One of the great mistakes we made early in our marriage was to spend way more money than we had to live on. It was usually due to $10 here and $20 there. As we worked our way out, we became determined that we would do everything possible to teach our kids about finances. We wanted them to avoid the same mistakes we made.
A 2016 National Post article says that the average student in Canada graduates with over $26,000 in debt. In the article, Katrina Walsemann is quoted as saying, “Students who took out more student loans were more likely to report poor mental health in early adulthood.”
If you are a parent, then you want your children to thrive. You don’t want them to be weighed down by debt and financial pressures. Is there anything you can do to help them without paying for everything for them?
I am really grateful to say that, so far, our kids have paid for their own education and will graduate with no student debt. In addition, they pay for their own cell phones, car insurance, and car payments. Here are some lessons we learned about teaching our kids about finances.
1. Give to God First
From the very first day our kids started to earn money, we helped them set aside a certain percent to give back to God. It has become so much a part of their life that my daughter told me a few weeks ago, “It’s just automatic now. I don’t see it as an added expense. It’s just what I do.”
As a family, we believe that all money belongs to God, so this is just one way of practicing what we believe. Each of our children support our local church financially plus give to other causes they believe in.
2. Earn Some Money Outside the Home
We never did allowances for our kids. We always felt that helping out around the house is just what you do because you are part of a family. When they became old enough, we helped them get a newspaper job. When the time came to search for a “real” job, we helped them develop their resume and prepared them to go for job interviews.
3. Take Responsibility for Your Life
As parents, we take care of the basic necessities of life (the water bill with 4 teenagers is interesting). Our children were required to pay for anything extra they wanted. Our priorities started with God, and then went to saving for school. Following that, we prepared them for the cost of car insurance, cell phones, and more.
4. Have a Savings / Spending Plan
In our case, we helped each of our children develop a formula for saving and spending. The formula went something like this:
- Start with how much money you earn
- 10% is set aside to be given back to God
- $150 per month set aside for school
- Cell Phone Expense
- Car Insurance Expense
- Half of what is left over is for school savings and the other half for personal spending however you want.
The money set aside for school is invested into an RESP in order to maximize government grants and also earn some interest.
Most of us know that the cost of living is making it very difficult for young adults to gain traction in life. Add that reality to starting your life $26,000 in debt and you can see how crippling this can become.
This plan requires a lot of hard work by our kids. They had to do their school work plus work a job to pay their bills. Our oldest son, Carter, once told me how mad he was at me when we first started this. He then went on to say how it is one of the best things we have ever done as parents.
A while ago, Carter went to lease his first car. He lived within his means and was instantly approved without any need for me to co-sign.
I’m really proud (in a good kind of way that a dad should be) of each of my kids.
Hopefully, some of these tips can help you guide your own children in building a healthy financial picture in their lives.