John Coleman is a father of three living in Tennessee. He shares tips related to smart money management, family life, and home improvement.
Teaching kids about money is essential if they’re going to grow into financially responsible adults. Unfortunately, the school system doesn’t do it, and if you think the Internet is a good resource, well, let’s just say there’s a good bit of misinformation out there. As a good parent, the responsibility falls entirely on you. When you take on this task, however, it’s important to practice what you preach, and there are far too many financial mistakes that parents commonly make. Most of these don’t happen on purpose, but it’s how you deal with them that’s important.
1. Falling Into Credit Card Debt
The average American adult carries $3,037 in credit card debt according to the Federal Reserve. Do not let yourself fall into that trap. If you don’t currently have a credit card balance, commit to never carrying one. If you do, devise a pay-off plan and put it into motion immediately. Reduce your monthly bills, save on groceries by clipping coupons, and refinance your home loan if it makes sense.
2. Not Saving for Retirement
The National Institute on Retirement Security reports that roughly 45% of American households have nothing saved for retirement. Just as the responsibility of teaching your kids about money is yours alone, no one is going to invest in your retirement for you either. Get signed up for a 401k program if one is available through your employer. If you already have one in place, boost your contributions. Make adjustments to your monthly finances – like eliminating impulse purchases and cutting home energy costs – and you won’t even notice the difference.
3. Failing to Have an Emergency Fund
No one can predict when a major medical expense is going to hit or if your car is about to break down. Don’t let these things throw your finances for a loop. Sign up for the best cash-back credit card available and put all your rewards toward an emergency fund. It may take some time to build one up sufficiently, but you have to start somewhere. Set up your direct deposit so that a small amount is transferred into your emergency fund each pay period.
4. Not Having a Save-First Mindset
One of the best things you can do when managing your finances is to adopt a “save-first” mindset. Get all your saving out of the way at the beginning of each month or right after each paycheck. Then, you can spend anything leftover with confidence. Participating in a 401k plan can help as well, and also consider setting up automatic contributions to your retirement accounts.
5. Not Starting a Budget
Creating a budget can seem like a pain, but it’s a necessity, plain and simple. How are you ever going to reach your savings goals if you’re spending more than you make each month? To simplify the process, sign up at a website such as Mint or PearBudget. It’s a quick and easy way to get an effective money management system in place.
You won’t necessarily pay the price for any of these mistakes in the short-term, but you’re almost certainly going to further down the road. The economy is not out of the woods yet, retirement programs like Social Security and Medicare are facing difficulties, and you never know what the future has in store for you. Get a firm grip on your finances starting today and you’re going to be that much better prepared for whatever life presents you in the years ahead.
Can you think of any other financial mistakes parents accidentally make?