Within the next few weeks, high school kids around the world will be prepping to embark on one of the biggest adventures in their life. They will be leaving the comforts of what they know and preparing to attend college.
College, is an experience that far too many kids are not prepared for. It is an exciting time full of many emotions. Graduation is not the time to start preparing your child for financial independence. With other concerns at the forefront of their teenage brains, such as prom and ironing out frosh-week plans, your child will likely not be in the best mindset to absorb all the important information you have to share. For this reason, it is important that you start financial lessons early in their life. The earlier you start, the better equipped they will be.
Start With Basics
If you accomplish nothing else, make sure you don’t send you child off until they know the financial basics. Ideally these foundations are laid throughout their upbringing but make sure the absolutely understand the basics before leaving home. The financial basics include:
- Borrowing and implications of borrowing (loans, credit cards, lines of credit etc)
- Debt and all responsibilities associated
If they don’t understand these simple basics, they will be starting their life, in a financial turmoil. A child needs to understand how to manage money before leaving home since the ”real world” will completely overwhelm them with opportunities to make bad decisions.
Opportunities to make bad financial decisions are everywhere. Most of these decisions are due to lack of education but totally avoidable.
It was lack of education that was the catalyst of my bad financial decision-making. I started university, knowing nothing about budgeting or borrowing money. I knew that credit cards eventually needed to be paid back but, like so many, thought as long as I was making the minimum payment I was fine. I thought a credit card was a great invention; instead of using my hard-earned paycheque to pay for gas/clothes/textbooks, I could charge it onto my credit card only be required to make a much lower minimum payment. It wasn’t until many years later that I truly understood the implications of my actions.
Smart Doesn’t Mean Knowledgable
Though I would consider myself well-educated, understanding my personal finances was totally foreign to me. I wish I had been educated prior to getting my first credit card but I didn’t, and subsequently ended up borrowing much more than I needed for university. Just because someone is smart academically, doesn’t mean they know anything about simple life basics. Too many parents assume that their bright children work hard in school, get scholarships and have life totally figured out. This is completely untrue.
Knowledge is based on a lifetime of experiences, something most young high school grads lack. Given their age, it is impossible for them to have had much opportunity to become well knowledgeable on real-world finances. It if for this reason that we as parents need to teach them from what we have learned.
What financial lessons have you learned, the hard way, which you’ll now be able to teach your children?