children Archives - The Pastor's Wallet

Don’t Let Your Kids’ Activities Kill Your Budget This Fall

by Amy Monday, August 5, 2024

Marketers are going crazy with their back-to-school ads right now and they all have one goal: to get you to spend more money on your kids. There’s nothing wrong with spending money on your kids, I do it on a regular basis, but I believe that our culture takes it to an extreme.

It’s amazing how much kids activities cost and how quickly they add up. With school starting again, parents have to prepare to be nickel and dimed to death. It’s not just the gymnastics classes you were already paying for over the summer, it’s the $25 snack fee, the fundraiser that you have to participate in, the dozens of brand new #2 pencils you have to buy, and the extra cost to be in the school band. What can you do to survive the back-to-school tidal wave?

Ask For A Discount

If you really cannot afford something, don’t be afraid to ask for a discount. Not only do schools offer free or reduced priced meals to families who meet the income requirements, but they can also help you with or waive all of the other little fees, like for snacks and yearbooks.

Sports and classes also offer discounts, especially if you have more than one child participating. If you have three kids who want to do karate, the dojo is more likely to let all three attend for the price of two than to lose you as a paying customer completely. Usually, deals and discounts are not advertised, so you’ll have to suck up your pride and ask. Just say, “Do you offer any scholarships or discounts?” The worst thing that can happen is that they say no.

Have Them Pay

If your son wants to play flag football and you can’t fit it into your budget, have him help out. Even if they aren’t old enough for a regular job, teens and tweens can earn money babysitting, doing yard work, teaching older people how to use their electronics, and the like.

I remember when my older brother wanted $100 basketball shoes growing up, my parents made him pay for half. I’m sure he valued them and took better care of them than he would have if they had just been given to him. Not only can it help your budget, but it will teach your teen to work and give him the opportunity to practice the adult skill of weighing opportunity costs and making decisions.

Create Teachable Moments

Money is a finite resource, and the sooner we teach that to our kids, the better off they will be. When my daughter wanted to do swimming, karate, gymnastics, and play soccer, I could have just told her no. But what would that teach her?

Instead of simply saying no, I explained that each activity costs a lot of money. We don’t have enough money to do everything. So, she needed to pick the one thing that she wanted to do most. It taught her that money is finite and also gave her the opportunity to practice making decisions for herself.

When my son was selling coupon books for a fundraiser, he wanted to sell enough to win a big prize. He was disappointed that I wouldn’t just buy 10, but I wanted him to get more than just a cheap toy from it. I explained that if he really wanted the prize, he could go door to door in the neighborhood to sell the coupon books. I would go with him, but he would have to ring the doorbell and do all of the talking. It was a great learning experience for him.

Maintain Your Priorities

It’s easy to get caught up in all of the “needs” that kids have. Especially, when all of the other kids have the same thing, are doing the same thing, or if your child is a persistent whiner. (Remember, the Bible promotes that!) However, it’s important to keep the big picture in mind and stand your ground.

Eating a family meal together is very important to me, for both nutritional and relational reasons. Even if my kids show talent, I’m not going to sign them up for activities during dinner time. I’m willing to move dinner a half hour earlier or later once a week, but feeding my kids granola bars in the car while we run from one activity to the next just isn’t going to cut it with me. Family dinners are more important to me than kids’ sports.

It works the same way with financial priorities. If missions giving or saving for college is a priority for you, don’t give it up so that your daughter can be on a traveling soccer team. If soccer is a priority, though, by all means, put her on the team! Just know your values and establish your priorities, and make everything else submit to them. Remember, the most common regrets that parents of grown kids have are about not spending enough quality time with their kids, not that their kids missed out on certain classes or activities.

While back-to-school is a time of mixed emotions, don’t let anxiety over your budget be one of them. These are my suggestions, how about you? Do you have any of your own? Let us learn from you too; please share in the comments your own wisdom and experiences. Thanks!

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3 Things You Need To Know Before Taking Out Student Loans

by Amy Monday, July 22, 2024

Even though to me it seems like summer is just getting started, some colleges are starting up again in only a month. This is the season when thousands of families are signing up for student loans. Personally, I don’t think loans are necessary to earn a college degree, but they definitely are the norm.

If you or your child are planning on attending college this fall and using loans to do so, you need to know what you’re getting into. Here are three very important things for you to understand before taking out student loans:

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You Just Had A Baby. Now What?

by Amy Monday, July 3, 2023

Having a baby comes with a lot of responsibility and a long to-do list. Here are the things you should do legally and financially to set yourself up for success once your little one arrives.

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How The Housing Allowance Can Hurt Pastors With Families

by Amy Monday, March 20, 2023

The clergy housing allowance is touted as the greatest tax benefit available to pastors. And it really is a great benefit. I learned back in 2019, though, that it can have a dark side. Not a Darth Vader using the Force to crush you kind of a dark side, more like a “If I hadn’t claimed so much, I’d be $1,000 richer” kind of dark side. The problem is how it can affect the Additional Child Tax Credit, which is a major benefit for pastors with children.

How The Clergy Housing Allowance Affects The Child Tax Credit

One of the provisions of the tax reform that passed 5 or so years ago, one of the few points that everyone liked, was the doubling of the Child Tax Credit (CTC). Kids used to be worth $1,000 each and now they are worth $2,000. That still doesn’t feel like enough when your child is laying on the floor screaming, but hey, it’s something, so let’s be thankful for it.

The CTC is credited against your federal income taxes. On your Form 1040, you add up all your income, subtract the standard or itemized deduction, and end up with your taxable income. That taxable income determines your federal income tax. The CTC is then subtracted from the tax so that you won’t have to pay as much.

Income

-Standard/Itemized Deduction

=Taxable Income

Income Tax

-Child Tax Credit (and other credits)

=Taxes Due

The housing allowance lowers your taxable income, which lowers your federal income tax. In fact, I know a lot of pastors are able to completely erase their taxable income between the housing allowance and deductions. No income means no tax due, which means you don’t get to take advantage of the CTC.

But why does that matter if you’ve eliminated your tax bill anyway?

How Income Affects The Additional Child Tax Credit

It doesn’t, really. What matters is the Additional Child Tax Credit (ACTC). The ACTC is the refundable portion of the CTC. That means that it isn’t simply used to cancel out part of your tax bill. The government will actually give you the money, even if you didn’t owe any income taxes in the first place.

On your 2022 tax return, up to 75% of the CTC qualifies for the refundable ACTC. That means the government is willing to pay you up to $1,500 per child. If you have a big family, that is a big deal.

Where the housing allowance comes into play is that your ACTC is limited by your income. It is limited to 15% of your income over $2,500. So, if you use the housing allowance to reduce your income, you also reduce your eligibility for this refund.

Taxable Income

-$2,500

x15%

=Limit on Additional Child Tax Credit

How It Plays Out In Real Life

(This is for illustrative purposes only and does not include things that are immaterial to the subject at hand, such as self-employment taxes and the deductible part of them.)

Let’s say you’re married, you have three children, and you earn $50,000 a year. You take half of that as taxable income and half as a tax-exempt housing allowance. Your tax return would show $25,0000 as income that would be completely eliminated by subtracting the $25,900 standard deduction. So, after the deduction you show no income and, therefore, no income taxes are due.

If you don’t owe income taxes then you can’t take the CTC. However, the ACTC is still available to you. The maximum that you could be eligible for is $4,500 (3 kids x $1,500). But there is still that income limitation.

To calculate your ACTC, you first take your earned income, which was $25,000 in this example. Then subtract $2,500 and you end up with $22,500. You then calculate 15% of that amount, which is $3,375. That is your ACTC. In this example, your housing allowance cost you $1,125 in ACTC ($4,500-$3,375).

$25,000

-$2,500

x0.15

=$3,375 maximum ACTC allowed

What would happen if you had only taken $15,000 as a housing allowance instead of $25,000? On Form 1040 you would have ended up with $9,100 of taxable income ($35,000 income – $25,900 standard deduction). The income tax on that is $908. However, the CTC would have canceled that out and you would not have ended up owing any more than before.

How does the lower housing allowance affect the ACTC?

$35,000

-$2,500

x0.15

=$4,875 new maximum ACTC allowed

Your new limit is $4,875, which is more than the $4,500 you are eligible for. So, lowering your housing allowance increases your ACTC to $4,500. That’s $1,125 more that you get back without increasing your tax bill at all. What could you do with an extra $1,125?

What Should A Pastor Do?

Remember, the clergy housing allowance is a benefit available to you. There is no requirement that you take it. The IRS isn’t going to come after you, mortgage statement in hand. You don’t have to claim a housing allowance and you shouldn’t if it is costing you money.

If you have kids and a lower income, you really need to look into this. Check your 2022 tax return to see if you got the full Additional Child Tax Credit. If not, play around with the numbers. Calculate your tax bill with different housing allowance amounts to see how the final results are affected. Now is a great time to do it since you can use your 2022 return numbers to determine how much of a housing allowance you should be taking in 2023.

Remember, the Bible says that children are a blessing. So let’s make sure you get all of the financial blessings you’re entitled to!

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3 (Free) Ways To Have An Affordable College Experience

by Amy Monday, April 11, 2022

There are 3 foundational things that you can start developing in your children from an early age that will help make college less of a burden on your budget.

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Another Thing You Probably Haven’t Discussed With Your Spouse—But Really Should

by Amy Monday, January 17, 2022

Back in November, I gave you some homework. Did you do it? I hope so! Being on the same page as your spouse about your vision for the future is very important. I have some more homework for you again this week. It’s a lot like last time’s—getting on the same page as your spouse. Except this time the topic of conversation is in the nearer future.

How Much Would You Like To Help Your Children Financially?

After the retirement conversation, the next one is kids. Even if you don’t have kids, you may want to have this same conversation relating to other family members in general. How much financial support would you like to provide?

Again, there is a wide spectrum of possible answers to this one. I’ve seen everything from “You start paying rent on your 18th birthday” to “I’ll keep paying your car insurance well into your 30’s.” The major place the topic of helping out adult (age 18+) children comes up is in regards to college.

How Much Do You Want To Help Pay For College?

Do you want to contribute to your children’s college education? If so, how much? Do you want to pay for it all so they aren’t saddled with debt? Do you want them to shoulder part of the burden so they feel they have skin in the game? Do you want them to find their own way to develop character and responsibility as an adult?

Chances are, your initial reaction to this question will be to do whatever your parents did for you. That’s what I have seen with most people. After all, it worked for you, didn’t it? But what happens if you and your spouse have different opinions based on your different experiences?

Here’s another opportunity to practice your marital communication skills. Talk it through with your spouse. If you have different ideas, sincerely try to understand their point of view instead of just trying to help them see your point of view. This is a topic that you should really try to find some agreement on before your kids are old enough to ask.

Also, your kids might not ask. They may assume that you will provide for them what all of their friends’ parents are providing. If that’s not the case, speak up sooner rather than later. If most of your children’s classmates are wealthier than you are, then you should start to set realistic expectations early.

What About After College?

In December 2020, more than one in five 25- to 29-year-olds lived in their parent’s homes. And you can’t blame the pandemic, because the December 2019 numbers were actually higher for that age group.

Here’s a question: are your children welcome to come back and live in your home after college? Will it be on the same terms as before college?

I know some people love and cherish having time when their adult children are living under their roof. I mean, isn’t your goal as a parent to help your children become the kind of people that you love to be around? I’ve also seen young people who have lived with their parents rent-free while saving up for a down payment on a house, which gave them a great head start in life that they didn’t take for granted. Then there are the people who think they can go back home and not have to work and their parents will just keep supporting them as if they were kids again.

Do you know how your spouse feels about adult children returning home?

What About Weddings?

College is something that most parents have thought about at least once or twice and even what happens after college. Here’s something that usually scares parents, though, especially dads: weddings. Yes, your baby girl may get married someday. It’s the only way you’ll ever get grandchildren, after all.

While you don’t need to set a budget for your seven-year-old’s future wedding, you should start mulling over in your mind what your participation will look like. I’ve seen people make detrimental financial decisions to fund lavish weddings because that’s the expectation that was set for their children.

But I’m not here to tell you what to do with your money. I’m just here to tell you to be proactive and intentional rather than reactive. And you and your spouse should do so as a team.

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Making Sense of the Advanced Child Tax Credit Payments

by Amy Monday, July 19, 2021

If you have kids, there’s a good chance that you received some money from the IRS in the last couple of days. It is a part of the American Rescue Plan legislation that was passed in March, an advanced payment of your 2021 child tax credit. Along with money in people’s pockets, it has caused an incredible amount of confusion.

I honestly don’t think I’ve ever seen so much confusion surrounding something that so broadly affects Americans and has had good press coverage. As pastors, you’re used to confusing rules (seriously, dual-status taxation?!?), but this is widespread among the general population, not a unique group like ministers. So, I decided to spell it all out for you today. I’ve seen all kinds of questions regarding how it will affect taxes in the spring, what to do with the money, and if people should opt out of the payments. Let’s start from the beginning.

What is the Child Tax Credit?

If you make under a certain amount of money ($400,000 for a married couple) and have qualifying children, you get a break on your taxes. You basically get a discount. After calculating your tax liability based on your income, etc. you get to knock a couple thousand dollars off your bill. Pretty cool, huh? Even better, some of that tax credit is refundable, meaning they’ll give you the money even if you don’t owe any taxes.

Child Tax Credit Changes for 2021

They made some changes to the Child Tax Credit (CTC) in the American Rescue Plan. The changes only apply to the 2021 tax year, though some people want to make them permanent. The biggest changes were increasing the amount and a provision to pre-pay some of it. This is a good article if you want to read more about the changes.

The prepayment part is what this blog post is about. They decided that instead of making people wait until they file their tax return to receive the benefit of the higher amount, they would give them some ahead of time, starting on July 15.

How the Prepayment is Calculated

How much did you get on July 15? The IRS calculated the payments as if they were paying out the entire CTC over the course of the year. But they’re only paying over half the year, so only half of the credit is being pre-paid.

For example, let’s say you have a 10-year-old and a 12-year-old, so for 2021 tax purposes they are worth $6,000 total. If you divide that by 12 months, you would get $500 a month. You will only receive payments from July to December, for a total of $3,000. The other $3,000 you will subtract on your tax return, the way you usually do it.

Why Wouldn’t You Want the Prepayment?

While the government is sending out this money to try to help people, not all of us want it. Personally, as a self-employed person, I have to pay quarterly estimated taxes just like a lot of you do (even though you’re not self-employed, it’s that dual-status taxation again!). I don’t want the government sending me money because I just have to turn around and send it back to them.

Also, a lot of people with steady income have it figured out so that they pay just the right amount and don’t owe or have a refund when they file their tax return. These prepayments can mess things up in that situation.

Let’s look again at our above example, the people who got $3,000 of prepayments and took $3,000 off on their tax return. Normally, they would not have gotten any prepayments and instead taken $4,000 off when they filed their taxes (the usual value of 2 kids). When they go to file next April, they will only be able to take $3,000 off (since they already got the other money) and will therefore end up owing the IRS $1,000. I hope they’re setting some of those payments aside to give back in April!

How to Opt Out of the Prepayments

Of course, the IRS recognizes that not everyone wants the CTC paid in advance. They have provided a way to opt out. You can go to this website to check your eligibility and also unenroll from payments. I went in and unenrolled. It was easy for me because I already have an account with the IRS that I use to pay my quarterly estimated taxes.

I wasn’t able to completely unenroll, though. I am married, so I was only able to unenroll from half of the payment. To unenroll for the full amount, my husband needed to unenroll also. And he tried. Boy, did he try.

He submitted so many documents and so much information to prove his identity, I almost thought it was a scam. Finally, they told him that they were unable to confirm his identity and he would have to speak to an identity specialist with a webcam on and sent him to a queue with a 3 hour wait (which had increased to 3 ½ hours 45 minutes later). He never made it far enough to opt out. It simply wasn’t worth the effort. I would have thought he was a unique case or it was a user error, except I have heard from clients and others that also had a terrible time trying to unenroll. (And after all that we got a letter saying we would receive the full amount!)

So, technically you have the ability to unenroll from the payments, but whether or not you can actually do it is still to be determined. It has to be done three days before the first Thursday of the next month that you’re scheduled to get a payment by 11:59 pm Eastern time. In case that’s as clear as mud, this page has a chart with exact dates. Good luck!

How the Prepayment Affects Your 2021 Taxes

Now you can see why there’s so much confusion, can’t you? Not even the deadline to opt out is clear and simple! The major point of confusion for most people, though, is the effect it will have when they file their tax return next April.
What impact will it have?

The prepayments will not affect your tax liability. That is how much money you actually have to give to the government. The amount of your income that you keep in the end is not affected by the prepayments.

However, it likely will affect your tax return or the amount you have to pay. Those are both different from your tax liability. They are just what’s left of your tax liability after subtracting out the money that has been withheld from paychecks or paid as quarterly estimated payments throughout the past year. A big refund doesn’t mean you paid less in taxes, it just means you prepaid too much. The total amount you pay the IRS is the same whether you pay too much ahead of time and get a refund or don’t pay enough and have to pay more with your tax return.

Well, I hope that helps to clear up some of your questions. I’m sure I’ve missed some, so go ahead and leave them in the comments and I’ll get back to you!

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How To Teach Your Kids About Money (No Matter Their Age)

by Amy Monday, November 16, 2020

I am officially a homeschool mom. While my kids have been home since March, I decided to officially cut ties with the local elementary school and go out on my own this fall. And I can honestly say that I have had no regrets whatsoever.

So far in third grade math, my daughter has learned how to count coins and different kinds of bills. This week, my daughter is going to be learning how to write a check. It is all very helpful (her older brother never learned to write a check in school!), but it isn’t enough. Kids learn in school the difference between a dime and a nickel, but they don’t learn what to do with them. That’s our job as parents. Some schools now offer financial classes, which you really should encourage your kids to take, but learning about compounding interest is still only a piece of personal financial management.

It would be easy if the schools would just teach our kids everything, but there are some things that must be learned at home. Like table manners. Or brushing teeth. Or money management.

Now, you may be thinking, “I can teach my kid to brush her teeth, but money management? Why can’t the schools teach that again?”

Teaching Kids About Money Is A Parent’s Responsibility

It’s scary and intimidating for most parents to think about teaching their kids about money. Money is a taboo subject in our culture, so it can be hard to talk about. And a lot of parents simply aren’t confident enough in their own money management skills.

You may need to brush up on your skills a bit (you’re in luck, you’re reading just the blog for that!), but if you really want the best for your kids, you need to teach them about money. Do you really want your kids learning about paying taxes from people like Willie Nelson (owed the IRS $16.7 million in 1990) or learning about debt from Kanye West (who a couple of years ago revealed he owed $53 million)? I sure don’t!

How To Teach Your Kids About Money

So how do you teach your kids about money? And is it too late if they’re already teenagers?

Here are three keys to teaching your kids about money. And you’re in luck! They work at any age, though the younger you start, the better.

1. Set A Good Example

We’ve all caught ourselves telling our kids not to talk with food in their mouths while we’re still chewing our last bite. But that just won’t cut it when it comes to money management. Our kids don’t really care what we say, but they watch what we do. And whether we want them to or not, they will mirror our behavior.

If you want your kids to have a strong foundation in their finances, you need to model to them how to do it. I know, it’s much easier said than done. But it’s true. The first step in teaching your kids about money is to simply show them.

2. Talk To Your Kids About Money

In our American culture, there are certain things we don’t talk about. That list is getting smaller and smaller, but it still exists. Sex lives seem to have escaped the list, but money still hasn’t. Can you believe that a 2013 study found that 63% of Americans would rather share their body weight with co-workers than their bank account balance?

That same avoidance carries over into the home as well. Many parents say they would rather discuss drugs or sex with their kids than money.

Some things can be learned by observation. Your kids can probably learn how to load a dishwasher just by watching you, though I’m sure you’ve nagged them about silverware placement once or twice. But finances aren’t very visible. The only way your kids will learn about proper money management is if you actually open your mouth and talk about it.

Many parents don’t want to worry their kids or don’t want to admit their mistakes. If you’re stressed about money, they will pick up on it whether you are open about it or not. Talking about it will probably make them feel better, even if things aren’t going well. The only way to prevent them from the same pitfalls is by talking about them. Give them the chance to learn from your mistakes so they don’t have to repeat them.

Silence about money will only cause your kids problems. Most parents don’t expect their kids to understand the dangers of drugs just because they have never seen their parents shoot up. Some things require more in-depth discussion and openness, and finances are one of them.

3. Get Your Kids Involved

Learning theory and research have consistently shown that the more active a learning experience is, the greater the learning gains and retention. How do you teach your kids about money? Let them do it!

How this plays out will differ by age. If you are buying your preschooler a toy, have him hand the money to the cashier himself. In this transaction, he will learn that he has to give up something (the money) in order to gain what he wants (the toy). He will learn that everything costs something.

If your 10-year-old has been begging you for a new video game, don’t just refer her to grandma. Have her figure out the cost of the new video game, plus tax (don’t want her to end up like Willie Nelson), and help her save up for it.

Let your teenager buy her back-to-school clothes (yes, some day they will go back to school) on her own with a set amount of money. She will either be more frugal than if you were with her or learn the hard way the value of budgeting.

Nowadays, a lot of kids are going off to college only to realize that they have no clue how to use money. Don’t let your kid be one of them. Take the time now and make a conscious effort to teach them about money. Otherwise, their bank’s overdraft fees will (we hope).

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6 Things You Need To Teach Your Kids About Money NOW

by Amy Monday, March 2, 2020

Today we’re taking a break from tax season technicalities to discuss something a little bit more fun but often more stressful: children. Actually, children and money. That doesn’t sound very relaxing, now does it?

Today’s post was inspired by my daughter who will be turning 6 ½ in two weeks. She has decided that she wants to make YouTube videos with me where we talk about finances. But first, she needed to learn about finances. So that’s what we discussed all weekend. What? Isn’t that what all first graders are into?

I was actually amazed at how much a 6-year-old can learn and understand about finances. I explained budgeting to her and she immediately turned around and re-taught the lesson to her older brother. She now understands insurance, taxes, and compound interest. She’s really excited to start investing. She has $7.08 and wants to open an investment account already.

Now, my daughter might not be totally normal, but she’s not some rare genius. I think we often sell our kids short these days, thinking things are too complex or too advanced for them. Kids are a lot smarter than we give them credit for.

My daughter wanted me to write today’s blog post about kids and money. She was right. The sooner we start teaching our kids these things, the better off they will be in life. So, here you go. I won’t get into investing quite yet, because I think it’s important to first lay the proper foundation. Here are 6 things that you need to teach your kids about money starting now, written as if to a 6 ½-year-old.

Nothing Is Free

Everything costs something. We have a house to live in because mommy or daddy goes to work to earn money to pay for it. Because why would someone take all the time to build a house and give it away? They put a lot of work into building it, so we have to pay them for that work. We have to pay for the clothes that we wear, the food that we eat, and the car that we drive.

Nothing is free. If it seems like something is free, it’s because someone else is paying for it. You might think that your birthday presents are free because you don’t have to pay money for them. But, your friends and their parents paid money for them. Every time you get something, someone somewhere paid for it.

You Have To Pay To Use Someone’s Money

Even using money isn’t free. If you borrow money from someone, you have to pay them to use it. Otherwise, why would they give it to you instead of keeping it for themselves? What you pay to use money is called interest.

If you borrow money, you have to pay interest. If you let other people use your money, they pay you interest. And interest compounds, which means it gets bigger and bigger. So, if you borrow money to buy things, you end up paying a lot more for them. If you invest your money and let other people use it, then you can earn a lot more money because they pay you. I showed my daughter the following chart to explain how interest gets bigger and bigger, or compounds:

Account Balance	Interest Earned (10%)
$10.00	$1.00
$11.00	$1.10
$12.10	$1.21
$13.31	$1.33
$14.64	$1.46
$16.10	$1.61
$17.71	$1.77
$19.48	$1.95

How To Earn Money

There are two ways to make money; work and investing. In order to work, you need time. In order to invest, you need money. It’s best to do both. Work and save up some money. Then invest that money so that it can start to earn compound interest like we just discussed in the last point. You’ll end up with a lot more money if you’re working and your money is working for you as well.

We All Pay Taxes

Sometimes, there are things that we want or need that we can’t do on our own. We need everyone to work together and help to be able to have them. You want to be safe, but you can’t pay for an army or police on your own. We need roads to drive on, but we can’t afford to build them all on our own.

When we join together to do things like that, the people that we put in charge of doing them are called the government. Everyone has to help pay for the things we want, like the army, so we each give money to the government. That’s called taxes. We pay taxes to the government when we buy things (sales tax), when we own a house (property tax), and when we earn money (income/payroll tax). Everyone has to pay taxes so that we can all have things that we couldn’t get alone, like an army, policemen, roads, or schools.

Some people think that what the government does for us is free. But nothing is free, remember? We pay for everything that the government does by paying taxes.

Money Is Just A Tool

A tool is something that isn’t good or bad by itself, though it can be used to do good or bad things. A wooden spoon can be used to make brownies or to hit your brother. The wooden spoon isn’t good or bad, it’s how you use it that matters.

Money is a tool like a wooden spoon. You can use it to do really good things or you can use it to do really bad things. It’s your choice of how you will use your money.

None Of It Is Really Ours

Who made the world? Who owns everything in it? If God made everything, doesn’t that mean that he owns everything? If God owns everything, then our money isn’t really ours, is it?

Everything that we have really belongs to God. But he lets us take care of it for him. When you go to a friend’s house, she will let you play with her toys and play however you want with them. But, in the end, they are still her toys and not yours.

It’s the same way with God and money. He lets us use it however we want to, but in the end, it’s all his. Because of that, we should use it the way he would want us to. Don’t hit your brother with the wooden spoon, make him brownies with it!

Those are some foundational financial principles, in kid-friendly form. If my kids can understand them, then so can yours. If you don’t teach them now, they will end up learning the hard way later on in life. I just tucked my daughter into bed and she gave me a hug and told me, “Thanks for teaching me that stuff.” I’m sure she’ll feel the same way twenty years from now.

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11 Reasons Your Kids Should Practice Entrepreneurship This Summer

by Amy Monday, June 17, 2019

Here in the Pacific Northwest, it is strawberry season. For most of us, that means we get to chow down on juicy berries that make us avoid the bland store-bought strawberries for several months afterward. For my daughter, it means business. Literally, business.

The minute the signs go up for the U-pick strawberry field near our house she starts asking when she can sell strawberries. You see, rather than just eating them, she likes to pick them and then set up her own stand by the side of the road to resell them. Yes, that’s her in the picture above.

It’s funny because at 5 she doesn’t seem to really care about money. Until strawberry season. Then, it’s all about earning money.

I think it’s a good thing. There are a lot of important life skills and lessons she’s learning as she sits in that field selling her wares. I think every kid should experiment with entrepreneurship, whether it’s babysitting, selling berries, pressure washing sidewalks, or something else. Here are some of the benefits of childhood entrepreneurship that my daughter and I came up with:

Practice Math Skills

When customers see how old my daughter is, they always want to test her math skills. If it costs $4 and I give you $5, what’s the difference?

I can’t blame them, though, because I do the same thing. It’s a great chance for her to practice that math that she’s been learning all year in kindergarten. Kids of all ages get a chance to put their math into practice when working with money. It’s good for them to see that there’s more to math than just endless worksheets.

Learn To Count Money

Working with money also gives them a chance to practice counting it. This is especially good for younger children who still see no more value in a $20 bill than a $1 bill. If you throw some coins in there, then the lesson gets really good. My daughter said that it’s important to learn to count money because “when you’re older you need to know how much you have.” She’s got a point.

Develop People Skills

One of the things that even trips up adults is that in order to make money, you need to interact with people. Entrepreneurship is good for your people skills no matter what age you are. Several years ago a neighborhood boy came to my door soliciting pressure washing and I was so impressed with how professionally he spoke to me and explained his services that I hired him on the spot.

If your kids have the opportunity to learn to talk to adults and explain their goods or services, it will only benefit them in the years to come. My daughter is young, so she is just learning to not be shy and look at people when she speaks to them. Older kids will have to rise to a different level of communication and sophistication of people skills, which is good for them.

Face & Overcome Fears

This one is closely tied with the last one because a lot of kids (and adults) are afraid of talking to people. But, like I said, in order to earn money you have to face your fears and interact with people. My daughter was a great example of this last year.

All spring she was scared to death of bees and wouldn’t look at or talk to anyone, even our next door neighbor whom she loves. However, when strawberry season came around, she spent hours sitting in a field full of bees and talking to strangers. I was so impressed with how she rose to the challenge and overcame her fears. Sometimes I wish I could be more like her.

Experience The Relationship Between Money & Work

Second Thessalonians 3:10 says that if you don’t work, you don’t eat. The concept that nothing is free and you have to expend effort in order to get a reward is being lost in our current culture. To me, the most appalling part of the Green New Deal that is being floated around is that they demand a living wage for anyone who is unable or unwilling to work. Yes, you should receive a living wage for doing nothing even if you’re perfectly able to work. Wouldn’t that be wonderful?

Unfortunately for some, the real world doesn’t work that way. If you want something, you have to work for it. There is a relationship between work and money and the sooner our kids can learn that the better our entire society will be.

Learn How Business Works

I studied business in school, so I’m a little biased, but I think everyone should learn about business. If you have a young adult going off to college that doesn’t know what he or she wants to study, have them study business. It is applicable to anything you do in life.

Going to work in a bank? You need to understand business. Going to be a professional artist? You’ll really need to understand business. Going to be a pastor? A lot of business principles still apply in the church (accounting, anyone?) even if some of your motivations differ.

Setting up their own little business will give kids hands-on experience with how business works. My daughter has learned that in order to make money, you need to have something (a good or service) that people want enough to pay money for it. To get that good or service you will need to either work hard for it or buy it. And then to make a profit, you need to charge more for it than it cost you.

This knowledge will help her later in life when she starts getting credit card offers in the mail. No, being pre-approved is not a special privilege because you are spectacular and unique. They are trying to sell you their product, a credit card, because statistics show that they will probably make money off of you. Lots of money.

Understand Economic Systems

As I mentioned above, you can’t sell a good or service if no one wants it. There has to be a demand for your product. And you can’t just charge anything you want. My daughter would have loved to have charged $50 a pint for her strawberries, but then no one would have bought any. She’s not that cute.

Supply and demand are basic economic principles that can sometimes be hard for kids to wrap their minds around until they live them out. Starting a business is an excellent way for kids to learn about economic systems by living them.

Learn To Tithe

My daughter can be incredibly generous most of the time, but not always. Every once in a while it’s like running into a brick wall and there’s no way around it, she simply won’t let go. When I brought up tithing in that field as we waited for customers I ran into the brick wall.

I had to use my entire Bible college education to try to persuade her that it’s worthwhile to give God 10%. It’s incredibly painful for her to think of parting with $3 of her hard-earned money but it will only get harder as she gets older and earns more and more. I think it’s very important to teach children generosity and tithing at a young age and the best way to do that is for them to start earning their own money.

Improve Prayer Life

When we were near the end of our berries and there were no customers coming, my daughter resorted to prayer. It was adorable to see her praying to God and asking him to send us customers. I think she was also trying to make a deal where her tithe was contingent on him sending customers, but hey, at least she’s starting on the right foot.

It may sound silly, but having their own business can be really good for your kids’ prayer life. Just try it and see.

Earn Money

Here’s the most obvious benefit: your kids can earn money if they start a business. Money to pay for Pokemon cards, ice cream cones, trips to the water park, and summer camp. The more money they earn, the less money will be coming out of your pocket. It’s a win-win for everyone.

When I asked my daughter why it’s good for kids to earn money, her response was, “To buy your own toys or when you’re older a phone so someone doesn’t have to give it to you for your birthday.” Kids’ activities and desires can be expensive and it’s good for them to learn to work for what they want.

Start A Roth IRA

Finally, if your kids earn their own money then you can open Roth IRAs for them. Anyone with earned income, regardless of age, can open a Roth IRA and contribute the lesser of their earned income or $6,000 in 2019. My daughter earned $33 selling berries last week so I’m going to put $33 of my own money into a Roth IRA for her.

Why would I do that? First of all, the sooner she starts investing, the longer her money has to grow. If all she ever invests is that $33, by the time she is 67 it will have grown to almost $7,000 if she can earn 9% returns (which is likely with her time horizon). I really don’t think she’ll use it for retirement, though. More likely she’ll use it to pay for college or buy her first house.

Contributions can be withdrawn from a Roth IRA at any time tax-and penalty-free. Also, once a Roth IRA has been open for 5 years, you can withdraw up to $10,000 of earnings to purchase your first home or take out money for qualified higher education expenses tax- and penalty-free. I think having her own investment account will also be a great teaching tool for her as she gets older, even if she doesn’t have much in it.

As you can see, there are a lot of benefits, both tangible and intangible, to your kids practicing entrepreneurship this summer. Perhaps more valuable to you than any of the above, it will also combat boredom. A kid who is out earning money is not moping around the house saying they are bored and annoying their siblings.

So, what are we waiting for? Let’s get these kids to work!

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