What Financial Lessons Would You Teach?

An Article in USA Today Got Me Thinking…

“Financial lessons every parent should teach before kids leave home” was the headline of a story in USA Today recently. It very wisely stated that it’s important for kids to understand how their spending habits can affect their lives over the long term.

So far, I was liking the article. But when I looked over the five section headings that followed, I was scratching my head over the author’s choice of subjects.

• They should understand how to balance a checkbook
• Know advantages, disadvantages of compound interest
• Teach them a good credit history leads to a good credit score
• A quoted salary is different from their net salary
• They should know the difference between a debit card and credit card

These points seem off-topic at best, and the first one is outdated. Writing checks is becoming obsolete. A CNN report at the end of 2023 found that 46% of their 1000 respondents had not written a single check in 2023. Thus, while we need a method to keep track of our income and expenses, a physical check book is likewise a thing of the past for many people.

I was equally displeased with the advice that followed in the other sections. They sounded like lessons you’d teach an adult child while the basics of “how spending habits can affect life in the long term” need to be learned from the time the first penny is dropped into the piggy bank.  

Thinking I could better address the topic, I decided to write my own story. It contains one basic thought with one P.S. thrown in for good measure.

Here’s the basic thought: When we talk about spending habits, we must also talk about saving habits.

When my son was nine or ten, we sat down with the Service Merchandise catalogue one day and he showed me all the things he wanted. “I want this and this and this,” he said as he showed me popular toys and games. I turned to the jewelry section and likewise said, “I want this and this and this.”

This led to several great conversations:

• The difference between wanting and buying
• The need to count how much money is in the piggy bank and see how far it could go
• The methods we might use to save up money for this, and this, and this

It was ok at nine or ten to have a toy be the reason to save. But as kids get older, the goals for saving change as well. Maybe they are aiming for a car or better still, college. At this point a new type of “savings” needs to enter the discussion as they learn about this very fun thing called “interest” that a savings account earns.

I was very fortunate as a child and young adult. My parents had saved enough money to put me through college and to pay for my wedding. I entered adulthood debt free. My kids knew this as they grew up. They also knew it was my ex-husband’s and my goal to give them those same gifts.

By watching us, they learned to save in a new way, not for immediate gratification, but for the far-out-there future. And they also heard about more powerful ways of investing than a savings account.

The example I set for my kids was to save first and buy second. With the exception of buying a home, I followed my parents’ example and did not borrow money or carry credit card debt.

But I know many people are not in this position, so we also need to talk to our kids about this NOT very fun thing called interest when it is applied to a loan. Yes, it’s sometimes ok to borrow money, but we must do so with our eyes open.

Using a wedding as an example, Bankrate.com tells us that the average cost of a wedding in 2024 was $33,000. If a young couple took out a loan to pay for it, the average rate for a personal loan at that time was 12.65%. If it was a five-year loan, the couple would pay $11,697 in interest making the real cost of the wedding $44,697.

I am a frugal person. I always want to buy things at a sale price. I do not want to pay extra instead. But this is what we do when we borrow money. As shocking as the wedding example is with a 12.65% interest rate, the average credit card interest rate is currently 23.99%.

And now here’s that P.S. I promised:

A favorite fact of life for me is that a little bit plus a little bit adds up to a whole lot. This works beautifully – and horribly – with money. If we are talking about saving consistently a little bit at a time, a secure future can be ours. But if we are talking about overspending and taking on debt a little bit at a time, the far-off future is grim.

In response to the USA Today article, this is exactly how our spending habits can affect our lives over the long term.

One may think of saving as the evil twin of spending, but it is not. It is what allows us to keep spending into the far-off future.

*****

Some of my grandkids have worked on this lesson thanks to an “educational toy bank” that they received as gifts. The bank goes one better than the lesson I suggest in that it also teaches philanthropy. The bank has three compartments into which the kids can divvy up their dough: Save, Spend, Share. How cool is that?

*****

If you like my writing, I hope you will check out my new book, Chai on Life. “Chai” is a mystical word in Hebrew. It is pronounced “high” making this book High on Life with a Jewish slant. It is available wherever books are sold and on Amazon.