Confession of a 20 year old on “The 5 Money rules I wish I learned in school!”

Kids and money lessons, growing up I didn’t have a good starting position for myself in my life journey when it comes to financial literacy. Like most schools in the US my school didn’t have a personal finance class, and my parents thought I was too young to understand anything about money.

I learned some of these rules the hard way and some of them I learned easier because people taught me and I was smart enough to listen- wasn’t always smart enough- but let me give you some of these rules.

Maybe they will help you out preparing your children before they leave for college!!

Studies have demonstrated that financial education need is best introduced to kids as soon as 5 years old, so parents keep in mind that it’s never too early.

The contrarian approach

You have to do the opposite, when most people are putting money out, you have to be pulling money in and when most people are pulling money in, you have to be putting it out ,this contrarian approach is probably the fundamental rule of money.

Let me give you a little example, most teenagers if they had to choose between spending $150 on a pair of shoes or a financial literacy book, they would probably go for the most expensive pair of Nikies instead of an educational book, even if they would learn more reading a book than wearing the shoes.

The money rule here is go for the book and invest in your financial education. So if you see your friends spending money out on items that are unnecessary make sure you hold back and don’t be afraid to go against the wave and invest on educational material even if no one does it around you.

Nothing that will build up rust and depreciate

Avoid items that will build up rust and depreciate, make sure that the items you are investing your money on are items, that you can re-sell, for example if you invest in some good stock you can resell and make money, but if you invest in a flat screen TV or a pair of Nikies, know that it will depreciate fast and if you had to sell it later it will be worth not more than $30 on Graig’s list.

How to spend and structure spending?

People usually cringe when somebody mentions “budget” because budget means limits and boundaries. But if you think about it, budget just means putting together a plan on spending your money. It’s actually quite liberating.

When I left for college, I was lucky enough to have a part time job that pays well, but because neither school nor my parents taught me how to manage my earnings Vs spending, I had no personal finance management skills and so i started rambling and spending more than I earned, thinking that Plan B will be credit cards so no worries. I was WRONG! (More on this later)

Once I’ve learned how to budget and changed my perspective on spending, I’ve started putting more thought into planning my everyday finances. Saving towards big purchases became a second nature to me as I’ve started automatically to set saving goals for myself.

Live debt free, never borrow money

First day on campus, a major bank was giving out credit cards, and I’ve signed up right away. To me it was just free money, I could buy anything from a car to a hamster! Yes did you know that some pet stores are willing to lend you money to buy a hamster?

Just like the proverbial hot stove, I have burned myself on borrowing money a few times, before I have learned my lesson, never borrow money.

If you have to borrow money, it means you are broke and don’t need whatever you’re about to buy. If you can’t pay for something in cash, you can’t afford it, so move on. Live beneath your means, pay cash…The horror stories behind free credit card money are not worth it at all.

Invest early, regularly, and aggressively for the future starting right from the get-go

“The prospect of buying something cool right now outshines any future needs, after all I’m young and I worked hard for my paycheck so why would I deprive myself now, it’s not like I’m turning 65 next week right!” and that’s how I used to think about it.

Then I came across investment and I realized that if I invest 10% off of every paycheck starting early, in just a few years I would be able to cover all my living expenses with my investment income, when I’m old and retired. And my biggest motivation is that I can even retire earlier if I invest my money the right way.

Research has shown that sensitive topics such as income and debt should be used, not to cause children to worry or become anxious, but to teach them about money management, debt, accounting, and credit.

So, parents don’t hesitate and start teaching your kids about money. For kids ages 7-14 “It Doesn’t grow on trees” is a great book that helps parents and kids talk about money It includes brief histories of coins, notes, banking and credit cards and encourages children to adopt good habits concerning personal finance. Through the use of anecdotes, videos, games and interesting money facts, it promotes keeping accurate financial records as a way of preventing money problems or serious debt later in life. The book also looks at investing, charity, planning for the future and ways to make money before you are a teenager.

 

Comments