What I Wish My Parents Had Taught Me About Money
And How You Can Teach Your Kids These
I recently asked myself this question - "What do I wish I had known about money when I graduated college".
I have learned so much over the years about finances, that it was a difficult for me to try and narrow down which ones would have been the most helpful to me today.
I was however able to narrow it down to two things I wish my parents would have taught me before I headed out into the world! These two things have had the most dramatic impact on my finances.
I am going to share here these two things, plus how you can help your kids learn these skills before they graduate college.
How to Budget
This is one of those skills that the faster you master it the faster you can grow your financial security and wealth.
Budgeting allows you to know where your money is going, but most importantly it allows you to ensure your money gets to your priorities and not whatever splurge is right in front of you.
Teaching your kids how to budget is easier than you think. Mainly because they have very few expenses so it is easier for them to manage what they do have. Learning to budget when you only have to manage a handful of items makes it easier to get the basics down.
Budgeting at its most basics is taking your income and allocating it to your expenses. Adding all your expenses up and subtracting that from your income. This will show if you are over spending or under spending. Since your child has fewer expenses this simple approach is the best way to start.
A House is a Lifestyle Not an Investment
Somewhere along the lines we were told that owning a house is a great investment.
After owning four homes, I strongly disagree! (Unless you live in one of those markets that has greater than about 3% increase in housing values).
In fact if you look at all the costs of maintaining a home, most of us are lucky to get out without losing money. Just to name a few expenses to get you thinking about the costs: mortgage interest, general up keep such as yard maintenance and your larger expenses such as taxes, insurance, roof replacement and water heaters!
Plus are you really going to sell and downsize when you retire? That is the only way that you can get access to your "investment" without paying huge fees.
What is a house? A lifestyle choice. An expense you choose because you want to be happy in your day to day life.
The best way to talk to your kids about this is to include it in a discussion of expenses when you are budgeting. Discuss all the expenses that come with a house, but also cover the benefits.
In addition bring up housing when talking about investing. Remember the goal of investing is to eventually provide you with income to retire or follow your heart. Discuss with your child the better places to save for retirement than in an asset that you would need to turn around and sell to get any access to the funds.
Remember while we can't teach our kids everything, every little bit we do teach them helps them out that much more in life!