Times are tight for a lot of military families, and with the approaching holidays and PCS Season, many of us are looking for good tips about money management. Mike Martin, Chief Warrant Officer USMC (retired) put together this reflection on family finances. You can read more about Mike at the end of this post.
Maybe I was just a strange kid, but I always loved putting money in my piggy banks. Yes, banks, plural. I had several of them.
I had the standard ceramic pig. I had a big plastic one shaped like a European castle. I had a couple homemade ones ‚Äì simple plastic containers with a coin slot cut in the lid.
Whenever I got money from a birthday card or the tooth fairy or anything else, I spent half and I banked the rest for later. So where did that idea come from? I certainly didn’t think up that plan.
I owe my financial sensibilities to my mom and dad. We were frugal people, struggling financially at times, and they taught me that every penny counts, every dollar you save matters, and financial responsibility means having self-control. Their guidance with these messages was always clear and consistent.
They’re Never Too Young to Start
In addition to my first piggy bank, my folks also started a standard savings account on my behalf around the time I was born. They put as much into it as they could afford for most of my childhood and I continued once I was past the point of piggy banks.
As soon as I was old enough to drive I used my savings to buy my first car ‚Äì a beat up old Buick Skylark. It wasn’t the nicest car in the world, but it didn’t really matter because it was mine and I earned it.
Because of that foundation, I’ve always thought saving money was important. And I think that’s where a lot of parents and young service members go wrong. If you’re trying to teach a 16-year-old why he shouldn’t just burn through every paycheck he gets, it’s going to be a struggle for you as a parent. But if your kid already knows he shouldn’t do that, it’s much easier to guide him in the right direction once he starts earning his own money.
So the younger you start the better. If your kids grow up with ideas about financial responsibility ingrained from the start, it’s much easier to carry those habits into their adult lives as well.
Reconsider Your Approach to Allowance
My thoughts on allowance are pretty simple ‚Äì they should only receive what they earn. Whether it’s mowing the lawn, cleaning up the garage or helping with the laundry and dishes, there’s plenty to do around the house. Give them some specific tasks to complete if they want to earn their allowance. You can even apply bonuses or deductions for doing extra or not doing enough.
Learning the value of a dollar is one thing, but how do you teach them about things like credit and interest rates? Once your kids are a little older you can take a more experimental approach. One idea is to charge them interest on any extra spending money they ask for. Does your daughter want $20 to go see a movie on Friday night? If you say yes, let her know the juice is running. Pick a fixed interest rate and take it out of her next allowance. Too much borrowing and she could get into debt pretty quickly. You could even take it a step further and emulate a debt collector by calling her cell phone three times a day until she pays up. Get creative!
Communication is Key
The bottom line here is that you need to talk to your kids. When appropriate, keep them informed about family financial situations and the decisions you make. And not just what you’re doing, but why. The why is important and without proper context your kids aren’t going to retain any of the lessons you try to teach them.
This can be as complicated or as simple as you want. Have you decided to roll your old 401(k) into an IRA? What’s the difference? If the thought of retirement makes your kids’ eyes glaze over, just keep it simple. Why are you buying the value brand at the grocery store instead of their favorite mega-corp name brand? Explain the difference and work together to calculate the total savings.
The Rewards of Starting Young
I’ll remember the day I emptied out my piggy banks for the rest of my life, or at least until I’m old and senile. Rolling up all the change with my dad, driving down to the bank to deposit it into my savings account ‚Äì it was an empowering accomplishment.
Don’t wait to teach your kids about financial responsibility. The younger you start, the easier it will be to instill that same sense of pride. Keep at it and you should have no trouble getting your kids interested in personal finances.
This guest post was written by Mike Martin, Chief Warrant Officer USMC (retired). He now works as a writer and consultant for Pioneer Services, the military banking division of MidCountry Bank, which specializes in military loans and financial education for service members.