What should be your child’s first lesson about Financial Literacy (money management)?

Question  What should be your child’s first lesson about Financial Literacy (money management)?

Answer  How to save money.

Complete Answer  A basic assumption of Financial Literacy (money management) is “Don’t buy stuff if you don’t have the money to pay for it”. Most children know that instinctively. Unfortunately some adults who find themselves in financial difficulty seemed to have forgotten that basic assumption of Financial Literacy.

A child’s first lesson in Financial Literacy is how to save money. It’s called “Pay Yourself First” (PYF Savings). Every time a child has money to spend, a birthday gift, money earned for raking a neighbor’s yard, et cetera, 10% should be saved. This should be automatic and nonnegotiable.

Although these concepts are beyond the understanding of a child, in the future the PYF Saving account could be used as a rainy-day fund, a child’s personal bank to borrow money from, and eventually a retirement account.

Financial Literacy Knowledge/Skill

Teach your child how to save money using the concept of  “Pay Yourself First”.

Comments or Questions

Thank you for visiting the Financial Literacy a Life Skill site. Please feel free to submit comments and/or questions you may have about managing your money (Financial Literacy).

 

What does a family’s spending plan look like?

Question  What does a family’s spending plan look like?

Answer  Family spending/expenses take priority over individual spending/expenses.

Complete Answer A family spending plan is similar to a spending plan for a single person – simply combine net incomes to get Family Net Income.

Family Net Income 100%
Pay Your Family First (Savings) 10%
Housing 30%
Transportation 15%
Health & Medical, Giving, Retirement, Debt Paydown, et cetera 20%
Lifestyle 25%

However, because each member of a family is financially responsible for the financial well-being of the entire family, family spending/expenses take priority over individual spending/expenses. In the above example, the first four categories, Savings, Housing, Transportation, Health & Medical et al,  would be considered family expenses and take priority over Lifestyle spending/expenses.

Because we all have different values, interests and priorities, in my family’s spending plan, Lifestyle spending is divided in half; 12.5% for my wife and 12.5% for me. Your family’s Spending Plan will be unique to your family. The above Plan is only provided as a guide. Additionally, your family’s income and expenses vary from month to month. You both get to decide what categories are included and how much is spent for each in your Plan.

Financial Literacy Knowledge/Skill

Develop a Family Spending Plan unique for your family.

Comments or Questions

Thank you for visiting the Financial Literacy Life Skill site. Please feel free to submit comments and/or questions you may have about managing your money (Financial Literacy).

Next week’s topic: Should you teach your child(ren) about money?

Do personal finances change after you are married?

Question Do personal finances change after you are married?

Answer Yes.

Complete Answer It is no longer “your money” and “my money”, it is “our family’s money”. Jesus said to the Pharisees, “God made them male and female. For this reason, a man shall leave his father and mother, and the two shall become as one flesh”.16 All family members are expected to contribute to and are responsible for the financial well-being of the family.

The net pay that each person brings home is added together to equal the “family income”. Very rarely do both spouses earn the exact same pay. That does not matter – each is contributing what they can to the family. Remember that the pay you receive for your work is a gift from the Good Lord. If you make more money than your spouse, thank the Lord for the talents given to you and the opportunity to earn more money. If you make less money than your spouse, thank the Lord for your spouse.

Financial Literacy Knowledge/Skill

All family members are expected to contribute to and are responsible for the financial well-being of the family.

Comments or Questions

Thank you for visiting the Financial Literacy Life Skill site. Please feel free to submit comments and/or questions you may have about managing your money (Financial Literacy).

Next week’s topic: What does a family’s spending plan look like?