I will be writing some posts to try to educate my kids. I know they are still very young (5 and 7) but it is never too early to start. And they can read these blog posts later on in life 😉 (This is probably the case, because they don’t speak or read English very well at this moment – You got to love an understatement!).
This is another blog post to keep the “snowball of knowledge” rolling.
I think when you educate kids about money, they will benefit from it for the rest of their lives. Or as the saying goes: “What is learned in the cradle is carried to the tomb”. And to educate your kid is your responsibility as a parent.
This post is in my opinion about one of the most important lesson of financial health.
I’m a strong believer in the fact that the most important bill has to be paid first. And that is the bill to yourself. If you want to start saving and investing it is important to pay yourself first. Or in other words: before you pay your bills, before you buy your groceries, set aside a part of your income. The first bill you pay, after you have received your paycheck, is yourself.
To do this every month requires discipline! Hardcore discipline. Or should I say self-discipline. If you cannot control yourself, it will be very hard to become (and stay) rich.
This discipline comes also in handy when it comes to investing (understatement ;-)). Because in my opinion it makes no sense to invest, make money and then blow it.
I once read an article that stated that the lack of self-discipline causes most lottery winners to go broke soon after winning the jackpot!
The statement “pay yourself first” comes from: The Richest Man in Babylon, by George Samuel Clason. This is a real bestseller (my review). Probably millions of copies have been sold. But while millions of people read this statement, only a handful follows the advice.
I try to life by this statement and follow the advice of George S. Clason. I have done it since my first job. And yes, I know it is hard. There are always nice gadgets to buy (What about the new IPhone 6s. Yes I admit, I’m a real sucker when it comes to gadget). Or I could pay my dentist bill. But before all this, I still pay myself First.
Also in times when my income is low (or should I say: my expenses are to high), I still pay myself first. Part of my money goes to my savings account, part of it goes to the savings account for my family and part goes straight to my broker account. And although I pay my bills last, I am smart enough not to get into big financial situations. If in one month it is hard to pay all bills, the next month I’ll live more frugal.
To give an advice is easy, but to follow an advice is real hard. To start paying yourself first, you should develop a habit of saving. This can be done the easiest way by doing it automatically. For instance: Give your bank the order to take a part of your income the moment it arrives on your checking account and put it on a savings account. The first month it is painful (yes you will miss this part of your income), but the next months you don’t even know that a part of your income is missing on your checking account.
How big the part of your income is you will be saving, is up to you. This figure is different for everyone. For instance I’m saving automatically approx. 40% of my income.
So kids: Pay yourself first! And let the magic of compound interest do its work.
This is my ninth blog post about teaching my kids. I hope my kids at the age of say 18, have all the financial knowledge I’m having right now. This would be a huge advantage for them! And that’s why I started these blog post series.
Do you talk with your kids about investing? I like to hear from you.
And will you help me to get the “snowball of knowledge” rolling?