Pandemic personal finance

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.

30 thoughts on “Pandemic personal finance

  1. I like your new kitchen table! So pretty! Very nice that your 10yo was able to help. Some tables (like the one I bought from Ikea years ago) require a ridiculous amount of assembly! So having a helper is essential!

    This is a good time to talk about finances, especially since some of your kids are old enough to start to get the concept. Our little guy is 2 but we have had talks about when to start talking about money/how to educate him. My husband and I both work in financial services so it’s a topic that is heavy on our mind. We also like to have more cash on hand than is probably necessary but we also feel like our job stability/security is pretty low as financial services is such a volatile industry that is shrinking. I don’t have the cash preference that you do, but we definitely like to have at least a year of living expenses in cash. The peace of mind is better than the market returns we are missing out on. When our son is old enough to try investing, we’ll have to find some sort of investment simulation program for him. All our trading activity has to be pre-cleared by both of our compliance departments and that will apply to our children, too. As a result, we basically never do any trading besides mutual funds/ETFs because it’s such a pain!!

    Your comment at the start about the kids arguing and saying he/she never would have gotten away with what X sibling did brings back memories of my childhood… and early adult years. Ha. I’m 1 of 5 and we are spread over 17 years, so there were some changes in parenting techniques along the years. I’m #4 and they got stricter and stricter after learning from my older brothers and then with my sister, it was like they had given up and let her do soooooo much that I NEVER would have been able to do. We talk about it less now that we are all in our 30-40s but it will occasionally still come up when we are together!

  2. “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 had a good chuckle at that. I feel close to the same… maybe enough for years and years.

  3. Excellent tips. I hadn’t really thought of addressing some of these with kids. We tend to focus mostly on their allowance and spending/ saving habits…but honestly we have even been lax on that lately. We kind of tie chores to allowance for our 10 and 11 year old boys- they get paid automatically (auto-transfer from us to their Capital One Money debit cards for kids) but we can deduct money if certain chores aren’t done. But then we aren’t “always” that great about enforcing the chore rules and we don’t ALWAYS actually deduct the money…terrible I know. It just gets to be a headache and some weeks we let things slide depending on the circumstances.. So, it hasn’t been great since we aren’t 100% consistent. We also feel that while we definitely don’t lavish our kids with purchases, they live a pretty comfortable lifestyle overall. In normal non-COVID world, they know they get taken out to eat or an ice cream cone, etc pretty regularly…so if we take away $1 from their allowance for not completing a chore, sometimes we get a shoulder shrug in response!! Grr. My husband insists we need to make their lives tougher and make THEM start paying for more everyday expenses out of their own money so they will “feel” the losses more. It’s definitely a work in progress at our house!!

    1. @Grateful Kae – we don’t do allowances at all. If it sounds like a headache for you guys, or no one’s very enthusiastic about the system, you don’t have to do it. You can just make them do chores because…you’re their parents.

      1. I agree it’s not necessary to pay kids to do chores. But without any allowance of any kind, how do the kids learn to manage their own money (or, where do they get money in the first place I guess is more the question-since they are not yet old enough for a real “job”?) I have always thought that an allowance at least gives them some money to work with to then save up/ spend/ donate, etc.

        1. @Grateful Kae
          This is an issue I thought about for many years, and my conclusion so far, with a 16-year-old, 11-year-old, and 7-year-old is that it’s ok for them to start learning later, say in their teenage years. When I was a kid, we bought things IRL–candy, ice cream, maybe books or t-shirts. But they rarely do. We got debit cards for our two oldest years ago, and it just didn’t work out. The money wasn’t tangible enough. However, once the oldest turned 13, things became real. There is a lot more she wants that we aren’t going to buy her, so she has an autopay electronic allowance from our account to hers for that. She has made some mistakes, and, I hope, learned from them. I hope my son and younger daughter will too.

          Their allowances are not tied to chores. Chores (house jobs, we call them) are something you do because you’re part of the household. Also because I don’t want them to have to pay to have their houses cleaned or pants hemmed one day. A big positive of our current situation is that house jobs have ramped way up and they are learning a lot. Even my 7-year-old is mincing garlic and onions because she was feeling left out. The 11-year-old cleaned a bathroom yesterday with no help (ok, he also made a mess of part of it, but that’s part of learning). I am really happy and proud.

          1. Interesting! We did get our younger kids the debit cards, although I keep them with me in my wallet at all times so they don’t have free reign of them. I actually DO like it though because when we were doing cash allowances, they never seemed to actually have money on them. So if we would stop at Target or somewhere ( especially in cases where they weren’t necessarily “planning” to spend money/ hadn’t brought some along), they never had their cash with them! Then sometimes I ended up buying the little item or the pack of gum or whatever they wanted (if I deemed an appropriate use of their money), and then I had them pay me back at home…just was annoying. I wanted them to be more responsible for paying for their own things but also didn’t want to be carrying their cash around with me. So we switched to the debit card system since those are so easy to keep in my wallet. That also means we always have “their” money available too. They have seemed pretty aware that it’s real money, though they are 10 and almost 12 now.

        2. We have allowances, and we have chores, but they are not linked. Extra chores are sometimes available (contingent on, well, availability — actual stuff needing to be done) to earn money.

          I too struggle some with keeping track of details and with how privileged my kid is (how little he actually needs to keep track of / buy to satisfy his own desires) but this does work (more or less) for us.

  4. Wonderful mix of our reality- daily whinge and harsh reality of what kids are picking up on. Kids can’t go shopping here so they hold me to account on the weekly budget when we get home which I have explained as a way is saying we are ok as long as we live within our means…and that is a moveable feast. They’ve started saying that as we won’t be travelling this summer we will have more money for holidays next year.

  5. Actually its the book of yours that I have re-read the most 🙂 currently part way through it again. Just finishing ‘Rethinking Retirement’. Never too soon to talk to children about money and how it’s a tool for your life. Especially now when everything can seem so fragile.

  6. My child is at a private school that has gone to asynchronous online instruction. every day he has things to do – and has to turn everything in by 11:59 pm. Some days it works out, some days not so much. I figure this is a good time to learn about procrastination, etc. – that will serve him in college and in life in general. No micromanaging on my part, and only stepping in after he fell apart and figured he needed to ask for help. So all in all a good use of this time.

  7. At the risk of sounding overly dark, this post really got me thinking. These are very helpful lessons for children to learn, if a family is in the position of modeling what you describe. I benefited from some of this growing up, but I also saw what happens when an industry radically changes beyond your control (domestic manufacturing) and you cannot easily jump into another high-earning job. The lesson here was two-prong: save AND some things are well beyond your control and planning. I don’t think that is what you are getting at here with young children, but I do wonder about the tipping point of preparedness, beyond which you really cannot prepare and you need ample creativity, determination, resilience, and faith to repair the damage. Let’s say you do follow all this advice and a series of bad luck/life challenges had already befallen you in 2018-19 depleting a healthy emergency fund, then the pandemic comes as even more of a gut punch. I work with a variety of business owners across industries who have lost significant wealth and income potential (shuttered stores) and won’t be in a position to bounce back quickly, if at all. What if your two incomes are both in industries decimated by the pandemic? I relate to your desire for a significant, generations-strong cushion, but a lot of things have to fall into place to make that possible, and even significant wealth can erode and not be “enough.” I’m reminded of Bernie Madoff victims of 2008 as an example of thinking you’d completely protected yourself, done all the “right things” to build wealth only to see that come crashing down in your 70s when a return to your income producing years was not possible. I think this is my long-winded way of saying I agree with you, AND there is a lot more to consider in vein of what really makes us feel comfortable and secure financially. Clearly, I have more questions than answers.

    1. @GR- there are definitely things within our control and out of our control. You can do everything right and still have everything go wrong, which is a situation where one hopes you’ve built up relationship capital over the years…so there are people who won’t let you live on the street. And the ability to pivot helps too. I almost put that on the list, but didn’t. We’ve talked with the kids about my taking on the new podcast and now an ebook since I’m reading the tea leaves that the speaker circuit is going to be decimated for the next 2 years. But I know this is more complicated in other lines of work, and certainly some skills are very specific and hard to transfer.

      1. Had the speaker circuit grown to be a significant part of your business? I sometimes forget that generating income is not just about writing for your. I will say that I’ve learned something from every financial crisis I’ve witnessed and the upside might be that my resolve grows stronger each time to save more and think more carefully about the income side of things as well.

  8. First, I really enjoyed “All the Money in the World” and would definitely buy anything you put out in the personal finance space, if you ever ventured in that direction again.

    Second, so on board with these money lessons for kiddos.

    Our key teaching moments / areas of focus:

    – We opened custodial accounts for our 7- and 9-year-old boys last Christmas and funded them with 1 share each of Disney (because it holds the Marvel Cinematic Universe, but of course). The guys are now waiting to earn enough to buy another share of something. We’ve talked about ETFs and index funds, and the concept of owning tiny pieces of many different companies. They’re mostly interested in single stocks right now, though, and that’s OK by me!

    – We strongly emphasize JOYFUL giving with the kids. They know that we put a portion of every paycheck and bonus into a charity account, and that we give monthly donations to certain organizations (our church, a third-world aid organization, an animal welfare organization, and several child sponsorships). They also know that we let bigger chunks build up for larger donations (building houses in Haiti and donating to pediatric cancer research, mostly). We talk to them about these choices and how we made them, and they’ve decided what causes they want to help. Sweetly, they want to help Mercy Ships (third-world medical care).

    – Understand debt, and live below your means! We’ve talked to them about debt, how credit cards work, how cars depreciate, when it makes sense to borrow (for a reasonable home, and for a quality education), and how paying off debt quickly saves interest and frees up cash flow. They helped me press “SUBMIT” when we made our final mortgage payment a few months ago, and they love saying “We own our whole house! The bank can never take it away!” It’s pretty cute. I’ve let them look at my net worth spreadsheet, and we’ve discussed the various categories.

    – Gratitude, gratitude, gratitude. We talk about the financial and educational opportunities they’ve been blessed with, remembering to be grateful, and remembering to put their privilege to good use by helping others.

    – Support the community you want to live in — with your time and your money. They know that Mom spends a few nights and weekend mornings each month doing things for the community as an Economic Development Commissioner and a financial mentor. We’ve talked about why this matters to us for building the community we want to live in. They also know why we choose to walk to the nearby Vietnamese restaurant rather than order Dominos — because we want to support interesting businesses owned by people in our community.

    – Income Diversity: We’ve talked about this in the simplest way possible — both spouses work.

  9. … some also are truly entirely passive. I’m very (very) grateful right now that 2/3 of our household’s principle streams of income are a pension and social security. Yes, they could both disappear, but if they do things will have gotten really, really bad (both are my husband’s, but I have survivorship in the pension, and with a dependent child would also have access to survivor benefits from SS, though of course not forever). I know these aren’t directly relevant to @Laura’s household for now, but could still be worth mentioning to kids as part of financial education (I know pensions are becoming something of a thing of the past, but they haven’t entirely disappeared and may be useful if only as an “alternative model now largely gone” sort of example).

  10. Another one who greatly appreciated “All the Money in the World”!
    Living in Europe, I am often surprised at how high donations are in the U.S., but I suppose I have to factor in that taxes are lower. Here, half of our salaries go to the state (so my “donations” are to the social security system which also is good.)

  11. This was a great post. I recognize some of these tips may be coming from a place of privilege, but they are also tips that mostly can be implemented by anyone regardless of their income stream. Right now the challenging financial times will really rock people that overextended themselves or relied heavily on debt. It saddens me. I feel bad for these people because in some ways they just bought into society’s view of “normal” and most likely were never taught the sound financial principals of saving and living below their means. If there is any silver lining, I hope that a refreshed perspective of debt comes from this. The recent statistics of car loans alone is sickening (five figure cars, with $500/month payments for over 5 years?) Maybe this will change and people will think twice before buying something they can’t afford.

    Also, I read All the Money in the World, and loved it. Plan to read it again. In fact, since libraries are closed I will just buy it! 🙂

    Finally I wanted to add how much I respect your ambition. If I was a speaker, I think I probably would have just hid under the covers and cried with COVID. You didn’t do that (or maybe you did, we just don’t know!) Instead, you promptly pivoted and came up with a different business idea, and LAUNCHED it.
    Quickly. With a newborn at home. (!!!) I think the New Corner Office is a huge opportunity for you- you have been working remote for years and have insight and tips that others don’t. Just a note to keep up the good work, you set a great example for other motivated women.

    1. Also, how the heck is your house that clean? And your plants are alive? You do have 5 kids and a husband, right? Was this taken at 5am? 🙂

    2. @Lori C – aw, thanks! I am aiming to be resilient. I’m fortunate to have a career where I can scale up different things and I am also fortunate that we have a big enough cushion that it will all be fine.

  12. My kids are little, so my oldest, who’s 4, is the only one who comments or asks about money. When he says he wants money, I tell him he has to earn it by working. Then I mention setting aside portions of earnings for saving, spending, and giving. I plan to teach these concepts in more detail as the kids get older.

    I love your new table. We’re facing a
    similar situation you just faced: Our dining room table is about to be at full occupancy with our six family members. When this pandemic comes to an end, we would like to have other families/extended family over for meals, but we’d have to set up another table. I wonder: Are multiple tables how large families have people over?

  13. In terms of public messaging to a consumer-driven society, I like the idea of emphasizing the importance of having at least a small emergency fund because if people can get the hang of saving and see how the EF helps them with one of life’s smaller hiccups, they might consider the wisdom of saving more.

    1. @smh- I do get this. I imagine that saving up $2397 (or whatever it is) sounds more reasonable than 6 months, and sometimes if people think 6 months is impossible, they won’t even start.

  14. I won’t pay for chores, but I have paid for naps! When I was pregnant with my third child, my three year old twin boys had by then given up their afternoon naps. I was desperate, and told them I would pay $1 every time they took a nap. Hopeful, I made sure to get a huge stack of dollar bills from the bank. One twin would jump into bed and promptly fall asleep, and wake up with his outstretched hand. He would even ask me if he could take a second nap! The other twin could never fall asleep, and I compromised with him that as long as he didn’t leave his room during said naptime, he would still get a dollar. He managed to earn a dollar most days. They spent their money on the ice cream truck or at the Dollar Store. Today, at twenty four years old, they are both in finance and have healthy savings and emergency funds.

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