When we help children to understand that there is happiness in providing for ourselves through work and prudent budgeting, they prepare to succeed in a world that rewards consumption and excess. 

According to government statistics in the 12-year span from October 1, 2005 to September 30, 2017, about 12.8millionconsumer filed bankruptcy petitions in the federal courts.

According to data released April 26, 2018, by the American Banking Association, there were 364 million open credit card accounts in the United States as of the end of 2017. The average balance on credit cards at the end of 2017, according to Experian, was $6354. That is up 2.7 percent, from $6,188 at the end of 2016.

Dun & Bradstreet found that people spend 12-18% more when using credit cards instead of cash. 

In early 2015, a study by Student Monitor found that 23 percent of college students had a credit card in their own name. Of those students who didn’t have a credit card in their name 38 percent had a debit card.

Credit Card Accountability Responsibility and Disclosure Act of 2009, commonly called the CARD Act, is a federal law that fundamentally changed credit card practices and rights. It requires anyone under 21 who wants their own credit card to have an adult co-signer or show they have enough income to repay credit card debt. This is probably the reason more college students do not have credit cards. 

When students were asked what would change if they had a credit card 40 percent of students said they would spend more than $100 per month more on a credit card than they do now if they had a card.

Each year Americans spend over $384 billion for the purchase of fast foods or about $1,200 on fast food annually. That breaks down to $100 a month and roughly $12.50 spent per meal. 

Forty percent of American families spend more than they earn, and 96% will retire dependent on the government.

Frightening, isn’t it? Is it any wonder church leaders counsel members to get out of and stay out of debt? Are children being set up for the same fate as previous generations of spendthrifts?

Most of us have experienced the stress caused by severe financial strains. Some money worries are unavoidable, such as debt for an education or to purchase a home, or the loss of income from unemployment or disability. Yet over 40% of all divorces are due to financial challenges. 

Children who are taught good habits are far more likely to be wise money managers as adults. Children can understand and practice wise budgeting and spending habits, even when very young. 

Remember home economics classes? They used to be universally taught in schools to help students learn home management skills before venturing out on their own. These classes are now few and far between – the victim of overspent and underfunded school district and the attitude that skills are less important than testing and college prep. The responsibility to educate children about home management skills is now solely vested in the family.

Begin today 

Financial responsibility is like other responsibilities – it takes time, practice, commitment, and understanding before it can be perfected. 

Meet as a family and discuss the importance of being financially independent and the importance of staying out of debt. Debt takes a huge toll both physically and spiritually. Therefore, the objective is to teach the skills that promote peace of mind and prosperity. 

Those who manage money well create more wealth than those earning the same income who spend all or more than they earn, because living within your means enables savings and investment.

How old is old enough?

When a child begins to ask for things that cost money, such as toys at a store or if they ask for money to use in a gumball machine, they are old enough to begin earning and managing money. Several years ago our four-year old grandson was so excited recently when he finally had enough money to buy “Doc Hudson”, a toy car from the movie Cars. He even called us on the phone to share the good news.

Begin by establishing a list of household chores that every member of the family will have a responsibility to help with. These may include keeping their rooms clean, making their bed, setting and clearing the table, sweeping the floor, putting away their clean clothes and so on. These are responsibilities that go with being a member of the family and families share work and help each other. 

Establish an allowance

Once household duties are established, introduce the idea of an allowance. The purpose of an allowance should be to establish a habit of saving and budgeting. This money will be paid to family members as they perform their chores around the house. These could include other light duty household activities like taking the newspaper out to the recycling, taking out the garbage, mowing the lawn, dusting, vacuuming, doing laundry and cleaning bathrooms – anything that needs to be done daily or weekly to keep the home clean and orderly.  

Of course these chores will change as the child grows and can handle more complex responsibility. An allowance should be limited and should not enable a child to purchase everything they want.

Wants and Needs

Help your children understand the difference between a “want” and a “need”. A need is something you must have to live and function each day. A want is something that will make your life more rewarding but is not necessary to survive. New running shoes may be a need, but designer brand running shoes are a want. A cell phone may be necessary to communicate with your family – but mobile web browsing and video playback are not. 

Children can be part of the decisions that rank the wants and needs of your family (from most important to least important). Compose a list of each family member’s wants and needs. Determine which needs you will pay for and which ones they will take responsibility for. Naturally, all wants are their responsibility, not yours.

Coco Chanel, who sold perfume to the rich and famous, wisely observed: “There are people who have money and people who are rich.” We can teach our children that real wealth is in being master over needs and wants.

Paying Jobs

“God sells us all things at the price of labor” – Leonardo da Vinci.

Compile a list of jobs you are willing to pay for. When our children turned 11, they assumed the responsibility of purchasing their own clothes. We provided them with jobs around the house to begin earning money. They also received money as gifts from extended family and they could determine how to spend that money. Pay well, because after all – your children will need clothes. They can either work to earn them, or you will buy them without having helped them to learn money management skills. Either way, you pay. 

Post a list each week of jobs you need done and your children can choose which to do. Of course, you will pay more for the less desirable tasks. One of our grandsons when he turned four earned  money helping his dad stack wood in the shed and also earns for bringing it into the house. A wide variety of jobs will allow young children to feel successful also. Be sure to clearly define which jobs are available only to the youngest members of the family.

Discuss Goals

People who write down their goals are far more likely to achieve them. There are three categories of budgeting goals: immediate, short term and long term. Using the wants and needs list you compiled, divide the goals into these categories. 

An immediate goal, one which needs to be met very soon, may include buying or making school lunches, a book which needs to be purchased for a class, paying a library fine, even buying a new toy. 

Short term goals are further out (1-5 years) and may include such things as a mountain bike, laptop, tickets for a dance, a yearbook or new clothes. 

A long term goal could include a car, college or trade school or your senior trip. You may want to prioritize some long term goals, such as a full-time mission or education fund. 

Explain some of your own financial goals – a family vacation, a new kitchen table, improving your food storage, or paying off your consumer debt.

Establish a budget

“Budget: a mathematical confirmation of your suspicions” – A.A. Latimer.

Once you have established a few goals, explain that they must allocate their money each week. Set limits on what part of the budget is spendable, and discuss what percentages should go to savings for long term goals, for tithes and offerings, and for immediate needs. Purchase piggy banks or just use pint size canning jars, labeled with each category. For children who are eight or older take them to the bank and have them establish a savings account. This will help prepare them for banking in the future. Have the bank employee explain interest, how their money will grow. At the end of each month, have the children count their money to understand that it is growing.

But I want it now!

Do not give in and bail out your kids when they want something now! Do not purchase several things from their wants list as gifts. One or two is fine for a special occasion like a birthday or Christmas, but you will not teach them anything if they never feel the sense of accomplishment from saving and purchasing an item they really want, on their own. 

All of us, even the youngest among us take better care of items we have saved and sacrificed to purchase. Like the Schwinn bike my husband earned and bought when he was eleven, which hangs in our garage even today.

As an incentive, consider matching any money they place in savings above the percentage you have agreed upon. If they are to save 50% but then save 60% you match the 10% difference.

With older children, discuss income and expenses and help them plan for upcoming expenses. 

Children are also very capable of earning money even at a young age. Our son made and sold bird houses and detailed cars. Some of our grandchildren have made and sold cinnamon rolls. Others made Christmas ornaments and still others set aside Saturdays near Christmas to have a drop off babysitting day for parents wanting to Christmas shop.

Let them make mistakes

Debt among college students is staggering. Now, while they are still living at home, is the time to allow them to fail. Catch them. Help them to formulate a new plan to meet their goals, but don’t bail them out. If you decide to loan them money to pay for something you feel is important and urgent, then teach them the concept of interest on the loan. Explain that if you or a bank loans them money, that money is not available for you to use and you will have to make some sacrifices. This is why interest is charged.

“If you think no one cares if you’re alive, try missing a couple of car payments” – Earl Wilson.

Teach them to shop

When your child is ready to spend their money, go to the store with them and help them evaluate their purchases. Point out the sale racks. Introduce them to the concept of store coupons. Compare designer looks with less expensive clothing and teach them about bait and switch. Bait and switch is the practice of not having an item that is advertised available when you reach the store, then they tell you they will substitute another similar item but for a slightly higher cost, or they will offer you an inferior quality item.

When our daughters were in high school we loved going to the consignment shops. It was a challenge to see who could find the cutest outfit at the best price. We also loved hitting the sale rack at bridal shops looking for prom dresses. Help your children to understand two very important things, first, there are always other stores to check out for better prices, and second, everything goes on sale, just be a little patient.

Take you child grocery shopping, especially the teens. They will be on their own soon and need to know how to spot the bargains in a grocery store. The jumbo size is not always the cheapest per serving and store bands are canned by the same canneries as name brand items. 

Don’t forget to teach them the importance of food storage to a budget. When you have food storage you are always eating at last years prices and you never need to purchase anything that is not on sale. 

When all is said and done about shopping, one principle is still true:

“The safe way to double your money is to fold it over and put it in your pocket” – Frank Hubbard.

Involve others

Let grandparents know what you are trying to teach and let them help. I love it when my grandchildren come and want to earn money. I love having them wash my baseboards (a chore that seems to get harder on the back each year). Our grandchildren had banks at our home and we put money in them when they were here or when we heard about something unselfish they had done, or when they were extra good helpers at home. As we took day trips when they visited, the money in those piggy banks made those outings even more fun as they had money to send and they had earned it.

Offer to “hire” a friend’s child if they will “hire” your child. Children often work harder for someone other than mom and dad, and the experience of seeing that other families also work hard can leave a lasting impression.

Save receipts

Teach children to save receipts. Explain that receipts will help them to know exactly how much they are spending and where. They are also important in case the item is defective and it needs to be returned.

Reward them

Praise your children for all their budgeting successes. Surprise them by adding to their spending fund or savings account. Your children need to know you are watching and are proud of their budgeting accomplishments.

If we fail to teach our children the skill of money management we are setting them up for financial dependency (relying on parents or government instead of themselves). We are setting them up for unnecessary stress in their future homes. 

Of course, managing money is not about believing that happiness comes from having things. Happiness comes from being true to ourselves, to our families, and to the Lord. When we help children to understand that there is happiness in providing for ourselves through work and prudent budgeting, they prepare to succeed in a world that rewards consumption and excess. With the experience you give them, they will be equipped to recognize the snares that cast others into lifelong habits of spending excess and financial woe.

Carolyn has begun a new year on her Totally Ready facebook page. Go check out the goals and information to be tackled this year, ask questions and share your successes and frustrations.