Effective money management is vital for a family to thrive. Yet, only 35% of adult males are financially literate worldwide. This indicates that the majority of fathers today lack the necessary skills to provide economic leadership for their families.
This post will show you seven crucial reasons why dads should pursue financial literacy.
Summary
Financial education isn’t taught in schools. Dads must take the responsibility to learn about money through books and other means. Fathers who are proficient at handling money will raise financially responsible kids and build an economically stable household.
1. Filling the Void: Why Dads Are Key to Their Kids’ Financial Education
If there’s one big idea to take away from this post, it’s this: schools do not teach about money. I hope this reason alone will spur us fathers to learn about personal finance. Schools not teaching financial literacy means our kids won’t learn how to properly handle money unless we teach them to. Sure, they may learn it from someone else. But with such noise and conflicting views on this topic, how sure are we that they are learning the right way?
Three reasons why schools don’t teach financial education, according to Time.com:
- There are not enough qualified instructors. Only one in five teachers feel qualified to lead a personal finance class.
- The concepts of personal finance are not standardized. If concepts are not tested, it can’t be taught.
- Lacks clarity. There is no governing body to mandate personal finance classes. Each state has its own ideas on how to go about it. As a result, there’s no clear agreement on what kind of method works.
2. Leading by Example: Dads’ Financial Habits Shape Their Kids’ Future
Based on a study, parents who are financially responsible are more likely to have kids who:
- Discuss financial matters with them. (83% vs 66%)
- Cultivate patience and the ability to delay gratification. (52% vs 40%)
- Are honest about their spending habits. (43% vs 34%)
The keyword here is “parents”. Both mom and dad should exemplify financial responsibility to their children. We have already learned that only 35% of adult males around the world are financially literate. What about women? Well, they are even behind by 5%. Only 30% of adult females worldwide are skilled at handling money.
As heads of the family, we must ensure our wives are also capable of managing our finances. When both parents demonstrate proper financial discipline, children are more likely to follow.
3. Building a Lasting Legacy: Financial Literacy as a Gift for Generations to Come
The Bible says that, “a good man leaves an inheritance to his children’s children.” While inheritance involves more than just money and possessions, most parents choose to pass down riches to their children. I’m sure they are handing them over with good intentions and love. Unfortunately, inherited fortune often does more harm than good when handed to financially incompetent descendants.
The truth is, passed down wealth has the potential to ruin our children’s lives. The accumulation of money and possessions over time is often accompanied by challenges that build one’s character. Those who did not earn the money will almost never appreciate how difficult it was to create wealth. We will only produce entitled heirs if we hand over our assets without giving them proper financial training.
It’s easy to pass down the wealth. Passing down the character is a different story. Let’s train our children to be capable inheritors.
4. Shielding Your Loved Ones: Dads as the First Line of Defense Against Financial Threats
There are scammers out there who are always ready to pounce on the ignorant. Financial literacy is a weapon we can use against those predators.
For example: Did you know that achieving a 10-15% annual return on your investments is no easy feat? With this knowledge, you’ll be more cautious when someone tells you that he can make your money earn more than this amount. Ignore, especially those who say they can double or triple your capital in three months. There’s no such thing.
Another red flag to watch out for is the word “guarantee“. The truth is, there are no guarantees in the financial world. We all play by the risks we can tolerate: high risks give high returns; low risks give low returns. If someone promises you a low risk with a high return investment, then it’s a potential scam. On the other end, I’m sure nobody wants to venture into anything high risk with low return.
A quick overview of risk tolerance:
- High-risk, high-return = Aggressive investor.
- Low-risk, low-return = Conservative investor.
- Low-risk, high-return = Scammed investor.
- High-risk, low-return = Foolish investor.
The more we pursue financial literacy, the better we protect our family from scammers.
5. Financial Harmony: Budgeting Fosters Peace and Stability at Home
It’s not a mystery that most trouble families are facing almost always involves money. In fact, financial conflicts are one of the leading causes of divorce. Now, I’m not downplaying the complexities of this matter. But the usual culprit for this issue is the couple’s contrasting view about money.
Learning how to budget as a family will foster teamwork and unity. It enables us to be more accountable to one another, especially when making financial decisions. Where do we eat? Can we buy this one? When’s our next trip? Is it possible to help a friend in need? Most of our day-to-day questions about money can be answered objectively when we have a budget. It will no longer be who has the final say, but whether our budget allows it or not.
As you embark on studying about money, you will discover that there are different budgeting strategies available today. There’s the 50/30/20, the zero-based budgeting, envelope system, and more. Find the one that will work for your family. But for me and my wife, we initially followed the zero-based budgeting and revised it along the way. It’s the system we used to pay off eight credit cards.
6. Savvy Spending: Empowering Dads to Make Informed Financial Choices
Here’s a question: if you have enough money for a property or a luxury car, which one will you buy? If you answered property, you are, in general, a smart consumer. Why? Because the property is an asset, while the car is a liability. Property values tend to stay the same or increase over time, whereas brand-new cars lose 15% to 20% as soon as you drive them off the dealer’s lot.
The same concept applies to many things, like watches. Buying a more expensive luxury watch that holds or increases its value over time is smarter than purchasing a cheaper one that doesn’t. Assets are anything that has the potential to increase your cash flow, while liabilities are anything that decreases. Having the eye to differentiate between assets and liabilities is crucial to our financial health.
Let’s see a slightly different case. It’s on sale, which do you buy: a branded shirt or toothpaste? If you choose toothpaste, again, you generally are a smart shopper. Toothpaste is a need. You brush your teeth daily (unless you don’t). Every penny saved on essentials is a real saving. The branded shirt, in contrast, is a want. You can buy an equally comfortable shirt at a much lower price from a different brand.
7. Breaking the Chain: Dads as Catalysts for Positive Financial Change
How do most fathers lead their families today? Chances are, we lead using the examples set by our parents. I’m sorry, I don’t mean that in a disrespectful way. We are grateful for all the lessons we have learned, but it is crucial to determine whether those lessons are worth passing on to the next generation.
In my case, I grew up having a positive view of debt. We talk about it every day at home as if it’s a part of our family. We discuss how the tycoons started small, and would not be who they are today if it weren’t for the loans that helped them get there. This eventually led me to live life on credit, which has put me in serious financial trouble for seven years.
I learned things the hard way. Now I know the truth about the destructive nature of debt. Our family’s concept of “debt is good” stops with me. What I’ll pass down instead are the habits of saving, investing, and having a frugal lifestyle.
Final thoughts
Many children may never receive any financial education without our guidance. As dads, we play a vital role in shaping our children into capable and contributing members of society. It is our responsibility to not only achieve financial literacy for ourselves but also to impart that knowledge to our children.
Call to action
What’s the most important financial concept you intend to teach your children today? Share it in the comment section below.
Did you find this post helpful? You can subscribe for updates using the notification bell below. Thanks for reading!