Tuesday, 19 November 2019

Money, Credit, & Greed: 8 Tips Parents Must Teach Their Children; Matthew Toone

As important as it is for children and teenagers to understand these 8 essential principles below – it is far more important that their parents actually know, understand, live and exemplify them before trying to teach them to their kids.
1)What Do Kids Want … That Money Can’t Buy: Our me-oriented culture has engrained into our minds that to show love or appreciation for another person, we must buy them something. As a result, our children’s closets are full, toys are everywhere, and candy is always accessible. And yet, so many children are still not satisfied and happy. Why?

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Because ‘wants’ are bought to temporarily replace the essential ‘needs’ each child truly desires. What are those needs? They are: you, family, attention, affection, friends, discipline, acceptance, and someone to listen to and love them.
2)Credit Cards … A Necessary Evil: There are some parents who carelessly hand over their plastic to irresponsible, selfish, and undisciplined children who are allowed to buy whatever, and however much they want – and daddy will pay the bill. On the other hand, there are also ignorant parents who teach that credit cards are evil and refuse to let their children have one. To me, these are both excellent examples of horrific ways to teach basic Finance 101! Credit cards are essential in our day and age to build credit; and if used properly, they can become an asset in every regard. (How? See point #3 below)
3)How to Build Credit … And Protect It: First and foremost, parents should get a credit card for each child (the earlier the better). That does not mean you give the child the credit card, but Dad and/or Mom will occasionally (once a month) make small purchase on the card, and pay it off in full each month. There is the first secret – pay off the credit card balance in full every month. Never miss a payment, or be late. The longer the line of credit is open, the better. Never use more than 25% of the credit limit. And, you should proactively seek to increase the credit limit … often. Then, when a parent feels the child is financially responsible enough to have the card, the child then must make occasional purchases, pay it off in full each month, etc.
However, building credit is half the battle. In our day and age, identity theft protection should be regarded just as highly as life or health insurance. Parents and children should always protect their SSN, never lose their credit cards, protect financial information online, and never answer emails or phone calls asking to ‘update information,’ etc. More importantly, regard your credit as you an asset. Why? Well, do you want lower rates, better jobs, larger loans, better pay, etc.? Than you better protect your credit
4)Consumer Debt vs. Good Debt: Is there actually such a thing as good debt? Of course! While the list is very small, it includes debt for: education, starting a business, and buying a house. Money borrowed to accumulate knowledge or an asset that will make you money, is good debt (although, I would argue that owning a home is a liability in every sense of the word). Thus, anything outside of that parameter would thus be classified as consumer debt … which should be avoided at all costs. If you don’t have cash to pay for it – don’t buy it! If you use your credit card to purchase something, do it knowing that at the end of the month you will be able to pay the balance in full (never justify a purchase because you can afford the minimum payment, or because there is no interest for 12 months, or any other foolish reasoning).
5)Save 10% … Always: Get into the habit right now that whenever you get paid any amount of money, that 10% automatically (without question) goes straight to savings or investments for the future (college fund, money for a rainy day, retirement, etc.)
6)Occasionally Going Without Is Not A Bad Thing: It is true that too much of a ‘good thing’ can actually become a ‘bad thing.’ Regardless of whether parents have the money or not to buy their children what they want, they would be wise to occasionally teach their kids the important lesson of ‘going without.’ Now, of course I am not talking about depriving your children, or withholding the basic necessities of life; but, how many times has a child wanted (not needed) this or that, and daddy bought it for them? All too often, right! This is not to suggest that buying nice things for our children is bad; rather, parents need to stop being guilty of giving too much and expecting too little. Most importantly, we need to teach children how to: sacrifice, work, appreciate, give, share, be patient, and be content and happy with what they have.
7)Interest & Investing – The Good and the Bad: Parents must teach children what good interest is, and what bad interest is (and how to obtain it, and avoid it). In fact, teaching the valuable principle of compounding interest might be best realized by opening an investment account so the child can learn first-hand how to make their money work for them. Just as important, parents must teach and help children invest early in life. Parents would be doing themselves and especially their children a great service by establishing early the habit of contributing often to: savings accounts, college funds, and IRA’s.
8)Secret To Wealth: Give and You Will Receive: There is a principle that is applicable and true for every aspect of our lives, especially in relation to finances. It simply is: Give and you will receive! I can’t fully explain how or why it works, nor is the medium or the place to do so, but it does work! The more we think of others and help others, the more others will help us.

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