This guest post from Neil Wyn-Jones is part of the "reader stories" feature at Get Rich Slowly, and a perfect post for Father's Day. Some stories contain general advice; others are examples of how a GRS reader achieved financial success or failure. These stories feature folks with all levels of financial maturity and income. Want to submit your own reader story? Here's how.
Having recently completed my journey out of debt, I now have a new focus around all things money. For much of my life adult life I've let money control me as I bought into the "buy now, pay later" culture and became trapped by debt and strangled by the situation. Whilst by no means frivolous, I thought the money I was spending was making me and others happy, but day by day it was taking away my choices. [More from Forbes: 5 places to save cash]
This was compounded back in 2008 when I went through a divorce leaving me to deal with an enormous home loan, spiraling debt , shared care of my two little boys, and a struggling business with outgoings vastly exceeding incomings! Cue the light bulb moment and the start of a route to responsibility.
With four hard years under my belt, I'm out of the other side of the tunnel and can clearly see the light. I'm no longer carrying the millstone of debt and money has now become a tool as I write a script for life on my very own blog.
So I suppose the question is: What financial wisdom can I pass on to my boys from the lessons I've learned during my transition from childhood to adulthood? (And from couple to single?)
As I did, they will ultimately find their own way and stand or fall by the decisions they make as they develop. But I guess what I'm looking to offer them as a father is some guidance. [More from Forbes: 10 common money wasters]
Now comes the tricky bit. If they're anything like me, they'll be growing up with a slightly headstrong "I'll do it my own way" approach. To be honest, I wouldn't really want to change that, so it's down to actions and not words. By implementing some basic principles early on in life, I hope they'll see the rewards that can be reaped.
Money Needs to Be Earned
Recently I've introduced the boys to the principle of pocket money. I have no idea when is the best time in a child's life to start this process, but with coin recognition on the syllabus at school, there would appear to be no time like the present. I feel age-based pocket money may have some merit, so it's £1 per week for every year in age. Initially this £5 a week offering may seem a little high, but firstly it has to be earned via the completion of some basic household chores.
Don't Just Give It Away
I hate to think how much money I've wasted over the years on the minor repeat purchases that quickly absorb the disposable income. My boys have already grasped the concept that if they sacrifice some of the smaller impulse purchases, they can save for the stuff that they really want. [More from Forbes: The 20 new rules of money]
For example, my eldest, who is approaching his 8th birthday, loves Lego Star Wars. He's cut out a picture of the next set he wants and put it on his wall. Each week when the pocket money arrives, it diligently goes in the piggy bank and he takes another step closer to his goal. I admire this determination and commitment at such an early age, and I'm happy to see him spend his money on the things he wants. I suppose in a roundabout way I'm trying to teach the idea of targeted savings.
Expect the Unexpected
Okay, perhaps an emergency fund is a bit excessive for a five year old. After all, what sort of emergencies can really break the piggy bank? I don't think it's a bad concept to teach, though, so I'm trying to educate my boys that it's important to hold back part of the weekly income for unseen circumstances. In all honesty, I'm a bit of a softy here and tend to come to the rescue for those childhood emergencies like broken toys or a new tyre for the bike. I'm going to have a bit of difficulty not being the "go-to guy" when emergency strikes or bail out is required! [More from Forbes: How to start a conversation about estate planning]
Save for the Future
At five years old, it's a little early to be talking interest rates and retirement. However, the principle of saving is a solid one that's made so much simpler with time on their side and the power of compound interest to help them on their way.
Whilst the level of age-related pocket money dispensed from the "Bank of Dad" may appear to be a little high, 20% of this goes straight into savings accounts via online banking. By involving the boys in this online transfer, they see the money being moved, but don't miss it as it is taken at source teaching the principle of automated savings.
Give
One of the items on my never-ending list of things to do was to sponsor a child. I believe that we live in global society with neighbors not restricted by boundaries or borders. I'm not going to change the world with the odd charitable donation or sponsorship here or there, but I may just go some way to changing someone's life.
This concept really hit home this week after the boys and I signed up to sponsor a child in Haiti via a charity partner [note - this was done via Action Aid UK]. Our welcome pack arrived with a photo and background literature of the child we are sponsoring and straight away this made it real for the boys. They immediately rushed off to pen a letter and draw a picture to send to their new pen pal and they have agreed to donate some of their money to the 50p per day cost. [More from Forbes: 9 reasons why Joe Six-Pack can't invest like Warren Buffett]
Be in Control
Experiences enrich life and are long remembered after the material Stuff has been scrapped. One of the most important lessons that I want for my boys to learn is that money can be a tool to enhance life if managed correctly. Sounds so simple, doesn't it?
I'm keen to hear your thoughts on what is right or wrong in terms of financial guidance for children. I'm just learning about this myself.
- What age should this education start?
- How much pocket money is the right amount?
- How should it be broken down?
- How strictly should it be adhered to?
Lots of questions and not one exact right answer I guess, but hopefully by thinking about money and understanding it, my sons will be in a position to do what works for them in the future.
Note: My blog, neverendinglist, is in its infancy. It's a list of things to do, some worthwhile, some random, some just silly. The list is writing the script for my life, motivating me, educating me and documenting life as I go. Get Rich Slowly has played a massive part in transforming my life and getting me into a position to be able to make choices for me and start living life.
