Did you know?
- 50% of American households live paycheck to paycheck
- 44% of Americans don’t have enough cash to cover a $400 emergency expense
- The average American household’s credit card debt is $5,700
- A third of Americans have saved nothing for retirement
- 80% of Americans’ retirement plan is to keep working
Sources: MarketWatch, Money, Employee Benefit Research Institute, Value Penguin
That’s why, it is crucial to teach kids about finance well before they need to start making financial decisions. You can run from your money problems, but you can’t hide!
Here are 7 reasons why ALL kids should learn about personal finance and what they need to know to grow up to be financially savvy adults.
1. Any Skill is Easier to Learn as a Kid
Whether it is about learning to ride a bike or money management, all life skills are way less intimidating when learned as a kid.
2. It’s Crucial to Distinguish Between Needs and Wants
Good financial habits start by being able to distinguish between what is a “must-have” and what is a “nice to have”.
Think about it for a moment – in today’s world of extreme consumerism, need for instant gratification, and social media bombardment of “must-haves” that we otherwise had no clue about, would you really blame people for their spending habits which send them into a dizzying downward spiral of debt?
By teaching kids how to differentiate between needs and wants, they become more aware of their choices from a very young age. And who wouldn’t want their kids to be conscious consumers – we all know expensive habits are hard to change.
3. It’s Never too Early to Learn About Saving and Investing
When children get an allowance, earn wages or receive cash gifts, encourage them to spend a specific amount for things they want, but also make them aware of the importance of setting aside a portion of their allowance or gift money towards a long-term goal or an “emergency want”.
Don’t discourage them from making mistakes – When they make a bad purchase by spending all their savings on something they just “had to have”, they realize very quickly how much easier it is to spend money than it is to save.
4. Kids Can Really Benefit from the Magical Power of Compounding
It is essential to teach kids how rapidly their money can grow thanks to the power of compounding. They quickly learn that by investing, their money can grow manifold, helping them reach their long-term goals much sooner.
This helps them practice delayed gratification, which creates the self-discipline needed to save money for college, retirement and other expenses in adulthood.
5. It’s Crucial to Understand the Importance of Opportunity Cost
By evaluating the opportunity cost, their decisions are deliberate and not based on impulse.
6. Retirement Planning Should Start From the First Paycheck
It shouldn’t start very close to retirement. It’s imperative to teach the younger generations the importance of planning for their retirement starting with their first paycheck.
The sooner they start planning for their retirement, the faster they can grow their nest egg and maximize their returns, leading to a debt-free, self-sufficient, and comfortable retired life.
7. They can Enjoy a Lifetime of Financial Independence
This will result in a life of independence from unnecessary debt, excessive spending and overpriced “expert” advice.
Remember, healthy financial habits will last a lifetime!