When I was young, my parents kept the exact details of their finances a complete secret. I was aware when times were good and when times were tough, but in terms of knowing how good and how tough, I often just had to guess based on what I could pick up in small snippets. This had several ramifications:
I went through periods of being scared about money without knowing why. I remember situations in which my mother would almost be in tears over the checkbook. I had no idea why, but I knew that the checkbook meant money, and thus I knew that there was a powerful and negative emotion attached to money. I was often scared, and I believed that lack of money was the cause of it.
I didn’t really understand how money worked or where it went. I knew that my father brought home a weekly paycheck and that they deposited it in the bank. I also knew that my mother would write checks to pay for the house, the electricity, and the phone. What I didn’t know is the approximate amounts of what everything cost. For a long time, I believed that all bills were the same amount and thus electricity bills were the same amount as mortgage payments. I also didn’t understand the relative importance of the different things money was spent on; if there was money to buy groceries, why wasn’t there money to buy a new action figure?
I never learned the hows and whys of budgeting or saving money. My parents never assembled a budget that I had access to. I was told that they saved money, but after a while I wasn’t sure if I believed it because it seemed like there was always some sort of financial trouble. If there was money saved up, shouldn’t that protect us? I also didn’t comprehend the idea of categorizing spending and limiting it, as there seemed to always be money for some things and never money for others and I couldn’t understand why this was.
In short, my parents taught me many things, but one thing they didn’t teach me much about was money. With my own children, I intend to change that by modifying an idea that my wife’s family used.
Each month (or so), my wife’s family had a meeting where they would talk about different family issues. Everyone sat around the living room or around a table and they just went over things. They didn’t discuss money issues too much, but they did discuss most of the aspects of family life.
This seemed like a wonderful way to bond as a family, so I plan on instituting family meetings as soon as my son is old enough to really understand what’s going on. The difference is that I want to incorporate a financial portion of the meeting with the goal of educating my son on money issues.
Here are some of the common steps that are used for planning monthly financial reviews within a family. I plan on trying these out to see how they fit my own family.
Prepare a simple monthly budget and allow your children to see it. It doesn’t have to itemize every single little thing, just enough so that the bills are clear and the percentage of the income that they take up is clear. Financial programs make such preparations a snap.
Require them to bring their own budget to the meeting and report on their spending and saving. This allows them to explain how they handled their own money. I plan on giving my son an allowance to do with what he pleases in exchange for house work, plus encourage him to do odd jobs for neighbors, such as sidewalk scooping during the winter. He can then report his income and savings each month, giving us an opportunity to applaud him when he makes smart choices and advise him on planning.
Let them know what the goals are and involve them in the discussion when re-evaluating these goals. Why are we saving money instead of spending it? Why are we paying extra on the house each month? Will we move to a nicer house someday? These are all questions that we can discuss as a family once we all understand where the money is going.