Creating a Sound Financial Foundation for My Kids
July 25, 2019 by Lisa Longo
When my parents were young, they learned about how to manage money from watching their parents. They would see them bring home their earnings in cash and divide the funds into envelopes to make their weekly contribution at church, pay for groceries, and save for future needs. Money was a private matter and one they didn’t discuss.
My parents inherited those traits and we did not discuss how to manage money. I was generally unaware of most of my parents’ financial practices because they were no longer cash transactions. Money involved direct deposit, checks and credit cards. I did know that my parents contributed to many causes, primarily the church.
When I became a parent, I wanted to give my kids a solid foundation for managing money and for charitable giving. Frankly, I was overly ambitious and by the time my twins were eight I had both set up with ledgers to track their income (allowance and birthday gifts mostly), spending, saving and charitable giving. It was a rather cumbersome procedure and was abandoned after about a year, but we have continued our conversation about money and giving.
These are the areas I have focused on as a parent teaching financial management and generosity:
Talk about money
Kids need to be comfortable talking about money. Being available for regular conversations about money will help kids develop a healthy relationship to money. They will have questions that need thoughtful answers. Money was the #2 stressor for Americans according to the American Psychological Association’s 2017 Stress in America survey. Not talking about money or making it a taboo subject gives it some type of mysterious power. Money is simply a tool that we must learn how to use.
Share Your Practices
Let kids know how you budget and make financial decision. Also discuss your charitable giving. When younger, my kids would look at my weekly check to the church. They would occasionally comment about what else we could do with those funds. I would share why giving to the church is important to my husband and me. It is helpful for kids to understand that we have a mortgage, a car payment, insurance, etc. and that we can also take care of our neighbor. In addition, we discussed our income so the kids would understand that money is earned, it doesn’t just pop out of a bank machine.
Parents do this every day. I talk to our kids about needs and wants. When one of them says they “need” something, I answer with the questions, “Is it a need or a want?” Most things end up in the want category which then provides the opportunity to discuss the general value of the item and whether it is worthy of spending the funds.
Set Financial Goals and Expectations
We began talking to our kids about how they manage their money when they were around 8, when we first established the ledger system. We talked about spending, saving and giving. Many people use the tithe (10%) as the giving guideline. I no longer explicitly track giving by my kids, but I have observed many examples of them giving to something they are passionate about. I know they are generous and believe they will grow in that behavior as their discretionary income grows. Our expectation today as we look at paying for four years of college is that the kids save adequately to cover their daily expenses at college and we will work with them to cover tuition, room and board. We have recently projected what the four years will look like including the fact that our 529 plans will not cover all four years. They have an understanding going into college that they will need to contribute more in their Junior and Senior years. If I had this to do over, I would have done this projection in their sophomore year of high school so they could go into the college search with a better understanding of the general cost of college and the value of pursuing scholarships and grants.
We gave our kids allowances when they started elementary school. We felt it was important for them to have a small amount of money that they could decide how to use. We started with just a couple of dollars a week and moved to $10 when they were 8. There is no right or wrong amount. We had expectations as to what they would cover and what we would cover. This got us out of the constant request for candy or toys as that had become their responsibility. Once they started jobs at 16, we opened joint savings accounts. Watching money accumulate in those accounts was a great experience for them. I have one kid who is a penny-pincher and one who can always find a reason to buy a new video game. They have made a few spending mistakes that have been learning opportunities. I am glad they are experiencing that now and not when there are larger implications, such as when they start their first job.
Advisor to Young Adults
My twins turned 18 last fall and we went with them to the bank to open checking accounts. My husband and I still have joint savings accounts with them to manage paying for college and to monitor their savings levels. We do not have joint checking accounts. Those are their responsibility. They are now paying for gas, going out with friends, trips to Target, etc. This is a new level of freedom for them and they have stopped asking for cash every time they go out the door. I plan to continue talking with them about money and to more formally check in with them every 6 months or so about how their money management is going. They will likely need to do some budgeting once they get a sense of their spending habits in college. Post college I will encourage them to start an emergency fund and a retirement account. And charitable giving will always be part of the conversation.
My twins will start college this fall. They have a solid foundation but are not yet ready to go it alone. I plan to walk alongside them through college and into their first jobs to support healthy money and giving practices.
Lisa Longo is the Ministry Relations Officer serving the Central Region. She works with congregations to create a culture of generosity, offers seminars and workshops, develops gifts and fundraising plans for ministries, and provides coaching to finance, stewardship and endowment committees. Lisa’s experience includes fundraising, fiscal management, policy development, board training and conference planning. She is an elder at Northminster Presbyterian Church in Indianapolis serves on the Committee on Ministry for Whitewater Valley Presbytery.