Do you feel uncomfortable teaching kids about money? You´re not alone! Perhaps you learned from your parents that it’s an improper topic of discussion. Whatever the reason, we live in a different world than our parents did, and one for which requires financial literacy. So I decided to send an email to my 19-year-old daughter, who is currently away at college. In it, I wanted to include all the financial advice I wish I’d gotten at her age.
When you told me the other day you got a raise at work, it got me thinking. Thinking about teaching kids about money and how things were when I was your age and how different things are today. Thinking about where you are right now in your life and all the wonders that you’ll soon be able to experience. Soon, too, you’ll have to make choices, some of which may be clearer than others. So I’ve decided to share some thoughts with you…thoughts about money that I’ve learned over the years, both in my career and as a person, that hopefully will guide you. I hope you will print this letter out and keep it some place safe.
Financial literacy is important and it’s perfectly fine to talk about money. If you ask me questions about how much money I make, I will answer them. If you ask me why I bought something, I will tell you. I want you to develop good financial habits, and I am the best person to teach you.
• Always spend less than you make. Save the difference for a time when you may not be able. I hope that never comes, but just in case it does, you need to be prepared.
• There is good debt and bad debt. Good debt will help you improve your financial position in the long run. Bad debt makes you worse off in every way. Stay away from bad debt.
• Your financial reputation is important. You’ll need good credit to buy a home or a business, or maybe even get a job. Don’t do anything that will put that at risk.
• Take financial advice from people you trust, but ultimately make your own decisions. Make your decisions wisely and in accordance with your goals. If you act on someone else’s bad advice, it will be your that you may lose. Protect that for which you have worked so hard.
• Start a Roth IRA with your very first paycheck and add to it every year, as much as you can. It may seem odd to include retirement when teaching kids about money but trust me on this one!
• You to buy things. It’s okay to spend on a fancy car, nice clothes, or a luxurious vacation, as long as you have money saved. If you don’t have the money to pay for something, wait until you do. If you use a credit card to pay for an item for which you don’t have the money, you’ll end up paying even more because of interest.
• Understand the difference between needs and wants. There are very few things you need, but many things you may want. Make sure you have what you need before you get what you want.
• Don’t buy things to impress other people or to get attention. It won’t make you any happier. It will only attract people who wish to take advantage of you, and those aren’t the type of people that you should surround yourself with. True friends love you for who you are, not what you have.
• There are people in this world who will try to convince you that you’ll be happier if you buy things. Know that it’s not true. You can’t buy happiness. They tell you that because they want your money. It’s their job to do that. It’s called advertising. Don’t clutter your home and life with possessions that you’ll have to worry about, or responsibilities that will weigh on your freedom. Instead, live a simple life. Surround yourself with positive people who you love, and who love you back.
I love you. I don’t expect that I will agree with every decision you make in your life, financial or otherwise. Nor will you always agree with me. But I will still love you, and I always will, no matter what.
All my love,
Dad (aka Financial Planner)