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5 Reasons You Should Only Give A Small Amount Of Money To Your Kids

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5 Reasons You Should Only Give A Small Amount Of Money To Your Kids

As parents, most of us want our kids to have nice things, and enjoy the benefits that money can bring.  For many of us, it is very tempting to offer our kids the sort of luxuries we might not have had the opportunity to experience when we were growing up.

Seeing the smile on your son or daughter’s face when you surprise them with the latest toy they have been talking about non-stop, or an excursion they have been dying to go on is a priceless feeling.   Nothing is better than spreading joy to a child.  However, is there such a thing as too much giving?

It’s understandable that parents would like to give the best to their kids, but when treating your children to gifts and surprises too often, potential problems can arise.  This is especially true when it comes to money.  Here are five reasons why you should only give a small amount of money at a time to your kids, even if you’re rich:

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1. Spoiling your kids can lead to poor behavior and attitudes later in life

David Bredehoft argues in his studies on Childhood Overindulgence and Young Adult Dispositions that overindulging your children by giving them too much money, or toys can result in dysfunctional attitudes as they transition into young adulthood.

In his studies, the more spoiled a child was, the more self righteous they were likely to believe themselves to be.  Furthermore, children that had been over indulged tended to see themselves as less effective than the children from other groups.

2. Teaching your kids about wants versus needs

Whenever kids have too much money at a time, it is all too easy for them to satisfy every desire on a whim.  Every child will naturally want the latest toys to come out, like a gaming console, or perhaps the new iPhone that just hit the market.

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This is normal behavior, as constant bombardment by the media practically trains our children to seek out these luxuries.  Because we live in a society that rewards instant gratification, it is important to instill in your kids the differences between wants and needs at a young age, so as to prevent bad spending habits later on in life.

One way put this concept into perspective is by explaining the amount of work required to obtain the money for a specific purchase.  For example, if your child learns that it takes an average of say 30 hours of work to buy a Playstation 4, ask them how willing they would be to work that many hours, on top of the amount of time it takes to pay for things like food and shelter.  This can help them to appreciate the amount of extra work necessary for the luxuries they desire.

3. Giving only small amounts of money imparts big lessons on savings

Building upon the last point, if a child is adamant about wanting something, giving it to them straight away might not be the best decision.

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By setting a weekly allowance, parents can teach big lessons about the importance of savings.  If your child wants a new item, they will have to save up to be able to afford it, which means limiting other purchases.  This will prevent your child from developing the bad financial habit of impulse spending.

Whether or not you require your child to complete chores to receive the allowance is up to you.

4. Kids don’t recognize the actual value of money

With the advent of the digital age, the value of money is becoming less and less recognizable for kids.  With the increased use of credit and debit cards, rare is the case anymore when money is actually changing hands during a purchase.  Without the tangible exchange of paper money, it can often be difficult for kids to realize the significance of the spending that is occurring.

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A recent survey by T. Rowe Price on brandable domain names reports that while 60% of kids say they participate in online shopping, almost 75% rarely, if ever, go to a bank.  This disconnect between the purchases our children are making, and the actual financial institutions that facilitate them is troubling, to say the least.

By making your kids give you real paper money in exchange for the use of your credit card for an online purchase, you can help them to realize the value of the money they are spending.

5. Giving your kids too much money can build the wrong sort of expectations

Giving your kids too much money may be setting them up for failure from the start.  Kids who have constant access to money will quickly become accustomed to a certain sort of lifestyle, and they may continue to expect it as they grow older without ever learning the action necessary to maintain their desired standard of living.

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What happens when they are released into adulthood and no longer have an endless supply of money to support them?  Certainly the results are not pretty.  The best strategy is to limit the amount of money your kids have from the start.  This will prevent attitudes of entitlement from ever developing, and limit the false expectation that the gravy train will keep on rolling forever.  Your kids will learn that there is no free ride in the real world, and instill in them a work ethic that will benefit them for the rest of their lives.

Featured photo credit: Spc. Bobby Allen via flickr.com

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Last Updated on July 20, 2021

Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

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Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

Break Free of Your Finances

Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

Though it seems hard to believe, it is really very simple to get financial freedom.

To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

1. Stop Unnecessary Spending

We often spend money inwardly, instead of objectively.

For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

To stop this habitual spending, log down all your spending over the course of a month.

Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

2. Plan a Monthly Budget

This is a great opportunity to get serious.

Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

3. Cut-up Credit Cards

Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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If not, you may want to consider ridding your life of the burden that credit cards bring.

Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

4. Increase Savings

There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

It’s good practice to save up to 15% of your income.

Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

5. Invest Wisely

Consider investing in funds.

Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

6. Invest in Gold

There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

Another way to invest in gold is through ETFs (Exchange Traded Funds).

These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

7. Stash Emergency Funds

Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

Make it hard to get your cash.

Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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8. Find Fabulous Mentors

Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

9. Be Extra Patient

Patience is the key of financial success.

Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

Financial Freedom for All

Anyone can achieve financial freedom, regardless of their financial circumstance.

Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

Featured photo credit: rawpixel via unsplash.com

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Reference

[1] Hartford Gold Group: IRA Retirement Accounts

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