My parents were children during the great depression. Because of this, they taught me to think of money as a demonstration of success, and always said that “you can’t take it with you, so you’d better spend it now.” I was given just about anything I wanted, regardless of whether we could afford it, and taking on debt was a money management tool. My parents were trying to protect me from having to worry about money. They meant well and were the most generous people I have ever known. But my lack of financial literacy led me to a rocky relationship with money, and I developed bad spending and saving habits.
April is Financial Literacy Month. So what better time to do a bit of spring cleaning and review your own relationship with money, especially as it relates to saving for college? Studies have shown that even a very small college savings fund significantly increases the likelihood that a child will attend college. So, finding the money to save even a little can go a very long way.
Here are some tips to improve your relationship with money:
- Review your spending. Where are you spending your money? Analyze your spending habits and look for waste.
- Communicate. Talk to your family about priorities and make a list of your financial goals.
- Create a budget. Budgeting is an important tool that is used by only 40% of U.S. adults! By creating a budget, you learn to control your spending. And, where you spend your money shows your priorities. If saving for college is a priority, then plan for it!
- Set up an emergency fund. Be ready for unexpected life events – illness, job loss, major car repairs – by saving at least 3 months of your basic living expenses. This is where unwanted debt can easily accrue if you don’t plan ahead.
- Get out of debt. Find ways to save money to pay off your debt by limiting luxuries, selling stuff you don’t use anymore, or even getting a temporary 2nd job. And, avoid taking on new debt if possible.
- Make deliberate purchases. When you want something like a new car, or those adorable, but outrageously expensive shoes, try waiting 24 hours before making the purchase. Marketers want us to think we can’t live without a lot of stuff, but when you put your savings goals before instant gratification, maybe you can.
- Teach your kids about money. According to Parents, Kids & Money Survey, over 70% of parents are reluctant to talk about finances with their children. Like mine, these parents think they are protecting their children from having to worry about money. But, in reality, children who are involved in family finances tend to be more confident about money and are more motivated to save.
In addition to these tips, this month #FinancialLiteracyMonth has taken to Twitter to give some of the best financial literacy stats/tips around. Check it out.
I think every month should be financial literacy month, don’t you?
Betty Lochner is the Director of Washington’s Guaranteed Education Tuition (GET) program. Under her leadership, the GET program has grown from 7,900 to over 130,000 accounts, with a fund valued at over $2.4 billion. Washington is unique in that their only 529 plan offered is a prepaid tuition plan. Lochner currently serves as Past Chair of the College Savings Plans Network (CSPN). Note: This post was originally published by the College Savings Plans Network (CSPN) on April 18, 2016