Financial competence is an essential skill that any teenager or young adult has to learn. It means knowing how to spend wisely and how to save. As young adults, this skill is vital for their survival and success in the adult world. It can mean the difference between having a house to live in and being homeless, or having the means to buy that shoes you saw on the window and being in card debt. Being financially savvy can spell the difference between homelessness and success, in later life.
They learn to be financially savvy
By teaching them how to save at such a young age, that lesson is inculcated in their brains by the time they grow up. At an early age, they learn the value of money. This translates to knowing how to spend money wisely. They learn what purchases are essential and what purchases are just mere luxuries. Expenses for food, lodging and the costs involved with driving are essential purchases, but the newest Chanel bag is just a mere luxury. By knowing the difference, they can then decide whether or not they can afford the luxury item, and when they can purchase it. It also includes the question of whether or not they should buy it at all.
They learn to be financially independent
Being financially savvy translates to financial independence. People who cannot control their spending habits become slaves to their credit cards. They start off a cycle of debt, where the person purchases non-essential items using a credit card, without the funds to pay for it fully. They pay the minimum monthly payments but the interest and the principal just starts to pile up until they are so buried under debt. Financial independence also means that they can control their finances without letting it overrun their lives. It can mean taking a mortgage on a house but with a clear plan on how to pay for it. It can mean taking a car loan with a definite monthly budget for its payment. It doesn’t mean your child will not need financing help anymore, it just means your child will be able to maximize the opportunities provided by financing.
They will learn how to be successful
Being financially independent is the first step to success. When they can take charge of your finances, they can manipulate it and maximize its benefits. They can make use of financing to set up their own business without shelling out a big chunk of money. Financial savvy will also allow them to be successful in any business venture they enter. After all, the success of a business depends on whether it is making a profit or not. If the leader of the business knows when to take risks with their investments, the business will be able to avoid bankruptcy. If the business leader knows how to manage the company’s finances, there is no surprise if the company flourishes in the long run.
Starting a child early in the art of saving and spending wisely will be a big benefit to them when they become young adults, and eventually mature adults who are in charge of their lives.