Financial Responsibility 101

February 27th, 2013 by Rita Florez

Why the road to fiscal responsibility should start at home.

Brought to you by Liberty Mutual's
The Responsibility Project

Shelley Shelton made it a priority to get her financial house in order when she was 35-years-old. She saw an ad in her church’s newsletter. The headline stated, “Could You Use Some Financial Peace in Your Life?”

“This was the summer of 2008,” says the Tucson, Ariz., resident, now 40. “So it was right before the economy went kablooey, and I was like, ‘Yeah. I think we probably could.’”

Shelton did not know what the workshop was about, but she signed up anyway. The 13-week class was a debt elimination program. Learning about how to make a budget was first on the list. “Everything you do financially pivots on having a budget every month,” Shelton explains. “So I just had to learn how to get over that hurdle.”

Before taking the workshop, Shelton says she didn’t know anything about budgeting. If money was left in her bank account after the bills were paid, Shelton simply spent the money. But Shelton does remember her parents trying to teach her about the concept of saving money to buy things. She received an allowance and was even a young entrepreneur.

“I can remember running a Kool-Aid stand when I was in elementary school,” Shelton recalled. “I couldn’t even tell you how old — maybe fourth grade or so. And I remember my dad actually charging me for the supplies, because he wanted me to understand the whole concept of overhead and having expenses, instead of letting me use all the Kool-Aid and keep the money. I had to pay him part of it.”

But the mechanics of figuring out a budget and how to plan for purchases was foreign to her.

“I saw dad sitting at his desk every Sunday, working on bills,” Shelton remembers. “It looked like miserable work. I would hear him talking about the budget all the time, but I guess the word budget always sound like something that was horrible, drawn out and time consuming. I just never bothered with it as I got older.”

Before learning how to make a budget and stick to it, Shelton dreaded the stress of even thinking it. But once Shelton sat down and figured out her expenses, she says she was able to set aside money for fun stuff. “If you can make yourself sit down and do it a couple of times, you’ll find it’s actually really liberating,” Shelton says.

For Shelton, having that budget allows her to breath a little more easily because she knows what it is she can afford to do. The budget, Shelton says, gives her permission to do or purchase what she wants rather than hide from her bank account statement.

Dr. Michal Grinstein-Weiss, a professor of Social Work at Washington University in St. Louis, says figuring out how to make a budget is not an intuitive process. Because of this, a person’s financial education should start at home, she explains. “I think for every age there are appropriate things we can do to get our kids to explore from very early many issues related to money management,” Grinstein-Weiss says. “Today things are so complicated, and lack of knowledge is really a problem.”

For example, kids are later haunted by credit reports showing they didn’t pay library fines, the professor explains. In some cases, the impact of poor credit scores and money management skills can be felt as early as college application time.

Grinstein-Weiss recommends that parents start the conversation with their children early. Parents, she says, should use every life situation as a teachable moment regarding financial choices, including what to buy, what to wait on, and the difference between needing something and wanting it. Grinstein-Weiss recommends a dinner-table discussion about basic finances. Parents should broach the subject with their kids regardless of their own financial situations. Covering the basics, she says, should be part of an ongoing discussion.

“New topics can be introduced as kids mature or the family situation changes,” Grinstein-Weiss says. “For example, house hunting is a natural time to discuss mortgages, interest rates and buying-versus-renting.”

Getting kids involved in decisions about spending is another way to continue the conversation. Grocery shopping together is a good way to accomplish this. According to Grinstein-Weiss, routine purchases give children the opportunity to develop essential skills, such as comparing different brands, estimating the cost of the purchase, counting the money and completing the sale with the clerk.

These lessons don’t have to limit themselves to weekly shopping trips. Showing children how you pay the electric bill, balance the checkbook and manage your online bank account are just as important, Grinstein-Weiss explains.

For Shelton, skills such as budgeting and balancing her checkbook instilled a desire to teach others the financial responsibility program she took part in years ago. One of the people Shelton targeted was her teenage daughter Courtney. About five years ago, shortly after Shelton completed the financial program at her church, she started gradually increasing Courtney’s financial responsibilities.

Courtney, 17, opened a checking account in the ninth grade with her mother’s help. That’s also when she purchased her first cell phone, a bill Courtney has been very diligent in paying, according to Shelton. But the shock of seeing how quickly the money goes out right after it comes in something Shelton says her daughter is still coming to grips with.

“She was sitting and doing her checkbook, which I never sat and did when I was in high school. But she was balancing her checkbook and I heard her say, ‘yay, it’s over three digits’,” Shelton recalls. “She had over $100, and then she had to pay her cell phone bill. And I said, ‘Yeah, welcome to my world.’”

Rita Flórez is a nationally published writer. Her work has appeared in GOOD and, as well as a variety of regional newspapers and magazines.