The MoneySmart Family System

Steve Economides, Annette Economides

• Publisher: Thomas Nelson
• Year: 2012
• ISBN:
  9781400203321
• Topic: Développement personnel
• Subtopic: Finances personnelles

Is it possible to raise financially responsible kids of any age in a society filled with consumerism and entitlement?

New York Times best-selling authors Steve and Annette Economides raised their five kids while spending 77 percent less than the USDA predicted. And the money they did spend was also used to train their children to become financially independent. The MoneySmart Family System will show you how to teach your children to manage money and have a good attitude while they're learning to earn, budget, and spend wisely.

Learn how to:

• Get the kids out the door for school with less stress.
• End the battle over clothing—forever
• Teach your children to be grateful and generous.
• Inspire your kids to help with chores as a member of a winning team.
• Prepare your kids for their first paying job.
• Help your kids pay for their own auto insurance, and even pay cash for their own cars.
• Employ strategies for debt-free college educations.
• Truly help your adult children when they want to move back home.
• Be prepared to deal with your adult children when they ask for bailouts.

With clear steps for children of every age, The MoneySmart Family System proves that it's never too early, too late, or too hard to start learning financial responsibility.

"Every parent or parent-to-be should read this book!" —Dr. Laura Schlessinger

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CHAPTER 1

The 5/50/500 Rule

No matter what age your children are, you will always have a financial connection with them. It starts before they are born and will continue after you die. That connection will be defined by how you view and handle money, and how you train your kids to view and handle money. The flow of cash from you to your children may be a trickle or it may be a torrent. The control of the spigot and the power of the flow should be determined by you, but in many cases, unfortunately, the child controls the tap.

This is a book for parents who have money—any amount of money, from a small amount to a small fortune.

This book is about how we, as parents, deal with our money and how we deal with our kids at every age and stage of life.

You will always be your child’s parent. Sure, over time the relationship will change. The first change starts when the umbilical cord is cut. But one cord that will never be cut is the cord of money and possessions.

We really love our kids, and we know that most of you feel the same about your own children. The strategies and philosophies we espouse aren’t anti-kid—they are pro-parent and pro-child. We want to equip parents (grandparents, aunts, uncles, and anyone who might regularly interact with children financially) with tools that will help them empower their children rather than enable them.

We are going to base what we write on a few assumptions:

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1. All children and parents can learn.

2. All children and parents can learn to work.

3. All children and parents can learn to save.

4. All children and parents can learn to manage money.

5. All children and parents can learn to spend money responsibly.

What we have written is pro-parent, if you define successful parents as those who desire to raise their children to be independent, self-sufficient, and mature adults who can stand on their own two feet financially.

And what we have written is pro-child, if you define successful children as those who want to be independent and self-sufficient adults, able to stand on their own two feet and look back at their parents with a smile of gratitude for helping them to be autonomous.

Unfortunately, this rosy scene is becoming a rare occurrence as many parents are finding it more and more difficult to cut the cord of cash flow to their aging children. We’re going to show you how we’ve carefully and progressively minimized the transfer of funds and how you can too!

Raising Kids Costs and Costs, and Costs Some More

If you’ve got kids, the experts say you’re going to be spending money—and a lot of it. The “experts” at the USDA in their 2010 report “Expenditures on Children and Families” say that we should expect to spend about $261,000 to raise each child from birth through age seventeen ($14,500 per year). Do you think this is accurate? We don’t! In 2009, according to the U.S. Census Bureau, the median annual household income fell to $49,777. Meaning that it could take more than five years and three months of your entire gross household income to get Junior through the formative years and ready for college. And if you have more than one child, the situation is even bleaker. Unless you have some sort of trust fund or rich uncle who has left an inheritance, the money you’ll be spending on your kids today is probably the money you should be saving for tomorrow—for your retirement.

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The Experts?

Throughout this book we’ll refer to experts and their statistics. While we like to use these numbers as points of reference, we are very cautious about basing serious life decisions solely on their conclusions—particularly any survey telling us what it will cost us to raise a child for the first seventeen years of life. Here’s why we’re skeptical.

When we actually dissect their numbers, we have found that they are based on providing a prescribed number of square feet of living space per person, a certain number of cubic feet in a car, a certain amount of money spent at restaurants each month, and an average cost for clothing, food, and health care expenses. In short, the numbers might be accurate if you lived in a major city, paid retail for everything, never shopped sales or thrift stores, bought all designer clothes, and drove a late-model car.

Just calculate with us for a minute. If you’re an average family with 1.8 children (according to USDA figures, this alone should cost you $26,100 per year), living in an average city, spending an average amount on food ($200 per month per person × 12 months = $9,120 per year) with an average yearly household income ($50,000 per year—about $40,000 after taxes), you’d be left with $4,700 a year ($392 per month) to spend on cars, clothes, housing, debt, recreation, gifts, utilities, health care, cell phones, cable TV, medical bills, dental bills, and chewing gum. Something simply doesn’t add up!

Do you think that the experts are right on the money when it comes to the cost of raising your children?

The Best Things in Life?

Most parents want to give their children the best things in life. But the truth is, if you give your children the best (whether you can afford it or not), they’ll be very obliging and take it. It’s human nature to receive when someone generously provides. And the more you give, the less incentive your kids will have to work and provide for themselves.

Even if you can afford the very best for your children (because you earn a higher income), what will the end result be, especially if your children never achieve your level of earning?

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1. Will they shun your lifestyle for one they can afford?

2. Will they work two or three jobs so they can afford your lifestyle?

3. Will they look for alternate ways to get the things you earned?

4. Will they look to you to continue providing for them?

We’ve got to honestly ask ourselves: Will giving my child the best things in life truly create financial independence?

The questions we’re posing aren’t the result of mere speculation. They are based on our experience with our own kids, observations of other families, and from our time as volunteer budget coaches. For many years, before we started our writing and speaking career, we met with families to help them sort out their debt and spending. While reviewing their financial habits, we regularly discussed how much money they were giving to or spending on their children. Usually it was money they could ill afford. We often heard reasoning like, “My children shouldn’t suffer and do without because I’ve made bad decisions,” or “I need to give my children the same things that my parents gave me.” Does this type of thinking actually help kids become financially responsible?

But we’ve gotten ahead of ourselves. Before we answer these questions, or get too deep into a subject we’re obviously passionate about, we should give you a little background on how we became so zealous about parents needing to train their children to manage money.

How We Started

We are Steve and Annette Economides (Econo me dis), and are the parents of five children. Some of you will gasp and ask, “What were you thinking?” while others will say, “Only five?”

We have worked hard to help our kids grow into financially independent adults. We aren’t accountants, stockbrokers, or financial gurus. We’re just an everyday couple who found some great ways to transfer financial principles to our children.

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We were married in May 1982. Eleven months later our first child, John, was born, and two years after that, Becky came along. Roy, Joe, and Abbey followed. In 1985, right before Becky was born, we put 15 percent down on our first home—a bank repo “fixer-upper.” We weren’t earning a lot of money at that time. Steve was working as a graphic designer and Annette stayed home with our kids. Laboring together, we were able to find plenty of ways to get the things we needed to transform that house into a home.

We were committed to living within our means, which meant that we’d only spend the money we had saved for specific purchases and wouldn’t use credit cards. As our income increased, we continued to utilize our personalized budgeting system (detailed in our book America’s Cheapest Family Gets You Right on the Money), which helped us manage all of our expenses and allowed us to pay off that first home in nine years, on an average income of only $35,000.

We looked pretty normal on the outside—a tidy little home with a one-car carport and two cars on the driveway. Steve would leave for work in the morning carrying a briefcase, and the kids would wave from the front window as he drove away. But the inner workings of our home were anything but normal. Because we were committed to living within our means and not using credit, we needed to communicate more with each other, shop differently, research better, and apply more patience than most families our size. Our frugal habits started out of necessity, but eventually turned into a game—a fun challenge where we looked at our lack of funds as a blessing and obtaining deals as the reward.

Some friends started asking us where they could find good deals, and others came to us looking for help in managing their finances. A few years later, in 1990, a man from our church asked us to be trained as personal budget coaches. We learned how to evaluate a family’s financial situation, identify areas for improvement, and walk them through a process of paying off debt and right-siding their often upside-down financial condition.

The Pivotal Question

One evening after a coaching session with a couple in our home, our nine-year-old son, John, approached us and said, “When are you going to do financial coaching with me?” We both stood there dumbfounded. We’d never discussed the problems any family was experiencing with him. He’d usually spend his time in another room of the house, reading or playing with toys. We now realized that he’d been listening the whole time—listening and thinking about his own situation. He had seen some of these families go from tears to resolve, and from resolve to joy as they worked to restore their financial lives. He was keenly aware that there were misfortunes and miracles occurring in these families, and they all centered on how they handled money. He knew we cared about these families and that we wanted them to succeed. He wanted us to care about him in the same way.

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As John grew from a toddler to a youth, he would help Steve with little projects around the house—building shelves, mowing the lawn, washing the car, and trimming trees (we wanted him to learn to be a working man). We also tried to teach him about money, as some showed up at Christmas and birthdays or when he earned some for doing special chores. We didn’t have a plan, because our parents hadn’t had a plan that they used with us. We were simply clueless about how to transfer our financial ideals to our children.

When it comes to the topic of preparing children to manage money, most parents don’t know where to start. They ...