What’s the One Lesson I Need to Teach My Kids About Money?
I was recently asked this question by friend and a mom. She wanted to know, what one concept should she teach her kids about money. She, like so many parents, feels she is not good with money. So, even passing down anything related to money is difficult for her. However, she knows it’s important to teach her kids about money.
The most fundamental and basic advice that everyone, including teens and all adults during their working years needs to understand:Always Spend Less Than You Earn Click To Tweet
This article will explain further about this principle and how you can introduce it to your pre-teen and teenage children.
What does “Always Spend Less that You Earn” Mean?
First, let’s understand what statement means. Always means that no matter your circumstances (excluding when you are retired and living off your savings), you must pay attention to how much you are spending.
When I refer to spend, this includes money that is directed towards savings. Savings can include saving for a down-payment for a car or home; college fund; retirement. Or more short-term, like saving for a vacation.
If you follow this rule, you will keep a positive cash flow and likely will increase your net worth. It will stop you from overspending and having out of control bills. This is the essence of managing your finances. And it applies to all income levels.
What Makes This a Key Money Principle?
It’s actually a few money principles rolled up into one. It teaches self-monitoring and being more deliberate about how money is spent and saved.
A by-product is learning how to budget. The only way to know if you are spending within your means is to keep track of spending. This leads to learning where money is spent and making more informed money decisions. It also includes how to save for something in the future, such as a car or college.
What can Parents do to Teach Kids This Principle?
Parents should start early teaching kids about choosing how to spend and their money. It should start before they are teens. Young kids can receive an allowance, so they are can learn about spending and saving. If you haven’t started to teach your kids about money before they teens, it is never too late. Start now.
Explain the principle to your kids and help them decide how they will spend and save. If you teen is earning his or her own earning money help them decide what should be spent on fun and what should be put aside for short-term and long-term. Keep in mind, this is the time that a teen be safe. It’s better if they make money mistakes now instead of when they are on their own.
How can Teens Put This Principle into Practice?
Teens can participate with the parent as a guide. Parents should help teens consider what they want spend their money on. If it requires saving, then the teen (along with their parents) can plan how long and how much they need to set aside. Again, while a teen is at home is the best time to be able to help them learn good habits.
“Always spend less than you earn” is a critical money principle. It applies to teens and adults alike, because it applies to all income levels. It is one of the most important principles to teach your kids about money. Parents need to be good role models. Often being a good role model without preaching is the best teacher.