About a month ago, I wrote a piece called Lessons From Off the Grid, which described some of the good lessons about money that my parents taught me as I grew up: frugality, doing things for yourself, and never acting solely for the love of money. These are things that I try to reflect in my own life today.
However, my parents taught me some lessons that didn’t serve me as well later in life, and I worry every time I see these lessons repeated.
A windfall is something to use on a giant splurge I understand fully why my parents did this. We were among the poorest families in the area and when something would happen that would bring us some extra money, my parents would want to use it to create something special for me and for our family. Unfortunately, it often went too far: I would have nothing (or very little) for long periods, then suddenly I’d get a Sega Genesis. One time, my parents came home giddy and gave me a copy of Super Mario Brothers 3 the day after it had been released. Once, we went to a record shop and I got about fifteen albums. Then, when things were lean, there was very little money to go around. It was out of love that my parents did this, but it set me up for a life full of splurging with every paycheck, and that splurging eventually led to a lot of debt.
You get an allowance whether you do anything or not At various points in my childhood, I received an allowance. In theory, I received that allowance in exchange for doing normal tasks around the house and the farm: keeping my room clean, taking out the trash, feeding rabbits and chickens, and so forth. However, I would still get or not get my allowance completely independent of whether I did the tasks or not. In short, if you’re going to tie allowance to performance, actually connect the two. The disconnect basically taught me that the things I did really had no value at all, so why do them? This accounted for a very messy room in high school, among other things.
Saving for the long term? There is no long term When my parents would get a new car, it was always financed, then when the car was paid off, that meant there was more money to spend on frivolous things. This seemed normal when I was young – one less bill is a good thing, right? But if my parents wanted to be better off in the long run, that money for the car payment should have, at the very least, went into the bank to save for the next inevitable car purchase. Other options would have included investing in my father’s fishing business or any number of things that were actually beneficial. If we were able to live without that car payment money, why not keep saving it for the future?
Can you see where this leads? As a young adult, I didn’t see a connection between my own efforts and my income, I splurged like crazy with every paycheck, and every item paid off meant more discretionary income. Eventually, this state of affairs led to my financial apocalypse.
So what can I do to prevent a little bit of history repeating? I certainly don’t want my son or daughter (yes, another little familial tidbit for my regular readers – she’s 99.9% likely a girl) to have to go through the painful experience of unlearning foundational material from childhood, so I’m going to do things a little differently.
When a windfall happens, we celebrate on a very small scale, then save or invest the rest. We will let the children know, but also we will save or invest the rest (or directly pay off debt). This will all be done with their full knowledge, so they have a mature example of how to handle a windfall.
Their allowance will either be directly tied to chores or clearly not tied to anything at all. We have not yet made the determination of which path to follow, but we do know that mixing the two messages can create some serious confusion and some broken ideas of how to handle income.
Not only do we save part of each paycheck, our children will be required to save part of their allowance. Again, we’ll have to feel out the specifics here, but there will be some component of saving for the future in whatever allowance our children get.
My parents were wonderful people and they taught me many great things about life. The best tribute I can pay to them is to do my best in raising my own children, and I believe that this is the right way to do it.