Financial literacy: Ways to manage money while you are still young

 

Ways to manage money while you are still young. [Source/ Pinterest]

There are many important aspects of parenting, and one of them is financial security. I am confident that you will be able to instill in your children the right manners, positive values, and healthy eating. However, can children be taught financial security? Do you really know what to tell them about money?

I recently got the opportunity to talk with Mike Zisa. He is presently a financial consultant and a teacher at Bucks County’s Pennsbury High School. “The Early Investor: How Teens and Young Adults Will Become Wealthy” is Zisa’s first book. We discussed our neighborhood children and the need — and rarity — of high school financial education. Lisa discussed the most critical things that every secondary school student should remember after graduating.

7 Things Every Teenager Should Know About Becoming Wealthy:

1. Saving money is not synonymous with spending it

Saving entails depositing cash into bank accounts such as deposits, cheques, or cash. Cash deposits, including short-term certificates of deposit, may also be included (Certificate of Deposits). You may even make your money extraordinarily secure and easily accessible by investing. Investing is the process of using cash to acquire assets such as stocks, shares, real estate, and other investments that are expected to appreciate over time. Your career’s top performance was investing your money.

2. Take advantage of compound interest

Compounding refers to the method through which your savings and dividend income generate extra earnings. In other words, aggregation is the process through which money becomes income. Compounding allows wealth to grow tremendously! The younger you are, the more prospects for collaboration you will have.

3. Begin investing early

Zisa is most emphatic at this point. It was his motivation for writing his book. The sooner you begin investing, the longer you must wait for the long-term advantages of combining to build cash. Consider this: if you start spending $3,000 each year at the age of 25, and the average annual growth rate is 6%, you will have around $680,000 by 65. You are worth $260,000 if you are just 35 years old. The most significant factor affecting long-term wealth growth is time. Begin investing now.

4. Avoid purchasing anything that you cannot afford

Financial literacy: Ways to manage money while you are still young

We currently live in a world that requires and desires stuff. There is nothing wrong with wasting money; but, there is something wrong with not spending it. Your spending does not contribute to debt building that will eventually result in financial ruin.

5. Make prudent use of credit cards

Credit cards will likely play a significant role in your financial life. Credit cards may also be a source of financial distress. Many individuals have used credit cards to purchase unnecessary and frivolous items to avoid significant debt. It is critical to understand that when you use a credit card, you are borrowing money that you must repay. A few essential points to remember concerning credit cards:

• Pay the remaining money in full by the due date;
• You impose exorbitant interest rates if you do not pay the entire sum in full;
• Avoid purchasing anything using a credit card unless you have the funds to pay for them;
• Maintain an eye out for introductory interest rates and balanced promotions;
• Scan the credit card’s print (the tiny image that you do not want to read).

6. Invest in real estate rather than debt

Purchase items that generate revenue for you, not items that cause you to incur debt! For instance, when you invest in a stock that pays a quarterly dividend (a percentage of the company’s revenues), you get money for doing nothing. If you obtain a mortgage, you will receive interest payments every six months. The term “passive profits” refers to this. On the other hand, if you purchase a loan of any type, you have already acquired debt that you must repay with interest. Naturally, such loans as a mortgage may be necessary to purchase a first house or even a car. Other sorts of debt, on the other hand, raise your obligations and hamper your ability to generate wealth.

7. Create a budget to save aside money for a rainy day

Financial literacy: Ways to manage money while you are still young

A budget is simply a monthly prediction of anticipated revenue and expenditures for a specified period in the future. By creating a timetable, you can track how much money you spend on various items and services. A critical budget component is the monthly establishment of a cash account, referred to as an emergency fund. An emergency fund is money set aside to meet the costs of an unexpected incident in one’s life. Ideally, you should have three to six months of living expenses in the emergency fund. You should keep the emergency fund in insecure, easily accessible assets like, for example, a certificate of deposit (CD), a bank account, or simply a savings account.

Zisa implicitly implies that the route to financial security begins early. As with other elements of parenting, parents should model financial literacy for their children. You will save yourself and your children if you live beyond your means and develop the behaviors necessary for a less tiring and rewarding existence.

Read the original article on Finance Ritual.