Children are not born with a sense of the value of money. Usually they learn by what they see, hear and experience — especially at home. Christian homes are no exception.
Opportunities exist all through life to teach sound financial management — from your child’s first allowance to the major investments they make as adults.
Young children
Childhood is a great time to learn about money management that could yield benefits for a lifetime. Children are bombarded daily with persuasive appeals on how to spend money. They need to have money of their own to learn how to manage it. Rather than simply giving children money upon request, an allowance is an excellent teaching method.
Debate on allowance generally revolves around:
- Should the allowance be tied to “chores” or other regular tasks?
- How much is the right amount?
- What expenses does the allowance cover?
Family systems vary on these issues, and there is no one right way to answer these questions. Openness and flexibility are paramount in making it work in your family.
Almost all agree that an allowance for children should be a set amount and should be paid regularly. When deciding on the amount, discuss what items will be covered. The amount should be enough that the child has money to manage with few strings attached.
An allowance can be a tool that helps children learn about saving and spending money. Parental guidance is helpful but avoid directing every step of a child’s spending. Be flexible. Allowances require a few rules for management but avoid micromanagement.
Take your child to open a savings account. A regular savings habit early in life is key to sound financial management later. Many financial institutions have programs for children. Be careful not to refuse all requests to withdraw from savings; you may risk discouraging savings altogether.
Many experts suggest a 10–10–10–70 approach to managing an allowance. The first 10 percent is for giving to the Lord’s work through the church. The next 10 percent is for saving — perhaps with particular short-term goals in mind. The other 10 percent amount is for investing — usually focusing on long-term goals such as college or a car. The remaining 70 percent is for spending.
Teach children how to evaluate advertising. Will the product really perform and do what the commercials say? Is it really a sale price? Are there products available that will do a better job, perhaps for a lower price?
Finally the responsibility for teaching children about money is also a privilege. Schools should not be relied upon to teach children your values about money. Habits and attitudes parents teach early in life will impact a child’s life for years to come.
Teenage children
The values they learn as young children will prove important when as teenagers they become the targets of credit card companies across the land, beginning as early as their junior or senior year in high school, with offers that they often find hard to refuse. It is estimated that in 2001, more than 30 million American teens spent over $170 billion — representing an enormous market.
Even with good training, many teens find it difficult to fend off the onslaught of “easy” credit. Just as Christian parents teach their children to tithe 10 percent, managing the other 90 percent is also teachable. On-line help is available from several sources. Use your browser’s search engine to find a “Credit Card Payoff Calculator.” Your teen might be surprised how long it takes to pay off a balance at 18 percent interest.
As teens get their first jobs, teaching them how to manage their income is important. Teach them to give 10 percent of their income to the Lord’s work through the church. Perhaps another 30 to 40 percent should be saved or invested in a college (or post-high school training) fund. The remaining 50 to 60 percent is then available to spend. But if the teen has debt, then spendable income is lessened.
It’s usually a good idea to gradually ease your teen into credit management. Many credit card companies offer innovative products like prepaid credit cards. Or you can allow your child to be a signer on one of your accounts, perhaps with a small limit.
Remember if your teen is under 18, a parent will have to serve as a co-signer and will be responsible for the debt. (You should carefully weigh the pros and cons before cosigning for your teenager.)
Bankrate.com suggests these credit card tips for parents and teens:
- Review the credit agreement with your teen. Find the annual percentage rate and how the minimum payment is calculated. Help them see what happens if they’re late with a payment or if they go over the credit limit.
- Determine what the credit card will be used for. Is it for emergencies only? What is considered an emergency? Or perhaps the card will be used to purchase a particular item — i.e. a computer. Also, if the card will have limited use, should it be carried around?
- How will the bill be paid? Who is responsible for paying? If both parent and child will contribute to the payment, what percentage will each pay?
- From where will the teen’s portion of the payment come? Part-time work? Allowance? If the teen has to get a job, can he or she handle school, homework, household responsibilities and work?
- What happens if the teen can’t pay one month? It’s important that he or she understands what happens to an adult’s credit report if bills go unpaid or are paid late. Be sure your teen understands the value of a good credit rating.
Of course, despite your best efforts, your teen might get overextended in credit. Think twice before bailing them out. Instead consider going with your teen to a local consumer credit counseling service and let him experience the consequences of poor financial decisions. It’s better for a teenager to learn the hard way how to get out of $1,500 worth of debt now than $15,000 later.
Adult children
As with teens and credit cards, if Christian parents find that their grown children are having recurring financial difficulties, they should resist bailing them out too quickly and perhaps robbing them of a valuable life lesson.
The financial difficulty may be a God-sent opportunity to help your children seek solid counsel, then establish and implement a workable budget. In fact, parents may consider making their financial help — if any — contingent on it. It is never too late for parents to teach their children about God’s principles for handling money.
Many parents of adult children are challenged with how to appropriately help them. The late Larry Burkett, founder of Christian Financial Concepts and co-founder of the merged ministry of Crown Financial Ministries, once wrote that too many parents attempt to buffer their children financially, usually making the problem worse. Burkett advised parents to let their financially strapped adult children know that more money won’t help them change poor spending habits.
Bailing children out of financial crises sometimes encourages them to be dependent on parents rather than on God. If God is trying to teach your children discipline and you financially step in, your actions could shortchange the experience.
Facing the problems associated with poor financial decisions is often a great teacher. Many believe God has often allowed problems into His children’s lives to teach them the value of dependency on Him.
Crown Financial, among others, offers a comprehensive program for local churches to equip people of all ages to handle money from a biblical perspective. They encourage parents of adult children to:
- Help adult children understand God’s principles. They need to know they can trust God to take care of them and know He can be trusted to work out their finances.
- Love them but do not indulge them. While no one likes to see their children suffer, financially rescuing them may teach the wrong lessons and only doom them to repeat the problem.
- Allow them to fail. Sometimes parents must allow their children to fail. Some of life’s most valuable lessons are learned because of trying and failing. Love them enough to allow them to learn from the failure.
Of course, there is nothing wrong with financially helping adult children if they are truly in need.
But if their income is adequate and is simply being mismanaged, parents need to be wise. Let your children know that although you love them, any financial help must be contingent on establishing a workable budget with good counsel to help implement it.
Parents need to be cautious and allow God to lead them in a manner that will not thwart His purposes in their children’s lives. (GuideStone)
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