I remember my mother used to take me to the ATM machine when I was younger (about 7-8 years of age), and let me push the buttons. I was fascinated by how with the simple push of a few buttons on this magic machine would spit out whatever amount of money I told it to. Where did this money come from? What an awful job to be that little man just sitting there in the wall, waiting all night to give money to whomever comes up and pushes the buttons? Well, obviously, there was no little man. The machine was by no means magic, but directly linked to the checking account in which my mother’s hard earned money rested.
How was I to know that the result of hard work is money stacked in the ATM? This same scenario occurs all the time. Unknowingly, parents miss valuable opportunities to teach their children what it means to earn and manage your money. Money, and the concept of earning and managing money, is a process that must be respected. As soon as the child is ready for school, he should be given his own income to manage. It doesn’t have to be a lot of money, but enough to show him the importance of earning, saving, and giving the money he/she has made. The amount of the income that you give your child is not as important as how he handles it. If little John Boy wants to cry to get that new toy from the shelf at the toy store, a Happy Meal from McDonalds, or a drink from the grocery store, let him blow his entire budget on the item. When the “law of natural consequences” takes place, and he realizes that he has blown his entire income on the first day for an unwise purchase, don’t think about bailing him out. Create some boundaries and offer advice on how the money should be spent, but give the child freedom within these boundaries.
I started working as a golf caddy when I was 12. It was the beginning of the summer and my only goal was to make $100 (I had never had as much as $100 dollars of my own money). I was a short caddy, a little clumsy, and was viewed as the runt of the caddy shack. Consequently, due to lack of popularity, it took me a little longer than the average caddy to make my goal. However, after 2 weeks of long hard work in the sun, and days of not getting picked to work, I reached my goal! The first place I went was Baker’s Square to buy my very own Lemon Supreme pie (with the cherry on top). I then went to McDonald’s to buy my very own Value Meal without any permission from my parents because I could. Later, while walking down 8 mile road I saw some of the best looking short sets that I had ever seen. They were layered with stripes with just about every color you could think of with the short and shirt to match exactly. As Witherspoon said in Boomerang, “You got to coooooordinate!” Of course, I had to purchase three pairs.
Well, two days later, my money was gone and all I had to show for my hard work was a sick stomach full of pie, two Big Macs, and three of the ugliest summer outfits one would ever see (I can now freely admit they were ugly but I should have known when my grandmother saw me and all she could say was, “Wow baby…that outfit sho’ is colorful!”). I think I cried at the feeling of an empty pocket when they used to be so full! I didn’t know the value of setting a budget. When you give your child an income, his allowance or whatever you call it, teach them how to manage or budget their money. A good idea, as children understand visual examples, is to devise a system of three boxes or jars. Label each box separately- Give, Save, and Spend. Make your child put a portion of his income into each box. Even a five year old can see and understand this method. As the child matures involve him in the family budget. As he gets older, perhaps in his teenage years, have him establish a written budget. We must teach our youth to be wise consumers. Have discussions and conversations teaching your children about shopping skills, the difference between needs and wants, and if you are in a spiritual household the benefit of waiting on the Lord to provide resources when the time is right.
The concept of saving money should be taught as well as the value of compounding interest. Have him open a savings account, and walk him through the statements. Calculate just how much money should be available to him if he continues to save money in this account at X% rate 5, 10, 20 years down the line. If the child is younger, he might not appreciate or understand saving for college, but he can understand saving for that new toy he wants. If he wants it badly enough, teach him the benefits of saving for it. You will perhaps discover that the new Power Ranger will not be as important as it once was.
Debt, a problem that plagues us all, should also be taught as soon as possible. For some of the bigger purchases such as bikes, video games, or designer clothing, loan your child the money. Draw up a credit agreement with interest. When the loan is paid off, give special attention to the relief that is felt when a debt is paid.
Contrary to popular belief, life isn’t all about money. It is just as important to learn the value of giving. Money comes and goes, but people are more important then any amount of money they will ever make. If you can use your money to help people, then that money will come back to you tenfold. Giving to the church, giving to a charity, a family that needs food, etc. are all opportunities to involve your child in this wonderful spirit of giving.
The growth of a tree starts from the roots. We all will agree that our children are the roots and foundation that determine the future and the direction of our society. If we can reach and teach them, tomorrow will be a better and brighter day. “And he shall be like a tree firmly planted by the streams of water, ready to bring forth his fruits in its season; his leaf also shall not fade or wither, and everything he does shall prosper.” Psalm 1:3
Written By Ryan Mack, Author of Living in the Village and President of Optimum Capital Management, LLC