The Airplane Oxygen Mask Approach to $
The month we anticipate all year has finally arrived! It’s financial literacy month: the perfect time to pause and check in on your financial health and the financial literacy of your kids. But if you’re like most of us, you have more knowledge than you do action. This month, take the airplane oxygen mask approach to financial literacy: before you shower your children with knowledge, make sure you’re turning your own knowledge into action. Not sure where to start? Start with these five steps.
Give Budget Breakers the Boot
Perhaps you know that your coffee spending has gotten out of control, or that your list of streaming services could use some reigning in. Yet here you are, 14 months later, having spent $100 per month on nothing but video. Take two hours to sit down with your bank statements and search for the culprits. Highlight anything that gives you that “meh” feeling, and star it if it’s a recurring charge. Ask yourself, “can I do without this?” and cancel any service that earns an emphatic yes.
Adjust Your Money Mindset
Many of our bad money habits (the ones we pass down to our kids) are rooted in wrong perspective. The feeling that a budget is suffocating rather than empowering, for example. Or the belief that putting money into savings or a 401K is akin to throwing it out the window (if I’m not using it, it’s like I never made it!) Write down your most honest thoughts about money, then read through them and find where you’re believing something that’s negatively impacting your spending habits. Mindsets you can take to the bank: a penny saved is a penny earned; time is money; financial freedom is within reach. Those are mindsets you can take to the bank.
Biz Kid resource: What’s Your Money Personality episode
Establish Your Emergency Fund
The recession that began in 2008 was a wakeup call for people around the world. The majority of Americans living paycheck to paycheck realized that their lack of savings could actually come back to bite them. Meanwhile, the large TV they purchased instead of establishing an emergency fund was of little consolation. Do you need an emergency fund? Yes. How much do you need? Start with $1000. When you’ve done that, save a month’s salary. Check? Go for three months. Then six. Little by little, you’ll be weaving a safety net that will provide comfort in hard times. (Much more comforting than anything money could buy today.)
Biz Kid resource: Wheel of Misfortune episode
Draw a Line on Debt
One of the fastest ways to sabotage your financial future is to get in over your head with credit cards. For Americans, we tend to define “need” very broadly. We need food to eat. But do we need new shoes? Do we need to go on vacation? Credit can be a helpful financial tool. But just like a scalpel, it’s a tool than can also be quite dangerous. How do you know you need to cool it with your credit cards? If your balance has you thinking “what’s another ten dollars?” it might be time to freeze your cards. Literally.
Resource for your Biz Kid: “My First Credit Card” episode
Make Money Work for You
All of this cutting and denying has to have some rewards, right? Every dollar you save today is a dollar you’ll have tomorrow, right? Wrong. If you make your money work for you, every dollar your save today could be $2 you have tomorrow. Or $3. Or more. It all depends on how far tomorrow is and how much interest you can snowball in the meantime. Brush up on your understanding of compound interest. Each time you’re contemplating whether or not to “reward” yourself by spending, remembering that you could be “rewarding yourself” many times over in the future.
Resource for your Biz Kid: Compound Interest clip
Did you do it? Did you turn your financial knowledge into action? If so, you’re ready to impart your wisdom to your children. Need some help? Our online money course for teens is here to help.
