Money management is a skill that can greatly impact your life, and it’s surprising how little we are taught about it. Regardless how old you client is, they may not have as much experience and/or understanding of how to make your money work for them. In this article, we’ll explore seven things parents generally don’t teach about money.
1. The Power of Budgeting
Creating A Financial Roadmap
Budgeting might sound dull, but it’s the foundation of good money management. We can think of it as a financial roadmap. For some people, creating a monthly budget that outlines income, expenses, and savings goals is not a habit. Teaching budgeting can help your clients gain control over their finances and avoid the common pitfalls of overspending.
2. Emergency Funds Are Lifesavers
Financial Safety Net
Unexpected expenses can throw finances and financial planning into chaos. Parents may not always emphasize this, but having an emergency fund is essential. Discussing about savings and encouraging your client to set aside a portion of your clients income for emergencies can be a good practice. You’ll both have peace of mind knowing they can handle unexpected car repairs or medical bills.
3. The Magic of Compounding Interest
Growing Wealth Over Time
Saving money is good, but investing it can make wealth grow exponentially. And this is also why your clients reach out to you. Discussing compounding interest – the money they earn on their investments earning even more money – can be a good way to provide additional value to your services. Starting early can make a huge difference in your clients financial future.
4. Credit Cards Aren’t Free Money
The Credit Card Trap
Credit cards can be convenient, but they can also lead to debt if misused. It’s important to understand that using a credit card means borrowing money that they’ll have to repay with interest. Encourage your clients to always pay their balance in full each month to avoid falling into the credit card trap.
5. Building Credit Matters
Their Financial Reputation
Your clients’ credit score can impact their ability to get loans, rent an apartment, or even land a job. (And as their analyst, you know that even more.) Building good credit involves using credit responsibly, paying bills on time, and keeping credit card balances low. It’s crucial, as the more they’re aware of this, they’ll be able to use your services to invest.
6. Saving for Retirement Now
Securing Their Future
Retirement often seems distant, but the earlier they start saving, the more comfortable their retirement will be. Sometimes, your clients won’t take into account their retirement. It’s important to help them prepare for it too. You can take it a step further by taking advantage of retirement accounts like 401(k)s and IRAs. You can also consider employer contributions as they’re essentially free money for their future.
7. The Importance of Financial Goals
Dream, Plan, Achieve
Setting financial goals gives money purpose. Whether it’s buying a home, traveling the world, or starting a business, having clear goals helps people stay motivated and on track. Help your clients create a plan to achieve these goals, and you’ll be amazed at what you can accomplish together.
Navigating the world of finances can be overwhelming, but armed with these seven insights, you’re better prepared to help your clients make smart financial decisions. Remind them to budget, build an emergency fund, invest wisely, use credit cards responsibly, build good credit, save for retirement, and set clear financial goals. Their financial future is partially in your hands, so make the best of it together!