Involving Family Members in Finances is Paramount- by Chaz
Top 3 Take Aways-
- Finances have a big impact on how happy and fulfilled your life can be.
- Help your children understand money, interest, and goal setting.
- Track your family expenses—all expenses—for thirty days (and beyond).
There are a plethora of quotes on finances but these two have become my mantra.
“The best things in life are free.”
“Money can’t buy you happiness.”
Platitudes abound that downplay the necessity of money for happiness. Such phrases highlight the important truth that your FAMILY and relationships that you build will be the source of your greatest joy in life.
My kids are certainly my greatest blessing and joy!
Life on the Amazon
When I was 20 years old, I lived in a small town on Brazil’s Amazon river. I had the chance to play barefoot soccer with some of the happiest kids on the planet.
Our soccer ball was old and worn. Our field was just a dusty footpath. There were no goals at all.
Nevertheless, laughter filled the streets for hours and hours as these kids found joy in friendly companionship and competition.
They certainly did not need money to buy their happiness.
Yet—still— idealistic expressions disconnecting money from happiness ignore an undeniable truth. Lack of money or unwise financial decisions can significantly complicate things, damage relationships, and impede your ability to get the most out of life.
Financial issues appear in the top ten reasons for divorce here, here, and in this big academic longitudinal study too. Ironically, the studies do not show that LACK of money leads to divorce, but LACK OF UNITY regarding family finance drives a wedge in the relationship.
Sadly, it is all too common for children to overhear an argument about finance between a Mom and Dad.
Money CAN do a lot for you.
When a family has its finances in order (i.e. they spend less than they earn, remain out of debt, have some emergency funds, and invest for the future) they open up a world of opportunity.
Here are seven benefits from having a plan for your family finance. There are so many more.
- Peace, knowing where your money is going.
- Hope for the future, saving so that you can be financially independent.
- Less stress, no calls from pesky debt collectors.
- Funds to enable guilt-free memory making vacations and adventures.
- Savings to help your children with college (or push them towards the military, worked great for me!)
- Relief, as you step away from the all too common rampant consumer lifestyle.
- Experience the joy of charitable giving.
Ammo’s Sacrifice
In our family, I am admittedly the stickler when it comes to spending money. I track every dollar and usually vacillate over even the most mundane purchases. Sara is more balanced and helps tame my scrooge-like tendencies.
One night I was reviewing the costs of Marek and Ammo’s Tae-Kwon-Do classes and was complaining to Sara that the fees, uniforms, and boards to be broken, when added up, were tantamount to HIGHWAY ROBBERY.
Little did I know, just around the corner Ammo was sitting down listening to the whole conversation. His little mind absorbed all of my—unfortunate—belly aching and built an image of our family’s finances falling apart because he and his big brother were getting ultra-expensive ninja training. HE was the reason our savings were lacking, that we were living outside of our means.
After a few minutes, Ammo entered the room and, when I saw his face, I immediately realized he had been listening in. With big crocodile tears in his beautiful green eyes, he looked down and said, “Dad, I need to quit Karate. I’m sorry I spend all of your money Dad.”
His innocence and humility melted my heart and I wrapped him up in my arms and told him his ninja training was not that expensive, that it was worth it, and I was being silly. I realized that my over-zealous effort to steward our family finances had created a hostile environment. Worse yet, the world of finances was largely a mystery to my children.
Finances, to our kids, are a mystery no more, welcome Family Finance Challenge!
3 Old School Rules for Family Financial Success!
Children never cease to amaze me with their ability to comprehend topics that adults so frequently assume are beyond their level. I am lucky that my Grandparents made it through the great depression, and they taught their children some habits and pearls of wisdom that my parents passed on to me. I don’t know the quotes’ origins, but I distinctly remember a few lessons from my Grandma that we are going to pass on to our kids.
1. “Never spend your money before you’ve earned it.”
Maybe Jefferson said it first, but I learned it from Grandma. She could never understand the “must have it now” mentality of today’s generation. If you want something, you save for it, you study it, and you find the best possible deal. I never want to teach my kids that they can’t afford something, I want to teach them HOW to afford something. But, if you really can’t afford it, you have no business buying it. Which leads to the next lesson.
2. “Interest is a funny thing, thems that understands it, earns it. Thems that don’t—pays it.”
We taught our kids that credit cards make purchases convenient, and that savvy use of cards can even get you points to pay for flights and hotels, BUT that convenience comes at a cost. Marek was appalled when he learned that we have to pay the credit card company interest if we don’t pay our bill off in full.
Now, whenever I get a credit card out Marek tells me, sternly, “Dad, you better pay that off as soon as we get home!”
We also encourage our children to save. For us, we have an “Allen Family Bank” that is little more than a spreadsheet for our kids that tracks their deposits, withdrawals, and—fascinatingly for our kids—the magical INTEREST EARNED numbers. We apply an 8% annual interest rate to their savings and encourage them to continue building their lil’ nest egg.
Once they learned that money makes more money, they have been less inclined to buy that candy bar next to the cashier.
3. “Use it up, wear it out, make it do, or do without.”
Learning to distinguish between wants and needs is a continual process. Military life has been great to us because it forces us to move homes every couple years. We enjoy the adventure of moving to new places, but we also enjoy the purge of excess junk that we find when we pack up our possessions. Our goal is to teach our kids to value the toys they have, to purchase quality items that will last, and to use money to create memories.
We will never own a gaming system in our home.
Besides the countless hours that would pour into unnecessary Screen Time (challenge and results here), I cannot imagine an argument where an XBOX would provide more value than tossing the football outside.
When we do make a purchase, we encourage our children to take care of their item. This arena has plenty of room for improvement.
Family Finance Challenge
This month’s challenge is for you to open up a dialogue with your children about finances. Take away some of the mystery. Develop a plan, share with them your family goals, and make money management a fun family affair.
For us, at the end of every month we gather around the table for a Family Finance pow-wow where I have displayed a big poster board. The poster has every year plotted out, by month, until 2028—so twenty years on one sheet. We have circled some of our goals, like paying off our home and getting a RIDGEBACK DOG in 2020, going on a CRUISE in 2022, Going to DISNEY WORLD in 2025. Each month we mark on the chart how much money we earned (in blue), how much we spent (in red), how much we saved (in green), and our net worth (in orange).
Here is our Family Finance poster board that hangs on our wall. We put it in a place, in the middle of our stair case, where the family can see it everyday.
The kids know that we want to spend less than we earn, and that we want the orange, blue, and green lines to go up. When we are out shopping, they have been less inclined to ask for a toy. If a younger sibling begs us to buy the latest lego set, a big brother will often respond with, “do you really need that?” or “can’t you wait till your birthday?”
We don’t want our kids to be misers, but we are glad to seen them participate in the decision making.
The cornerstone of this month’s challenge is to track all spending for 30 days.
Yes.
Track ALL SPENDING FOR 30 DAYS.
No one is asking you to make an elaborate budget or cash flow plan. We are not expecting you to go out and read every book on finance or spend hours on the countless online financial blogs.
(Although that may be time well spent…my favorite is Choose Fi and Mr. Money Mustache!)
The Family Finance Challenge is simply asking you to keep track of WHERE your money is going. The results may surprise you.
At the end of the 30 day window, you can assign the expenses into different categories. In the interest of simplicity for our kids, we simply break it down into the following; food, recreation, transportation, lodging, communication, donations, investments, and other. Then we simply total it all up and compare how much money we made from how much money we earned.
Boom. That’s all there is to it.
Where your treasure is, there will your heart be also.
When you see where your money is going you might start to see trends.
For example, we thought we were pretty good about making our own family meals. But after tracking our expenses for a few months we saw that we ate out more frequently than we assumed.
Getting something at Costco or McDonalds was pretty expensive, but it was convenient doggone it. But, as a family we wanted to save money and make more quality memories eating in our own home so we targeted that aspect of our finances and deliberately ate at home.
We loved the change.
Perhaps you too, will find an area where you can tighten your purse strings, save a bit more, and invest more. Yes, invest money for the future, but invest time and effort into educating your children on finances TODAY.
Do YOU have a favorite money lesson from your parents or grandparents? Please share in the comments!
Chaz
Many people like to say, thinking they are quoting scripture, “Money is the root of all evil.” The correct words are, “THE LOVE OF money is the root of all evil.” How we think about money, our obsession and greed, is where the evil begins…in our heads. Money has great power to do good. With it you can feed the hungry, clothe the naked, and lift your neighbor. So, as one seeks to advance themselves financially they need to pay close attention to where there minds and hearts are at.
Changing gears, I want to know where you bank. I haven’t seen 8% on a savings account ever, and there are less and less investments with an 8% return without a certain level of risk. You may be giving your children unrealistic expectations. I like the concept though. Excellent financial training, especially putting in a way that they can see growth, upward or downward.
Such a great point on that classic “root of all evil quote”! I also think money catalyses people. Good, self-less people have greater ability to do good. Selfish people have greater ability to spend lavishly on themselves.
With respect to the 8% return, you are very correct. We may have to look at that again in a few years, especially if their accounts ever break into the triple digits! As for now, let’s chalk that up to over-zealous encouragement to avoid wasteful spending.
Such a great point on that classic “root of all evil quote”! I also think money catalyses people. Good, self-less people have greater ability to do good. Selfish people have greater ability to spend lavishly on themselves.
With respect to the 8% return, you are very correct. We may have to look at that again in a few years, especially if their accounts ever break into the triple digits! As for now, let’s chalk that up to over-zealous encouragement to avoid wasteful spending.
I love this challenge! I think it’s such a great idea to teach kids the value of the things around them, their toys, their extracurricular activities, etc. When I knew my parents were paying for my tumbling lessons in junior high and I knew how much it was, I was able to appreciate their willingness to do that for me. There are many kids who grow up taking for granted those financial sacrifices their parents make. So I love that your kids are aware and don’t take it for granted, even to the point where they are willing to quit! haha, poor guy. I think every parent has been there though!
I think for me and my future family, I will wait until they are older to teach them about interest and their expenses. Not that I don’t think they can grasp them at a young age, because you’re right, they catch on to things quick and are so smart! But for me, I think those areas of finance aren’t quite necessary for kids to know yet, and I don’t want to risk causing them anxiety that seems unnecessary. They first need to grasp basic arithmetic, fractions, multiplication and division.
Kids can stress a lot about things, more than we realize. From my schooling and my own experiences, I think that if we teach them the very adult areas of finance too early, they could potentially take it the wrong way and start to worry about how much everything costs, how much every meal costs, and worry about the future financial status of their family. Which is definitely not something a kid should be worried about, ya know?
But again, I love that you teach them those principles of saving, especially for specific things the whole family wants like a dog, or a vacation!
I always value what my parents did. At 15 my parents encouraged us to get a job, letting us know that we were now expected to start paying for some of our own things, not in a “we won’t help you out” way, but more of a “we want to teach you responsibility and the value of hard work” kind of way. We had the benefit of living so close to the Lagoon amusement park in Utah so my brothers all worked there during the summers at that age. When I turned 15 I also got a job there and ended up working there two summers in a row. It felt amazing to earn my own money and put it towards extras like a prom dress, gas money, entertainment with friends, etc. My dad set up a bank account for me when I was 12 and I would give him my money to put in my account and he would show me the totals on the receipt. I thought it was so cool. Then we started going to the bank together so I could learn those things and do them myself. I think I just really appreciated the way my parents did it event though I definitely could have learned a few years earlier how to save and spend wisely. I felt more aware of the value of things than my friends did who didn’t have jobs during the summer or during school. My parents wanted us to focus on school, but if we had an opportunity to handle both reasonably then they encouraged us do it. My friends took things for granted so much, though!
Thanks for encouraging challenges to families, I know it’s enriching peoples’ lives!
Thank you for the awesome feedback! You are so right, each family will (and should) have their own approach to teaching their children about finances. We could not agree more on so many of your points, especially the idea of helping preserve the innocence and joy of childhood. If a family is going through a rough patch financially, it will be important to weigh out the pros and cons of being completely transparent with the kids. I learned this the hard way with Ammo, as mentioned in the post!