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Education

How Can Parents Help Financially Educate Their Children?

It is so important that our children understand all about finance so that they can keep control of their own finances when they have to live on their own. Parents use to just lead by example and this could have helped some children, but only those that were observant and only those who had parents that handled their money well. Whether parents are good or bad with money themselves, it is important for them to make sure that they teach their children the right things to do with money.

There are many different aspects to finance such as debt, saving, investing and budgeting and it can be difficult knowing where to start and it may even be a bit daunting for some. However, there is no need for it to be difficult as you can just start by showing them what you are doing with money. It may be that you think you are not a good role model that you are not good with money, but that is fine. You can highlight to them why you think your choices have not been wise, so that they can learn from your mistakes. You can also go to some websites for help and guidance on how to teach finances to your children.

From when they are quite young you can show them prices in supermarket and explain to them how you make choices as to what to buy. This may be based partly on price and partly on what you enjoy and it is great to show them that you prefer certain brands and think they offer better value for money despite the fact that they are more expensive. You can show them how you can make a budget with shopping and add up as you go to make sure that you only spend a certain amount of money.

It is also worth explaining to them about your financial commitments. How you have to pay rent or mortgage to live in your home and then pay for all of the bills that go with it such as council tax, insurance, electricity, gas, water as well as food and clothing, which are the things they are more likely to see you buying. Explain how as you get a bigger property all of these costs will rise and so people choose the size of their homes according to what they can afford to pay for, not just with regards to the cost of the rent but the cost of the bills and maintaining the property as well.

It is also very important to address how important saving money is and what the difference is between saving and investment. Then to explain about debt and how it can be useful but it is a risk. It is worth explaining about risks with investments as well. It can even be good to give them examples of financial decision they may face such as whether to borrow money for a home, holiday or car and get them thinking about it and discussing both sides of the argument with you. Getting them understanding that money decisions need to be considered and are each very different as they are specific to personal circumstances is so useful for them.

Keeping money as a conversation that can always be talked about and letting them discuss their money concerns with you as they get older is good too. Do not be judgemental if they have made errors, but help them to improve their habits in the future. We all learn things by making mistakes, but if you can teach them as much as you can as they are growing up and then guide them gently when they do make mistakes, you are doing as much as you can. Buying them financial books as they get into their late teens can also be extremely helpful. Children do not always do what their parents advise them especially as they get older as they want their independence and to show they can do things on their own. So if you give them some books and guides, then they can follow their advice rather than yours and feel like they are making a more independent decision. Just make sure that you choose books that you agree with!

Borrow Money

Should Borrowing Money be a Positive or Negative Experience?

There are many people that feel that we should never borrow money. We may have had grandparents that had the motto ‘never a borrower or a lender be’ but actually some borrowing can be a good thing and it is wise to understand when borrowing can be helpful as well as when it can be detrimental.

Most people would not be able to buy their own home without borrowing money. This is because the price of a home is so large that it takes most people at least twenty-five years to pay for it. However, if they were living in rental accommodation for twenty-five years they would be unlikely to be able to save up a lump sum big enough to pay for a home because they would be paying out rent. Therefore by getting a mortgage they can buy a home, live in it rent free and pay it back over twenty-five years or longer. This will not only save them the rent they would have paid in the mortgage period but they then have a home to live in rent free for the rest of their lives.

There are some people though, that get into trouble with their mortgage. We hear about houses being repossessed by banks because the mortgage has been unpaid for so long or people getting into negative equity due to house prices falling. This is why we have to be sensible when we are considering a mortgage. We need to be confident that we will be able to make the repayments and that we will not want to sell the house in the near future. It is worth imagining what might happen in the future with regards to our employment, family and things like that to see whether you think it is the right time to borrow money. If you plan it all well, then borrowing to buy a home should be a positive experience.

However, some types of borrowing can be very negative from the outset. If we borrow without thinking too hard about it and without considering how we will repay the debt, we can get into trouble. By spending on a credit card, for example and buying a lot of things without considering how to pay them back, we can end up with a lot of debt. A credit card does not need to be paid back, so people can end up just paying the interest each month and maybe a tiny bit off the debt. By doing this it could take them decades to pay off the debt and the amount of interest they are paying on it could be really high. It can be tricky to see exactly how much interest you have paid overall as it is calculated monthly and so unless you actually add it up and work out how much you have paid over the years, you may not notice that you are paying out a lot money. It can be easy to have a selection of cards and just paying a little off each and get into a lot of debt. Then when you do decide to pay it back, you may not be able to remember what you even spent the money on and you may feel regret for having done it. However, had you planned carefully and come up with a repayment plan, you could have had a very different approach to it and had a more positive outlook as well.

So borrowing money can be either a positive or negative experience. How it is for you will depend on how well you manage the debt as well as your personal feeling about debt. If you feel in control then you are more likely to have a positive experience of debt. This is why it is so important to plan what you are doing carefully. Comparing different types of lenders and different lenders can also be very worthwhile as you could end up saving money which will help to keep the experience a good one. If you feel that you are gaining something significant as a result of the loan will also help the experience be a much more positive one for you.

Car Loans

Is a Car Loan Worth the Cost?

Many people find that when they want to buy a car, it is difficult to afford the cost of it. Even second hand cars can be very expensive and that means that many people have to consider how they will pay for the car. If you can, it is best to save up for one, but you may find that you just do not have the money available and feel that it would just take too long to save up. Sometimes, you need to buy a car right away if your stops working and you use one for work and if you do not have the money then you will have to borrow it.

It can therefore be a very personal decision as to whether you should borrow the money to buy a car or not. If you have a decent car, then it could make sense to wait and save up before getting a new one rather than borrowing the money and buying it that way. However, although this seems to make financial sense, you may want a new car because it is more fuel efficient, it has a lower tax or insurance or is cheaper to get parts for it, so feel that borrowing the money to get it, is worth t. It is worth actually doing the maths to see if that is true. There may also be non-financial reasons for wanting a car such as needing a bigger size due to an increase in size of the family, wanting a more reliable model, wanting one that can get you to places faster, give a smoother ride or that have a better infotainment system. Decisions we make about buying things are not purely financial which is why it can be difficult to make them.

Assuming that you have decided to borrow money to buy a car, you will then need to think about what sort of borrowing to use for it. Sometimes will not be suitable as they are unlikely to provide you with enough money unless you are buying an extremely cheap car and so overdrafts, credit cards and short term loans are unlikely to be options for you. Many car dealers will have their own finance system and you can get a car loan from them. This can be very convenient as you will not have to search around for a lender but they may not be the best ones to choose.

It is always wise to take a look to see what is available with regards to the short term loans available. You may find that you can get a personal loan for less money than a car loan. It is easy to take a look at a few comparison websites and see what loans are available to see what sorts of rates there are to choose from. Remember not just to compare the interest rates though as there may be some administration fees as well. It is also important to consider the terms of the loan and see what penalties there are for late or missed payments as if you do happen to get into trouble, this may be relevant for you. It is also important to look at how much the repayments will be and how long you will have to pay them for. You need to think about whether you think that you will be able to manage those repayments both now and in the future.

Consider what might happen if your circumstances change with regards to perhaps income falling and /or spending going up and whether an increase in interest rates could be a significant factor as well. It is always worth calculating the cost of the loan and then thinking about whether you would have bought the car if it had been priced that much dearer. This will help you to decide whether it is best to choose a cheaper car, get that car or not get a new car at all. It will also help you to understand the costs of the loans and find one that looks like it will be the cheapest for you.

Deciding on any loan can be a difficult decision. However, whether you feel it is right for you will very much depend on your personal situation as well as how much risk you are willing to take. It is wise to do a lot of research first and consider all of your options before taking one out.