Don’t assume your kids are going to learn about how to manage money well in school. There is a growing recognition of the need, but few children are fortunate enough to learn money matters in school—solid foundational principles they’ll hold onto throughout their lives.
If you have kids, teaching them about money rests squarely on your shoulders.
So how are you doing with that? Don’t know where to start? Today, I’ve prepared an important but simple lesson for you to teach to the kids:
Principle: The secret to reaching your goals in life is to make good choices with your money.
If you spend your money without thinking about your choices, you will probably make bad decisions. A wise person considers three important things before making a spending decision:
What causes someone to go on a hunger strike or to climb a tree and not come down until “they” promise not to cut down any more trees? What causes someone to host his own 13th birthday party at a homeless shelter where he gives gifts to 300 children he’s never met? What causes a 16-year old girl to skip lunch every day in order to pay for a tattoo? What causes you to do the things you do? The answer is values. Values are things like kindness, love, self-worth, spirituality, respect, fairness, compassion, creativity, thrift and faith. Make a list of your top seven values.
2. WANTS VS. NEEDS
Sometimes it’s not easy to tell the difference between a want and a need. Basically, a need is necessary to sustain life, health, safety or to comply with a legal obligation. Food, shelter, clothes, medicine, and paying taxes are “needs.” A video game is a want. But it’s not always that clear-cut.
Are Lucky brand jeans a need or a want? Well, clothes are a need but paying a lot of money to get a certain brand crosses over to a “want.” There is nothing wrong with wanting things. It’s just important that before you make a spending decision you are clear in your mind whether this is a need or a want.
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3. OPPORTUNITY COST
What you give up when you make a spending decision is called the “opportunity cost.” Let’s say you’ve got $10 in your pocket. You can either save it or spend it. If there are four things you want to buy with that $10, you have to make a choice. Let’s say you choose to buy a cool T-shirt with it. You gave up the choice of saving it which was your second choice. Ten dollars becomes your “opportunity cost.” Every decision you make with your money now and in the future will have an opportunity cost. If you can train your brain to calculate and think about the opportunity cost before you make a spending decision, you will start to make better choices with your money and you will have fewer regrets.
There’s a popular belief in our society that you can have it all. That’s just the line from a commercial. It’s not true. You cannot have it all, but you can have enough.
Every day of your life you will make decisions and many of them will involve money. As you begin to make good decisions and prove you can be responsible with money, you’ll have more of it to take care of and your life will be more enjoyable.
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