Financial Education for the Real World
3 Tips to Prepare Your Child for Realities of the 21st
Century
You wouldn't give your sixteen year old the keys to your
car without drivers training; so why send them out into the
real world without financial training? Both scenarios
could devastate your child's financial situation for years.
Everyday we send young adults out in the 'real world' with
dangerously little preparation for the financial realities
of life. Little mistakes can have negative consequences
that last a lifetime. Just one simple missed credit card
payment will blemish their credit report for seven years.
These mistakes lower their confidence; which can result in
a downward spiral of financial blunders.
Most parents are already aware that public high schools do
not provide young adults with a practical financial
education. Yet these same parents understand how important
financial education is for their children's future. So
parents it's up to you to provide your children with the
financial skills they need to make it in today's society.
There are important financial lessons you can teach your
children. But before you do, it's important you recognize
your teaching beliefs and style. There are three common
parenting styles that affect the way your children lean
about money.
- Parents that don't feel qualified. This is the most
common parenting problem when it comes to providing
children a practical financial education. These parents
often feel stressed out because they realize how important
receiving financial education is; however they just don't
know where to start. They may not feel confident
instructing their children because they don't fully
understand financial matters themselves. When their
children start making the same financial mistakes that they
made themselves, they often feel guilty.
If you relate to this situation, eliminate those negative
feelings because it's not your fault. If you are like most
people you were never taught this information either. So
use this opportunity to learn about money and grow with
your children.
- Parents that don't know how to teach. Many parents out
there have a general understanding of money matters however
they don't know how to go about teaching this information
to their children. They're not sure what they should
teach, how to teach them and question if their children
will actually listen to their advice. They also realize,
during the teen years, their children may respond better to
other people passing on practical financial lessons to
them. As a parent, you don't teach them biology or
geometry so why put pressure on yourself to teach them a
subject as important as money?
- Parents that enroll their child in the school of hard
knocks. Many of us have learned about money the hard way.
We make a mistake then struggle to try to fix it. Parents
that are believers in this learning style are taking a big
gamble with their children's lives that can have serious
long term consequences.
The lessons you learn in the school of hard knocks often do
last a lifetime. However often times these mistakes can
undermine the confidence and eliminate all hope of your
child ever achieving financial freedom. There are
resources available that will give your child a financial
head start; so use them!
Every young adult needs a professional course on financial
education so they are able to avoid the financial pitfalls
that plaque so many people. Here are three tips that will
help you prepare your child for a structured financial
education course.
1) Lifestyle. Children, teenagers and young adults don't
really care about money. It's what money brings them that
motivates them learn. Relating money to time, freedom and
lifestyle will inspire them to learn about money. Once they
understand the personal freedom having money will afford
them, you'll find your children excited and wanting to
receive a practical financial education.
Relating money to lifestyle is a great opportunity to get
to know your children better plus it's the first step
toward helping them develop a healthy relationship with
money. Take some time out and talk to them about their
dreams. No matter how far fetched their financial dreams
may seem to you; make sure to acknowledge them and use that
to motivate them to learn all they can about financial
matters. For instance, if your 16 year old dreams one day
owning a restaurant make sure you encourage that goal.
Now, instead of teaching them to save money for no
particular reason, you can use their goal as the reason to
learn about money matters.
2) Accounts Open their checking, savings, and investment
accounts early. It doesn't matter if they are in
kindergarten or colleges by getting these account set up
early they will have and advantage that will last a
lifetime.
The longer relationship you have established with a bank or
financial institution the more benefits your child may
receive. Many financial institutions offer long-term
clients additional benefits that newer clients may not
receive. They offer their preferred clients benefits such
as: better rates, better terms, additional services and
they often are able to qualify for loans easier.
In addition to the financial benefits, young adults also
feel an added sense of responsibility for their financial
future when they have the proper accounts open. This sense
of responsibility is a vital part of giving your child
adequate preparation before they move out to live on their
own.
3) Invest early. Encourage your young adult to begin
investing once they have money saved up. The stock market
is a great place for them to start; however do not go out
and buy individual stocks or mutual funds. Both are too
risky unless you have specialized investment training.
Instead you may opt to invest in the overall market.
There are several investment vehicles available that allow
you to invest in the overall market that are just as easy
as buying a stock or mutual fund. Making a simple
investment in the overall market may give your child lower
risk, more consistent returns and greater diversification.
The best part is this strategy is dead simple to do. Once
they set up their investment account they can automate it
so each and every month the investment is made for them
automatically.
Getting your young adult prepared for the realities of the
21st century is an important part of responsible parenting.
Giving them practical financial education before they move
out on their own will continue to benefit them throughout
their entire life. You would never give your child a car
without drivers training; so make sure you give them a
practical financial education before they move out.
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Vince Shorb, author of 'Financially Free by 30' and the
leading young adult financial literacy advocate, prepares
young adults for the financial real world. Broke at the age
of 26, in just six years he made his first million. He
spent several years as one of the nations most productive
loan officers and has reviewed the finances of over 10,000
clients. Get your free copy of his latest book and
instructional videos at http://www.FreeBy30.com .
