Question: Living debt free - is this the most important thing to teach my children about money?
Answer: Almost. Living without debt is extremely important when it comes to learning about money.
The sad fact is that many people are not taught the ins and outs of money, which is why they are so keen on getting more credit cards, spending money, and not thinking through to the consequences.
"There is no comparison between that which is lost by not succeeding,
and that which is lost by not trying."
- Francis Bacon |
Children who see their parents living within their means are very likely to grow up and do the same, and escape the perils of dealing with extreme debt and credit related issues.
Money troubles often plague families and the stress can drive them apart. Children are rather sensitive and pick up on things that their parents display, even if the parents are not aware of it.
Teaching children from the start not to spend their money in one place and to live within their means is the perfect way to put them on a path of financial responsibility – a path of living debt free.
While showing children how to avoid debt is important, you also need to show them what to do with their money if they are not going to spend it. Otherwise they will not fully understand the real power of money.
Too often people operate on a simple concept, “I earn money, therefore I must spend it.” This sort of thinking can quickly lead to major debt problems.
Show your child that saving their money is a smart and rewarding option. If you give your child a weekly allowance, you might want to consider eventually opening a savings account for them. Then every month show them the bank statement and point out what they have earned. The prospect of earning money without work appeals to everyone.
Be sure to point out the interest they earned on their money – is will teach them the value of compound interest, which is a very important money lesson. As your child grows, you can continue their education, from living debt free to creating better investment options.
It is important to note that most people tend to have some sort of debt; college tuition, purchasing a house, and buying a car will often lead to signing on the dotted line for a loan. But if you start now, you can teach your children how to avoid credit cards altogether, to save their money in order to pay cash, and to live well within their monthly paycheck.
Parents are encouraged to educate themselves first, and then their kids.
Living debt free provides opportunities in life that might not otherwise be possible. Even if you currently have debt, you can begin today to work toward paying off your debt so that you can exhibit the behaviors that you wish to instill in your children. You will, in effect, be changing your family tree in a very positive way.
Teach them these things throughout their life, from their time as a youngster all the way into their college years, so that by the time they are an adult, they will be financially savvy and on the path to success.
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"No man's credit is as good as his money."
- Edgar Watson Howe |
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Debt is NOT your friend. It's not a wonderful "tool" for building wealth. That's a myth.
