Change Your Tree - Personal Development Blog

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Welcome to part one of our six part series entitled, “6 Concepts You Must Teach Your Child Before Age 18″.  The articles detail six concepts we feel it’s important for your child to learn before they reach adulthood in order to facilitate their survival in the real world.

The entire six part series, 6 Concepts You Must Teach Your Child Before Age 18, can be found on our 6 Before 18 page.

Part 1: Personal Finance

How important is personal finance in your life?  If you were terrible with money, how would that change your current situation?

Money management is probably one of the biggest subjects they don’t teach you in school.  And I’m miffed at why they don’t.

In elementary school they teach you about different types of money; this is a quarter, this is a dollar, this is a dime, etc.  But what about the rest of it?  What about balancing checkbooks, investing, and credit cards?

If you expect your child to survive on their own, and eventually flourish, then you’ve got a lot of work to do with them in the field of personal finance.  Here are five basic areas to help you get started:

Avoiding Debt

Nobody got rich from acquiring debt.  Personally, I stay away from it all together.  There is no such thing as good debt and bad debt. While some debt can work for you it, it’s all bad debt because it’s all a liability to your survival.

The only thing I agree with using debt for is purchasing a home, period.  I don’t have credit cards, I pay for cars with cash, and I don’t have any payments.  It’s Zen-like and it’s wonderful.

With the majority of Americans drowning in payments, your children will be well-off if you can pass this simple concept down to them.

(I know this is controversial, but you can’t go wrong with it so I have no problem teaching it.  On the other hand, you can go very wrong using debt; possibly even completely breaking yourself financially)

Budgeting & Balancing

It’s hard to run a successful household without a budget.  I know, I said the “b” word.  If you dread budgeting, you’re probably not doing it correctly.

All a budget does is tell your money where to go.  It doesn’t prevent you from having fun unless you don’t budget for fun. 

If you can get in the habit of telling each dollar where to go and what to do, you’ll stop wondering where it went every month and you’ll notice that you have more of it to meet your goals with.  Teach your child how to create a zero-based budget that includes saving, spending, and giving.

After they’ve learned how to budget, make sure they know how to balance their checkbook so they don’t make any mistakes with their bank account.  It’s such a simple concept yet nobody seems to teach it or do it anymore.

Organizing and Paying Bills

My parents never taught me this and it resulted in missed payments and damaged credit in my early days of living on my own.

Bill organization is as simple as creating a spreadsheet or list and logging each bill with the amount and due date as they come in every month.  All that’s left is writing the checks.

You can also show them how you pay bills using online bill pay to up the convenience factor.

An organized household is a well-off household.

Saving and Investing

What’s saving?  It’s a concept that America seems to have forgotten.  Saving means thinking ahead, planning, and being prepared, something most people don’t have the patience for.

If your child is going to live debt free, they’re going to need good saving skills so they can save up the cash for those large purchases and an emergency fund for the rainy days in their life.

After saving becomes a habit, it’s easy to teach them investing.  Go over stocks, mutual funds, compound interest, etc.  Remember, we’re just hitting the basics here; it’s your job to figure out the rest.

Spending and Giving

Lastly, teach them how to spend wisely and give money away.  If they can spend wisely by finding bargains, not being wasteful, buying quality products, etc. they will be able to keep more of their money and put it to work for them.

Giving is also important.  Giving completes the cycle of success, though it’s important that your child understands the difference between helping and enabling because giving can be a bad thing in the wrong circumstances.  I aim to donate 10% of my income to different charities and I try to give other than with my wallet as well.

Conclusion

You’d be very surprised to learn how many children reach adulthood (and beyond) without learning any formal money management skills.

This cycle needs to stop.  It’s damaging our society and our future.  Millions are retiring with reliance on government assistance, millions are on government assistance throughout their working lives, the country is in massive debt and savings is in the red, people are buying houses they can’t afford on stupid rip off loans, and on and on.  Almost all of this can be solved with good money management and behavior skills.

Don’t let your child fall into the same traps; make them a money genius before they move out.

If you’d like more information on this subject, you may want to check out my book, “The Good Parent’s Guide to Teaching Your Children How to Retire Young and Wealthy”.

Check back on Wednesday for Part 2 of the “6 before 18″ series.

• Teach Your Children The Four Basics of Smart Money Management
• 6 Concepts You Must Teach Your Child Before Age 18 (Part 3 of 6): Personal Accountability
• 6 Concepts You Must Teach Your Child Before Age 18 (Part 6 of 6): Healthy Boundaries
• 6 Concepts You Must Teach Your Child Before Age 18 (Part 5 of 6): How to Teach Yourself
• 6 Concepts You Must Teach Your Child Before Age 18 (Part 2 of 6): Real Life Economics

ADVERISE HERE

This entry was posted on Monday, April 7th, 2008 at 7:36 am and is filed under Career & Success, Money, Debt, & Giving, Parenting & Children. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.