Important Money Lessons to Pass Onto Children
Kids don’t get taught enough about money in school.
Handling finances are one of the most important aspects of life.
Even so, it’s not on the curriculum.
I will repeat what I’ve said before:
According to the American Psychological Association, the number one cause of stress in the State is money.
Therefore, in the modern day where well-being is super important, wouldn’t it make sense to help kids prepare for dealing with finances?
Without a doubt, it’s never too soon to start teaching our kids about money.
Concepts such as spending (important) and saving (equally important).
Consequently here are 7 good money lessons we can pass on to our kids.
Nevertheless, this list could be so much longer!
Money Lesson #1 Teach them how to budget
The dreaded ‘B’ word.
Nonetheless, like it or not, budgeting forms the foundation of financial planning.
Budgeting is not about restricting what you spend, not in the first instance anyway.
Firstly, it’s simply about being conscious of where you’re spending.
Then, secondly, if you need to restrict certain expenditures, do.
No matter a kid’s age, balancing saving versus spending is important.
Break it down, needs, wants, saves.
Teach them the difference between these three categories.
Money Lesson #2 You need money to buy things
Money doesn’t grow on trees.
Popular saying – in my house anyway!
It can be difficult for kids to see the link between money and purchases.
Particularly in the world of tapping phones and cards.
Make that link for them.
Importantly, make sure they don’t think you are buying things with the tap of plastic!
Money Lesson #3 Explain how interest on borrowing and debt works
At some point in our life, we all get lumbered with crappy debt.
Short term loans, credit cards.
However, these are not free and come at a cost.
That cost is interest. High interest.
There is clearly no such thing as ‘free money’.
Help children understand the implications of debt and the cost of debt.
Undoubtedly, this can help them when it comes to student loans and their first credit card.
Loans and credit cards have the potential to cause serious problems in someone’s life.
It can also help avoid parents having to bail them out of expensive debt!
Money Lesson #4 Encourage Saving
Fact, saving is a great habit.
A real good demonstration of financial discipline.
Is your kid looking for an expensive or luxury item?
Encourage them to do odd jobs for money and save for it themselves.
As a side effect this helps them understand in life at some point we have to work to earn.
Create opportunities for them to earn money.
Revolut is a fantastic app for this where you can open a Revolut junior account within your own.
Simply transfer their earnings into their own account.
Money Lesson #5 Older kids – teach the benefits of compound interest
The old 8th wonder of the world.
Interest upon interest.
The earlier a child saves, the more beneficial the compound interest is.
Show them the benefits of money making money.
Money Lesson #6 Older kids – introduce investing
Following on from compound interest, introduce older kids to investing.
Here is where they’ll really benefit from compounding.
I only wish I knew when I was 18 what I know now.
This is a great way to encourage them to plan to get on the property ladder.
There is no point in saving in the bank for a future mortgage – no return.
Get it invested, compound it, interest upon interest, money making money.
Introduce them to the power of the stock market.
Giving them the foundation of knowledge needed to understand the importance of investing.
The sooner they start investing, the more their money will grow.
They’ll thank you for it in the long run.
Money Lesson #7 The Importance of an emergency fund
Life is never plain sailing.
We should all have an emergency fund.
Somewhere between 3-6 months of our net after-tax income.
Children should be given the knowledge of the importance of retaining an emergency fund.
So in the event something goes wrong, it’s there.
Summary
So, 7 quick money lessons to help our kids.
Some can be applied to younger, some are reserved for older.
To reiterate, managing finances is one of the most important things in life we have to do.
Therefore it’s important we set them off on the correct foot and help them avoid expensive mistakes.
Book Recommendation
We can’t recommend this book enough:
‘Grandpa’s Fortune Fables: Fun stories to teach kids about money’.
A link is below to purchase the book on Amazon.
Disclaimer: We do not receive any proceeds from sales – it’s just a really good resource.
How We Help
Secret money lesson #8 – introduce them to a financial planner like ourselves.
Explain to them how a financial planner can look at someone’s finances objectively and take the emotion out of decisions.
We are advocates for financial education for your people and would be happy to explain key elements of finance, investing and wealth creation to your children.
Get in touch
Email us at info@fortitudefp.ie or request a callback.
Alternatively, you can get us on 086 0080 756 or access our diary here and book a call at your convenience.
Why not visit our insights.
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Our blog posts are intended for information purposes only and should not be interpreted as financial advice.
You should always engage the services of a fully qualified financial planner before entering any financial contract.
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