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Abstract

er to learn from other’s mistakes than to let life teach you lessons in its own way.</p><p id="9d2c">Here are seven simple yet powerful financial lessons you should teach kids in their teenage:</p><h1 id="9270">1. Budgeting</h1><p id="3832" type="7">A budget is telling your money where to go instead of wondering where it went. – Dave Ramsey</p><p id="d21d">Budgeting is a great way to keep track of your money. It will help them create a spending plan for themselves. Following a budget would ensure that they never fall short of money for the important stuff.</p><p id="4dd2">Teaching your kids about budgeting would keep them out of debt.</p><p id="65bd">Teach them the 50:30:20 rule – spend 50% on needs, 30% on wants, and 20% on savings.</p><h1 id="3e9c">2. Investing is better than saving</h1><p id="684f">There’s no harm in saving money. But it’s always better to put your money to work. Ask your kids to have a stipulated amount as savings for emergency needs. But do tell them to invest once they cross that threshold of savings.</p><p id="fdfc">Investing gives your money the potential to grow. Tell them the power of investing. Tell them the power of compounding. Show them the maths even if they hate it!</p><p id="8017">But tell them not to fall prey to high returns. High returns involve high risk.</p><p id="2961">Ask them to diversify their investment plan. Tell them to invest in different schemes and not to put all the eggs in one basket.</p><p id="6de7" type="7">Never test the depth of the river with both feet. – Warren Buffett</p><h1 id="a7ee">3. How to read financial statements</h1><p id="7b9d">You don’t necessarily need to have a way with numbers to understand financial statements. They are easy to understand but provide great knowledge.</p><p id="8184">Teach your kids how to read financial statements. This would help them keep track of interests, their dues. Keep them alert of fraudulent transactions or mere human errors.</p><p id="82d2">Ask them to do it every month if not weekly.</p><h1 id="acf0">4. Live cheaply, cutting down expenses is another way to help them save more</h1><h2 id="a8b9">Savings = Income – Expenses</h2><p id="52ef">Whenever we try to save more, we think of earning more as the best way. But this is merely the scenario. Whenever we earn more, it instigates the desire to spend more on wants.</p><p id="36f7">If we try to decrease our monthly expenditure without e

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arning more, our savings will increase. Cutting down expenses will always work in your favor.</p><p id="3a60">Teach your kids the equation and ask them to learn it by heart.</p><h1 id="8825">5. Ask them to say no to credit cards</h1><p id="94fd">Credit card debts are in no way normal debts. Credit card debts can take up an ugly shape upon missing out on deadlines.</p><p id="105c">Mounting credit card debt will hamper their financial stability.</p><p id="9e6c">Ask them to stay away from credit cards. If your child insists on having one, ask them to limit their credit card purchases to the amount they can repay monthly. So that it doesn’t come as a burden.</p><p id="f66f">Credit cards are mostly used in cases where you want to pay for your desires. Encourage them to live within their means.</p><h1 id="cb1d">6. Help your child understand wants vs needs</h1><p id="cb4e">It is undoubtedly the most difficult part. It is hard for even grown-ups to differentiate between wants and needs. Teaching kids about wants and needs is difficult. Your child is still young and isn’t too mature to understand this.</p><p id="35f2">Also, it is a little difficult to make them understand because whenever you label his requirement as a want, You are acting strictly according to them. And this can hamper the situation.</p><p id="dc70">You have to help your child understand what’s important to them and what is an infatuation. You have to introduce the concept of wants v/s needs subtly.</p><p id="ac8d">You don’t want to be strict but at the same time help them avoid the same mistakes you made at their age.</p><h1 id="77de">7. Financial goal setting and planning</h1><p id="c613">Once teenagers are on their own financially, they have different goals, owning a car, a house, going on a vacation, or financial independence in their twenties. They all work hard towards achieving them. These are all materialistic goals.</p><p id="fc16">You need to help your child understand the importance of financial goals. Why having financial goals are important? How financial goal setting motivates you and drives you towards a successful life?</p><p id="d7b0">Take your financial goals at different ages as examples and show them how you worked towards achieving them. Discuss with them the way you accomplished those goals. This would ensure they learn how financial planning can help them accomplish their goals.</p></article></body>

7 Simple yet Powerful Financial Lessons to Prepare Teens Before They Leave Home

The best conversation you would ever have with your kid.

Photo by Melissa Walker Horn on Unsplash

Financial education is the best gift you could give to your child. It does not matter what age group they fall into. They are never too young to understand money.

Behavioral researchers from the University of Cambridge revealed that kids develop planning and monetary habits by the age of seven. And the researchers encourage parents to start teaching their children about money at the age of three.

Kids as young as a three-year-old can understand concepts such as saving and spending. Children start understanding money probably the same time they start learning about numbers.

A few days ago, while going through my Instagram feed, I saw a post saying, “The best way to teach your kids about taxes is to eat a part of their ice cream.” And I was amazed by the idea.

It was undoubtedly a great way to make kids understand taxes. Let’s keep aside taxes for now. I just wanted to share the post because it struck me hard.

Financial knowledge at an early age gives children a different perspective, a different approach towards life, and would make them stand out amongst their peers.

I have always admired the book Rich Dad Poor Dad. It has left an everlasting impact on me. It is the first money management book that I read. After that, I have read several books on the topic.

The book highlights the importance of financial literacy at an early age. The book also advocates the fact that money should be taught as a subject in schools.

Wouldn’t it have been great if you had all the knowledge and understanding about money you have today, back when you were a teenager?

It is better to learn from other’s mistakes than to let life teach you lessons in its own way.

Here are seven simple yet powerful financial lessons you should teach kids in their teenage:

1. Budgeting

A budget is telling your money where to go instead of wondering where it went. – Dave Ramsey

Budgeting is a great way to keep track of your money. It will help them create a spending plan for themselves. Following a budget would ensure that they never fall short of money for the important stuff.

Teaching your kids about budgeting would keep them out of debt.

Teach them the 50:30:20 rule – spend 50% on needs, 30% on wants, and 20% on savings.

2. Investing is better than saving

There’s no harm in saving money. But it’s always better to put your money to work. Ask your kids to have a stipulated amount as savings for emergency needs. But do tell them to invest once they cross that threshold of savings.

Investing gives your money the potential to grow. Tell them the power of investing. Tell them the power of compounding. Show them the maths even if they hate it!

But tell them not to fall prey to high returns. High returns involve high risk.

Ask them to diversify their investment plan. Tell them to invest in different schemes and not to put all the eggs in one basket.

Never test the depth of the river with both feet. – Warren Buffett

3. How to read financial statements

You don’t necessarily need to have a way with numbers to understand financial statements. They are easy to understand but provide great knowledge.

Teach your kids how to read financial statements. This would help them keep track of interests, their dues. Keep them alert of fraudulent transactions or mere human errors.

Ask them to do it every month if not weekly.

4. Live cheaply, cutting down expenses is another way to help them save more

Savings = Income – Expenses

Whenever we try to save more, we think of earning more as the best way. But this is merely the scenario. Whenever we earn more, it instigates the desire to spend more on wants.

If we try to decrease our monthly expenditure without earning more, our savings will increase. Cutting down expenses will always work in your favor.

Teach your kids the equation and ask them to learn it by heart.

5. Ask them to say no to credit cards

Credit card debts are in no way normal debts. Credit card debts can take up an ugly shape upon missing out on deadlines.

Mounting credit card debt will hamper their financial stability.

Ask them to stay away from credit cards. If your child insists on having one, ask them to limit their credit card purchases to the amount they can repay monthly. So that it doesn’t come as a burden.

Credit cards are mostly used in cases where you want to pay for your desires. Encourage them to live within their means.

6. Help your child understand wants vs needs

It is undoubtedly the most difficult part. It is hard for even grown-ups to differentiate between wants and needs. Teaching kids about wants and needs is difficult. Your child is still young and isn’t too mature to understand this.

Also, it is a little difficult to make them understand because whenever you label his requirement as a want, You are acting strictly according to them. And this can hamper the situation.

You have to help your child understand what’s important to them and what is an infatuation. You have to introduce the concept of wants v/s needs subtly.

You don’t want to be strict but at the same time help them avoid the same mistakes you made at their age.

7. Financial goal setting and planning

Once teenagers are on their own financially, they have different goals, owning a car, a house, going on a vacation, or financial independence in their twenties. They all work hard towards achieving them. These are all materialistic goals.

You need to help your child understand the importance of financial goals. Why having financial goals are important? How financial goal setting motivates you and drives you towards a successful life?

Take your financial goals at different ages as examples and show them how you worked towards achieving them. Discuss with them the way you accomplished those goals. This would ensure they learn how financial planning can help them accomplish their goals.