As the parent of a teenager, one of the most important things you want to pass on to your kids is how to achieve financial freedom. This is especially true if you yourself have struggled with personal finances over the years. If that’s the case, you know firsthand how mismanaging your money can lead to a downward spiral that is difficult to reverse.
There are a lot of personal financial tips that you could teach your teen, but here are three of the most important ones.
- Get a Good Education
They say that knowledge is power, and this is certainly true when it comes to managing your money. One of the best things you can do for your kids is to encourage them to pursue higher education. There is no denying the fact that people who have college degrees tend to earn more money than people who don’t.
But a college education comes at great expense. A bachelor’s degree might not be enough in today’s economy for your teens to flourish as adults and achieve financial freedom. They will need to pursue a master’s degree or higher, and this likely means they will need to get a financial aid through government loans or private lending institutions.
Whether they get a loan from a private lending company, or another source, a low interest-rate is absolutely necessary. Otherwise, they risk spending the rest of their life paying off their loans. High interest loans are no way to achieve financial freedom.
- Don’t Rely on a Single Income Stream
Another important tip to pass on to your teens is the importance of building multiple streams of income. In the old days you could get a job, move up the ranks and stay with a single company for your entire life. Then you could retire with a nice fat pension. But it doesn’t work that way anymore.
Today, you need to have more than one source of income. Your job might be your primary income source, but it could disappear at any moment. So you should teach your teen to also have other investments and perhaps even a side income from a small business of their own.
- Make Positive Cash Flow a Priority
Overall it’s really important that your teen avoid debt spending. Many young people get caught up with credit cards right out of high school, and they end up carrying that debt with them for years and years. High income debt, especially in the form of credit cards, is the biggest destroyer of financial freedom.
The best thing you can do is model this behavior for your kids. But you also need to teach them specifically to avoid using credit card spending when they don’t have sufficient funds in their bank account to cover these expenses. Some credit cards have low rates and no annual fees, so these can help them build their credit score and credit history when used responsibly. But if your kids don’t have the discipline to spend less than they earn every month, then credit cards should be avoided.
There are legitimate reasons to take on debt, such as purchasing a home or expanding a successful business. But using credit cards for everyday purchases when they don’t have enough money in the bank to pay off the bill every month is just stupid.
Teaching your kids how to achieve financial freedom should be one of your highest priorities as a parent. So model and teach these strategies for responsible money management. This will enable your teenagers will be well on their way to achieving financial freedom as early as possible.