I recently read only 30% of Americans could ace a relatively simple, three-question test about finances. (you can find the test here)
After reading the questions, it is sad more adults don’t understand basic financial concepts.
Don’t you wish our educational system taught us what the hell to do with our money once when we became adults?
It would help us out, especially when we became parents.
If I haven’t told you before, I spent nearly a decade as a financial advisor. That means I had my Series 7 (Stock broker license) and a few other certificates no one really cares about.
After I realized 95% of financial companies only cared about their bottom line and not the customer; I abruptly quit.
However, during that time in the financial world I learned a lot of valuable information.
Today I want to share with you the 10 money lessons for parents.
1) Invest in Yourself First
Everyone tells you to invest 10% of your money into a retirement plan. That is ok advice, but some great advice is investing in yourself first.
Try to invest a minimum of 3% back into yourself every year. This small investment will pay dividends and increase your earning power exponentially.
Look into courses, conferences, and books. These types of platforms are far more powerful than traditional education. You will also get ahead faster because the majority of people stop learning after they receive their diploma.
The best decision I ever made was listening to a podcast about selling on Amazon. Since listening to that podcast I have turned $75 into over $300,000 in sales.
2) Get Insured
I’m not here to preach, but once you have a family then you must get life insurance.
This is important because you have a responsibility, to your family, to ensure they are taken care of whether you are here or not.
How much do you need?
If you don’t have insurance, get it today. It’s cheap and you can get a good term policy over the internet.
3) Wills & Trusts
When you become a parent, there are decisions you have to make that you probably didn’t even know about.
Every parent needs at least a Will and probably a Trust.
If you die a Will dictates who gets what; including your children. When you don’t have a Will and both you and your spouse pass away, the state will determine who gets your children.
A Trust allows you to control your money from the dead (to an extent) after you pass away.
Both of these are important for you to ensure your family is taken care of if you pass away prematurely. Any attorney can help create these documents or you can do them yourself at a site like Legal Zoom.
4) Please, Change Your Beneficiaries
When I was working in the banking industry a recent widow walked into my office with her late husband’s life insurance and retirement account paperwork.
After quickly looking at the papers, it was apparent her husband never changed the beneficiaries. Her husband’s mom was the beneficiary on EVERYTHING.
To make a bad situation worse, her mother-in-law didn’t like her.
Here was a woman who just lost her husband, had three young children, and was about lose out on over a million dollars.
Please take the time to update beneficiaries on life insurance, retirement plans, and all financial accounts.
5) Automate Your Finances
To make life easier, you need to learn to automate your finances. It is probably the best psychological tool to mastering your money and taking control of your life.
It is proven that people who automate their finances save more money, pay more bills on time, and have more time.
If you want to learn how to get on board with automating your finances, start with Glen Craig’s article from Free From Broke.
6) Get Out of Debt
One way to be a better parent is to get out of debt. I believe this improves your parenting skills at least 50%.
When you are in debt (especially heavy credit card debt) you are constantly thinking about how are you going to get out this mess. This isn’t fair to your family.
Debt creates stress and this often leads to fights. It is actually the number one reason people get divorced.
Once you get out of debt you can take all of that time you spent worrying and focus it on your children and spouse. You become present.
If you want to read a great inspirational story about how a couple got of debt in 18 months, then check out this article at the Money Peach. I think this will motivate any young couple.
7) Forget the Kids Education Account (for now)
One of the biggest mistakes I see parents make is opening up education accounts for their children before taking care of other financial obligations.
If you are in debt, get out of debt first. If you have never invested in yourself, do that first. If you don’t have a savings account, start one first. If you haven’t started saving for retirement, put at least 10% of your salary away first.
I understand you want to give your children everything, but when it comes to college there are ways to pay for it. When it comes to your retirement, there is no other way to pay for it other than saving money.
8) Buy Your Freakin Latte
As parents, we already sacrifice a lot. If you spend $3.00 on a latte because you enjoy it, then by all means buy that freakin latte.
Let’s be real, $90 a month is not going to make or break you financially. However, it may break you mentally because you are already giving up so much.
My thought is you should spend money on things you love and save on things you don’t care about.
For me, I love coffee, living in a nice house, and doing things with my family. On the other hand, I don’t care what kind of car I drive so we have two cars, 187,000 combined miles on them, and no car payments.
9) Your Kid Probably Isn’t Going Pro
Parents spend WAY too much on kids athletics – in upwards of $5,000 a year for their child to play club sports.
Then more money on traveling, private coaches, and equipment.
What? That’s insane!
My reaction exactly.
The chances your child will become a pro athlete are slim to none.
Don’t believe me? Check out this article detailing the odds of your child playing a pro sport from NPR.
Just look at Michael Jordan’s kids. If his sons couldn’t make the NBA, your child probably won’t either.
Instead of spending that money on sports, think of things you could do.
- Go on vacations
- Save some money for retirement
- Pay off debt
- Start a side business
- Save for college
If you really want to help your children, then put them rec sports and spend money on teaching them real life skills.
10) Start a Side Business
Your time is limited, but having a side business is one of the best things a parent can do.
Today there are so many opportunities for you to build something on the side.
The money you make from these side gigs can transform your life. They can help you pay off debt, retire early, save extra money, pay off debt, and so much more.
A little known secret about side businesses is often you can start them with a relatively small investment. (Click here to read about the 26 Side Hustles any parent can start)
Everyone is on their own financial journey.
Sometimes it’s difficult and sometimes it’s confusing. No matter where you are in that journey, the financial moves above will help you and your family live a wealthy life.