5 Lessons to Ensure Children’s Financial Independence
5 Lessons to Ensure Children’s Financial Independence
Over the past few years, there has been an increase in the number of adult children living with their parents due to financial matters. As a result, preparing them to be financially independent is currently an important aspect of parenting. The following are five key lessons to impart to children to make sure they will have financial independence in the future.
First, manage small, everyday financial decisions. Teach your children to ask themselves whether or not they need to buy something and whether or not it is the best deal. Once they have this state of mind, they will definitely save lots of money in the long run.
Second, get rich slowly. Social media and reality TV shows have caused recent generations to think they can become rich and famous in an instant but the truth is this cannot happen overnight. One example of earning money slowly is compounding interest rates, which could lead to good savings returns.
Third, teach them financial discipline at a young age. For instance, you can put a portion of their allowance into a piggy bank or savings account as soon as possible because this will teach them that saving a small amount regularly can add up instantly. They will more likely adopt this habit when they eventually have jobs and established their careers.
Fourth, encourage your children to have the spirit of entrepreneurship. Although our society prepares us to be good employees, successful people in places such as Australia are entrepreneurs. Encourage them to put up micro businesses but do not finance their business venture.
Fifth, teach them the difference between good debt and bad debt. Good debt is taking on loans to develop appreciating assets and investments, while bad debt is using credit to purchase a depreciating item. Moreover, encourage the use of debit cards rather than credit cards.
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