No one is born knowing about money, and some people don’t figure it out at any point during adulthood. Readers of Len’s blog have taken it upon themselves to do that learning, and have likely reached a strong level of financial knowledge and skill. One of the most important steps, at this stage, is to pass on this knowledge.
Not all of us have children, but those of us who do care very much about their financial futures. And while some parents set aside funds for their kids to access on some far-off day, others will understand that it makes more sense to teach their kids about the basic financial building blocks that they can leverage later on to create a financially-secure future. Here are just three of them:
- Credit Scores. Many adults don’t even know the answer to “What is a good credit score?” much less what a credit score does. Credit scores tell lenders, like banks, how much to charge you to borrow their money. A good credit score can save you tens or hundreds of thousands over the course of your life, so it’s really important that kids know what they are, as well as how to keep them in good standing. There are simple steps to improve a credit score, most of which are pretty common sense once you think about them. It’s important to get kids thinking like this early, as healthy financial habits will pay off big in the long run.
- Saving. This is hard for almost everybody. Nobody likes to save money when they could spend it instead. Some kids take to this idea relatively naturally, but no one does it perfectly all at once. If you are the kind of parent that gives allowances, show your kids how, if they’re willing to save, they’ll be able to afford awesome stuff — especially the stuff you won’t buy them, no matter how much they beg. If you have a serious-minded kid, help them save for things that will actually change their lives, like investing and college savings.
- Investing. Half of all American adults don’t invest, so you can hardly expect a kid to — or can you? Even if you don’t want to start sinking your kids’ money in the stock market, it’s important that they start to understand the concept of buy low, sell high. In a way, everything is an investment. A purchase is a bet that the thing you are buying will be worth more to you than the money you’re spending on it. Real investors hope to buy things that will gain money with time, and even kids can understand this. Even if it’s baseball cards or whatever else kids are into collecting these days, help them understand that choosing purchases wisely can increase their wealth in the long run.
There are many other financial building blocks you’ll want to give your kids, but these are three of the most important. Kids who learn money skills early on will be in a much better financial position than many adults out there. Best of all — they’re skills that will last a lifetime!
Photo Credit: OC Always