As parents, we strive to instill good habits in our children in hoping they bring these lessons into adulthood. Most adults who eat well, get exercise and include good practices as part of their lives developed them over time, which dates back during their adolescent years. We should instill financial literacy and good financial habits throughout our children’s lives, and the younger we start, the better.
Most adults are poor at managing their finances never reaped the benefits of learning the basics about money when they were young, and we manifest it during their adult life. Like good eating habits and good manners, it is best to educate our children about the world of economics and how it affects them throughout their lives while they are young.
Working for Money Earning money is accomplished in two ways, either you trade time for money or you create passive income. Most people trade time for money, which means we get an approved dollar amount for a set number of hours. The problem with trading time for money is that it limits you in the amount of money you can earn, as there are only 24 hours in a day. Passive income is generated by investments, which we will discuss later.
Budgeting Financial gurus agree, “It’s not how much money you make, but how much you spend,” this is budgeting. It is essential to understand the importance of effective and sustainable budgeting. People who are financially well off-budget below their means and the poor budget beyond their means. Budgeting is creating a financial road map and specific plans on how and where you spend money.
The Equivalence of Value and Money There is a direct correlation between the value provided and the money earned. The marketplace will always pay you based on the value you provide. The more value you bring to the market, the more money you will make. To maximize earnings, you must maximize the value you provide.
Debt Debt is the antithesis of wealth. To generate wealth, you must eliminate debt. As long as you owe money, you cannot grow wealth. There is good debt and bad debt. Bad debt is attributed to that which does not generate or assist in income, such as flat-screen televisions and other unnecessary items. Good debt is the debt that helps generate income, such as payments on a car that is used to make money.
Credit Score A credit score is a measurement of the consumer’s history of their ability to pay back loans. Credit scores are used to determine the creditworthiness of consumers and a guide for lenders to award.
Investing Investing is using money to maximize and generate profits or materials and is achieved by placing money in various financial schemes, which includes shares, properties, and other commercial ventures. Investing creates passive income. Active investing gives you the freedom to generate income without trading time for it.
Paying for College Unlike two to three decades ago, college is not so much a choice but part of the educational process on the path to success. Unfortunately, many young adults begin their adult lives with thousands of dollars in debt from poor strategies to pay for college. While student loans can be a viable option, there are options outside of loans that can fund your higher education. Scholarships are an excellent option, as many are available for an array of qualifications and often go unclaimed for a variety of reasons. School-specific scholarships often become available as students may choose a different school leaving those funds unclaimed. There are still low-interest government loans, if used responsibly are always good options for paying for college. Even with low-interest federal loans, only borrow the bare minimum needed to cover the cost as you will have to pay it back, eventually. Pell Grants are another underutilized financial option and do not require students to pay them back. With a wise combination of low-interest federal loans, grants, and scholarships paying for college can become less of a financial burden for your family.
Conclusion Financial literacy is essential to ensure that our children experience fruitful and fulling adult life. A strong business foundation can be the difference between building generational wealth or generational debt, and our financial literacy guide provides a perfect set of tools for young adults.