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Three Things I Want My Kids to Know About Money (and Life)

June 30, 2011

I’m 46 years old. My husband and I have been married almost 25 years.

A lot of what we believe about money has changed during that time. Some of that is because of our experiences (i.e. mistakes) with money. Some of it is due to just observing things around us.

My kids are 19 and 16. Their financial lives are just beginning.

We talk to them a lot about money.

The teenage years have a way of making that happen. The cost of driving, social lives, clothes…it all has to be negotiated with them.

We try to talk to them about the big stuff too. College, careers, houses.

And because I want them to hear it one more time (yes, I’ll make them read this), and because writing it out is a good reminder for me, here are three things I want my kids to know about money.

And about life.

Because it’s never just about the money.

A house is first and foremost a shelter (and not the tax kind).

I like owning a home. Our house brings us a lot of satisfaction and will hopefully be a paid-for place to live in someday soon.

But most of us now know that a house isn’t guaranteed to appreciate in value. In fact, some people have seen their homes plummet in value to the point where they’re walking away from them.

Here’s what I want my kids to know about buying a house:

  • Buy a house because you will enjoy living there.
  • Buy smart and hope that it also appreciates in value.
  • Use the mortgage interest tax break to help make the house more affordable.

However,

  • Don’t buy a house because you think it’s some requirement for the American dream. The real American dream is living on your own terms.
  • Don’t buy a house for the tax break alone (it’s not that great and could even go away someday).
  • Don’t buy more house than you can afford. (I like Dave Ramsey’s formula of 20% down and a 15 year mortgage.)
  • Don’t borrow against the house to buy a car, pay off credit cards or send your kids to college.

And speaking of college…

A college education is a tool, not a golden ticket.

I believe in college educations. My husband and I both have them and both of our kids are expected to get them.

But I don’t think about college educations in the same way I used to.

In our day (how old do I sound now?) college educations were much cheaper to get and carried more weight. Now they’re more expensive and more people have them.

We have one child in college and another soon to follow and here’s what we’re teaching them about college:

  • A college education is a tool and it’s only one tool in the tool box. (The others include a well-rounded resume, life experience, work experience, people skills, your willingness to keep learning after college, and good money management.)
  • A college education is not a golden ticket to future wealth or a certain job. (Even majors that were once considered “sure things” as far as jobs go, like nursing and education, are no longer sure things.)
  • There are other ways to get a college degree besides going into major debt. (See How to Send Your Child to College Without Student Loans and Are Student Loans the Next Housing Crisis?)

Hopefully, however, your degree will lead to a good job. Just remember that…

A job is only a stream of income.

It’s true that — for most of us — a job is the largest stream of income we’ll ever have.

But jobs come and go.

Any job you hold needs to be part of your bigger plan. That job shouldn’t be the plan.

With that in mind, use the money from your job to:

  • Buy everything you need.
  • Buy a little of what you want.
  • Build an emergency fund.
  • Invest for your future.

Don’t use a job to qualify for lots of debt that will become a burden to you if you ever:

  • Lose your job.
  • Would like to do something different.

I know you don’t think that those things will happen, but one or both of them probably will.

So how about you? What do you want your kids to know about money? Has it changed over the years?

  1. I’ve been surfing the net today for good finance blogs, and I found yours! I love it! You’re suggestions are wonderful, and I wish I would have learned some of those lessons a lot earlier in life. I’ll definitely have to follow your blogs from now on :-)

  2. This really is a great summary of everything you need to know to start out successfully in the world of personal finance. This kind of thing should be compulsory reading for young people. It really is a shame that we weren’t all taught this at an early age. Oh well, at least your kids know it! :)

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