There are many money lessons that can be learned, but in the interest of saving time, we came up with the top five every adult should know, regardless of gender or economic background.
First off, everyone knows debt is bad. No one wants to be in debt, but realistically, everyone is at some point in their lives. Whether you have a car loan, a bank loan, or a credit card loan, are invested in a bad penny stock, you are paying down debt.
Lesson #1 is pay off your debt as quickly as you can. The longer you let it linger, the more interest you will accrue, and the longer it will take you to pay off. So, the lesson here is don’t acquire more debt than you can afford to pay off.
Lesson #2 is to start saving money once you become debt free. Many people are faced with the temptation to celebrate when they finish paying off a debt. How do they do this? By spending money on something! If you really want splurge on a new outfit or a trip, save for it. Put money into a saving or CD account. And, always put more in than you plan to take out. You can never go wrong with an emergency fund.
Lesson #3 follows the advice of lesson #2, which is to prepare for the unexpected. It used to be as adults became older, they ended up needing to care for elderly parents. Now, with the economy forcing many college graduates back home, you could end supporting your parents and your age 18+ children! Look into resources for your parents, and keep your children on your insurance plan–they can remain on it through age 26. But, most of all, prepare for additional living expenses.
Lesson #4 also involves your adult children. Many don’t have the credit history needed to open a credit card, lease an apartment, or a car. But, creditors tell them if they can get a parent to co-sign their loan, they can have it all. DON’T DO THIS! No matter how much they beg and plead you’ll be on the hook financially if they miss a payment, make a late payment, or stop paying altogether. Their credit history will be fine, but yours will be destroyed. Let them get comfortable in a job and paying their own bills, and soon enough they can qualify for that apartment, car, or credit card.
And finally, Lesson #5: Don’t give away what you can’t live without. What does this mean? Don’t lend money and expect to get it back. Because chances are, you won’t. Do consult a financial adviser on how to best invest your money. Do contribute annually to an IRA or Roth IRA. If your employer offers a 401K, do contribute the max amount allowable. Remember, the smartest thing you can do with your money is to save it!
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