Instruct Your Children in the Art of Fiscal Management

Instruct Your Children in the Art of Fiscal Management

It's unfortunate, but many retirees end up poor. Many people who have worked for 40 years or so and earned hundreds of thousands of pounds have very little to show for it.

So, what the heck happened? In that case, you probably missed most of it. Why?  Although our educational institutions are excellent at preparing us for the world outside the classroom, one area in which they fall short is in the area of personal finance.

So, where can we send our children to learn about budgeting and saving? As parents, it is our responsibility to instruct children. The problem is that many people are not very good at managing money, sometimes because we were never taught these skills as children. Money isn't typically a topic of conversation between parents and their children. No, I don't think we should start handing out mortgage and bank statements to kids, especially older ones, because some parents, especially those of preteens and teenagers, could regard that as an embarrassing admission.

What we can do, though, is prepare our children for the challenges and risks they will face as adults. Consider your own interactions with financial institutions and the lessons you've learned. The reality is that we all face financial challenges at certain points in our lives. There may be things that happen that aren't in our hands, but there will also be times when we make a decision because it "seemed like a good idea at the time." Every single one of us has been there and done that, only to regret it later.

So, when and how do we launch them? As early as feasible; by the time most kids are 3, they have a basic grasp of currency and the idea of making a transaction with money. If you give them enough change, they can buy whatever lollipop they want from the candy store.

If you want to set your children up for a lifetime of financial success, consider the following advice:

Get your younger kids a piggy bank. Let them pick whatever shade, form, or measurement they like. Ask them to start saving their money in a piggy bank. They might keep track of their earnings once in a while and treat themselves if they so choose.

Take them to open a bank account once they've shown they can handle their money responsibly. Children can open savings accounts at most of the main high-street banks and building societies. Age-appropriate incentives may include gift bundles, discounts on media such as CDs, DVDs, and video games, and more.

"Money grows on trees" is a common misconception among young people. Show them that YOUR effort is what generates the physical currency they use. Do not teach your kid to be lazy, even if you have a lot of money via inheritance or a job. There are probably a lot of things that need to be done around the house, such as cleaning the bathrooms and the kitchen. Allow your children to earn their allowance each week. They need the option to work for free sometimes to appreciate the worth of a dollar earned through their own effort.

Many adults, especially those above the age of 10, now get monetary gifts for birthdays and holidays from extended family members. Their preferences are ever-evolving at this stage of life (what a 12-year-old considers to be "the in thing" is usually very different from what a 60-year-old considers to be "the in thing"). Insist that they put away ten percent of all cash presents. Again, if they are older and have a paper route or similar source of income, stress the importance of setting aside at least 10% of their earnings. Although this is a relatively small amount, developing this practice is highly recommended. Think about how much money you would have if you were a middle-aged parent reading this right now and you had always saved 10% of your income. Very frightful!

Proper financial management does not entail storing away all of one's cash in a safe. It's as easy as exercising restraint when making purchases and developing a practice of saving money regularly. Donating to charity is a great example to set for your children. This could go to a group helping the terminally ill, the destitute, or the person's favorite cause. This would aid in their development as whole people, teaching them to appreciate others no matter what their circumstances are and to value what they have. They would see that the investment paid off in ways they never thought possible.

Suggest that your youngster get a diary or journal in which they can write down their thoughts and feelings. Because of this, they are able to set lofty goals for themselves and anticipate a prosperous future. There is no shame in wanting material things and working to acquire them. Cash isn't the devil!

People frequently use the expressions "filthy lucre" and "money is the root of all evil" to describe greed and excess wealth, respectively. Ignore them. In reality, money does a great deal of good for society. Making money improves the employment market. When money is put into businesses, new and useful products and services become available to consumers. If you become wealthy, you can establish a trust fund or give more money to charity. As you can see, then, money in and of itself is neutral; it's how it's used that makes a difference.

"It takes money to make money" is one of the oldest adages about building riches. Unfortunately, it also costs money to lose money. Instill in your children the need to exercise caution in all financial matters. Never forget the cardinal rule of any daring enterprise: Put just what you can afford to lose into investments. And remind them that many multimillionaires had humble beginnings.

One of the most pervasive problems in modern society is debt. The "have now, pay later" mentality always ends up costing more in the long run. Some major high-street banks are partly to blame for this outlook. Posters in the lobby of my bank read, "Why wait? Have it now!" The burden of debt can keep you stuck in a job you despise, add unnecessary stress to your life, and eat away at any progress you've made toward building money. You can't get rich if you constantly spend more than you earn. Instill in your offspring the virtue of deferring pleasure. Whenever possible, do without.

The gap between your income and your expenditures is the true measure of your financial well-being. Therefore, it is rational to avoid spending more money than is strictly necessary. Explain to your kids that being frugal is not the same thing as being cheap. If you find the same product at two stores, but one is £20 cheaper, where are you likely to make your purchase?

Whether it's the three-card monte, a once-in-a-lifetime investment opportunity, or a limited-time company venture, eventually everyone is promised a "sure-fire" technique for generating a fortune. Do a thorough inspection of these "opportunities" at all times. Keep your money to yourself because opportunities that seem too good to be true often are. Explain to your children that building money is an easy, time-tested approach that can be applied to any generation.

Would you be in better financial shape now if you had learned and consistently used the aforementioned ideas when you were 10 years old?

Exactly why are you stalling? Instill in your children the fundamentals of building and maintaining wealth. Typical of most parental counsel, it will go unappreciated at the time. They will appreciate it in the long run. The best present you can give is the gift of knowledge.