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Fundamentals of personal finance - how you acquire money

Part of bringing some zen to the frenzy, is managing finances. Honestly, I've had to make many mistakes to learn the skill of responsibly managing the household money. Somehow I managed to miss all the lessons in high school about being a responsible adult who cares about budgeting and saving. I guess I should have taken Home Ec rather than pottery, but my mother would have been deprived of pottery that is so ugly it should've been smashed by the teacher the moment it came out of the kiln.

Still, there is a basic concept about money that I wish would have been driven into my thick teenage head. It would've saved me some pain down the road. This is the place I want to start with my children talking about money. There are only a few legal or legitimate ways I know of getting money.

1. Earn it - get a job!

For most of us this involves showing up somewhere and punching a clock at the start of the day and at the end of the day. It may involve providing a service or starting a business or some other form of hustling, but at the end of the day some action you took convinced someone to pay you money.

This one is obvious and I didn't need anyone to point out that I needed to get a job to get money. But there are some very dense teenage heads out there so I'm exploring the obvious.

2. Be given it - you get a push ahead in life.

This is really where most kids start. We rely on our parents to give us money or things that they bought with money. But being children that money is quickly converted into useless trinkets and candy, especially candy that involves getting sugar all over yourself.

Sometimes this is a substantial gift. A college fund or inheritance from an estranged rich uncle... My hopes and dreams of this were crushed when I realized none of my uncles were estranged.

3. Win it - gambling is not recommended, but to be comprehensive...

Don't gamble. It's a long-term losing strategy. If you happen to win money in some other manner, then good for you. Staking your future on making money this way is not a good idea.

4. Save it and invest it - the money you save makes more money!

If you haven't figure it out by now, this was the hole in my education. I wish I knew earlier the power of saving and investing money. And the danger of borrowing it. You can think of your savings as having a second person working to get you more money. At first, it doesn't bring you much. But with time it can grow to earn a substantial sum of money.

There are two things that determine how much of a difference this can make for you. Time and magnitude. The more money you save and the longer it is invested, the more it will grow. Your money can serve you or you can be a slave to your money. Personally, I hope my children take a shortcut on dealing with personal finance. I'll be encouraging them to start early and save what they can.

Of course if you have debt then it may make sense to pay that off first. That depends on the circumstances and I'll cover that in a future post about spending. But if you're starting from the beginning, spend some time to learn about saving and investing. It will pay dividends down the road.

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