Families, communities, and nations are stronger when parents understand correct principles of cash management and teach them to their children. Most people are not born with this understanding, so we need to learn it from someone, and parents are most qualified to do the teaching.
E. Jeffrey Hill and Bryn L. Sudweeks
taught cash management in their textbook titled Fundamentals of Family
Finance – Living Joyfully within Your Means. They defined cash
management as “how to effectively manage your family’s monetary assets.” They
defined monetary assets as “Financial resources that are legal tender (cash)
or can be converted to legal tender very quickly.” The quotes in this post will
come from their book in chapter 3.
Monetary assets include things like the
money in your wallet, in your checking and saving accounts, your certificates
of deposit, and money market accounts. All of these items consist of cash or
something that can be converted to cash quickly. Vehicles, houses, and other
property can be converted to cash, but they do not have as much liquidity. Liquidity
means “the immediate accessibility of money.”
Hill and Sudweeks listed an emergency fund
as “the most important role of cash management.” In case you do not know what
an emergency fund is, it is “Liquid financial resources to meet unexpected and immediate
needs.” The authors suggested that you should have enough money in your
emergency fund to cover your living expenses for three to six months. Such a
fund would be helpful if you lost your job unexpectedly, or your car broke
down.
Managing our cash is an important part of effective
money management. It is also a skill that can be taught to the rising generation
or to adults. In either case, learning and teaching effective cash management can
strengthen families, communities, and nations.
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