Start Having Conversations about Money
Many parents are reluctant to talk to their children about money. They may have grown up in an era where the subject was considered taboo or they do not feel qualified. However, starting age appropriate conversations about money with your children is one way we share our knowledge and set them up for financial success when they leave our home. Create opportunities to discuss concepts such as earning money through work, tithing, saving, investments, budgeting, paying down debt and giving. Share with them the values and biblical principles that help guide your financial decisions and spending habits.
“Now when a man works, his wages are not credited to him as a gift, but as an obligation.” (Romans 4:4)
Parents can also learn about money together with their children. If there are questions you do not know the answer to, research the answer together. Be honest with your children when it comes to money. If you have regrets or wish you had made different financial choices when you were younger, share these lessons as well. If you are working with a financial professional, and they are willing, have them speak with your young adult children about how money works.
Family Budgets and Goals
Include your children in discussions surrounding family budgets and goals. By looking at a paystub together, topics like income tax, social security, life insurance and employee benefits can be discussed. This could lead to going online with your family to see how your health or retirement plan works.
“In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.” (Proverbs 21:20)
This also provides parents with the opportunity to discuss needs versus wants. Learning that we rarely get to fulfill all our wants is an important life lesson. Understanding why there are things you would like to buy, but cannot afford, is easier when our children are not sheltered from the larger family budget and family goals. Transparency with trust is the basic rule to opening up our financial lives to our families.
Credit Cards and Checking Accounts
Do not neglect teaching your children about other methods of payments such as checks and credit cards. To this end, sharing how you balance your checkbook register and manage credit card statements demonstrates basic math skills and budgeting.
“The plans of the diligent lead to profit as surely as haste leads to poverty.” (Proverbs 21:5)
Discuss the Concept of Compound Interest
Another basic money concept is the miracle called compound interest. A simple way to understand compound interest is to ask the question: How long will it take my money to double in value at an assumed rate of return? The answer is found by using a formula called The Rule of 72, which will tell you how many years it will take your money to double in value. The point here is to understand that time is an important factor in creating future wealth. The longer a person lets time and compound interest work, the better.
“In all labor there is profit. But idle chatter leads only to poverty. The crown of the wise is their riches, but the foolishness of fools is folly.” (Proverbs 14:23-24)
Children can begin to learn some principles of financial management if parents are willing to invest the time it takes to teach them. Whatever approach a family employs, the real value for young people lies in learning to manage income and seeing that work has its rewards. Using everyday experiences as a springboard for conversation can demonstrate how you make choices that are consistent with good values and sound money management.