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Simple Financial Lessons I Will Teach My Daughter

Posted By peronalfynance40 286 days ago on Finance - I didn’t really become truly financially literate until I was in my 30s and after I had my daughter. I knew I needed to develop a solid financial plan for myself, and this included staying away from credit cards altogether and investing part of my income on a regular basis to retire early before age 50. I always thought I was just going to work my usual job and then retire when I’m in my 60s. I believed for so long that if you followed the go-to-college-and-get-a-great-job route, you would advance at some point. And while I did, I wanted something more. I also want my daughter to be better with money than I was when I was in my 20s. This is the inspiration behind these simple financial lessons I plan to teach my daughter. 1. Is Your Purchase a Need or a Want? I would talk to my daughter about distinguishing the difference between needs and wants. Kids need new clothes if they outgrow their current outfits, but they may want clothing from popular designers such as Tommy Hillfiger and Bebe. Your children need to eat, but they want mainly frozen pizzas and Chinese takeout meals. One reason why you should teach your kids about needs vs. wants because it teaches them to the value what is more important in life. 2. Always Save Money for Emergencies I want my daughter to understand that she should always be prepared for emergencies and that she should always put part of her paycheck every week into a high-yield savings account. This is something my mother always did and taught my brother and me to do. I want her to know that it reduces the need for getting into debt to fund unexpected expenses when she has emergency savings. 3. Avoid Student Loans If my daughter desires to attend college, then I would help her seek out free and low-cost options for funding her education so that she won’t have to go into debt in order to pursue a great education. I would teach her about the different ways to research and apply for scholarships and private grants. I would talk to her about the pitfalls of taking out huge student loans and how it affects her ability to get a mortgage, obtain a business loan, or the ability to retire early. I currently have a custodial brokerage account for her that could be used for college expenses after she inherits it at age 18. 4. Be Careful About Co-Signing on a Friend’s Loan I want my daughter to be generous with her finances in order to help others in need, but I will advise her against co-signing on a friend’s loan when the friend has bad credit and a history of not paying back loans that others offered them. When you co-sign on someone else’s loan, you are responsible for it whether the main borrower repays the loan or not. I would tell my daughter that she needs to make sure she is co-signing for someone who is trustworthy and who has a history of financially responsible behavior. 5. Start Investing Early I realize now that just simply working a regular job and placing my money in a traditional savings account will not be enough if I desire to grow wealth for myself and future generations. I plan to teach my daughter about the importance of investing early and how the compound interest earned on her investments will help her have greater options with her time and money. I want to teach her how to choose the right stocks and bonds, and why portfolio diversification helps during market downturns. 6. You Earn Your Money Through Work Too many young people feel entitled to financial success and the wealth that accompanies it. I want to teach my daughter to know that if she intends to establish a solid financial foundation in adulthood, she must work hard. I will talk about the different jobs I had over the years and how they helped me pay bills and save for emergencies. I plan to nurture any natural talents she has and encourage her to pursue careers that allow her to use them well. I’ll talk about how to write a good cover letter and resume. 7. Shopping Is Not for Recreation While I enjoy shopping for my favorite things, I learned to be smart about my purchases. I will teach my daughter to not treat shopping like an expensive hobby that could be detrimental to her financial future. I want her to learn how to find the best deals on the things she likes to buy, and how to budget for big-ticket items. I would encourage her to not shop because she is bored or just because she had a bad day and wants retail therapy. 8. Make Do With What You Have When I make a big meal, I like to eat off of it for a few days before I buy more groceries at the store. If I’m low on cleaning supplies, I’ll add a little water to the bottle to make them stretch longer until my next payday. If I have a small amount of liquid bath soap, I turn it upside down so more of the soap comes out the bottle. Sometimes I use my T-shirts as sleeping shirts if I run out of clean nightclothes. I would teach my daughter that before she rushes out to buy new items, she should make do with what she has. 9. Use Credit Wisely Personally, I’m not a big fan of credit cards because of the addictive nature of them and the temptation to misuse them. On the other hand, I believe that it is possible for someone to use credit cards wisely in order to build a strong credit history and credit score. My daughter might decide to apply for a credit card one day, so I’m choosing to teach her how to be responsible with credit cards. I would talk about the importance of paying off the entire balance each month and avoiding paying only the minimum balance. 10. Be Generous With Your Money I believe that if you have substantial resources, you should share with loved ones, friends, and community members in need. I want to make sure that my daughter understands the need to be generous and to use her resources to help others. She can do this by donating her old toys and clothes to local Goodwill stores, giving money to meaningful charities, or buying lunch for a classmate whose mom couldn’t afford to pay for it that day. 11. Insurance Saves You Money Without health, car, and life insurance, expenses for certain services can get high if you pay out of pocket. This week, I purchased life insurance and I’m glad I made this decision. I want my daughter to understand that having insurance is important because it can save you money when emergencies occur. If you suddenly pass away and you have life insurance, your survivors will have the necessary funds to pay for your funeral and burial costs. 12. Wealth Is Not Just About Financial Success When I was growing up, I thought a wealthy person was someone who accumulated lots of money and who flashed his fancy cars and clothing everywhere. But nothing could be further from the truth. I know that my daughter will hear messages from the media and her friends about how good it will feel to be rich and famous. However, I plan to tell her what wealth is really about. I want her to know that wealth gives her the freedom and time to live life on her own terms without restrictions to hold her back. 13. Budgeting Matters for Financial Freedom When you know where your money goes each month, it helps you achieve financial freedom. This is why I would like to discuss budgeting with my daughter. If she receives money for birthdays and holidays, I would have her allocate the funds in three categories; saving, giving, and spending. This shows her how she should manage her own money once she enters the workforce. 14. Don’t Be Afraid to Discuss Finances With Your Partner I wrote a post titled Money Talks You Must Have Before Marriage. The information in that post is exactly how I would advise my daughter to talk about money with her future spouse. This is helpful because too often engaged couples neglect these conversations and when financial issues arise in the marriage, they don’t know how to handle them. 15. There’s Nothing Wrong With a 9-5 Job We live in an era where entrepreneurship is touted as the primary way to build wealth but this is actually false. You can work a regular job and still build wealth or even retire early! I don’t want my daughter to get so caught up in hustle culture that she feels bad for not being a highly influential business owner. In fact, it is the 9-5 job that often prepares some people for entrepreneurship.

The post Simple Financial Lessons I Will Teach My Daughter appeared first on Adventures in Frugal Living.

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