Money is a Tool

Understanding Finance

“The last time I looked there is not a money tree growing in the backyard?” My children grew up hearing me say this time and again when they asked for something they had just seen on TV. They would roll their little eyes skyward as if they thought God would come to their defense, when he didn’t they would run off with a groan and the determination to come up with the money through some other means. They made a plan of ways to earn and save the money they needed, but before long they were interested in something else.

As a parent it was my goal to teach them about money and how to manage it and how to spend responsibly and how to save. They were children so, of course, they got “just because” treats and toys, and they got the occasional “yes, you can have that”, but they also needed to know the value of the dollar and why it’s important to respect the money that we work hard to earn.

Through the process they learn to:

• Make a budget
• Set short and long-term spending and saving goals
• Prioritize
• Make spending decisions based on the goals they set
• Plan
• Save

They also learned a most important lesson, that instant gratification--buying now--is not always the best choice

Through this process they became money smart kids. As young adults they strayed from the process, got into a little financial trouble, looked out the window and realized that their parents were right…there is no money tree growing in the backyard.

I believe the easiest way to understanding finance is learning about it early--teach children as you start giving them simply chores. There are many wonderful books on the market that will help us begin to understand the process. Books like:

• I Will Teach You to be Rich by Ramet Sethi
• Total Money Makeover by Dave Ramsey
• Debt is Slavery by Michael Mihalik

There are also any number of books that are geared to children. Some examples are:

• Raising Financially Fit Kids by Joline Godfrey and Kit Hinrich
• Financial Peace, Jr. by Dave Ramsey
• Money Does Not Grow on Trees by Neale S. Godfrey

If you are a parent struggling with finances and have decided to do something about it don’t leave the kids out. Bring them in on the family discussions.

A most important thing to tackle first is to look at how you view money. If you are a “live for the moment kind of person” then you probably will not want to “budget” or “plan”, but if you really don’t like how you've handled your money to this point then you will want to explore or discover ways to manage better or more efficiently.

There is power in having money but we can either use money or misuse money. We live in a society that honors cold hard cash. We need money to provide the basics--food, shelter, and clothing. When we use money we can provide for ourselves and our family, as well as, enjoy a few pleasures along the way. We can enjoy life, build savings, take vacations, provide for the education of our children, and invest. We can live comfortably and/or we can build wealth.

When we misuse money very often we find ourselves living paycheck to paycheck, pillar to post, working only for the money instead of the money working for us or simply working to pay off credit cards that are maxxed, etc. Actually that is not simple…credit card debt is very complicated and can have us tangled in a web of never-ending interest rates. When we get to this point we may find that we are hopelessly in debt.

“Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” --James W. Frick. One of the first things you can do is to take out your check book or bank statement and make a list of what you have spent your money on and how much. Do you see any patterns? Any wasteful spending? Any mindless spending?

Financial analyst Paul Clintheroe once said “There are plenty of ways to get ahead. The first is so basic I’m almost embarrassed to say it. Spend less than you earn.” Taking a good, hard and realistic look at how we spend money is the first step in getting to understanding our finances and understanding lead to control.

“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” Ayn Rand