We’ve been having a lot of family meals lately. Often the conversation centers on who did what to whom during the day, and how mom and dad are unfair for letting child A get away with something that child B would never have been able to do, and do I have to eat this? But! Occasionally we introduce other topics of conversation. One of those is money. Given the larger economic currents, there are lots of lessons to be had. As you can imagine, the children have little interest in these lessons, but here are a few we’ve been trying to sneak in.
Have more than one source of family income. There are lots of ways to make money, which I think is an important finance lesson. I also think it’s important to have more than one source of family income, as few sources are 100 percent secure. Some are either on or off (as in the case of many traditional jobs’ salaries) and some go up and down (business income, incentive payments like bonuses). Some require full time labor (again, many traditional jobs), some more on-and-off labor (income from rental properties, royalties) and some are almost entirely passive (dividends, interest). Being a two-income family gives some immediate income diversity, but there are other approaches. When you have a portfolio of income sources, one can go down or possibly disappear without everything falling apart.
Live on less than you make. An obvious one, perhaps, but the core of financial calm. The primary reason to do this is that it allows you to…
Build up assets, including an emergency fund. I listen to the How to Money podcast, and they keep talking about a study finding that some exact number (it’s like $2397) gives you a high chance of staying solvent during a crisis. I understand the appeal of a relatively low number (vs., say, a year’s living expenses) since it seems more doable, but you can operate from a very different mindset in life if you have a year of time (or two!) in liquid assets vs. not. Of course, there’s an argument from the other end that you miss out on growth if you have too much in cash vs. investments. My husband and I have different feelings about this. I’m the sort of person who would feel most comfortable, financially, with enough in cash for me and my children and probably their children to live on until we all die. I also like a good supply of canned goods and toilet paper. But given that my grandchildren don’t even exist yet, that’s outside the 5-7 year time horizon where investing is the way to go. Speaking of investments…
Steel yourself for stock market dips. My husband in particular wants the kids to understand investing, and to that end, he sets up custodial accounts for the kids when they turn 10. They put in some amount from birthday and Christmas money, and we get it to the minimum. They choose stocks or index funds, or fancier moves. My 10-year-old actually put in an order to buy a certain stock if it dipped low enough and lo and behold in mid-March it did. This was a great lesson in buying low! In any case, if you have done the grown-up financial thing and invested, and then the market dips, watching your hard earned money seem to disappear is tough. The current market volatility is providing a chance to talk about why investments are for the long haul, and why it’s good to be diversified, and to understand that the panicky feeling of “we should sell everything!” when the market drops 10 percent in a day is natural and not actually a reason to sell everything.
Money is a tool to build the life you want. This is one of my main messages from All the Money in the World (also known as the book of mine you are least likely to have read). When I feel miserable reading about the various terrible things going on, I try to stop reading headlines and do something. I’ve donated to local food banks, to other emergency food relief programs, to a 3-D printing program producing face shields for local medical workers, and to small arts organizations that aren’t getting performance income. I’m trying to buy from small businesses. It’s not much, but it feels like something.
What lessons are you sharing with your kids from this time?
Photo: The new kitchen table, which my 10-year-old and I built together. Site of most family meals. Just added a high chair since this was taken; baby not yet ready for it but he will be soon.