Financial Freedom: A Foundation for Children

BACKGROUND

Writing about financial freedom has been an aspiration for many years. I've stalled out several times, unsure how to appropriately articulate the swirling tornado of thoughts and plethora of learnings on the subject. It's taken years for several reasons. The first is obvious: attain a semblance of it yourself with enough experience to have something to share with others. The second: how do you talk humbly about financial freedom? It's a fine line. One I hope to maneuver well.

To begin, I do not claim to have everything figured out, nor do I possess a golden bullet to fulfill every desire. Not in life and not on personal finances. People have achieved financial freedom through thousands of varying methods. Others experience horrific tragedies nearly impossible to come back from. For those that have achieved financial freedom, some simply work the same job for thirty years, saving as they go by strategically allocating portions of their pay to a 401K. Others write books, blogs, trade stocks, job hop, invest in real estate, and so on. Each path is often unique, but I believe there are foundational elements that help a majority of people achieve a realistic measure of financial freedom.

I am a man of action, have been for many years, and that action has led to both good and bad discoveries related to financial goals, and ultimately financial freedom. This blog, and the many more to come on this topic, are the results of those actions, and their learnings, along a journey to my own financial freedom, and what I hope will be my children's.

WHAT IS FINANCIAL FREEDOM?

I think it's important to first define Financial Freedom. You will find hundreds of definitions online, probably thousands - most of which make sense. For me, I believe the definition of financial freedom journeys with you throughout life. As a young adult, fresh out college or a trade school, financial freedom may simply be paying off student debt. For someone in their 30s, financial freedom may be paying off all debt except a mortgage and having several funds established for one's children as they age. For someone in their 50s and 60s, financial freedom is likely the ability to retire comfortably.

Financial Freedom is 100% related to your goals, which are likely to change throughout life. Therefore, I argue that Financial Freedom is best described as an ability to avoid sleepless nights due to worries over money. This definition assumes realistic expectations around standards of living and what most Americans strive to achieve for themselves and family. Again, financial goals (a precursor to financial freedom) should be different for people at different stages in life. It doesn't make sense for a teenager to lose sleep over having enough money to retire. Although, I do encourage everyone to save for retirement as soon as possible - I've been saving since I was 20.

An example: In your 20's, you focus on paying off student debt while setting money aside for retirement. In your 30's, you focus on paying down a mortgage, establishing college funds for your children, and increasing retirement savings. Everything is going swimmingly! You have what you would call financial freedom. The ability to provide for your family. A house, two cars, life insurance, mutual funds, and on and on. Then, BOOM! You cannot shake a call to start your own business. A mindset shift occurs. You weigh options. Do you pursue acquiring enough money to start this business? Do you take out business loans? Do you cash in the savings you've built over a decade? Suddenly, financial goals, and financial freedom looks different.

A FINANCIAL FOUNDATION

What I do believe is imperative for 100% of the population, even trust fund babies, is a foundation that allows for a smooth transition of financial freedom for every stage of life, where financial goals change with many of life's circumstances. I argue that different, or additional goals may come with time but as long as the foundation remains strong then you can achieve financial freedom throughout each stage of life.

A strong financial foundation is imperative, as early as possible to establish a mindset framework that allows for thoughtful decisions along a journey to financial freedom. This Financial Freedom blog series will begin with this idea; a call to parents to instill a financial understanding, a foundation, in their children at an early age. Future blogs will turn toward addressing individuals and different eras of our lives, but the beginning is always a good place to start.

INSTILLING A FINANCIAL FOUNDATION IN CHILDREN

Money shouldn't be, and isn't, everything in life. Neither is it the root of all evil. However, it's a big part of life, can be used for good and evil, and is something we shouldn't shy away from discussing, either amongst ourselves or our children.

Alike everything else in parenting, being a positive example is the most important aspect in developing our children. You cannot be a good example if your children fail to see or hear how you handle money.

For us, demonstrating generosity was the first step in that development. We openly discuss allocating both money and time toward generosity. These generous acts are done through tithing, donating to a couple of non-profits, and randomly providing resources to individuals or families in need. We have been fortunate, blessed in many ways, and we believe in sharing that blessing with others. Our approach isn't to boast to our children but for them to see generosity as a priority.

A fun fact about generosity is you wade into Kingdom math. I'm a blue personality, analytical, and detailed oriented. There were times we thought certain financial situations wouldn't work out. It wasn't we made bad financial decisions, but situations would arise where we would review the budget more frequently than desired. Through each of those situations, even when questions were raised, we prioritized our generosity. In the end, the math always aligned.

Generosity established, I began to dive deeper into financial understanding with my almost 4 year old. She has a princess castle bank that collects coins and dollars from relatives. Piggy banks are a great start. It teaches kids to put their money somewhere, to save, until a later date. It's important to tie the savings to spending at an early age. The idea is to instill money is earned, saved until desired or needed, then spent. Having a child save endlessly fails to instill a valuable financial lesson - the correlation between money saved and why or how it is spent.

Next, the lesson of how money is earned. Years ago, I established an eBay store for selling sports cards. It has since blossomed into selling for both myself and others. Amazingly, my oldest took notice of my sports card collection and demonstrated an interest - she even took some of her own sports cards to show-and-tell at pre-school! The next logical step was to deploy child labor! Recently my oldest has assisted several times posting hundreds of video games on eBay to sell. She knows she will receive between $5 and $10 for her help, depending on what is posted, how long she helps, and the value of the product. It started out a little rough, I admit, and I learned to expand my patience. However, with time and practice, she now provides value to the enterprise.

It's been amazing to see how the basics of financial understanding have connected over the course of these events. She will randomly ask to help in the card room in order "make money" to buy a toy she saw on a commercial, or played with at a friends house. We make sure to tell her how much that desired toy is and how much additional work is required to afford it (admittedly, I'm a softie. So, sometimes we fill in the gap when I'm sure the lesson is learned).

I encourage you to speak openly and honestly about money, in a healthy way, around your children. Engage with them on the subject. Teach them the value of work, the correlation of work and earning money. Encourage them to save for something they want, then allow them to spend what they've earned to get it. At the core, demonstrate and encourage generosity. It's never too early to demonstrate and practice healthy habits that will establish a foundation our children can lean as they progress throughout their lives.