How to Break the Cycle of Being Bad With Money
Family problems tend to perpetuate themselves over the generations. We’ve seen far too many examples of abuse, mental issues, substance abuse and more, echoing through families generation after generation. While not as outwardly serious as some of those issues mentioned above, financial problems also tend to be passed down parent to child. This happens in a number of ways, not all of which are the fault of the earlier generation. Not all of our financial problems are within are control, but those which are should be corrected so that our children don’t have to deal with them.
One of the biggest reasons financial problems should be nipped in the bud before our children take them up is because financial insecurity is associated with many other personal problems. Drug abuse, bad credit, poor career and housing options, lower education – it makes sense that without financial security, these negative things may be the unfortunate result.
With that as a motivator, let’s figure out how to conquer some of these problems in the couple of decades we have to work with before children take over for their parents in the living and working world.
Save and Get Out of Debt
This is an obvious point, but it’s not so obvious that people don’t forget about it. Debt is the opposite of saving. And while debt is still in the picture, it’s almost pointless to save because the debt will just keep accruing. A quick read of top finance blogs on the internet will give you many saving and debt reduction strategies. If you manage to handle the debt reduction first, once it’s gone you will find that you have much more money to save. Save all of the money that you were using each month to pay off your debt and you will quickly build an emergency fund, cash for a significant future purchase, money for further education, etc. This sounds easy to do, but it requires daily dedication. However, if you master savings and debt, you can handle any other thing on this list.
Invest. Children tend to model the behaviors they see their parents perform. This includes saving and debt as described above, but it also includes investment. Many people don’t invest because their parents never did so. Even though investment is becoming easy with Betterment investing and other similar resources, we don’t do what we don’t understand. If your parents weren’t investors, take the time to learn the simple methods by which people prepare for their financial futures. It will make the difference between future uncertainty and future security for you, and could pass some familiar wealth on to your children after you are gone, making your family stronger as the generations go by.
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Acquire Familial Wealth. This has already been described somewhat in the point above, but it bears repeating and calls for some additional explanation. The way families traditionally become wealthier is through ownership of valuable property and assets. Home ownership is perhaps the classic example. While money you pay in monthly rent will never be seen again, money that you pay against a home mortgage will be “Saved” as Equity, money that will come back to you when you sell the house. Stocks, business stake, and valuables are other things to own for the wealth-building family, as they will hopefully gain value over time and can’t simply be spend like cash.
If you want to break the generational cycle of bad money management for your family, you’ll have to take a different path than the one taken by your parents. By following these steps and having a little luck, you can turn the tide and give your children a better future