Dollars and Sense: Teaching Children to Handle Money

In the early 1700s, two men developed distinct reputations for themselves–one was Jonathan Edwards, a man of integrity, refinement and Christian character and the other was Max Duke, a well-known criminal. During the last two hundred years, their descendants have been traced. In Jonathan Edward’s line of descendants are 13 college presidents, 200 preachers, 60 prominent leaders, 90 physicians, 32 authors, 6 professors and 300 farmers. On the other hand, Max Duke’s descendants include 90 prostitutes, 100 criminals, 145 confirmed drunkards, 300 delinquents and 285 who contracted various evil social diseases.

The point is this: As parents, we are models for our children and grandchildren, and we have a choice. We can be good models or bad models, and the type of models we are will affect future generations. Dr. Howard Hendricks, of Dallas Theological Seminary, has repeatedly stated that “more is caught than taught.”

Where and how we spend money is largely a function of where and how our parents spent money. The same can be said for our children. We don’t have to say a thing to our children to pass on to the decisions, priorities, commitments and habits.

As a consequence of seeing behavior modeled, children will either model that behavior exactly or react to it and behave in just the opposite way. Their reasons for doing so are many.

For example, perhaps your father always bought a new car every year; chances are you will do the same. Or perhaps your parents paid cash for everything; you, as a consequence, may find it difficult to use credit cards. Perhaps your parents always ate a Sunday meal out; you may do the same. It may even be that you shop at the same stores that they have always shopped at.

It may be that you were always forced to wear second-hand clothes or clothes purchased from a discount store when you were younger; as an adult, you determined that never again would have anything other than new clothes, and that your wardrobe would always represent the latest in fashion. It may be a need for recognition, an improved self-image or even a rebellious reason for reacting in just the opposite way that the example was set.

Because we are models, there are four implications for us: First, we must examine ourselves to see what we model. Second, it is essential to have unity between a husband and a wife regarding goals, priorities, and decisions; disagreements on one or several points can send mixed signals to children. Inconsistency can be confusing to them and can have disastrous consequences. Third, because a husband and a wife have different roles in the marriage relationship and in the decision-making process in a family, it is important that each of us understands and has well-defined roles. On the other hand, single parents will need to play both roles. Fourth, because of the long-term nature of training and its importance, we need to have a training plan in order to pass on to our children what we want to pass on.

The Need to Examine Yourself

The beginning point of developing a training plan for your children is doing a self-inventory. Below are some questions that you need to answer to determine how ready you are to begin passing on to your children principles and practices of personal money management.

1. Do you have financial goals for the next year, five years and beyond?

2. Do you have a spending plan for the next 12 months?

3. Do you have a plan to pay off your debt? Do you know the amount of your debt?

4. What would happen to your family financially if you lost your job or income?

5. Are you tithing?

6. Do you ever spend impulsively?

7. What does your lifestyle communicate regarding your value system?

8. Are you saving and investing for the future?

9. Do you have a will?

10. Is the “breadwinner” of the family adequately insured to provide for his family in the event of his death?

11. Do you and your spouse ever disagree regarding money matters?

12. If someone did not know you and had a copy of your checkbook for the last 10 years, what story could be written about your life?

Obviously, these are very penetrating and perhaps even convicting questions. Even though you may not have been able to answer them all to your satisfaction, you at least know what you must begin to work on. Once you have put your own financial house in order, you are ready to focus your attention on teaching your children to handle money.

The Elements of Your Training Plan

Every day we make plans–some long-term and some short-term. Those plans can be formal or informal. The formal plans tend to focus on the more important activities of life, such as planning for retirement, college or a new home. Less formal plans include planning for a vacation, a garden, a weekend’s activities, redecorating the home and so on.

The more formal plans tend to be more long-term and more significant, and they require you to give a great deal of forethought to them. The training of children in managing money is a very difficult and long-term task; therefore, you need some type of formal plan for that training process. It does not necessarily have to be written, but you certainly need to think it through. A plan is really nothing more than premade decisions. Then when a decision point comes up, you will have a plan from which to operate. This eliminates conflict and anxiety between you and your children. It also eliminates impulsive decisions that could be wrong.

The more formal a plan, such as blueprints for a home, the more likely there is to be clear and effective communication between the parties discussing the plan. Therefore, if you have formalized a training plan, you have a tool for enhancing communication with your children.

Once decisions have been made and communicated effectively to children, most of the reason for conflict has disappeared. Expectations and reality are becoming one in the process. Conflict occurs when reality does not meet expectations. A formal plan for training, communicated to children, gives them the security of knowing where the boundaries are and what their expectations should be.

For example, if the expectation by a child is a new car at age 16, and the parents had never planned that then at age 16 the child is very likely to be disappointed, hurt or angry, regardless of what his parents give him for the birthday. Or it may be that the child expects her parents to buy all her clothes through high school and finds out at age 16 that the parents had no plans to buy her clothes once she was old enough to work. Again, expectations and reality do not agree and, therefore, there is apt to be miscommunication at the very least.

In addition to establishing boundaries, the plan gives parents and children the track they are going to run on for many years. For instance, we have communicated to our children what financial assistance they can expect from us after they are married. This is just a further extension of our money management training, yet it gives us a communication tool and the track that we, as a couple, will run on in our own financial life. Through prayer and planning, we have predetermined what our children can expect of us instead of letting them be the ones to tell us what they expect. That is what a formal training plan is all about.

The Requirement

I am often asked, “How long did it take you to write your book, Master Your Money?” My response is always, “Twenty years.” Even though the actual writing process required no more than six months, it took 20 years to acquire the experience and wisdom to be able to have anything at all to say.

In reflecting on what it took to gain that knowledge, I realize that most of what I learned came from the mistakes I made and my willingness to learn from them. Not only does wisdom take time to acquire, but it costs something in terms of the mistakes that are made. Training children is a similar process in that it requires a long period of time and many mistakes will be made.

Proverbs 22:6 says, “Train up a child in the way he should go… and when he is old he will not depart from it. ” There are two key words in this verse–train and old.

Children must be taught what they should and shouldn’t do. However, they are not fully trained until they, of their own free will, choose to do what they should do. Children can be taught to make their beds, but they haven’t been trained to make their beds until they make them correctly and voluntarily, with no nagging or demand that they do so. Obviously, training is a long-term process, and parents often wonder if it will ever be accomplished.

Old in this verse refers to the age of puberty. Therefore, the Scripture indicates that children will be trained by the time they reach the early teens. That means that the training process must begin fairly early in each child’s life and it must end fairly early. There are not a lot of parents can do to shape the will of children once they reach the early teen years. Then they have to make their own choices, and sometimes a long, painful battle between them and the Lord occurs as they make use of their ability to choose.

Peter Lord, the pastor of the Park Avenue Baptist Church in Titusville, Fla., has been quoted as saying, “A person is not disciplined until God has control of his pocketbook.” We would agree with this statement. Undoubtedly, this is why our Lord had so much to say about money in His parables and teaching, not because He was concerned about our money management per se, but because money management is a reflection of spirituality.

If we look at how Jesus taught His disciples, we can learn four principles regarding training children in all areas, including money management. The principles are these:

1. They must experience what is being taught.

2. They must have an opportunity to fail.

3. They must have feedback.

4. They must have rewards.

Jesus sent out His disciples on their own to experience what He had been teaching and modeling for them, the preaching of the gospel of repentance.

Because the disciples were on their own, they had the opportunity to fail. It is not recorded that they did fail, but undoubtedly they were not 100 percent successful in their preaching and witnessing.

Immediately upon their return to Jesus, He took them aside to hear what had happened, and undoubtedly to give them instructions as to what could have been done differently? Take a look at Mark 10:28-30. In this passage, Jesus assures the disciples that because they have left all and followed Him they can expect to receive rewards.

From these verses and others (such as the parables found in the books of Matthew and Luke), we see how Jesus used the four principles in training His disciples. These four principles can be applied to training children about money management.

Experience

It is easy to tell your children that they should tithe, save and spend wisely. But until they experience the joy of tithing, the rewards of having saved for a major purchase, and the thrill of seeing how much money they have saved by spending wisely, you can tell them all day long and it will mean nothing. The training process, then, must give them an opportunity to experience what you are attempting to teach them. Only by allowing them to experience what you are telling them will it become theirs. It is at this point that training has occurred.

Opportunity to Fail

Failure is a part of life. The issue is not whether children will fail, but how they will respond to failure. The best time for them to fail is while they are young, and parents are available to counsel them. (Notice we said “counsel,” not criticize. “) Probably the biggest mistake that parents make in training children to manage money is not giving them the freedom to fail. Parents either make decisions for them or are so critical of their decisions that children quickly learn not to risk anything on their own.

To be unable to deal with failure in any aspect of life is to be crippled. Christians, of all persons, should be able and willing to deal with failure because, in the very act of becoming Christ’s followers, we have admitted our failure to live up to God’s law. Children must be given an opportunity to fail so that they can learn to cope with failure and not be devastated by it.

Feedback

While Jesus was training His disciples, it is often said of Him, “and He took them aside.” He gave them explanations about what they did well and what they did wrong. His explanation or feedback was, in most cases, immediate and uncritical. Rarely did the disciples become defensive when they were taught by our Lord, and yet He was clear and direct in offering insight to them.

According to the Nationwide Survey of 1986 conducted by the Rand
Youth Poll, 71 percent of teenagers consider themselves to be “wasteful” shoppers. If they consider themselves wasteful, I would interpret that as a cry for feedback on their decisions and behaviors. If we, as parents, do not give them that help, no one else will.

When giving feedback, parents have the opportunity to point out acceptable options to children. Saying, “This is the only way to do it,” is much less effective than saying, “This is a way to do it.”

Most of the decisions made regarding the spending of money reflect differences in judgments and values. Many of them have nothing to do with absolutes. For example, our three daughters differ from one another in their choice of clothing, and they certainly differ from their mother in that regard. It is OK for her to give her opinion when they are shopping, but she must communicate it as an opinion reflecting her judgment and values, not as an absolute. She may not fall in love with that dress one girl just has to have; she may even think it’s not a flattering choice. But that doesn’t make the selection of the dress morally wrong.

It is imperative for you to know where to draw the line. Knowing where to draw the line comes from having predetermined what you want to teach your children, morally, socially, financially and spiritually. The issue is not an absolute so far as the line is concerned, but you must know what that line is. Once the line has been determined, circumstances should not change the boundaries. Circumstances can, however, change what goes on within the boundaries.

This is especially important when it comes to spending money. In the area of spending money, rarely is that line one of an absolute. So be careful about the feedback that you give your children in terms of something being absolutely right or wrong. Continue to provide feedback, however, because they have no other source that has their best interests at heart.

Rewards

Jesus said, “In My Father’s house are many man signs; if it were not so, I would have told you. I go to prepare a place for you ” (John 14:2). If we, as Christians, are not motivated by obedience and commitment by that promise, we really don’t understand it.

Jesus used the promise of rewards and the promise of lost rewards as a form of motivation for His disciples and, consequently, for us as believers. Rewards are biblical, they are motivational and they provide a source of feedback.

For these reasons, rewards are necessary in the training process. We have given many types of rewards to our children throughout the years, including money. We are cautious about this, however, because money can easily become a form of bribery. A bribe involves using money, or some other promise, to manipulate behavior for your own benefit. A reward is a promise to be received as a matter of choice by the person to whom it is offered. You may have a desire as to what you would like your children to do, but it is their choice whether they act according to the terms you set in order to receive the reward

Bruce Wilkinson, president of Walk Through the Bible Ministries, has said, “The fear of loss of a reward is a greater motivator than the promise of a receipt of a reward.” One of the training techniques we have used is giving the reward ahead of time, but taking it away if the desired behavior is not followed. For example, we were having trouble with the children being critical of one another, especially at dinnertime. After giving the matter some thought, we gave each of them a jar containing $10 worth of quarters. Then we told them that for the next 30 days, anytime we heard a criticism we would remove a quarter from the jar of the child who made the remark, with no questions asked. We made it clear that they could have the quarters remaining at the end of that period. It did not take more than two days for the criticism to stop.

God Owns It All

The foundation of your training program must rest on one important truth: God owns it all. Haggai 2:8 records God’s words: “The silver is Mine, and the gold is Mine. ” Psalm 24:1 declares, “The earth is the Lord ‘s, and all its fullness. . . The world and those who dwell therein.” In the parable of the talents, Jesus said, “For the kingdom of heaven is like a man traveling to a far country, who called his own servants and delivered his goods to them ” (Matthew 25:14). Any reading of the Scriptures will lead you to the inescapable conclusion that all resources come from and belong to God.

This is our definition of stewardship: “The use of God-given resources for the accomplishment of God-given goals.” The implication of this definition is that a steward is a manager, not an owner. An owner has all the rights; a steward has only responsibilities.

If you truly believe that God owns it all, there are three implications of this belief. First of all, He can take whatever He wants. Second, every spending decision is a spiritual decision. Third, stewardship cannot be faked.

God Can Take What He Wants

If God can take whatever He wants whenever He wants, you should hold all resources with an open hand. God puts into your hand whatever He chooses to entrust you with, and He has the right to take out of that hand whatever He desires. When He takes anything out, you, as a steward and manager of His resources should heed the wisdom of these words: ”The Lord gave, and the Lord has taken away. . . Blessed be the name of the Lord ” (Job 1:21).

Spending Decisions Equal Spiritual Decisions

The second implication of believing that God owns it all is that every spending decision is a spiritual decision. In other words, there is nothing more spiritual about tithing than paying for a vacation. Why? Because tithing is the use of God’s resources to accomplish God’s purposes. We are not saying, “Don’t tithe. ” Just consider what is the real goal of God’s plans and purposes for your life and the lives of your family members. It may be to build family unity, and a vacation is a way to build that unity.

Money is nothing more than one of the resources to be used to accomplish the real goals and objectives of life! For example, one real goal is security. But the only real security is through a personal relationship with Jesus Christ. Money cannot buy this, and any attempt to use money to buy security will ultimately fail. God will cause it to fail, so you must trust Him for your security both now and for all eternity. God wants you to be secure in Him.

Stewardship Cannot Be Faked

The third implication of believing that God owns it all is that stewardship cannot be faked. Your checkbook reveals the spending decisions you have made. It tells how you choose to use God’s resources. Your checkbook reveals the priorities in your life. It reveals facts such as how you manage your life. It also reveals how you manage your time, what size family you have, where you live, how much debt you have, how much you are allocating to savings and investments, how you dress and so on.

Every other area, except the financial one, of the Christian life can be faked if you really want to. A person need only be a Christian for a short time to know how to pray, how to witness, where to go to church or how to study the Bible. These can be done with others not knowing the person’s real motive.

The checkbook, however, reveals the actual commitment to the use of God’s resources to accomplish God’s purposes. I sometimes wonder if, when we get to heaven, all our check registers will have proceeded us so that we can spend time in eternity reviewing how we used or abused His resources.

Modeling Good Stewardship

To train your children that God owns it all, you must begin by modeling that attitude. Model prayerful financial decision making. Model an attitude that says, “I am responsible to handle God’s resources because they do not belong to me, and He has all the rights.” Show your children that you control financial resources instead of being controlled by them. In other words, illustrate your freedom in
the area of money and money management.

Probably the most significant way to model the truth that God owns it all is to model freedom in the area of tithing and giving. Anyone who truly believes that God owns it all will freely give, with the tithe being merely the beginning point of giving.

One way to do this is to have family times when giving decisions are made. Periodically, we sit down with our children and evaluate the requests for funds that we have received. We make decisions about particular needs and how much to give to them. We have found that in most cases our children are much more likely to give, even out of their own resources, than we are.

Do you reflect an attitude of stewardship with all that you possess? The best test is to think about how you treat the financial resources and all the other resources–home, clothes, cars, time and so on–God has entrusted to you. Do you communicate a willingness to give on a regular basis, to give at special times and to give when a need is known?

Here is a challenge we hope you and your family will accept:

1) If you have never done so, commit to the Lord to give up the ownership of His resources. That ownership may be in the area of money, but it also may be your home, time or other resources God has entrusted to you. Prayerfully return those resources to Him just as if He were a “depositor” in your bank, you were the banker, and He asked to see His resources.

2) In obedience to the Scriptures, give regularly as God has prospered you. First Corinthians 16:2 says, “On the first day of the week let each one of you lay something aside, storing up as he may prosper, that there be no collections when I come. ” This will communicate more than words the truth that you believe God owns it all, and your children, in turn, will catch that truth.

3) As you are confronted with the needs of the poor, the homeless, the missionaries, the church and so on, play some part in meeting those needs. Remember that may be the very reason God has entrusted some of His resources to you. You are to be a channel to meet the needs of others.

4) When your children are very young, require them to tithe so that tithing and giving become habitual. If that is done on a weekly basis, 52 times a year, they must, subconsciously at least, recognize that they are returning to God a portion of what He has entrusted to them.

Teaching Children Financial Maturity

Let’s take a look at one final principle that you should teach your family: the principle of financial maturity (or delayed gratification).

There are several ways that this can be done. Judy and I have found that one effective way is to require them to have a savings account. A portion of all money that they receive, from whatever source, goes into a savings account. But here is a critical point:

We allow them to make withdrawals from the account. They may dip into their savings for major purchases such as a dress for a special occasion, a trip, a tennis racquet, a bicycle, a stereo or some other item they desire. They quickly learn the thrill of being able to acquire something they would really like to have by saving for it, not by receiving a handout. In other words, they learn about delayed gratification.

If we require them to make major purchases out of their savings account, they also quickly learn about limited resources. If their funds are depleted, they can’t buy something they may really want. A few disappointments like that go a long way in teaching wisdom in spending.

We have them open a savings account that pays interest, and then on a quarterly, semiannual or annual basis, we sit down with them and show them how much interest has been earned. We explain that they did not work for that interest–they allowed the money to work for them. It is incredible how quickly they begin to understand the magic of compounding when they realize that interest earns interest.

We also attempt to teach our children financial maturity by illustrating other ways to benefit from the magic of compounding. When Cynthia, our oldest, was beginning to babysit to earn money, I pointed out to her that if she earned $20 a week for 26 weeks, over a five-year period she would have earned $2,600. At that time she would have been 17 years old. If she left that $2,600 to accumulate in an account earning 12.5 percent compounded annually, until she retired at age 65, 48 years later, her $20 a week would have grown to $741,812.98. If she chose to earn $40 a week, rather than $20 a week, for the same 26-week period over five years, her babysitting would pay off 48 years later to the tune of $1,483,625.95.

It was merely an illustration, but I remember it was mind-boggling to her to realize the magic of compounding. I was quick to point out, however, that if she spent the $20 a week she earned, her real cost of spending the money was $741,812.98.

This principle of delayed gratification may be the most difficult of all to teach your children because there is no support in our world system for it. However, it is biblical, and it is the truth. It will work if they apply it.

You must teach your children to be financially mature. It is essential not only for their own satisfaction and peace of mind but also for their spiritual well-being. God will not reward those who desire and are motivated by, instant gratification.

Some Final Thoughts

Is it worth it? Should you spend the time and effort to teach your children to handle money properly? The answer, I believe, is found in looking at the rewards.

You can expect to stand before the Lord someday and receive the rewards for what you have done. I believe that if you have trained your children to act as responsible and godly adults, you can expect to hear Him say, “Well done, good and faithful servant; you were faithful over a few things, I will make you ruler over many things. Enter into the joy of your Lord ” (Matthew 25:21).

I also believe that when you enter into this training process, you will eliminate the conflict with children over money and money matters. That alone is sufficient reward for many parents to make the commitment required.

Lastly, you can expect to see your children, even in their preteen years, begin to make sound financial decisions. Good decisions about what clothes to wear, how to spend their extra money, tithing, saving and planning for the future are reasonable expectations when children have been trained in the way they should go.

Count the costs, but the costs are nothing compared to the rewards. Your challenge is to commit by faith to pay the price to train your children in the way they should go. When they get old, they will not depart from it, and you will rejoice as you see them “walk worthy of the Lord, fully pleasing Him ” (Colossians 1:10).

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