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

According to government statistics in the 12 months from July 1, 2019 to June 30, 2020 there were 682,363 bankruptcy filings.

According to data from the American Bankers Association, 43% of credit card accounts carried a balance at some point in the second quarter of 2020. As of January 2020 consumers owed 829 billion dollars in credit card debt.

Not everything was gloom and doom during the pandemic as credit card debt decreased during 2020. This drop can be attributed to consumers’ access to cash and debt relief help from federal economic stimulus measures and the savings from working at home. This is good news. It is encouraging that so many used this time and extra cash to pay down debt.

According to Sallie Mae 36 percent of college students have at least $1,000 in credit card debt. This is on top of student loans. When students without credit cards were asked what would change if they had a credit card 40 percent of said they would spend more than $100 per month more than they do now.

The typical American spends about $1,200 on fast food annually. This number is per person so an average family of four spends $4,800 a year on fast food.

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. Over 40% of all those asked about their divorces mentioned financial challenges as a primary reason for the divorce.

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

Remember home economics classes? These classes were 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 districts 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.

As you diligently teach your children seriously consider what you can be doing to clean up your own finances. Time to practice what you teach.

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.

Before the pandemic I facilitated the church’s Financial Self-reliance class twice. During the first class one of the families was having a difficult time denying their children things the children had become accustomed to and now expected. They had a child who loved to eat at a certain fast food restaurant and who cried when the answer was no. They came up with what I thought was a brilliant plan. They purchased a gift card for the restaurant and told the child she could have whatever she wanted, whenever she wanted, but the card had to last for a month. The child quickly stopped asking to eat there. She was beginning to understand instant gratification might mean long periods going without her favorite foods. She was beginning to understand the joy of anticipation.

Those who manage money well create more wealth than those earning the same income who spend all or more than they earn. Living within your means enables savings and investment and creates more joy when we are finally able to afford the things we have desired.

How old is old enough?

When a child begins to ask for things that cost money, they are old enough to begin earning and managing money. Several years ago, our four-year old grandson was so excited 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. Children should not be financially rewarded for these.

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 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 responsibilities. 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.

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.

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. 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. A wide variety of jobs will allow young children to feel even more successful. Be sure to clearly define which jobs are available only to the youngest members of the family.

As a grandparent you can do the same. There will be jobs you can no longer do like climbing ladders to clean gutters, but older grandchildren can. Yes, our grandchildren should serve us, but we can help influence their future financial stability by looking to them to do the chores we would normally pay someone else to do. Young children can work alongside you in the garden or doing tasks that are simple but hard on your back and knees, like washing baseboards.

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, buying a yearbook which has a deadline to purchase or track shoes for the start of the season.

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

A long-term goal could include a car, college or trade school or a senior trip.

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 your child must allocate their money each week to goals. Set limits on what part of the budget is spendable.  Next, discuss what percentages should go to savings for long term goals, and an amount for immediate needs. Remember tithing also be included in the formula. Purchase piggy banks or use pint size canning jars, labeled with each category for them to place their money in as it is earned.

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. At the end of each month, have the children count their money and examine their bank statement 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.

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.

Let them make mistakes

Debt among college students is staggering. Now, while children 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 loan 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 are the grandparent the same is true for you, don’t bail them out. Loan them the money and insist they pay it back.

“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. The store will 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. Help your children 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, cheaper and just as good.

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.

Involve others

Let grandparents know what you are trying to teach and let them help. Grandparents are pushovers so ask them to make the children work for cash and just handing them money is not acceptable.

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 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. Remember no reward if they are not doing their part.

If we fail to teach our children the skills 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.

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. 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.