The average college freshman will receive eight credit card offers during just his first week of school. Across the national student body, 76 percent of enrollees carry at least one credit card and on average owe a balance of $2,200.
During 2010, 1.6 million students graduated from college. And 1.55 million people filed for personal bankruptcy.
Meanwhile, the percentage of “very happy” Americans peaked in 1957. Since then the figure has steadily declined despite most people consuming twice as much.
Here are two more startling facts for you. Fifty-two percent of teens say that when they want or need something, they simply ask for money from their parents or guardians. And a whopping 41 percent of teens get an allowance regardless of whether or not they do any chores (Dave Ramsey, Financial Peace School Curriculum).
Can we connect the dots? An alarming number of “highly educated” adults struggle to manage their money—simply because no one taught them how to manage money when they were young.
Proverbs says: Train up a child in the way he should go, and when he is old he will not depart from it.
Teaching youths how to handle money is not the school’s or the government’s responsibility—it is yours. The Bible commands parents to educate their children. Teach them when you sit at home and when you walk along the road, when you lie down and when you get up (Deuteronomy 11:19). It should be an everyday routine.
We as parents can help our children learn important fundamental personal finance concepts that will pay dividends for the rest of their life. Here are some ways:
First, teach them to give.
This may seem counterintuitive, but the way of give is the foundation of God’s way of life that leads to physical and spiritual prosperity.
One of the best ways to teach your children about this way of life is through tithing and giving offerings. Don’t just show up to church and hand your child a couple of bucks to give as you are walking in. They have to know how important giving and paying tithes is to you. If we don’t spend time and effort planning our offerings and calculating our tithes, how can we expect our children to value it?
Teach your child to budget and plan ahead for these opportunities to give. The skills they will learn from this effort alone—working hard, saving, sacrificing, contributing to something bigger than themselves—will help them for the rest of their lives. Plus, there is an unwritten law of tithing: People are blessed who give. God loves a cheerful giver.
Remember, it is never too early to establish good financial habits.
I was startled when my son (not quite 3 years old at the time) began asking me about money. My wife and I had been teaching him the Ten Commandments and were explaining what stealing meant. We told him that if you want something you need to save up money and pay for it.
A couple of weeks later, he then began asking all kinds of questions about money. I explained to him that I earn money because I go to work. And that people at stores need money too, so they trade things like food and clothes for money. Then I tried to show him the difference between nickels, dimes and pennies and how it takes different amounts of each to add up.
His excited response? “I want to buy something.”
On Mom’s next trip to the grocery store, she let him buy something, and helped him count out the quarters. He was thrilled to be such a “big boy.”
There’s something addictive about buying things with other people’s money. He naturally wanted to do it again. But the next time we went shopping, he got a different response: “No.” Disappointed, he said something along the lines of, “But I want it!” and “Dad, couldn’t you just buy it?”
Time to teach him “delayed gratification.”
Too many people have not learned self-control. The “I want it now” mentality has caused people untold financial problems. Plus, saying “no” to your children’s wants can be a good way to teach them the value of money. It is a truth that people don’t value things that come easily. If you give your children whatever they want, not only will they become spoiled brats, but they will not make the connection between earning money and being able to “get” things.
This is why giving allowances has been harmful to so many children. Children don’t understand how much hard work is required in the real world to earn those green pieces of paper. Money expert Dave Ramsey says that the concept of paying commissions for specific work is better than giving allowances. But this too can be dangerous if your children begin to believe they should be paid to do jobs that are just a part of being a family.
The point is that at a young age, children need to learn to appreciate money, as well as the hard work that is associated with earning it.
With small children (younger than 5), teach them about saving money using clear jars or a piggy bank. Let them see their money grow as they continue to add coins to the jar. Visual reinforcement can be a powerful tool. Be excited for them when they add the quarter they found on the street, or the dollar or two that Grandpa gave them.
When they are older (perhaps 5 to 12) consider the envelope system to teach them about giving, saving and spending. Have four envelopes labeled “tithes,” “offerings,” “savings” and “spending.” When they receive a gift of money for exceptional grades, or they shovel the neighbor’s driveway, teach them to divide their money up into the proper categories.
And remember, there must be some spending to keep it fun and fulfill short-term goal setting. But when the spending envelope is dry—and depending on the child, that might not take long—there should be no pilfering from the savings envelope. That is for savings for long-term goals, and for teaching the value of having an emergency savings that you never touch.
If you have teenagers, help them open a savings and checking account. Teach them how if you put money in a savings account, it will earn a return. Teach them about how interest compounds and grows your savings over time. Conversely, teach them about the dangers of debt and having to pay interest on borrowed money. Make sure they know how credit cards work and how they can get hit with fees, penalties and high interest rates. If you don’t understand all these concepts yourself, the Internet contains valuable resources to help your education (and write for our booklet Solve Your Money Troubles!). Show them why a debit card is different from a credit card. Another good exercise is to teach your children how to balance a checkbook and to keep tabs on their account.
With older teens, especially those with jobs, make them pay for some things themselves. Help them set long-term savings goals. Teach them that not all expenses are things you look forward to, and show them that paying for others can be rewarding.
I remember the students in high school whose parents bought them a car when they turned 16. Inevitably, they became the kids who had to buy the bigger, fancier-than-they-could-afford cars or trucks later—on credit.
As a parent, it is our job to help our children avoid the pitfalls of life.
At Imperial Academy—a grade school and secondary school run by the Philadelphia Church of God, which publishes the Trumpet magazine—grade 11 and 12 students take a personal finance class. One of the assignments they receive is to interview someone from a previous generation about their money habits. How did Grandpa or Great-grandma handle money? What was it like back then? What money advice would they offer? What do they think about credit cards and borrowing money? Was purchasing designer clothes high on their agenda? How much money did they get paid? Did they ever receive an allowance?
You might be shocked at how much America has changed over the past few generations. It is obvious that many Americans have not taught their children to manage their finances. With each generation, we seem to be losing the financial sense that helped make previous generations among the most prosperous in the history of the world.
So make sure to set a good example, which is the most important teaching tool of them all. Whether you know it or not, your children learn from you. Lead by example—and teach them! ▪