Dear readers, in this article, I’ve chosen a rather personal format to discuss a universal issue: financial literacy. Below is a letter addressed to my children, Julian and Scarlett. Through it, I not only wish to impart lessons on managing money but also to break the persistent silence that surrounds this crucial topic. My hope is that these lessons resonate not just with my children, but with families everywhere, encouraging open conversations about financial health and planning.
Dear Julian and Scarlett, I grew up in a middle-class home where the topic of money was always avoided. This wasn’t because of my parents but due to a societal norm that made financial discussions taboo at both home and school.
Now at 33, I find that money is still often a taboo subject. However, I want something different for you. I am on a mission to break this last taboo, so you and others won’t have to face the world unprepared as I did.
Here are some lessons I’ve learned, which I believe are essential for anyone wishing to gain control over their financial destiny:
Spend less than you earn: This is foundational. Always ensure that your expenses do not exceed your income. It’s a simple yet powerful rule that forms the cornerstone of financial stability.
Budget your money: The importance of budgeting cannot be overstated. It allows you to see where your money goes and helps ensure you live within your means. Set a realistic budget and adhere to it steadfastly.
Avoid debt: Debt can be a significant barrier to financial security. Avoid it as much as possible; if you must take on debt, ensure you have a clear and quick plan for repayment.
Save for emergencies: Unexpected expenses can arise at any time. It’s crucial to have an emergency fund that covers at least three to six months’ worth of expenses, kept in a separate savings account.
Invest in the long term: Investing is a superb way to grow your wealth over time. Focus on long-term gains rather than trying to time the market or chasing quick profits.
Diversify your investments: Don’t put all your eggs in one basket. Diversify across different asset classes and sectors to minimize risk.
Continuously educate yourself: The field of personal finance is complex and ever-evolving. Stay informed by reading books, blogs, and articles about finance and investing.
This is the legacy I want to leave you. I wish for you to live in a world where you can follow your dreams without financial regret, just as I strive to follow mine.
Take care, my children. With all my love, your Dad.
Follow Luca Caruana’s weekly column here, and his LinkedIn account or his Instagram for more budgeting hacks. For other money-related columns, check out Luca’s thoughts about how to make the one-income household work and his advice to couples who argue about money.
