Finance 05 June 2019
When you think of money, what comes to mind first? For most people, it's lack. Money sparks images of bills and debt instead of wealth and abundance.
Isn't that a curious kind of thing? Money is a very physical thing that can come in the form of paper or coin – but most people in our society associate it with the opposite. When you hear the word money, your mind actually thinks about the feeling of not having money instead of thinking about the physical money.
But when you really delve into the topic, it makes a lot of sense. We naturally associate words with feelings. And for most of us, money elicits feelings of lack. It's a cycle that begins at a young age… but it doesn't have to.
That's one reason why it's important to teach your tween how to save now. If your tween starts saving now, she can face those defining moments of young adulthood from a perspective of abundance instead of lack.
The money mindset begins now
By the time your child approaches his teenage years, he has already begun to form an opinion on money. And there's some good news and bad news: Those opinions largely come from you and your relationship with money.
If you've got it all figured out, there's nothing but good news in the equation. But if you have some work to do on your own money mindset, it's not all sunshine and roses.
But there's a silver lining…
Once you've identified your own blocks, you can course correct with your child. Take a look at your own spending habits to see whether you can dissect any hidden beliefs you may have about money. If you can't, and you have trouble with saving, spending or making money, you may want to talk to someone who specializes in the money mindset.
At the very least, read a book about creating positive habits around money, so you can pass on some healthier habits to your tween. The relationship he forms with money today will stay with him for a lifetime, so this is important.
Compound interest is a young adult's best friend
Compound interest is the easiest way to explain the benefits of saving to your young adult. If you have an account where you can illustrate the benefits of compound interest over time, now is a great time to share the learnings with your child.
If not, no worries. You can still walk through an example of compound interest with the money your tween has to invest.
For example, let's say your 13-year-old child has $1,000 today. She invests that money into an interest bearing account for the next 10 years. Without adding a dime (or withdrawing a dime), at an 8 percent interest rate, that $1,000 will more than double. And it may not seem like a lot, but the longer you leave the money there, the more it will grow. After 20 years, you'll have four times as much in the account at the same interest rate.
And, naturally, the more your child invests, the greater the benefits. It's always better to invest early than to try and catch up later.
Emergency funds can save your financial future
Now's a good time to teach your child what could happen if you don't have an emergency fund.
Most of us learn by example, so let's explore one possible scenario:
Bob graduates college and gets an apartment with his friends. He has a job earning $7.25 an hour and that barely covers his living expenses. After living expenses, Bob always has about $150 left in the bank. This is his "entertainment money," and he always spends it.
But this month, Bob's certified preowned Volvo broke down. The cost of the repair was $200. Now, Bob has -$200. He was forced to take on credit card debt to get his car fixed. His bills just got a slight increase because he's making minimum payments on his credit card.
By making minimum payments, Bob will take nearly 2 years to pay off that credit card and pay an extra $52 at a 24 percent APR.
This is one strike. And there will inevitably be more to follow.
It's easy to see how things can snowball from here. When you're spending money you don't have, it will always cost you. As overdraft fees, late fees and interest charges pile up, you'll end up losing money you don't even have. It's difficult to catch up once you've fallen down this rabbit hole.
That's why an emergency fund is so crucial.
If you want your children to experience financial freedom, you have to equip them with the right tools. What techniques are you using to tach your kids about money?
It is one thing to read and another thing to understand what you are reading. Not only do you want to understand, but also remember what you've read. Otherwise, we can safely say that if we're not gaining anything from what we read, then it's a big waste of time.
Whatever you read, there are ways to do so in a more effective manner to help you understand better. Whether you are reading by choice, for an upcoming test, or work-related material, here are a few ways to help you improve your reading skills and retain that information.
Read with a Purpose
Never has there been a shortage of great books. So, someone recommended a great cookbook for you. You start going through it, but your mind is wandering. This doesn't mean the cookbook was an awful recommendation, but it does mean it doesn't suit nor fulfill your current needs or curiosity.
Maybe your purpose is more about launching a business. Maybe you're a busy mom and can't keep office hours, but there's something you can do from home to help bring in more money, so you want information about that. At that point, you won't benefit from a cookbook, but you could gain a lot of insight and find details here on how-to books about working from home. During this unprecedented year, millions have had to make the transition to work from home, and millions more are deciding to do that. Either way, it's not a transition that comes automatically or easily, but reading about it will inform you about what working from home entails.
When you pre-read it primes your brain when it's time to go over the full text. We pre-read by going over the subheadings, for instance, the table of contents, and skimming through some pages. This is especially useful when you have formal types of academic books. Pre-reading is a sort of warm-up exercise for your brain. It prepares your brain for the rest of the information that will come about and allows your brain to be better able to pick the most essential pieces of information you need from your chosen text.
Highlighting essential sentences or paragraphs is extremely helpful for retaining information. The problem, however, with highlighting is that we wind up highlighting way too much. This happens because we tend to highlight before we begin to understand. Before your pages become a neon of colored highlights, make sure that you only highlight what is essential to improve your understanding and not highlight the whole page.
You might think there have been no new ways to read, but even the ancient skill of reading comes up with innovative ways; enter speed reading. The standard slow process shouldn't affect your understanding, but it does kill your enthusiasm. The average adult goes through around 200 to 250 words per minute. A college student can read around 450 words, while a professor averages about 650 words per minute, to mention a few examples. The average speed reader can manage 1,500 words; quite a difference! Of course, the argument arises between quality and quantity. For avid readers, they want both quantity and quality, which leads us to the next point.
Life is too short to expect to gain knowledge from just one type of genre. Some basic outcomes of reading are to expand your mind, perceive situations and events differently, expose yourself to other viewpoints, and more. If you only stick to one author and one type of material, you are missing out on a great opportunity to learn new things.
Having said that, if there's a book you are simply not enjoying, remember that life is also too short to continue reading it. Simply, close it, put it away and maybe give it another go later on, or give it away. There is no shame or guilt in not liking a book; even if it's from a favorite author. It's pretty much clear that you won't gain anything from a book that you don't even enjoy, let alone expect to learn something from it.
If you're able to summarize what you have read, then you have understood. When you summarize, you are bringing up all the major points that enhance your understanding. You can easily do so chapter by chapter.
Take a good look at your life and what's going on in it. Accordingly, you'll choose the material that is much more suitable for your situation and circumstances. When you read a piece of information that you find beneficial, look for a way to apply it to your life. Knowledge for the sake of knowledge isn't all that beneficial. But the application of knowledge from a helpful book is what will help you and make your life more interesting and more meaningful.