Your kids are growing up in a world dominated by consumer credit. Every day they're being told they are entitled to have whatever they want and even if they can't pay for it, it's okay. They can pay later.

At best you have about 18 years to teach your kids how to manage money skillfully. If you fail to do that, you're setting your kids up for a lifetime of miserable debt. But if you teach them to be effective money managers, you will send them off into the world with the gifts of confidence and self-determination.

Lesson #4:

Pay yourself first and start now.

Have you ever been broke? It doesn't feel good. But that's what happens when you spend all of your money. Different people handle being broke in different ways.

Some kick themselves and then just suffer until their next payday. But because they're so "behind" they use most of that check to catch up so they're broke again and suffer until the next paycheck.

Other people say, "No problem! I'll just use a credit card." As you know, borrowing money because you're broke can cause more problems in the future.

The solution is to find a way to never be broke. It's possible, but you have to work at it. You have to train your brain to concentrate on the truth that you really cannot have everything you want right now. You have to plan ahead and save. And speaking of saving ....

Making sure you always save is the secret for how to never be broke. Print this word in big letters on the front wall of your brain: SAVE!

When you choose to save part of your money before you do anything else with it, it's the same as paying yourself. Lots of people believe they should save money, but they do it backwards. They pay all their bills first and buy stuff they want thinking they'll pay themselves later. But you know what happens? They run out of money, so they don't ever get into the habit of saving money.

Let me tell you two things you have going for you that many grownups do not: First, you probably don't have bills. Second, you are young so that means you have time.

When you save or invest money, you earn interest. It's like your money is working for you even when you aren't watching it. Soon you start earning interest on the interest (something called "compounding interest") and that makes it grow even faster.

The sooner you start saving the more protected you'll be against ever being broke. But you have to be consistent. You have to save all the time ... not all of your money, just some of it. But you have to get very tough with yourself. You can't save just when you feel like it or when you think you have extra money. You should save at least 10 percent every time you get any money. That means money you get for your birthday, money you earn baby-sitting or working for your dad.

If you will get into the habit of saving money now while you are young, your life will be more enjoyable. That's because running out of money can cause a lot stress. Being broke makes people do crazy things that can lead to much bigger problems than just being broke.

Meet my fictional friends Taylor and Morgan. They're the same age and save $50 a month, which is $600 a year. Taylor starts saving at age 21 but stops after eight years. Morgan is a procrast-inator and doesn't start to save until age 29. Morgan saves $600 a year for 37 years but still cannot catch up with Taylor whose savings have now accrued substantial interest.  He figured out the magic of starting early. Just imagine what will happen for you if you start saving now!


© 2003 The Cheapskate Monthly. All rights reserved. Used with permission.

 "The Cheapskate Monthly" was founded in 1992 by Mary Hunt.  What began as a newsletter to encourage and empower people to break free from the bondage of consumer debt has grown into a huge community of ordinary people who have achieved remarkable success in their quest to effectively manage their money and stay out of debt.  Today, "The Cheapskate Monthly" is read by close to 100,000 Cheapskates.      Click here to subscribe.


Seeking financial harmony in your marriage? Read Mary Hunt's book Debt-Proof Your Marriage published by  Revell.