Raising Smart Money Managers: How Three Empty Nest Couples Taught Their Children About Money
How we manage our money as adults is entirely personal, but it’s also learned. And most often we learn how to (or how not to) manage our finances from our parents. Curious how different families approached the task of teaching money management skills to their children, we asked three empty nest couples who have been there, done that—who have raised two, three, and four children, respectively, and have watched their children grow into adults who make wise financial decisions—to share the skills and values they focused on when teaching their children about money. So whether you’re raising a toddler, a preschooler, a tween, or a teen, we hope the following insights might help you think through ways you, too, can raise smart money managers.
Money Management in the Doering Household
The Doerings live in mid-Missouri and have two grown children.
Saving and Borrowing
When our children were in grade school, we gave them an allowance that was not tied to chores. Chores were something you did because you were a member of the family—to contribute to the family. By not tying an allowance to chores, we hoped to instill a sense of sharing one’s wealth and being generous. As adults, both our children have expressed appreciation for our generosity to them, and they in turn are generous with others.
If our children wanted to buy something that was out of their reach, they had to save for it. However, we did allow them to borrow a portion of it so they could become familiar with repaying loans. When they received large gifts of cash (usually for birthdays and Christmas), we required them to put 25 percent into a savings account.
When they began high school, we gave them an increased allowance and encouraged them to buy some of their own clothes. As they began driving, we gave them a credit card for gas and emergencies, and we did pay for those charges.
Distinguishing Between Needs and Wants
We encouraged our children to take an accounting class to become familiar with how the world handles and accounts for money. We discussed that no matter how much money they have or make, they need to spend it first on tithing and needs (such as rent, food, utilities, taxes, clothing, insurance, saving for retirement) before spending money on wants.
Use Credit Wisely & Practice What We Preach
We also taught our children that it is alright to have credit cards, but always pay off the balance in full every month. Most important, we practiced the principles we taught them. Above all else, we emphasized the importance of education—that getting a good education opens the way to be able to succeed financially. Now, as grown adults, we are thankful they are good money managers.
Money Management in the Pfitzinger Household
The Pfitzingers live in south Texas and have three grown children.
Live Within Your Means & Expect the Unexpected
We taught our children to be a bit frugal and to live within their means. We encouraged them to be patient and defer purchases they did not immediately need. This is hard to do, especially now, as we live in an instant gratification society where desired items are only one click away (plus one-day delivery). We also talked to them about budgeting their monthly expenses and saving for unexpected expenses.
Think Before Buying
We taught our children to think long and hard before taking on debt for major purchases of a car or home. None of our children drove new cars until they were on their own and able to afford it with their income level.
Pay Off Debts
When our children were in high school and began driving (at age 16), they were issued a no fee credit card for fuel and emergency expenses. We taught them how to pay off their balance each month to avoid finance charges. This also helped them begin to build their credit history.
Invest Wisely
Fortunately, all of our children have jobs that offer employer matched 401ks. We encouraged them to invest in these retirement savings plans at the level that will max out their employer match. We also taught them to invest in equities during their early working years. Since they will be buying equities (through mutual funds) every month through these retirement plans for the next thirty to forty years, this is the best return on investment they can get even with the fluctuations in the market. If the market pulls back in any period, they will be able to purchase equities at a discounted price. As they get older, they will want to shift to a more conservative portfolio by adding more fixed income investments.
Money Management in the Watts Household
The Watts live in southeast Missouri and have four grown children.
When it came to money management, we wanted to teach our kids basic principles that would serve them their entire lives and biblical concepts that would ground their decisions in God-honoring practices. In the ministry, we have seen the impact poor decisions have on people’s lives, and our hope was to spare our kids the heartaches that often accompany bad choices.
The Envelope System & The 10–10–80 Plan
From a very early age, we gave our kids allowances. We found that they would gladly spend our money with reckless abandon but were super conservative spending their own! So, having their own money was important if they were to get real life practice. Whether it was their allowance or their pay from a real job, we taught them to be generous toward God and to save. We explained that the first 10 percent belonged to God and the next 10 percent belonged to them in a savings account. The remaining 80 percent they were free to spend as they wished.
Sometimes this approach is called the 10–10–80 plan, and it was instilled in them from the beginning. While this might sound risky to allow them freedom with the 80 percent, we rarely saw them waste their own money, and we often saw them save more than 10 percent. It was our hope that granting them real authority to make decisions would equip them for decision making on their own.
We taught them that generosity is good and that they could never out-give God. We also taught them it is wise to save for the future and that, if they faithfully put aside funds a little at a time, this would help them with future needs that were larger. And it all started with the envelope system: they literally put money in envelopes designated for giving, for savings, and for spending.
The First Car
We saw the purchase of their first car as a real opportunity to teach responsible money management. We told them years in advance that we would buy them any car they wanted . . . provided they cover 50 percent of the purchase price! (We figured this was a pretty safe bargain because they would never come up with half the funds for a Maserati!) We also had them sign a car ownership covenant that stipulated it was their responsibility to pay for gasoline and oil changes. We would pay for major repairs and insurance. Later, a couple of our children told us they were the only kids they knew who had to pay for their own gasoline. We did not want them to have an entitlement mindset, and we also wanted them to understand the costs of car ownership and the proper care of our material possessions.
Unexpected Gifts
How did you teach your children about money? Share your thoughts in the comments below!
