4 Things that your kids need to understand about money

When it comes to our children, we try to do everything that we can to prepare them for the future that we want them to have and most often the future that they want as well. There are four things that your child needs to understand about money and financial wellness. As a parent, it is important that you take the time to go over these four things and help them plan for a solid financial foundation in the future. When you take the time to do this, you are showing your child how to manage their financial wellness at a young age.

Asset and Liabilities

The first thing that you want to go over with them is the difference between an asset and a liability. Assets will put money in their pockets while liabilities will take money out. The more assets that someone has, the better prepared they are when anything takes a hit at their financial foundation. This is a reality that the world is seeing in full color right now with the current pandemic going on. When you teach your child to maintain as many assets as they can you are teaching them the importance of being prepared for whatever it is that the future might bring.

Cashflow and capital gains

The next thing that you want to go over is the difference between cashflow and capital gains. When you invest with the ideal of capital gains, you have no actual control over whether or not things go up or down. When you invest with the purpose of maintaining and building cash flow, you have the benefit of having a long term asset in place that you can have bringing you in funds on a regular basis.

Good debt and bad debt

You also want to discuss with them the difference between good debt and bad debt. Bad debt would fall under things like credit cards, vacations or other mundane things you do not necessarily need. Good debt is found in examples such as rental properties where the tenant would pay your debt for you and grow into long term cash flow. Most good debt like the provision of housing for others can also acquire you some tax breaks as well.

Financial self education

Make sure that your children understand that they need to have their own financial education as well. Having wealth and not understanding that wealth is useless at its core. You never want them to be in a position where they have to rely on other people in order to figure out what they need to do with their own money. When they have the knowledge to know what is best to do with their money, then they can move forward to having a better financial future.

Conclusion

Making sure that your children have a solid foundation for their financial future is important. It is your responsibility to give your best shot at a solid foundation in the future. Take the time to teach your children about financial wellness and they will forever be grateful for it. They will appreciate that you took the time to prepare them for their future.

The 4 Things that your kids need to understand about money

When it comes to our children, we try to do everything that we can to prepare them for the future that we want them to have and most often the future that they want as well. There are four things that your child needs to understand about money and financial wellness. As a parent, it is important that you take the time to go over these four things and help them plan for a solid financial foundation in the future. When you take the time to do this, you are showing your child how to manage their financial wellness at a young age.

Asset and Liabilities

The first thing that you want to go over with them is the difference between an asset and a liability. Assets will put money in their pockets while liabilities will take money out. The more assets that someone has, the better prepared they are when anything takes a hit at their financial foundation. This is a reality that the world is seeing in full color right now with the current pandemic going on. When you teach your child to maintain as many assets as they can you are teaching them the importance of being prepared for whatever it is that the future might bring.

Cashflow and capital gains

The next thing that you want to go over is the difference between cash flow and capital gains. When you invest with the idea of capital gains, you have no actual control over whether or not things go up or down. When you invest with the purpose of maintaining and building cash flow, you have the benefit of having a long term asset in place that you can have bringing you in funds on a regular basis.

Good debt and bad debt

You also want to discuss with them the difference between good debt and bad debt. Bad debt would fall under things like credit cards, vacations or other mundane things you do not necessarily need. Good debt is found in examples such as rental properties where the tenant would pay your debt for you and grow into long term cash flow. Most good debt like the provision of housing for others can also acquire you some tax breaks as well.

Financial self-education

Make sure that your children understand that they need to have their own financial education as well. Having wealth and not understanding that wealth is useless at its core. You never want them to be in a position where they have to rely on other people in order to figure out what they need to do with their own money. When they have the knowledge to know what is best to do with their money, then they can move forward to having a better financial future.

Conclusion

Making sure that your children have a solid foundation for their financial future is important. It is your responsibility to give your best shot at a solid foundation in the future. Take the time to teach your children about financial wellness and they will forever be grateful for it. They will appreciate that you took the time to prepare them for their future.

The 3 Things you can teach your kids about Money

Difference Between an Asset and a Liability

Assets put money in your pocket. Think of a rental property, a business, a skill. A Liability is something that takes money out of your pocket (that is why your primary house is a liability) Credit Cards, your home, your car are all liabilities. Explain this in children’s terms using their allowance. Most kids will just buy liabilities. Candy, games, etc. But open their minds a bit. Have them save to buy a rake and then use that rake to rake yards in the neighborhood for a profit. Or buy business cards to pass out where they can pet sit. The rake and the business cards are assets for children because they are vehicles for them to make more money.

With my kids when they were little we would go pick up golf balls from the course and sell it the next day to the golfers for $1 a ball and $5 for the nice golf balls. My kids were easily making $100 a day. Those golf balls were producing a profit for them far greater than their allowance for picking up their room.

Explain why it is so important to have so many assets under your ownership

When they start seeing profitability from one of their assets explain to them they can have another one. Show them the more assets they have the more opportunity they have to make money. This is diversifying your assets. For example, if they buy a rake to rake leaves their profits will be highest in the fall and non-existent in the winter, so they need multiple assets, so they can withstand the highs and lows.

Cash Flow vs Capital Gains

This is a tough one to teach kids, for adults we understand this. We know if you try and flip a house or sell an asset that is it very risky. For one, you have to try and time the market perfectly and second you pay the highest tax rate even if you do so successfully. I believe it is like gambling, you may win one hand, but will eventually lose it all on red. This is a bit over a child’s head. Capital gains, tax, etc. What I don’t think is over their head is cash flow. So for this lesson, have them take their business and create a recurring revenue around it. For example, if they pet-sit for $15 an hour, tell their clients there is a $10 monthly fee to be able to book services at that price. If not, it is $25 an hour. Explain to their customers what you are trying to teach them. If you can show your kids a monthly cash flow that comes in without them having to go and find more business I think that is a great groundwork for the cashflow vs capital gains conversation later on when they are older.