In recent times, I have closely examined the financial habits I currently practice, pondering when and how I acquired them. While some of these habits were ingrained in me during my childhood by my parents, the majority were cultivated later in life through my experiences running businesses and my voracious reading of books, podcasts, and audiobooks.
I firmly believe that, as parents, it is incumbent upon us to impart solid principles of money management to our children and teenagers. At the turn of the century during my high school years, financial education was conspicuously absent from the curriculum and to-date I feel that is still the same. Unfortunately, many parents presume that their offspring will naturally adopt their financial management practices, even though they rarely engage in open discussions about it.
Here, I present eight fundamental financial principles that I believe are invaluable for children to learn:
1. Initiating Early Saving and Investment
Encourage children to embark on their journey of saving and investing at a tender age to secure their financial future. Early investments possess the potential to multiply significantly over time through the marvel of compounding.
2. Living Below Your Means
Teach children the foundational principle of living within their means and investing the surplus. At a minimum, individuals should aim to save 10% of their income, with the ideal goal being as high as 30%.
3. Embracing Delayed Gratification
Educate children about the concept of delayed gratification and the importance of patience in financial matters. Amassing substantial wealth in one’s 20s is a rare feat. It is crucial to start modestly, align one’s lifestyle with income, and grow steadily. Its a must to understand the difference between a “Need” and a “Want”. Wants should be reward after investments have been prioritised!
4. Prioritizing Relationships over Consumerism
Encourage children to prioritize experiences and relationships over material possessions. Accumulating wealth does not hinge on continually acquiring the latest gadgets, cars, or clothing. While certain items may be necessary for work, moderation is key. True wealth lies in the relationships we cultivate and the shared experiences we cherish.
5. Creating Your Own Luck through Diligence
Explain to children that luck often results from tireless effort and meticulous preparation, rather than random chance. Waiting passively for luck to strike is an unreliable strategy. Successful individuals frequently attribute their accomplishments to hard work and unwavering commitment.
6. Recognizing Debt’s Impact
Instill in children the importance of managing debt wisely to maintain control over their financial future. Distinguish between beneficial debt, employed for investments like real estate or business ventures, and detrimental debt, which funds personal consumption such as credit card purchases for clothing or vacations. Avoiding personal consumption debt during youth lays the groundwork for sound financial management in adulthood.
7. Assuming Responsibility for Your Destiny
Help children grasp the significance of personal responsibility, particularly in financial decision-making. Many individuals fall into the victim mentality, allowing external factors to dictate their future. Regardless of their circumstances, children should be empowered to take charge of their financial destiny.
8. The Difference Between Being Rich and Being Wealthy
Instruct children that financial freedom hinges not solely on income levels but on personal responsibility and effective money management. Many individuals may amass money quickly or earn substantial incomes yet never attain wealth via financial freedom because their spending escalates in tandem with their earnings.
Conclusion
Equipping children with these fundamental financial principles lays a robust foundation for their financial success in adulthood. By imparting these lessons early in life, we empower the next generation to make informed, responsible decisions and pave the way for a brighter financial future. I have no doubt that had I understood and followed these simple financial principles during my teenage years, my wealth today would be considerably greater.
TheBucket 