Saving cash is a great way to improve your financial health, prepare for the future, and give yourself more confidence in your money. However, it’s not always the easiest process. The world is full of temptations that can distract us from our financial goals. Not to mention, we all have bills and expenses to consider each month. Teaching your kids how to deal with cash from an early age can ensure they’re more prepared when they move into adult life. After all, they’re unlikely to learn everything they need to know about achieving financial independence in school. While you might not be able to prepare your child for everything they’ll encounter in the adult world, there are some crucial lessons you can share to make them more financially healthy.
How to Manage Loans
Many parents make the mistake of trying to teach their children to avoid loans and lending entirely. While it’s true we should all try to minimize our debt whenever we can, the reality is most of us will have to borrow money at some point. Teaching your children how to get the most of their loans will ensure they can take advantage of lending opportunities correctly. If you go through your monthly bills and discover your education debt is costing too much, sit down with your youngster and show them how you can refinance those loans to cut costs. Introducing concepts like refinancing and shopping around for the best deal now could mean your children are less likely to be overwhelmed by interest in the future.
The Value of Emergency Funds
One of the most valuable things anyone can have in their life to keep financial stresses to a minimum is knowing how to save for a rainy day via an emergency fund. No matter how carefully we budget and prepare for regular bills, there’s always a chance an unexpected expense will come along and throw us off track. Teaching your children, the value of an emergency fund will show them how important it is to have a little cash saved back from their earnings just in case. If your child gets a part-time job to pay for a new car, teach them to save some of the money they earn back in case something goes wrong with the vehicle and it needs to be fixed. You can also show them how you’ve used your own emergency fund to avoid issues in the past.
How to Create a Budget
Finally, this is one of the most important financial lessons you can teach your child, and it’s something you can start covering at quite an early age. Budgets help people of all ages to ensure they have enough money for all the things they need in life. You can start introducing the value of budgeting with a weekly or monthly allowance. Give your children a small amount of money in exchange for the chores they do each week, and encourage them to assign the money they get to different purposes, like saving up for a new game, or going out with friends. Showing your children how to prioritize their expenses like this will give them a clear view of how important it is to plan with their money, rather than spending it all at once.