Many people are setting up their children for financial headaches and failure as they become adults because they do not teach and example for them good money management. Many kids see the poor way their parents handle money such as failing to have a budget and family budget meetings, refusal to engage spending within their means, and encumbering their lives with debt. Some parents who manage money well unfortunately do not regularly explain to their kids that working as unto the LORD, budgeting, debt freedom, tithing, saving, investing, and diversifying assets are biblical standards the LORD wants everyone to employ because they produce the best possible situation in which to live in this world. These parents often shower their kids with money but do not allow them to be active participants in understanding and employing greater degrees of good money management on their way to adulthood.
You should have a plan for how you will increase your kid’s involvement in family finances recognizing they will have money to manage from working and receiving allowances and gifts. They will do it either for good or bad often depending upon what the parent teaches and examples for them. If you want them to be more blessed than you are then as they grow you should teach them GSS, which stands for giving first, saving second, and spending last. Along with faith to believe the impossible will happen and commensurate declarations / proclamations of the LORD's desired prosperity for you, this three-prong approach is fundamental for helping your kids learn stewardship traits they can use to avoid credit card debt and car debt that will be pushed / marketed at them by banks, retailers, and dealerships throughout college, young adulthood, and indeed throughout life.
The Giving component consists of two parts: tithing (which is 10% of a person's income) and giving a free-will offering that can be any amount above the tithe. Income for kids often starts with allowances and other gifts they receive from any source. It should be continually explained that all the money and anything else they will ever receive belongs to God and they are only stewards (managers) dispensing and using His resources according to biblical principles (His will). To have the right heart and mindset about the need for honoring Him by helping abundantly fund the spread of the gospel to lead people to Jesus Christ you need to understand that it produces intimacy with Him and supernatural blessing and reward for everyone who meets this purpose for money. You and your children must know you can live far better on 89.9 percent or less of the money the LORD allows to come into your life through legitimate endeavors and gifts than you can on 100% of that money by failing to honor Him.
The Saving component consists at first of helping each child build a starter emergency fund of $100 in a savings account. Then putting at least 10% of their income into another savings account or two to help fund future endeavors the child intends to pursue (schooling, team sports, music lessons, art, a car, etc.) or buy things the child plans to get. Help the kid find savings accounts that pay the highest annual interest available with no account fees so he/she can begin to see how money grows when earnings are added. Next, teach each one to put at least 10% of income into long-term equity investments that have a history of much higher returns via compounding and exponential growth. An excellent choice would be a no load, low expense S&P 500 stock index mutual fund via a Roth IRA or brokerage account through Vanguard, Fidelity, Charles Scwab, TIAA-CREF, or another reputable brokerage house.
Explain the risk / reward scenario that can be used to the child's advantage that will allow him/her to be very wealthy later in life because they started investing at a young age even if they never become business owners or very highly paid employees. Also, let him/her know this will allow the avoidance of debt and provide greater financial flexibility as they walk through life. They should be taught and encouraged not to touch the long-term investments unless they encounter an extreme emergency or catastrophe. This money would be at their disposal when they become adults as a starter retirement fund, a business startup fund, or a ministry endeavor fund that allows them to avoid debt while working and pursuing entrepreneurial endeavors.
Finally, there is the Spending component, which we often think nobody has to tell adults or kids how to do. Yet, we all need instruction in this area to know it is not prudent to spend everything you get. Otherwise, because your outgo equals or exceeds your income, your upkeep will be your downfall. Though spending will represent the greatest percentage of income use throughout most people's lives, it is always best for children to learn to keep it under 70% of their income. So, they employ this “spending within their means” principle when they become adults and also have to face being charged federal, state, and city income taxes. Focus on teaching them how to set budgets and goals around their money that allows them to spend only what’s left after giving and saving the appropriate proportions of their money.
The income tax effect that converts gross income to lower take home pay can be displayed by showing children how your take home pay is far less than your gross pay. This will be experienced in their early teens as they start to work for employers and/or at entrepreneurial endeavors. At twelve years of age or so help each child craft and follow a budget that includes him/her handling money for clothing, school supplies, personal care, and entertainment and make him/her responsible for keeping purchases within the amounts set for each category.
Teaching the GSS model will help children live this way as they age, go to college, finish college, get that great paying job, start that great business, and move into the real world where all the financial shenanigans will be thrown at them and attempt to grab all their income through debt payments. If they get caught up in the world's way of managing money it will financially tear them from limb to limb. It will be great to know you helped teach and show them how to avoid financial pitfalls through biblical-based discipline that serves them best throughout their lives.
Please pray for this ministry and email me with any questions. May the LORD bless you richly as you follow His plan!
Deuteronomy 6:7-9, Proverbs 22:6-7, Ephesians 6:4, 1Timothy 3:4-5
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