Financial Freedom for the Next Generation – Part 1

The other day I ran into a friend at a local convenience store. We struck up a conversation, and very quickly landed on the topic of indebtedness and the burden it places on our families every day and for the foreseeable future. Our level of debt forces us down paths that we would rather not take because our choices have been limited. We end up making career decisions based on our college or consumer debt, not based on our chosen profession. Instead of starting our own business in our spare time we decide to work a retail job to get out from under the crushing weight of monthly payments.

The answer to staying out of consumer debt is usually not that difficult if you begin early enough in life. For teens, this information is incredibly important since they are on the verge of making these important decisions. When I speak to teenagers it seems like many of them are starting to understand the financial mistakes of their parents. What is exciting is that they want to do something about it! This is the first of a 5-part series where I will cover the main personal finance topics that I think are important to our financial future. If we can get these things right, we will have the freedom to pursue the future that God intended for us.

Cash over Credit Cards – Most of the teens that I encounter realize that credit cards can be a real problem. They have all heard that perks are available in the form of points or cash back rewards. Although they have heard of the short term benefits, they have also heard that many people have gotten deeply into debt with them. Unfortunately, they have a high chance of doing the same things if they don’t take a different path. Here are some good tips:

  • A credit card is not a good emergency fund. – As parents we need to demonstrate the use of an emergency fund (cash set aside for unexpected expenses) so that teens don’t grow up thinking that a credit card is a good plan for emergencies. For many of us, our debt troubles came from not having cash reserves in the event of a disaster. Unforeseen expenses are inevitable, so we need to anticipate them and be prepared. Ideally you want to have 3 to 6 months of living expenses sitting in an account where you can get to it quickly. Teens, you should plan to have roughly $500 for emergencies when you leave for college. This will help you to avoid the temptation of signing up for a credit card if your alternator fails on your 15 year old car. When you get out of college, you should plan to save up your 3 to 6 month emergency fund immediately.  Imagine the peace of mind you will experience when you have a sizeable amount of cash just waiting to be used when the inevitable happens.
  • Save for large Discretionary Purchases – Parents, if you can demonstrate how to save up and pay cash for that big screen, rather than swiping plastic the day before the big game, you will be doing your teen a huge favor. They will see your discipline and goal setting and will someday appreciate you for it. They will be better prepared to avoid the large impulse purchase that is made possible by having easy credit.  Help them to see that “Buying today and paying tomorrow” is really paying tomorrow for a long, long time.
  • Monthly Spending Plan – Most people don’t like the word budget. It brings up images of homework, or stressful conflict between spouses. Instead, use the idea of a spending plan. It has a forward looking feel to it and is much more positive. Help your teen to plan each month. Show them how to project their income and how to set aside money for giving, saving and spending. This will prepare them to plan ahead and be in control of their finances. For some helpful resources, visit www.ChristianPF.com. You will find worksheets, advice and helpful information.

If we can raise the next generation to be prepared to pay cash for toys and emergencies, and to have a plan for their money, we will be headed in the right direction and our children will experience Financial Freedom!

The second part of this series will discuss a plan to pay for College!

About The Author

Duane Rockensock

Duane (Rocky) Rockensock is a husband, a dad, and the National Reconditioning Manager for AmeriGas Propane. Since he was a teenager, Duane has loved hearing the stories of how people have started creative businesses or found ways to use their talents to accomplish amazing things. For that reason he started this blog to encourage teens and adults to find their purpose and to provide the tools and resources to make that happen!