Opinion | former TCW issue

Raising Generous, Debt-Free Kids

7 things your kids need to know about money
Raising Generous, Debt-Free Kids
Image: JUNPINZON / SHUTTERSTOCK

Sometimes it feels as if there’s a cavernous divide between being financially savvy and being kingdom minded. Day after day, adults and kids alike are essentially told that they will not be liked or happy unless they buy the new iPhone, order that extra cheesy pizza, or drive the latest luxury car.

Meanwhile, there’s a tiny voice trying to be heard above the din, encouraging us to trust God for our needs and store our treasures in heaven. A lot of living—and spending—happens between these two divergent messages.

Clearly, far too many of us fall for advertisers’ claims. The average American household owes approximately $7,000 in credit card debt, and the average college student graduates with $35,000 in debt. In this cultural context, how can biblical concepts both shape our own financial choices and help our children make wise choices?

The Basics

Despite the growing movement spearheaded by financial consultant Dave Ramsey to help adults get their financial houses in order and pay down debt, financial literacy is not a popular topic for youth groups or Sunday sermons. And given that only 17 states require high school students to take a class on personal finance, the only way our kids will become financially literate is if we teach them.

For many of us, the obvious challenge is that nobody ever taught us! Though my husband and I have avoided major financial faux pas, we have often felt as if we were finding our way in the dark. In an effort to give our kids a different experience, we’ve tried to be intentional about teaching our sons these financial principles:

1. Be aware of the pervasive messaging that manipulates you to spend money.

2. Learn to distinguish between wants and needs.

3. Gain impulse control regarding spending.

4. Make the connection between earning and spending.

5. Operate within a budget.

6. Avoid debt.

7. Share resources with those in need.

Learning Through Experience

As with our children’s spiritual education, their financial education should start early. Money skills can be taught alongside simple math as early as age two. According to Kimberly Palmer (author of the forthcoming Smart Mom, Rich Mom; former senior editor at U.S. News Money; and parent of two), regardless of whether you give an allowance or have children work for money, they can begin to distribute their income into three categories: save, spend, and give away.

“We want our kids to get used to parceling out their money for different purposes, including needs and wants. This is why I like starting an allowance at a young age, around five,” Palmer explains. “They can get used to putting some in the pile for wants, some for needs, and some for giving away to others.”

Palmer suggests using three separate glass jars or envelopes for this. This makes it visual and also gives them a sense of accomplishment as they see the jars fill up.

Though some financial experts strongly advise functioning on a cash-only basis, Palmer recommends giving teens a debit card. My husband and I did this for each of our boys when they turned 15. We established a budget for their entire year (including everything except medical and dental expenses), had multiple conversations about how to use the card (including tracking purchases), and then deposited a lump sum into their account. This curtailed their spending (and endless requests for us to buy things for them) more than any verbal lesson could have given.

I asked Palmer how to discern if your teen is ready to handle a debit card and what safeguards parents should put in place. “Research suggests kids are actually better with money as adults if they have practiced as teenagers, so even if they are not quite ready or still need supervision, it can be a good idea to get them used to handling their own accounts,” Palmer says. “One option is to give them a prepaid debit card with a limited amount of funds on it, like $100, so you know they can’t go too far astray. Regarding safeguards, the most important thing is making sure they protect their identities. Initially, they may need help so they don’t rack up debt.”

According to Palmer, the underlying principle is recognizing that kids need a lot of guidance at every age. “Starting around age four and five you can have these conversations at the grocery store about making decisions and finding sales, and then as they get older, the discussions turn to budgets and debt, like student loans. Even in their twenties, they probably still need guidance about setting up a 401(k) or taking out life insurance,” Palmer says.

College Debt

One of the most consequential decisions we will help our children make is how to finance their college education. Michelle Singletary, Washington Post columnist and author of The 21-Day Financial Fast, advised her daughter to forgo her dream school for a less expensive one, simply to avoid taking on debt.

“From the time our children were little, we have managed their expectations for college,” Singletary explains. “My husband and I told them that we would pay for college. However, they knew that we would not take on debt and that they would not be allowed to take out loans. We told them they could apply to any college they wanted, but if they didn’t get enough aid to make up the difference, they would not be allowed to attend.”

Singletary’s oldest child decided to change her college plans due to finances, attending a school that offered her a large scholarship rather than attending her first-choice school. “She learned what we knew, which is that she would succeed wherever she went and that we didn’t need to take on debt for her dreams to come true,” Singletary says. “Scripture is clear, the borrower is slave to the lender. We chose to teach our children to avoid being a slave.”

Raising Givers

Sharon Epperson, parent and senior personal financial correspondent for CNBC, views generosity as a key part of financial literacy, encouraging kids to look beyond their own needs and wants. “It’s especially important for kids to experience fulfillment by giving back because it lays the groundwork for them to be empathetic and philanthropic adults,” she stated in a televised interview.

Epperson explains how she and her husband have taught this countercultural message to their kids: “When my 10-year-old daughter’s piggy bank is full, she always wants to give the money away. We’ve researched and discussed organizations that might be a good fit, like children’s charities.”

Since children rarely share the same interests, as parents we have to tune into their unique frequencies and help them find appropriate opportunities. “My son, who is 13, is more inclined to give his time,” Epperson says. “He has done volunteer work in disaster relief and really enjoyed participating in a fashion show last year for a local charity that gives clothes to needy kids and teens. The organization raised $50,000 from that event! Some of these activities may seem simplistic, but I want my kids to understand that there are concrete ways they can give back even at their age.”

Epperson continues, “The way I was raised was that you give your time, your talent, and your treasure. My parents did all three in abundance, but within their means. When you think about the gift that you can give your children, there’s almost nothing greater than helping them to become charitable, humble, and philanthropic. In order to do that, we have to think long term. A great question to ask ourselves is this: What kind of financial legacy can we leave to our family and our community?”

Ultimate Values

Singletary asks another question that all of us need to consider: “Isn’t our job as parents to help our children become good money managers? Our children are watching and listening. Live what you want them to live. Teach them to hate debt. Teach them that God wants them to prosper but for a purpose,” she says. “This is the Scripture I live by and have taught to my children: ‘For where your treasure is, there your heart will be also’” (Matthew 6:21, NIV).

If we choose both to live by these words and teach these concepts to our children, perhaps they will grow to be a generous and debt-free generation.

May
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