When it comes to our personal finances, we typically keep things close to the chest. Think about it, do you share with your children/grandchildren what your monthly budget is and how it works? Do they know what worked well for you or some of the financial mistakes you’ve made and how to avoid the same mistakes?
As you can imagine, I get a lot of questions about finances, and I feel that each of us have a lot of wisdom we could share with our loved ones. The last several months have caused a lot of concern for people when it comes to the state of our economy. What better time to share some of your financial wisdom with your family than now? Here are a couple ideas you could discuss with your children/grandchildren to help teach them how to have a healthier relationship with money.
The Importance of Saving: Saving money is important because not only does it put you more in control of your future, but it’s nice knowing you have a nest egg to fall back on if needed. A good way to build a savings account is to pay yourself first – meaning when you get paid, move money to your savings account BEFORE you pay your bills, buy food or spend money on any extras. It seems like when we pay the bills, buy food and buy our extras first, there isn’t much left over for us to save. When my kids were old enough to start doing chores, my wife and I had them set aside 10% of their earnings to a savings account for their future (college, mission, marriage, house, etc.) and we continue to encourage this as they start working at age 16. It’s been fun to watch these accounts grow as my kids have added money to them, but teaching them to save money hasn’t always been fun! Our hope is that this will become a habit and something they do when they’re no longer living with us, and that they will (hopefully) thank us for it one day.
Credit Cards: we live in a world where instant gratification is a big deal, especially with younger generations, making credit cards ideal. I hear all the time the reasons why credit cards could be a good thing – they’re safer than carrying cash, they’re accepted virtually everywhere, and if you pay them off every month, they’re worth having for the rewards points. While these things are true, most people don’t pay off their credit cards each month, and credit cards can make impulse buying easier, causing us to spend more money and rack up debt. In fact, the average credit card balance per person in the U.S. as of January 2019 was $6,1941, and with an average interest rate of 21%, we really need to talk about how a credit card works with our children/grandchildren.
Contributing to a 401(k): When we get our first “real” job, our employer may offer the option to contribute to a 401(k) and may even offer a contribution match (up to a certain percentage). Oftentimes, when we’re just starting out, we opt out of contributing, thinking we’ll have plenty of time to save for retirement later. As most of us know, retirement comes quickly and many of us wish we would have started saving earlier. When we’re young we tend to think we have time and we’d rather have the extra money in our pockets, but getting in the habit of contributing early can be a game changer for your future.
I’ve always found it important to have these kinds of conversations with our loved ones because what better way is there to learn how money works than by example? I understand that some financial things are personal and maybe you don’t want to share everything, but it’s important to share some of your wisdom and help teach your children/grandchildren to help them be successful with their financial choices.
If there is anything we can help with, please give my office a call at 801-465-6990!
Scott B. Wharton & Team
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