I hope that you can teach your children proper etiquette, positive values and a balanced diet. But can you teach them financial security? Can you really know what to say about money to them?
Zisa is the author of The Early Investor: How Teens & Young Adults
Will Become Wealthy. We spoke about our community-based children and the value
— and the rareness — of high school financial education. Zisa shared the most
important lessons for all children of secondary schools to remember when they
graduate.
Saving money is not the same as spending money
Saving basically puts the money into accounts like a deposit, check, or cash on a bank. Cash deposits including short-term CDs can also be included (Certificate of Deposits). With investing, you can even make your money incredibly secure and readily accessible. Investing is the act of spending the capital to purchase securities such as stocks, shares, property, and other investments that are expected to rise in value for a longer period of time. Investing your money was the best performer of your career.
Use compound interest
Compounding is when your savings and/or dividend income generates extra
income. In other words, the aggregation is where the income generates income.
Compounding really lets the wealth rise exponentially! The younger you are, the
more time you have to work together.
Start early investment
This is the stage on which Zisa is most adamant. It was his drive to
write his book. The quicker you start investing your money, the longer you need
to allow the benefits of combining to generate capital over the long term.
Consider this: if you begin to spend $3,000 a year at an average growth rate of
6% at age 25, you’re around $680,000 by age 65. If you’re just 35 years of age,
you’re worth $260,000. Time has the most important influence on long-term
wealth generation. Begin to invest now.
Don’t buy stuff that you
can’t afford
We live in a world that now needs and wants things. There’s nothing
wrong with wasting money, so it’s all wrong if you don’t spend it. The money
you spend does not contribute to the accumulation of debt that will lead to a
financial catastrophe.
Use credit cards responsibly
Credit cards will be a big part of your financial life. The loss of your financial well-being may also be credit cards. Many adults have used credit cards to buy needless and frivolous goods only for extreme debt, which may be unavoidable. It is important to note that by using a credit card, you borrow money that you must repay. A couple of important items to note about a credit card:
- Pay
the whole balance by the due date
- You charge extraordinarily high interest rates
if you don’t pay the whole balance
- Don’t buy things with a credit card without
the money you have to pay for them.
- Keep in mind introductory interest rates and
balancing deals
- Scan the print (the very small print you do
not want to read) of the credit card.
Purchase properties rather than obligations
Purchase stuff that makes you money, not stuff that makes you owe money!
For example, when you invest in a stock that pays a dividend (a portion of the
company’s profits) every three months, you collect cash for not doing anything
at all. If you buy a mortgage, every six months you collect interest payments.
This is referred to as passive profits. Conversely, if you buy a loan of some
kind, you already have accrued debt that you have to pay with interest.
Obviously, such loans, such as a mortgage, might be required to buy the first
home or even a car loan. But other debt forms will maximize your liability and
hamper your wealth-building capability.
Set a budget to save a rainy day
A budget is essentially a projection, normally monthly, of projected revenue and expenditures for a given time in the future. You will track how much money you spend on some goods and services by setting a schedule. A vital element of the budget is to set up a cash account, known as an emergency fund, every month. An emergency fund is funded you saved to provide cash for an unusual incident in your life. You should preferably have an emergency fund equivalent to living costs of three to six months. You should keep the emergency fund safe, easily accessible assets such as a deposit certificate (CD), a money market account, or just a savings account.
Zisa obviously assumes that the
financial stability journey starts early. As in all aspects, parents should
teach their children financial literacy through role models. You will save and
save your own children if you live beyond your means and learn the behaviours
required to live a less exhausting and rewarding life.
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