Teaching your children about personal finance is extremely important in shaping their future. Your teenage children and adult children should also get attention and it’s critical in today’s economy to create the environment where children can ask questions about money and learn about how to manage their money. Take a look at these essential lessons about personal finance that you can teach your children starting today.
5 financial lessons to teach your children
Lesson #1 – Know the importance of paying bills on time
Whether it is your teenage children or your adult chidren, you should instill in them not only a hard work ethic but the ability to pay bills on time. The rise of technology and automated payment systems such as Direct Debits means it has never become easier paying off your bills whether it is utility bills or TV licence fees. Your adult children who live alone or have moved out should not be contacting you asking for money on paying their bills. They should be able to do this alone without you by now. You can start early by teaching them in teenage years how important it is to pay bills on time. Paying bills on time helps you to stay focused on sticking to your budget and this is something all young people need to know how to do.
Lesson #2 – Use short term credit wisely
Short term credit, also known as consumer finance, is one of the fastest growing types of financial products that are on the market today. You should teach your adult children that this type of credit should only be used if they are in need and if they have a job that can see them through the repayments without causing financial distress or hardship. You should also teach your children the different types of short term credit products from payday loans, consumer loans, car loans, logbook loans and instant cash loans.
Lesson #3 – Instil the power of saving
You should be teaching all of your children how important saving is and how important it will be in their lives as they grow up. Teach your children that saving is like paying yourself first before you spend money on other things that you might not need. Encourage your children to save by showing them the benefits of saving throughout their teenage years. The younger your children save money, the easier it will be as they get older. Your adult children should also make a concerted effort to save whether that is for general savings, emergency funds or for a house, or a holiday.
Do not save what is left after spending, but spend what is left after saving. – Warren Buffett
Lesson #4 – Understand daily spending trends
Your adult children will benefit the most from this lesson. They should be looking at what they spend every day to maintain their lifestyle. Whether they love going out to drink sugary coffees or if they are aficionados for luxury meals, daily spending will show your adult child where they need to make improvements when it comes to spending money. Tell them to write down their expenses for five consecutive days and when they do this, they will be able to see where they are overspending and where they could cut back in order to save money. The beauty of tracking daily spending is your adult children will be able to see exactly where all of their money is going. It is not guess work and it is not about making assumptions about your child’s spending. Daily spending tracking is hard to maintain but it is one of the best financial lessons you can teach your child because it teaches him or her complete responsibility for how they spend money. It’s not how much you have, it is what you spend it on and how you save it that truly matters.
Lesson #5 – Learn the value of property
Property is one of the best ways to build wealth in the UK due to the fact there will always be tenants for rental properties, and there will always be buyers for homes up for sale. You should teach your teenage children and adult children how important it is to own a property in their future. Saving, budgeting on how they spend money and finding an affordable property are some of the steps that need to be taken in order to get on the property ladder. How can you convince your adult children to buy a property on a budget? Show them the benefits of getting on the property ladder as long as they choose a home that they can afford. Benefits include not wasting money paying rent and having a financial asset for their future.
These are five simple yet important lessons that are often overlooked especially by young adults. Teach them these lessons and reinforce them constantly so that your children can be empowered when it comes to their personal finances, instead of being worried.
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