Most parents know that they should talk to their child about drugs and alcohol, and many adults are willing to sit down and have a conversation about the birds and the bees. However, when it comes to money, many parents are lacking. About twenty percent of parents have never really spoken with their kids about the importance of managing finances.
Knowing how to handle money is one of the most valuable life lessons that a person can learn, but it’s often a lesson that people don’t learn until much later in life. Few schools teach kids how to make good financial decisions, and in most cases it’s up to the parent to help their kids manage money correctly. Below are five personal finance lessons that every parent should teach their child.
You Can’t Have Everything You Want Right Away
The sooner a child learns to act with patience and save money for the things that they want to buy later, the better off they’ll be in the future. In a culture where people increasingly want things immediately, it’s becoming harder to teach kids the virtue of patience. However, learning how to delay gratification and wait for what you want is an important lesson that all children should learn.
A Good Budget is a Good Start
Most financial gurus agree that anyone who is serious about personal finance has to start with a budget. Former President George Washington once said that you have to consult your means rather than your wishes. Learning how to create a budget helps a child figure out the difference between the things that they need and the things they want. Children should learn that budgeting has only one rule: do not go over budget.
Never Let Another Person Outwork You
Hard work leads to profit. Hard work is one way that kids can secure a healthy financial future for themselves. Parents who want to encourage good personal finance skills in their kids must also encourage a strong work ethic. Parents must teach their kids that it’s what they do that matters, not what they think, say, or plan.
Investing is not Optional
Parents should encourage their child to choose a stock, CD or money market account if they have a few dollars saved. Additionally, parents shouldn’t be afraid to allow their child to take risks when it comes to investing. The author of the popular book Rich Dad Poor Dad once said that winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success. Investing is a smart way to build wealth, and it also teaches kids how to mitigate risk.
Money Doesn’t Buy Happiness
While kids should understand how to manage their finances efficiently by the time they reach high school, they should also know that money is not the only thing that matters in life. Research has proven that cash brings a temporary happiness boost while lasting, fulfilling happiness comes from good relationships and unforgettable experiences. Money is simply the icing on the cake.
Photo: Carissa Rogers / CC 2.0