency.  Hopefully, you will have enough in it to support you for a couple months if you have no other income.  At the very worst, you should have enough in it to get you and your stuff home.  It is not easy to have the discipline to save an emergency fund but the more you save, the easier it gets.

#8 – Financial Freedom or Financial Peace

I don’t know if I will ever have financial freedom but I will have financial peace.  There will come a time in my life when I know that I have enough money to live on in the worst case.  Every dollar that I put in savings gives me more security and less worry.  To me, financial freedom would be the freedom to be able to follow my dreams and to have the money to do so.  I doubt at this point in my life, I will reach that but there is no reason why you can’t.

#9 – The Best Thing You Can Do For Your Marriage

Developing a financial plan and having an emergency fund is the best thing you can do for your marriage.  Agreeing on a financial plan, determining your financial goals and relieving the financial stress will do more for your marriage than any counselor in the world.   I have listened to all of you and your biggest marital problems are financial.  You and your spouse need to sit down and reach agreement on what is important to each of you and find a meeting point.  Once you have developed your financial goals, develop a plan to reach them and then stick to it.  This will help your marriage more than any other thing that you can do.

#10 – Teach Your Children

Do what I say, not what I did.  Once you have taken the time to figure out what to do with the money you have and  don’t have, teach it to your children.  Teach them about saving, help them to develop a habit of savings, let them see how their money can grow.   Teach them about budgeting.  Let them plan how they are going spend their money and let them suffer the consequences of not following their plan.  It is a hard lesson but it’s easier when you are there to help them.  Once they have learned about budgeting and planning, teach them about credit.   Teach them everything you know and it still won’t be enough.

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