The teen years are no doubt difficult for many parents as your child starts to crave independence. I believe the teen years are when it’s time to really build on what you’ve taught your children about earning money, the value of money, and the importance of good financial habits. Accounts are available for children as soon as they turn 13; I decided to give my teen a debit card over a year ago.
Money-making schemes come and go, but stalwart money management methods do not have expiration dates. Of course, it is wise to adjust your financial strategy throughout your life, guiding your efforts toward the greatest returns. But some financial tactics simply never fall out of favor.
Ongoing financial success builds off of solid fundamentals, so instead of focusing on passing fancy, the most disciplined money managers stick to the basics. Building and protecting credit, saving, and living a life you can afford are chief principles of effective money management, so these cornerstones are worth a closer look.
Live Within Your Means
Though it may seem like an obvious point, maintaining an affordable lifestyle is essential for anyone wanting to stay solvent. With a steady income and fixed expenses, cash flow is easily managed from month-to-month. Freelancers and self-employed workers may face greater challenges reconciling irregular income and spending, but even entrepreneurs find ways to balance their books.
It is difficult to manage finances on-the-fly, so the best way to account for your expenses is to track spending, and then create a budget. Treat your personal cash flow just like a business would, staying atop deposit income as well as outgoing payables.
To create a workable budget: First, divide your customary buys into manageable categories, to illustrate exactly where your money goes. Next, fill-in payments and other spending to create a sample snapshot of your finances. Use at least one month’s worth of data, but try to accumulate budget information for a full quarter (three months).
Once you’ve determined where your money goes, it is easy to reel-in savings. Though fixed expenses, like mortgages and other recurring payments may leave little room for cutbacks, discretionary buys like entertainment, travel, food, and fashion can be pared for positive financial gains.
Strive to Save
It is easier said than done for many well-meaning families, who make ends meet with little room for savings. Even small sums go a long way; however, as money set-aside mixes with time to produce positive long-term gains. Whenever possible, designate a monthly sum to add to your savings, perhaps taken aside from your paycheck. As savings grows, the dividends it earns also appreciates, compounding its value again and again.
Savings accounts have not been terribly profitable in recent years, with returns sometimes failing to beat the rate of inflation. And to make any progress at all, deposits must be held in fixed-rate accounts for a particular span of time, before gains set-in. To make the most of your savings, consider investments with greater upside potential, like stocks and other holdings.
Protect Your Assets
The recent mortgage meltdown shed light on personal financial security, as hundreds of thousands of borrowers faced foreclosure and default. Many lost everything they had worked hard to acquire. To increase your financial security, your debt-to-income ratio must be preserved within reasonable limits.
Insurance cover is another essential feature of your comprehensive financial plan. Without adequate home and car cover, your assets are at risk. And additional policies may be required to cover mortgages, unemployment, and even disability.
Plan for the Worst – Hope for the Best
Sage advice for personal money managers includes a contingency plan. While you hope never to call on your emergency scheme, having one in-place protects you from financial disaster. An emergency fund, for example, covering 3-6 months’ worth of fixed expenses, hedges against income lapses and ensures your bills are paid until conditions normalize.
In addition to cash reserves, keeping credit lines available further enhances your ability to endure temporary financial hardship. When credit accounts are pushed to their limits, on the other hand, interest pressure adds to your problems and the safety-net disappears.
Wills and other documents carry-on financial responsibility in the event of your demise. Maintaining the proper documentation protects your family members and ensures your financial resources remain available to them.
Financial security is a lifelong pursuit, requiring commitment and discipline. While each situation is unique, time-tested principles bring success to dedicated money managers. To ensure the best outcomes for yourself and family, maintain an affordable lifestyle and protect your assets. Savings and backup plans add extra comfort, preparing you to fend off unexpected financial difficulties.
When speaking to my friend the other day about Christmas plans, she was detailing what she bought her eight year old for gifts. Included was a laptop. When I inquired about why the eight year old was getting a laptop, she explained that the current family computer wasn’t ”up to speed” in terms of processing for what the girl needed to accomplish school related projects. Knowing that the computer she was talking about was only three years old (since I was with her when she bought it) I called her bluff. I mean surely an eight year old isn’t doing that much computer related homework?And if she is, I’m confident that it doesn’t require that much processing power, let’s be honest! She fessed up that the kid wanted it so they were buying it, and that knowing she would be using it for school made her feel better and that’s what she had to tell herself to justify the purchase.
Am I alone in thinking if you have to justify purchasing an item, and if you’re not totally comfortable with it for whatever reason (an eight year old getting a $500 computer in this instance) that maybe you shouldn’t be buying it?
The other item that comes to mind is cell phones. I didn’t grow up with a cell phone, I didn’t have my first cell phone until university. I relied on the land lines at locations or using my friends parents cell phones (because there was no way my friends had phones of their own, that was unheard of). Though I can’t imagine my life now without one, I also can’t imagine my young child having access to her own iPhone. It blows my mind how many young kids (less than 15) I see with these devices. While I suspect when my little one is old enough to venture out away from mom and dad, we will get her an emergency only/call-mom-and-dad cell phone, I will not be buying her a $500 ‘phone’ that requires a $70+ monthly contract to be attached to it. If she wants one of those she can get herself a job and pay for it herself. Especially since I don’t think it is necessary that a younger that 16-year-old even have access to a device like this.
I understand that it is 2014 and things have changed a lot in the last few years, but there is no way an eight year old needs access to her own laptop or a ten-year-old needs the latest iPhone/Android/whatever. It is difficult to balance parenting, trends, and your child’s wants versus needs. I’m not suggesting you don’t buy wants for your children because a lot of what we buy for our kids as gifts are wants and not needs (toys etc) but we need to set realistic expectations for our kids. They need to understand when they want certain things they need to be willing to contribute towards the item since mom and dad are not open wallets.
At what age do you think it is appropriate to buy kids large items like cell phones, TVs and computers, if at all?