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Why Financial Education is a lesson you cannot afford to miss

For the last few decades we’ve enjoyed one of the most buoyant economic climates in memory. There was plenty of cash to go around, unemployment was low and credit was freely available to us. Our parents and grandparents may have lived in times where you had to save to buy the things you wanted but we didn’t – credit took care of all of our needs.

It’s fairly obvious to all of us that times have changed. The recession has hit on a global basis and the economic outlook is bleak for the next few years at least. Unemployment is rising, people are losing their jobs as businesses fold and credit is hard to come by even if you feel brave enough to apply for it.

The major problem here is that we simply don’t know how to cope in a tight market. For so long we’ve not had to worry about money and our spending but now we need to. The problem is…..few of us actually know anything about managing our finances when money is tight, credit is non-existent and the very bottom of our finances could be kicked from under our feet.

It is absolutely vital now that we revert back to more traditional ways of money management. This applies to us, as adults, and to our children in the education system. The best way to weather this kind of financial market is to have the right financial education in place so that we understand how to budget, how to manage our money and how to save for emergencies or for those rainy days that will still keep coming for the next few years.

This is a problem for us now but it may be an even bigger problem for the next generation who simply cannot remember lean times and who, to be honest, generally have no idea of sensible financial management practises. Schools nowadays are taking measures to help their pupils become more financially aware and budget conscious but much of this education process will also come from their home environments.

The fact is that it is never too late to start to learn how to manage your money and to spend within your means. You can take that step right now by putting together a basic budget and spending/savings plan. All you have to do is to:
  1. Work out how much money you have to spend every month.

  2. Work out how much you need to spend on essential payments such as mortgage/rent, utility bills, council tax and food, for example.

  3. Assess how much of the money left over you spend each month on non-essential items that you could actually do without.

  4. Set aside savings you can make here and start saving them for a rainy day.

The point here is that we all have to learn to live within our means. You can extend this lesson to your children with their pocket money. Try paying them on a monthly rather than weekly basis and give them strict guidelines on what you will pay for over and above their leisure/social spending. A couple of months of spending all their allowance at once and having no money for the rest of the month will soon teach them a very valuable lesson!
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