When you think about all of the lessons that your parents taught you over the years, what comes to mind? I would imagine such things as dating, friendships, school, and tying your shoes. Believe it or not, these life lessons from your parents helped mold you into the person you are today. You subconsciously think back to these lessons when you are in certain situations and make decisions based on them.
Unfortunately, lessons about finances are rarely handed out from parents to children. I know that was the case for me. I wish that someone would have given me half of the financial tools and knowledge as a child that I have now. Even the basics of how to make and deal with money.
Left In The Dark
Instead, I never really knew what was happening in my household financially. Even as a teenager and in my early twenties, my parents never disclosed much about their financial practices or situation. I saw that they made money and that they bought nice things. They normally used credit cards when they bought things. Sounded reasonable to me. As such, I never really learned the dangers of credit or how to use it safely.
I subscribed to the mindset that if I couldn’t afford, finance it. Worry about it later. I will always have money coming in and the credit card companies won’t let me spend more than I can handle. I may as well have been riding into the stores on my unicorn and buying these things.
When the time came that I couldn’t handle the massive amount of debt anymore and I had to go to my parents for some help, they asked me how I got into this situation. I had to tell them that I honestly had no clue. I had money coming in, I bought stuff I wanted, I could use my credit cards, but the balances never seemed to go down.
It is only then that they sat me down and actually gave me a huge life lesson on finances and how to handle money. How humiliating it was to be in my mid twenties, sitting at my parents’ dining room table and learning the basics of money, savings accounts, and budgeting like a child. That was a lesson I wish I would have learned about 10 years earlier. A lesson that, if I had learned earlier, would have saved me so much time and money.
In the years since learning that hard lesson, I have come across some financial information that may be very useful to the young people of today. There are so many that I could list, but I tried to narrow them down to the 5 most important lessons I could think of.
1. Live Below Your Means
This is HUGE! It is impossible to survive financially if you are constantly spending more or the same as you make. It is estimated that, in 2017, 57% of Americans have less than $1,000 in their savings account, while 39% of Americans have no savings at all.
The key to living below your means is understanding the difference between wants and needs. If you have been living your life shopping, eating out, and spending unnecessary money, you will find that those things only provide temporary happiness. Try to categorize things as a want or a need.
2. Start Early
It is never too early to start saving. Open a savings account as early as possible and put money in it regularly. It doesn’t matter how much, just keep putting something in it whenever you can. It will eventually become a habit.
3. Can It Wait?
Instant gratification is a staple in today’s society. Nobody wants to wait for anything. Instant gratification fuels the “buy now, pay later” mentality which undermines the foundation of good money management.
If a purchase is big enough to want to use a credit card, it should be a red flag and warning sign to take a deep breath and figure out if this is a need or a want. Ask yourself why you want to purchase this item now. Can you do without it right now? Are you buying it just so people will think you are cool? How long is will this purchase make you feel happy?
4. Track Your Spending
The days of paper and pencil tracking are over. There are so many apps and web tools out there that allow you to track every penny of your spending. Save your receipts and enter the transactions immediately.
By tracking your spending over time, you will begin to see trends and habits that can help you determine spending triggers. Tracking spending will also help you more aware that you are spending at that particular moment and may deter you from actually making the purchase.
We were always taught to share as kids. Share your toys, share your food, share everything. The same should go with your money. As you grow up, you should always give some of your money to charity. Not just any random charity, but a charity that you trust and believe in.
It seems counterproductive to saving, but it is beneficial in so many ways beyond finances. It makes you feel great, you can use it on your tax return as a deduction, and you never know when you will need some charity yourself.
I wish that my parents were more open with me about money and finances when I was younger. It probably would have saved me a lot of headaches later in my life. I know that they were probably thinking that the less I worried about their finances as a child, the less stress they were putting on me, but it is actually an important aspect of growing up to learn these lessons.
These lessons apply from childhood until the day you die. You become more mature throughout the process, hopefully, but the lessons themselves remain the same.
In order to ensure that the next generation of adults become financially responsible, we need to be able to communicate openly with them about money and finances. We need to be transparent about how money works and with our successes and failures.