Lately I’ve seen several great articles floating around about how to teach your kids about financial matters. As a father of 2 myself I tend to read every one of these posts that I can find, because I want to give my kids every opportunity to learn about effective money management when they are young.
I’ve been thinking it over, though, and have come to the realization that my dad was a pretty effective teacher of financial topics! Perhaps a more effective road map for my kids shouldn’t be “what should I teach”, maybe it should be “what do I remember learning?” And there are quite a few that I remember learning from my dad!
My dad wasn’t always the best decision maker with his money, as he will readily admit, but he was able to take both his good experiences and his bad ones and impart wisdom from them. I’m sure that in the years to come I’ll remember more of the lessons I learned from him, but here are the ones that come to mind today.
The Importance Of Budgeting
My parents gave me an allowance once a month of $5, starting when I was around 7 years old (if I remember right). When I got older I could earn a bonus $5 each month if I did a good job cutting the grass or hauling firewood. My friends got allowances too, and theirs always seemed to be more than mine. But that wasn’t the worst part!
My dad set up a set of envelopes that he kept in his dresser drawer (I guess he was the banker?) and I was required to split my money into the various envelopes he had set up. This applied not only to my allowance but to any money I took in. Birthday gifts, odd jobs, you name it, we split it up into the envelopes.
The envelopes were (drum roll please):
- Savings (20%)
- Giving (10%)
- Clothing (30%)
- Spending (40%)
I was required to buy my own clothes as a kid (this included shoes) so if I wanted to wear Walmart shoes, I could. If I wanted to buy some Nike’s, well… it would take some work.
Looking back, this was the single most important financial lesson I learned as a kid. I learned to be patient with my money, not to overspend in a certain category, to do my research before making a purchase (to make sure it was the item I really wanted and that I was getting a good deal on it), and most of all that all my income was not meant to be spent on whatever I wanted!
I love my dad for setting this up for me, even though it didn’t always seem “fair” at the time.
The Importance Of Being Debt Free
My dad is just now paying off his last mortgage debt (at age 59) and he’s got a few payments remaining on some land he bought from my grandfather a few years back. He’s not been debt free his entire adult life. But he let me “behind the curtain” at a young age to see the burden that debt gives you, and as a father of 7 children his burden was substantial!
One of the stories that comes to mind is a mechanical system that my dad built for his company, and then a few years later the company was trying to sell that system off as they were going under. They wanted my dad to buy it (since he had built it) and it was an attractive deal, since it could provide my dad with several thousand dollars each month in profit. But they wanted around $80,000 for the system and my dad didn’t have that kind of money around. He refused.
Several months later his former bosses came back and asked him again about buying it, for substantially less than the first price. My dad refused again and let them know that, while he would LOVE to buy the system, he wouldn’t pay more than the cash he had on hand, which was $20,000 from the sale of a family vacation home he had been part of. A couple months later the system owner came back to him and begrudgingly sold him the system for the cash he had on hand. Since then (15 years and counting) my dad has earned around $3,000/mo from maintaining that system that he owns outright.
He would have missed a great opportunity of his former boss had decided not to sell it to my dad, but my dad would have been just as content with his decision, knowing that he had avoided going into debt over this deal. Now, you can argue the wisdom of not going into debt for a deal like that when it looked very profitable, but it was seeing my dad in action in those kinds of situations that taught me how much going into debt should be avoided. He stuck to his guns. He gave his words to me weight. He demonstrated his integrity.
How To Be Resourceful
When I was 12 years old I wanted a nice basketball goal. I’m talking about in the ground, big backboard, u-can-slam kind of nice. The problems was that the one I wanted was around $300, and I had $20.
I worked some that summer, cutting grass for a lady we knew and trying to save up my money, but due to some necessary expenses I only had around $50 to show for it. I was complaining to my dad about not being able to get there and he talked to me about thinking outside the box. He helped me think of other ways to earn money, including another yard I could have been cutting and selling some of my things in a yard sale. He helped me understand that if I couldn’t afford the goal I wanted then maybe I needed to set my sights a bit lower.
He also said something to the effect of “and you know, I would love to have a new basketball goal myself, so if there’s any way I can help just let me know”. After thinking about that I made him a proposal. “Dad” I asked, “would you be willing to match each dollar that I save for the basketball goal with a dollar of your own?” He accepted this proposal immediately and over the next 9 months or so we saved $250 for that sweet basketball goal (which had come down in price since we started out).
It was a valuable lesson in being resourceful that has helped me in all kinds of ways ever since.
The Power Of Compound Interest
I vividly remember sitting down with my dad one day and talking about saving money (with an AmericanCentury logo on an envelope on his desk, which might have meant that he’d just received some kind of performance report for his investments).
He walked me through several scenarios, but the one I remember the most involved putting $5/week into an investment of some kind and earning 8% on it for the next 60 years. The numbers were eye-popping, and I’ve never forgotten how much money can work for you if you have it.
Money Isn’t The Most Important Thing
My dad talked to me quite a bit about money as a kid. He still does, actually. I’m fortunate in that way, I totally understand that.
But he also taught me a lot about life. He wanted me to be a good steward with the finances I’m given, but not to elevate them above other priorities in my life. He taught me how to be a responsible and loving husband and father. He taught me how to serve others and manage a career. He taught me how to be a man of faith and strong character. He taught me how to be a good citizen and care for others who are in need.
Essentially he taught me that money is, at the end of the day, just a tool. It’s one that we should take care of and not waste, but it doesn’t have the power to bring me ultimate joy or satisfaction.
It’s only money!