Money talks, says a song, money talks! But who understands what they are saying? We spoke with ATLAS Specialist Mihai Constantinescu, who really speaks the money language. Below, it’s all about financial education through the eyes of a specialist. He teaches us how to organize our income better and stop pulling the salary as an elastic, from month to month!?
Have you ever tried to stop everything you do and think about why you do the things you do every day? Have you also tried to think about the essential things in your life and ask yourself if you pay enough attention to them? Have you tried to think about what your ideal life would look like?
I know, these questions seem philosophical, but if we can stop our tumultuous lives for a moment, and try to answer these questions, we’ll start to see our lives with different eyes.
Most of the activities we do every day are directly or indirectly related to money. Whether we go to work or have our own business, whether we go shopping or go out with friends, it all involves money.
What is financial education?
Financial education is about money and how to manage to do more with the same money or how to increase the earned amounts.
Robert Kiyosaki, in his book “Rich Dad, Poor Father” said that Financial Education is our way out of the RAT RACE (in which we never work for ourselves – we work for the state (to pay taxes), we work for the employer, we work for the bank (to pay the rates), etc.
Exiting the Rat Race can be done by redirecting the amounts earned from the area of expenses that are not important in the area of creating passive income large enough to cover the monthly payments. Passive income can be derived from investments in:
- real estate,
- mutual funds,
- other instruments that can produce money for you without you having extensive active involvement in obtaining them.
You managed to get out of the Rat Race when the passive income you earn from your investments is equal to or greater than your monthly expenses. In the literature, this moment is also called Financial Independence.
Although it is not a subject that is taught at school, I believe that, in addition to mathematics and the Romanian language, financial education should be the third most studied field.
The burden of financial stress
Financial stress affects much of Romania’s population.
Whether we are talking about concerns with our job insecurity, the current situation created by the spread of COVID 19 and the possible adverse effects of this event on the economy, insufficient income, debt or the possibility of unforeseen expenses, all of these contribute to the occurrence of financial stress. We may be concerned about the loss of employment, about a sudden medical emergency, the lack of savings (in Romania about 50% of the country’s population has no savings to cover the essential expenses of the family for a month), the possibility of not being able to pay the payments for the house, car or maybe rent. All these concerns can put additional pressure on us. Fortunately, financial education comes to help in understanding these sources of stress and provides concrete, applicable ways to minimize the effects of financial stress on each of us.
How can financial education help you?
Let’s see what some of the areas this can cover:
- Monitoring and efficiency of expenditure
- Removing waste from your life
- Loans – how to make wise decisions when taking a loan
- The importance of repaying loans as quickly as possible
- The importance of saving
- Establishment of an emergency fund
- Increasing wealth through investment
- Early preparation, without significant financial effort, of retirement
- The early financial practice of children’s education
- The efficiency of lifetime fees and commissions
Going back to the “philosophical” questions at the beginning of the article, with a solid financial education you can improve your life, use money more efficiently, have more time for yourself, your family and the things that please you. Financial education is also about daily small changes, which, in the long run, will bring you the peace and joy of greater freedom.
For example, start investing money from your children’s allowance as early as possible so that when they reach the age of majority, they have the necessary amounts to study abroad or to pay the advance on their own home. Or start investing for retirement as a young man. Financial education can teach you how Compound Interest (i.e. reinvesting all profits earned and maintaining long-term investment) can bring extraordinary long-term profits.
How to prepare tomorrow’s adult by educating today’s child
Financial education started early, will help your child become a responsible adult.
Financial education begins at home, with children first observing their parents’ financial habits, their attitude to money, how they discuss it and how they spend the money they earn.
If you’re wondering when the right time is to start giving essential information about money to your children, find out that the right age is 5-6 years. At the moment, their curiosity is very high, and they also have a lot of toys that they want. This is when we can start talking to them about money, how to earn money, what this money should be spent on, how and for what to save and how to donate to the less fortunate.
Start giving your children money for some of the activities they do around the house and get them to raise money for a clear goal (e.g. for buying a robot or a doll) and help them see the evolution of the amounts raised against the final amount. The parent can also participate in achieving the child’s financial objective (buying the robot or doll) by doubling the amounts saved. This is recommended to help the child understand that he is not alone in this endeavor, that he is doing these activities with his parents and that he has support. The moment of acquisition of the desired object may be another learning moment… you can stay with the child and search for the lowest price for the object they want.
Financial education should not be left to the responsibility of the education system; it should be started at home.
In conclusion, financial education is about how money works and how to make spending more efficient, about efficient ways to save and invest, about making taxes, and commissions paid in a lifetime more efficient. It’s also about financial health and NOT making bad financial decisions that can cost you a lot in the long run.
Let’s discover the secrets of financial education together! Contact the Specialist in financial well-being, Mihai Constantinescu to learn how to take even more care of your money!