Yellow's Green

The Adventures of Money Blog.

Friday, April 21, 2006

Money Education

"Rich Dad Poor Dad" dwells on the fact that rich families teach their children about financial management, and middle-class families don't, or at least what people learn in the home about money is usually the wrong mindset. One example is whether your home is an asset, or a liability - which I already mentioned. Another is, in his words, most people work for money, and the rich have money work for them.

I began thinking about what I learned about money growing up. I don't recall ever sitting down and learning about money management or finances at home - but there were things my parents taught by example, most of which I only understand now - looking back.

My parents were both school teachers, which meant not a large income, and no income in the summer. We spent our summers traveling and camping, so they obviously saved some money for this purpose. My mom did the budgeting, at her desk in the middle of the kitchen, where bills went in slots and cash came out of an envelope. (Looks to me like she did envelope budgeting.) I did ask her about it once, and she told me she just knows how much cash to get out each week, and once its gone its gone. Now that I'm using the same method, I can see why she did it. Early in my life, they bought some beautiful property in north-central Idaho with the plan to move there when they retired, and we would travel there for vacations frequently. My Dad would also work one week of the summer at "The Festival of the American West" at USU. This obviously wasn't necessary for income, as he quit doing it when it was no longer fun, but it did bring in some spending money while he was doing it.
When we (the kids) got old enough to get a summer job, we quit traveling with the family as much. One such summer, I was put in charge of the bills. My name went on my parents account, and my mother showed me how she does the bills. It was pretty easy, really. Pay tithing first (I was raised LDS, which meant 10% of our family's income voluntarily went to the church), then round it up to the nearest whole dollar and give the difference in other offerings (humanitarian or missionary funds, etc.), then pay the bills. I was left an envelope of cash to get groceries from. I remember my little sister wanting me to order pizza with it, and feeling very responsible when I said no because we needed to make sure we didn't run out of cash. She thought that was silly, since I had access to mom and dad's account, I could always get more. (Sorry, Linds, to confess for you.) I guess that's why I was given responsibility for the bills and not her, huh?
Anyway, I remember hearing Mom mention a Money Market account, and when I asked her what it was, she said it was where they keep the money they used to live on in the summer time.
There are two other vivid memories regarding money that have stuck with me. One was that I was never told no when I wanted something from the store. "Sure you can have it," I was told, "If you earn the money for it." We were not lavished in material possessions, but we were given opportunities to earn money if we wanted it. I frequently washed windows or mowed the lawn to earn money. For a long while, I owned the only CD Player in the house because I earned the money for it. I still own and use the same player today, and I purchased it while I was in middle school!
The next memory, rides on the exact same principle, only with different incentives. "If you want to go to college, you'll have to get good grades and get scholarships, because we're not paying your way." You can have it, if you earn the money. Education WAS highly valued, and we WERE expected to go to college, and therefore were expected to get good grades. There was a little help for each of us; $1000 (or was it $3000 - I'm not positive) was put into a mutual fund for each of us that we could cash out when we needed it. I took mine out for college, but stocks were in a slump, so I ended up with less than that. Also, due to skyrocketing college costs, the money went a lot further for my sister 10 years older than I than it did for me. One reason the older siblings left school debt free, and the younger ones didn't. (I'm not upset about this in any way, it's just what happened.)

So, I knew my parents did the following:
*Pay bills on time
*Plan ahead (for summer)
*Plan REALLY ahead (for retirement), including having dreams and not just financial goals
*Believed in the value of tithes and offerings
*Invested in Money Market accounts and Mutual Funds
*Didn't spend beyond their means
*Oh yes, and they had their home all paid for before they moved.
All really good stuff. The ONLY one we ever really sat down and discussed, to my memory, was tithing. Religious was primo important in our house.

So, I learned good middle-class examples. What I didn't learn in all this was HOW.
It wasn't until a budgeting workshop in college that I asked my mom HOW she did it (the cash in the envelope).
I had no idea what a Money Market was, or why,if,how,etc I should get one.
I knew Mutual Funds could lose you money, or gain it, but that's about it.
I never knew how to plan for retirement, or buy a home.

So, in the world of middle-class, live within your means, I've got it. No Problem.
In terms of future planning and investing, I knew squat, and am only learning now.
In "The Two Income Trap" and "All Your Worth" they argue how that was fine for our parents generation. They'll get along fine this way. But the rules have changes, and debt now chases after us screaming "Hey! You NEED me!" We have to be even smarter than they were about our dollars and cents, they say.

So, I'm curious:
HOW do you teach your family about financial management?
What did YOU learn growing up?


  • At 4/22/2006 5:35 AM, Anonymous ric said…

    Actually there was NO money at all given to the older sister for college or anything else. I believe by the end of four years I had borrowed about $600 for emergencies like car repairs... which I paid back.
    It was very tough but I certainly appreciate the college education that I achieved entirely on my own.

    For our own kids we've decided to split the difference between what I did (no money from parents) and what hubby did (parents covered the entire cost of room and board until he got a very good paying job.) We're going to match whatever they earn. If they work hard to get a scholarship to cover tuition we'll pay room and board. If they get a job and save their money we'll match whatever they put into an account.

    We also do the "if you want a thing you can earn the money yourself." Works with some of the kids, not with others.

    They also get a clothing budget when they turn 8 to spend as they choose. If they spend it all on an expensive item then don't have shoes to wear... tough. Better to make mistakes now when the consequences are small then later when the consequences are terrible.

  • At 5/19/2006 7:34 AM, Anonymous ric said…

    ok... I just finished reading Rich Dad Poor Dad and it's got me thinking. I think I can convince Marcel to let me play with 3 or 5k from our investments. I let him do the same thing a number of years ago. He bought a couple of tech stocks.... right before they crashed... still hasn't made back the original money. I think I'm going to study a lot more about the stock market before I actually buy something though.
    The book got me thinking but the writing made me a bit crazy. He kept repeating himself over and over and over before finally getting to a point. One of those books I'd rather read an outline of than have to slog through bad writing. Good message though. Wish the game he created to teach money skills wasn't $200.


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