11: Families and Work

Children and Poverty

Childhood in our day does not require children to contribute much back to the family economy for most families. In our society with all the privileges and economic affluence there are still members of families, communities, and racial categories who go without, go hungry, and haven't the slightest notion of ever going to college. Today, many children grow up in poverty, even in the United States. A recent study pointed out the current trends in childhood rates of poverty (see “Child Poverty Rates Increased As Recession Began” Retrieved 30 November 2009 from www.ncsl.org/default.aspx? tabid=18557). Using US Census data this study indicated that in 2008 19 percent of persons below the poverty level were children. New Hampshire had 8.6 percent below poverty while Arizona had 26.2 percent.

www.nccp.org/publications/pub_892.html ). Children of color have a higher likelihood of living in poverty. Wight and Chau also reported that 27 percent of White children; 61 percent of Black children; 31 percent of Asian children; 57 percent of American Indian children; and 62 percent of Hispanic children all live in poverty.

Poverty in the US is layered across racial categories. What is poverty in the US?

The US has an official definition of being poor or in poverty. Poverty Line is the official measure of those whose incomes are less than three times a lower cost food budget. This definition has been the US's official poverty definition since the 1930s with only a few adjustments. Near Poverty is when one earns up to 25% above the poverty line. We would say that a person near poverty has more income than someone in poverty, but not more than 25 percent more. In Table \(\PageIndex{1}\) below you can see the US Health and Human Services 2009 poverty guidelines with estimates of near poverty levels. Most who qualify as living below poverty also qualify for state and federal welfare which typically include health care benefits, food assistance, housing and utility assistance, and some cash aid.

Those near poverty may or may not qualify depending upon current state and federal regulations. Absolute Poverty is the level of poverty where individuals and families cannot sustain food, shelter, warmth, and safety needs. Those below poverty are already in a bind. For example, the average home where I live in Utah cost way more than the average poor family could ever afford.

In recent U.S. data, poverty (and near‐poverty) continues to vary significantly across racial and ethnic groups. Although the overall poverty rate is relatively low (~10.6 % in 2024), Black Americans face a considerably higher rate (18.4%) than the national average. Children of Black families are especially vulnerable, with nearly one in five or more living below the Supplemental Poverty Measure threshold (22.7%). Whites still have one of the lowest poverty rates, but because they constitute a large portion of the U.S. population, the absolute number of Whites in poverty remains substantial. Meanwhile, Hispanic and American Indian/Alaska Native populations continue to record poverty rates well above the national average, reflecting enduring stratification along racial and ethnic lines.

Purchasing a Home

For many U.S. families in today’s economic climate, buying a home remains the largest investment they will ever make. Even though interest rates have pulled back somewhat, the cost of borrowing is still significant. As of mid‑2025, the average 30‑year fixed mortgage rate is hovering around 6.7%, compared to the historically low rates of recent years. 

If you were to take out a $100,000 mortgage today at 6.7% over 30 years, you would pay back about $100,000 in principal plus approximately $120,000 in interest — for a total cost near $220,000. That’s much less interest than in past decades, but it still represents a major long-term financial commitment, especially if the home doesn’t appreciate in value.

There are smart strategies to reduce the total cost:

• Put down a larger down payment to reduce the loan amount.

• Pay an extra 1/12th of your monthly mortgage payment toward the principal each month; by year’s end, you’ll have made the equivalent of a 13th payment, which lowers your total balance.

• Choose a 15-year mortgage instead of a 30-year one. Although the monthly payment is higher, you’ll pay off the loan faster and substantially reduce the total interest. For example, with a $100,000 loan at today’s rates, switching to 15 years could save you tens of thousands over the life of the loan.

One of the major financial risks some homeowners take is leveraging their home equity. If your home’s value increases, tapping into that equity via a second mortgage or home equity loan can seem tempting. Some financial experts suggest using that money to invest, but that approach carries risks like if the markets turn, you could be depending on borrowed money to generate returns. In contrast, others (including some of my neighbors) choose to avoid that risk, preferring to pay off their first mortgage and own their home outright.

Debt and Spending

It is estimated that the average credit card balance per consumer is now about six thousand five hundred eighty dollars, according to TransUnion. Total United States credit card debt recently reached about one trillion two hundred ten billion dollars at the end of 2024. The United States continues to be a nation that uses credit extensively. Many payments are now made digitally, and few people handle actual money, which can make credit feel like funny money when it is not used carefully.

Credit cards are not necessarily a bad thing. They facilitate travel and small transactions for the family. However, credit card balances or unpaid debt can be very burdensome to a family budget. Families should be aware of how easily debt can accumulate and how it can affect financial stability.

I have researched and taught family financial matters for many years. I suggest three rules that I call the Rules of Three when it comes to family finances. The first rule is to save three months of income and keep it in the bank. This means saving enough to meet all fixed debts, including rent, mortgage, car, medical, and insurance payments, so that a family can continue to live if there is a job loss or financial crisis.

The second rule is to have only one credit card with no bonus or rewards program. Keep a zero balance on it. Set the credit limit to the amount that would cover three weeks of bills, including rent, mortgage, and car payments. This credit card can be used for short term purchases, but it should never be used for long term debt.

The third rule is that whenever there is a consumer item that is wanted, such as a television, cell phone, or other device, wait three full days before buying it. This waiting period allows time to consider whether the purchase is necessary and fits the budget. Many marketing strategies encourage people to act quickly, but waiting three days can prevent unplanned and unneeded debt.

If a family is saving for a larger purchase, such as a car, it can be useful to save the amount of a monthly car payment in a savings account each month. After three years, the family will have enough to buy a car within their budget. Another idea is to buy a previous year model of a new car in the third quarter of the year. This can save thousands of dollars.

Families should budget and plan using these Rules of Three. Careful planning and saving can prevent unnecessary debt and provide financial security.

Budgeting

Most couples do not have a monthly budget. It makes it very difficult to manage a family’s finances without one, so I strongly suggest that you create one. There are numerous free budgets available online. In one internet search for “free monthly budgets,” I found more than ten easy-to-use formats. The two main purposes of a monthly budget are to know how much money you currently have in your accounts and to understand where you are spending it.

If you have not budgeted yet and want to start, ask your parents or a trusted adult for help. Show them this practice budget and ask for their recommendations based on their own experience. There is no single correct way to budget. The important part is to create a budget rather than to not have one.

To develop a budget, begin by making a list of all your fixed expenses. Fixed expenses are monthly costs that are set and do not change based on your choices. These typically include rent, mortgage payments, car payments, and insurance payments, to name a few. Next, make a list of other things you spend money on that relate to household matters. These are called variable expenses. Variable expenses change from month to month depending on needs and wants. They typically include food, gasoline and car maintenance, dining out, streaming services, groceries, clothing, and entertainment.

If you want to create a budget, the next few tables will help you with the basics. Table \PageIndex3\PageIndex{3}\PageIndex3 is a tracking sheet you can use to see where your money is going.

In the Table record every purchase or expenditure you make. This may sound tedious, but tracking your spending is necessary to estimate a budget for future months. Make sure to note what types of entertainment or leisure activities you spend money on. For example, if you go to a movie once per week, that would be four visits per month and might require its own budget allocation. If you play golf, attend sporting events, or participate in dance classes, your spending in these areas may also require an allocation in your budget. After you have tracked your expenses, use the Table to assign amounts for the next month’s budget

Planning Financially for the Future

Guarding your credit score is crucial for your family’s financial security. The FICO Score is the most common credit scoring system in the world and is named after Bill Fair and Earl Isaac, Fair Isaac Corporation score, or FICO. Your credit score is comprised of your payment history, how your credit capacity compares to your usage, how long you have had credit, which types of credit you have had, and how many times your credit was checked.

You must become a manager of your credit score. Many articles, such as “Top Five Money Mistakes College Students Make,” provide useful guidance. Overusing credit card debt, ignoring or damaging your credit score, not budgeting, and misusing student loan money are common mistakes. Numerous resources show how easily these mistakes can occur for students who are offered multiple credit card opportunities as freshmen.

Studies demonstrate that misusing credit negatively impacts students’ overall lives and experiences. Research shows that students with lower debt levels are generally more satisfied with their lives.

Every family needs a 5, 10, 15, and 20-year financial plan. Such a plan focuses on long-term goals while giving guidelines to follow in the short term.

Ask yourself, “What do we need or want to pay for in 5, 10, 15, and 20 years, and how do we need to prepare now to accomplish those goals?” Buying a home, owning a home, planning for retirement, putting children through college, life insurance coverage, starting a business, traveling, becoming debt free, and other goals may emerge during the planning process. Once these goals are clearly written out for the next two decades, you can align most budgeting, saving, and spending activities with them.

Remember that the Rules of Three suggest not buying in a hurry, and that becomes even more important when considering each purchase in the context of a long-term plan.

There is no such thing as extra money. I had a student explain that she and her husband received an end-of-year bonus at work. When asked what they planned to do with it, she replied, “We are still deciding. It will be something fun.”

I reflected on her response. In a senior-level family finance class, I had reviewed her monthly budget. She had two installment bills she could have paid off with the unexpected funds. However, she and her husband felt stressed and under pressure, and this money represented a gift of relief that, in her own words, “We work very hard and we deserve to do something fun with this.”

All money is real, including credit card money. There is no extra money, because with a 20-year plan, a monthly budget, and clear goals, any funds, expected or unexpected, can be applied to long-term objectives or budget categories. Had this student planned for the bonus, the funds could have been allocated to a fun category or split between debt reduction and enjoyment. Instead, they purchased a high-end flat-screen television, but could not afford cable or satellite service to use it. All money should be allocated and spent in the context of the overall family finances.

If you are middle class, you can increase your family’s net worth by following several basic principles. First, invest wisely and aim to buy low and sell high. Second, consider real estate investments as a renter-landlord or through owner financing. Third, practice extreme frugality. Never pay full price for anything and never sell below market value. Fourth, seek professional guidance. It is easy to consult advisors, read books, attend seminars, or assemble knowledgeable professionals on your team.

Many students take an elective finance class in the business department. I have seen students achieve remarkable financial success through disciplined family finance and investment habits. Dedication to managing family finances can open opportunities for freedom and stability. Some people sabotage similar efforts. Why?

Undermining Financial Stability

Entitlement is a feeling of wanting something for nothing, of being justified in having one’s wants met, or a sense of being excluded from the same rules that govern most members of society. The concept of “sense of entitlement” is often associated with addictive behaviors and unhealthy relationship patterns. Entitled people have difficulty distinguishing between “what I want” and “what I need” when it comes to money. A flat-screen television or other luxury items may feel owed simply because they desire it. Entitled people feel it is their right to have what they want. Many of us experience feelings of entitlement in some areas of our lives. However, when the pursuit of wants interferes with financial security, moral and ethical judgment, or social responsibilities, this entitlement can become harmful.

In the United States, many people feel entitled regarding consumer goods. They feel pressured to buy things that fall more under the category of wants than needs. Those with limited resources may overspend to acquire items, often feeling buyer’s remorse afterward. This is the hedonistic treadmill at work. Small purchases, when accumulated, can create significant debt. A friend of mine used to say, “Never finance a pizza.” He meant that pizzas, movie rentals, clothing, and other small-ticket items add up quickly. Without family financial guidelines, people have little direction and remain vulnerable to financial insecurity in today’s competitive marketplace.

Why do some human behaviors make so little sense to a reasonable person? Why do people spend themselves into financial difficulty? Why do they engage in choices that have long-term negative consequences, whether related to health, relationships, or finances? The answer is simple: we are human. Choice and intelligence guide us, but emotions play a central role in how we make decisions. A few emotions are particularly destructive to our sense of self-value: shame - a  feeling of being flawed at our core; guilt - remorse over past actions or inactions; and fear - anxiety over uncertainties in life.

Shame, guilt, and fear often underlie unhealthy financial decisions. I once witnessed a conflict in a small-town grocery store between a mother and her son. He insisted on a particular brand of cereal, she refused, and emotions escalated. In the end, she gave in, and I realized her guilt and shame had led to an unhealthy yielding to entitlement.

Many of us medicate these feelings through spending. We act emotionally rather than rationally. Some become addicted to spending, often called “shopaholics,” when it interferes with normal daily life. Obsessive or uncontrolled spending often stems from unmanaged emotional distress.

I have my finance students reflect on their own financial behavior by asking these questions: “Does more money make you feel better about yourself, more loved, or happier? Can you identify and release the chains of shame and guilt? Do you believe you deserve success? Is spending masking feelings of guilt or inadequacy?” These are not budgeting questions; they are about understanding emotions.

Figure 6 shows some emotionally driven financial behaviors that can disrupt sound decision-making. I often use a metaphor with my students: being thirsty but drinking from the wrong cup. Many people eat when they are thirsty, drink soda instead of water, or choose alcohol when their bodies would benefit more from a healthy beverage. In the United States, we are notorious for drinking from the wrong cup. Our busy lives and constant distractions make it difficult to recognize our true needs and to act in our best interests.

Fiqure 6. Common Emotional Issues that Underlie Poor Financial Behaviors

When we mismanage our finances or spend in destructive ways, we often have legitimate needs but are trying to meet them in the wrong manner. Some people shop when they feel lonely or isolated. They may spend money on cruises, vacations, or experiences, only to discover that being with other people does not always resolve loneliness and that happiness is ultimately a choice they must make for themselves. Others spend to compensate for difficult, neglectful, or traumatic childhood experiences, attempting to soothe old wounds with purchases.

Money in these cases is used both to medicate the problem, which rarely works, and to reinforce shameful feelings of unworthiness. Mismanaging money can create additional problems that seem to confirm what people have felt all along, that they are not deserving of happiness or success.

Some people invest enormous energy into projecting wealth, sophistication, or social status beyond their actual means. A friend of mine who repeatedly went bankrupt eventually realized his emotionally driven financial self-destruction. He said, “I have a millionaire’s taste and a janitor’s income. I am tired of suffering to prove something to others when I am not that something.” This pattern of financial self-medication is similar in many ways to drug or alcohol abuse. People attempt to distract themselves from pain through short term highs, whether by overspending, traveling, hosting lavish experiences, or buying expensive technology and gadgets.

In today’s world, new forms of spending trap people. Subscription fatigue, where families pay for multiple streaming services, apps, or premium memberships, adds up quickly. App-based impulse purchases and buy now pay later programs make it easy to spend money immediately while pushing the cost into the future, often with interest. People think they are managing small amounts, but it accumulates quickly and can feel out of control.

I once spent hours trying to untangle a stubborn knot in a tow strap. My friend, seeing my frustration, asked, “Can I show you a trick?” He folded the knot in on itself, creating enough slack to untie it. I had been ready to cut the strap because I did not understand the knowledge he had. People often approach money the same way, entangled in emotions and seeking instant solutions to deeper issues. Quick fixes rarely work.

Individuals with deep feelings of shame or worthlessness often try to distract others from these feelings. They dress, act, and live in ways designed to draw attention away from perceived flaws. Celebrities, influencers, and even students often exhibit this pattern, a polished exterior masking fragile internal struggles.

One of the strongest human needs is to feel loved and valued. I observed grandparents who mortgaged their home, spent their savings, and invested heavily in experiences for their children and grandchildren, hoping to create lasting memories. Amusement parks and entertainment industries benefited from their spending, but when the events ended, they were financially strained and still lacked meaningful time with family.

Elderly people are traditionally seen as cautious with money, but more are mismanaging finances in recent years. Rising costs of living, healthcare expenses, predatory lending, and pressure to maintain social status contribute to this trend. Some retirees even spend inheritance money intended for the next generation. If shame, guilt, or fear interfere with financial decisions, seeking guidance from self-help resources or therapists can help. Taking control of money management is always better sooner than later.

A useful strategy is to make savings, investments, and other financial assets hard to access for impulsive spending. One friend set up a savings account in another state that requires a multi-step process to withdraw funds, preventing spontaneous purchases. This also guards against modern financial predators who exploit quick cash, high-pressure opportunities online, or through scams. Confidence scams, from Ponzi schemes to cryptocurrency fraud, exploit greed, vanity, and lack of knowledge. There is no such thing as a guaranteed something for nothing investment.

The final two points from Figure 5 remain relevant. First, unless you have expert knowledge in investing, hire someone who does. Certified, experienced financial advisors can help you plan your 5, 10, 15, and 20-year goals and navigate markets. Second, treat money with dignity and respect. It will respond accordingly. Do not let money exist in a humiliating state of debt. Place it in interest earning, growth oriented, and secure accounts where it can work for you.

In marriages or partnerships, debates about needs versus wants are common. A need is something essential, while a want is usually superfluous. The key is unity in budgeting. Communicate openly, evaluate each other’s priorities, and sometimes yield to your partner’s wants, even if you see them as nonessential.

To distinguish needs from wants, ask questions such as: “Do we value owning things over doing things? Do we value doing experiences over owning items? Given our long term goals, do we prioritize investing over consumption? Do we value supporting people over acquiring things?” Discussing these points and negotiating together strengthens family financial management and promotes healthy, shared decision making.