Dr. Robert Lawson, the author of Dare to be a Millionaire, discusses what adults should teach teens about money.
Adults should make it their business to teach young people that its not how much you make that ultimately determines your financial success in life but rather, what you do with what you make. How you handle your finances is a critical component in whether you ever become successful or not.
Heres a perfect example of what I mean. Recently, I was reading an article about a professional athlete who had earned over $52,000,000 in his career. Obviously, thats an astronomical amount of money. However, because of poor investment decisions and real estate deals gone bad, this individual was on the verge of filing for bankruptcy. He was due to sign another professional contract for approximately $1. 5 million additional dollars and wasnt sure if that was going to transpire or not.
Shouldnt that be a lesson for all of us average folks, especially our youth? What should we be teaching them? What we should be teaching them is that a person who earns an average salary say of $40,000.00 a year and invests wisely and develops a good savings habit can manage his/her life more effectively and have more money in the end than someone who is a multi-millionaire who doesnt handle his finances wisely. Its a powerful lesson for all of us. We should be paying close attention.
Statistics shows that 78 percent of professional athletes are usually bankrupt two to three years after retirement. How could that be prevented?
Here are a few tips, strategies, and ideas to help teens learn effective ways to handle their money.
Heres a specific example. Lets suppose an individual is making a minimum contribution of $82.00 as payment on a debt of $8, 225.12. Lets say that the interest rate on that debt is 24 percent. At the rate of $82.00 a month, it would take 20 years to get that debt paid off.
Its imperative that young people understand at an early age that even though there are positives to having credit cards, there are also negative consequences associated with owning credit cards.
Heres the point. It might not look like much, but if students only make that minimum payment each month, what is owed can be dragged out for years. If they could get themselves into a financial position where they could pay an extra $40.00 a month, they could relieve themselves of that financial burden in three years and save over $3,000.00 in interests costs.
The essential financial literacy lesson that teens need to learn is this. The faster you are able to resolve debt, the sooner you can put more dollars into your own account or pocket instead of someone elses. Fiscal responsibility can affect your credit score, a job application, a car loan approval, and more. Debt can take just a moment to incur, but a lifetime to eliminate.