Here is some time-tested, age-old financial wisdom that can help your kids if they learn it from a young age, and it’s the latest addition to our Common Cents section.
If you can’t afford it, and you don’t need it, don’t buy it.
It means basically don’t take out loans for things that you don’t need, or if you don’t know how you’re going to pay them back. You’re better off saving up until you can actually afford it, rather than trying to keep up with the Jonses and risking your financial future in the process.
Pay off your credit cards first.
It’s generally good advice to pay off your credit card loans first, since they’ll usually have the highest rate of interest. Payday loans have a higher rate of interest, so it should go without saying that those need to be paid off before anything else. The yearly interest is sometimes between 1500% and 2000%, although they can be useful when you’re in a real pickle and you know you can play them back as they’re meant to be paid back – on your next paycheck!
The ten percent rule.
In his book the Wealthy Barber, David Chilton puts a strong emphasis on putting away 10% from each and every check you ever cash, starting with your very first job. Basically if you do this, and invest wisely, you’ll never have to worry about retirement or not having a safety net should you ever run into trouble.
There’s much more to teach the youth about basic finance and being responsible with money, and it’s a shame they don’t learn more of it in school. It’s up to parents to instill financial responsibility in our children, even if we weren’t given the same virtues in our younger days. Set a positive example for your kids, teach them to find happiness and not to stress about money – but also to be responsible enough that money never holds them back from the things they want to do.