We are living in the days when too often we, adults, act like kids: we act like money grows on trees; buy things we want when we want them and not when we can afford them; focus on today like tomorrow is going to take care of itself. Words like budget, discipline, or savings make many roll their eyes. Probably we all know somebody in their late twenties, living with parents, not having a stable job, and while being healthy, spending hours playing video games. If you don’t want that to be a description of your child in the future (I certainly do not), we need to take this money talk seriously, starting with ourselves. This post is part 1 of the series where we will look at money, how to manage them and teach kids too.
Many financial experts advise to start with building up an emergency fund, that should be able to cover three to six months of living expenses. The primary reason is to have money in case of an unplanned event such as a layoff or unforeseen medical expenses. While none of us want to think about it, most experience at least one in their life. Here are 5 principles to follow and teach kids about savings:
Start with the Why
Kids are great at asking questions. While after 191st question, it might get overwhelming, in general, it is an excellent quality that helps them learn about the world. Saving money is not something ordinary, so starting with explaining WHY it is important and might be a good idea. For yourself first and kids second. An emergency savings fund can give peace of mind and prevent worrying about being unprepared for unexpected expenses and stress related to it. Having an emergency savings fund is highly essential to the financial security of the family.
Lay down the plan
Saving up for an emergency fund is not a very complicated thing, but at the same, without the game plan, it might not go very far. After establishing why, the next step is to decide how and how much. The amount usually suggested by financial advisors is 3 to 6 months of expenses (depending on how secure your current situation is). For kids, for example, emergency fund idea is not suitable so find some toy or experience they really want, like entry tickets to a Legoland if you are planning a trip or new rollerblades.
Remember, your emergency fund is not an investment. “It’s insurance. Insurance costs you money to protect your investments. The money you have sitting there just for emergencies is not there to make you money; it’s there to protect your investments because if you don’t have the emergency fund, you will borrow money and pay out interest and horrible terms to some bank.” Dave Ramsey
Lead by example
As parents, our words are much more powerful and effective when we live what we preach ourselves. If you are spending money left and right buying most recent gadgets without reason to- don’t expect children to take your saving advice seriously.
“More is caught than taught!” It might look silly, but visualizing your process might be a great way to demonstrate what working towards the goal looks like.
Make it fun
Fun? Not the word you thought about in regards to savings, huh? Well, it can be, and it should be. Establish positive memories! To save money, kids need to make money so start by finding some fun ways and helping them along the way (it can be a separate topic, and it probably will be but keep in mind it should be age appropriate). Next, make every milestone well recognized and celebrated. If a kid is saving for a new remote control car, for example, draw one and color a part of it representing the percentage of the total amount.
Keep it consistent
Good and healthy habits take time to be developed, but are so worth it! Depending on the emergency fund amount you need, it might be a long journey with bumps along the way. Don’t let it stop you. Remember it is a marathon, not a sprint. While it is a number game for you, for your kids it is more of a teachable moment so keep the fun aspect of it while reminding about the importance of the disciplinary aspect as well.
In conclusion, here is a practical step for you to take today: sit down and calculate how much to you need to be in your emergency fund and how much do you have now? Look at the budget (start one if you haven’t yet) and figure out how much can you save up every month or what can you sell to speed up the process. It might vary month-to-month but keep in mind, money problems are the number two cause of divorce in America, so this is another way for you to prevent it in advance! 🙌
If you need help, feel free to reach out to professionals over at COUNTRY Financial®, who is the sponsor of this post and who help families like yours achieve greater financial health!
To find out more about COUNTRY Financial, click here.