Do you know anyone in your friends or family who are struggling with their finance and credit debt? How about someone trying to come up with a big financial sum for a health emergency? Or someone way behind on their insurance payment? I am sure you would know at least one person in your circle that might be going through one or more of the above scary financial situations.
Most of us do not realize the value of financial discipline until it’s too late. However, there is no point regretting our uninformed actions when we were young when we are facing a situation that demands all our alert attention now. Rather, we can only look at how we or our near and dear ones can avoid getting into a similar financially scary situation in the future. While apps like NumReceipt are specifically designed for just this purpose, to instill a sense of discipline and detailed finance and expense tracking, whether for your family or business, you must be financially literate to ensure you never land in financial trouble.
It is a shocking fact that 63% of Americans are reported to be financially illiterate and lose about $1230 every year due to a lack of financial knowledge to manage personal expenses. That is a massive loss of $295 billion just in the year 2018.
How do we avoid this?
By making sure everyone you know and care for gets educated about the basics of personal finance management and that includes children as well.
In the U.S, only 17 states have mandated that students must take courses in personal finance. That is a scary number considering that student loan debt in America seems to be on an ever-increasing trajectory. Kids and teens must necessarily be taught about managing money well, if not by academic institutions then by parents and caretakers so that they can have a safe and secure future.
So if you have a child or young adult at home, don’t miss any more time to teaching them about personal finances. Spending a few minutes every week imparting financial knowledge to them now will go a long way in ensuring they take care of themselves and family well later without getting into a debt trap.
Here are some ways you can get started:
Make sure the kids know their pennies from the dime
While this one is obvious, sometimes even adults struggle to understand that money will always add up however small. Teach your young children all about the coins and currency notes and help them understand why money and finances are important to run a family. Take them on shopping trips and let them handle the small cash.
How important is buying the new pair of shoes for the upcoming tournament compared to the demand for a pizza night out? Teach younger children about spending first on essentials such as nutritious food, house, and medicines while talking to your older children about buying many essentials for college versus one designer shoe. While the earlier is a need, asking for a designer shoe is a want especially if you are tight on your financial budget already.
As adults, we know the result of what happens if we control our impulse shopping urges and splurges and focus instead on sticking to the budget. By tracking expenses by category on NumReceipt, we can easily track our allotted financial budgets for the month and make sure we are always up to date on how much we wanted to spend versus how much we have already spent. Similarly, teaching kids to postpone their demands for a new toy or stationary, even if by just a day, can help them learn the self-discipline needed for a good financial life. Follow the lesson with action and do not indulge your child’s every demand immediately.
Most children today are very tech-savvy. So the next time you are updating your finances on NumReceipt or elsewhere make them sit with you to go over the family budget and spending the previous month. If they are older, have conversations with them to see what they think of how the family budget should be divided and what are the consequences of overspending. Gently, introduce the concept of debt and what might happen if one gets into such an issue.
One of the first steps to teach children about money might be to open their own savings account and have them deposit all their summer earnings into it. Teach them about compound interests and the need to save before spending. Having them in charge of growing their bank account will also instill a sense of purpose and pride while teaching them all the essentials of banking and personal finance management as well.
While the above are just some basic steps you can take, there are many more ways you can help your children become financially wise. Start early and reap the rewards.
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