Wednesday, September 28, 2016

Resist Retail Therapy With The Kids

A mood free shopping bag.

“Retail therapy is shopping with the primary purpose of improving the buyer’s mood or disposition.”

Scenario 1: Your kid is feeling a little blue. So you head out to the local ice cream parlor, saddle up to a double scoop, and share a little relaxed one on one time.

You just spent some money to improve your kid’s mood.

Problem? Nope.

The spending was just a modest backdrop. The focus was on quality time. No budgets were harmed along the way. No buyer’s remorse later.

Scenario 2: Your kid is feeling a little blue. So you head out to the mall, fill up your shopping bags with things you don’t need, and revel in the act of consumption.

You just spent a bunch of money to cheer up your kid’s disposition. (Perhaps you even did it to improve your kid’s feelings toward you.)

Problem? Yep.

The spending was the therapy. The focus was the act of consumption itself. You may have even torched the family budget along the way. Hello buyer’s remorse.

OK, those are obvious examples. But sometimes the line between retail normalcy and retail therapy can be a lot harder to discern. That’s why it’s always good to have the discussion with your kids:

“What’s the purpose behind this purchase?”

The more conscious your kids are about retail therapy, the less likely they are to seek it as adults.

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Tuesday, September 27, 2016

Add An Emergency Fund To Your Kid's Money Bucket List

A hole in a fence from errant lacrosse balls.

Spending? Check.

Saving? Check.

Giving? Check.

Emergency? For kids? Nah.

Most people don’t learn about emergency funds until they’re off on their own. And usually it’s after they’ve already dug themselves into a big financial hole. That’s why an emergency fund is the very first step in Dave Ramsey’s famous 7 baby steps to help people dig out of financial distress.

But what if we taught people about emergency funds much, much earlier? Why not take that first financial baby step as a kid?

Kids and teens certainly have plenty of little emergencies to cut their teeth on. Like:

  • That third lost sweatshirt.
  • The new shoes left on the soccer field, never to be seen again.
  • The hockey puck through the garage door window. Six times.
  • The gaping holes in the fence from constant lacrosse ball shelling. See evidence in picture above.
  • The glass pane in the side door cracked by a hurled cell phone. The culmination of a hormonal teen tantrum, the dramatic origins of which have been long forgotten...
  • The massive data plan overage charge.
  • The gold license plate replacement for the snooty Jaguar owner on the receiving end of a fender bump in the Starbucks parking lot.

Some or all of these may or may not have been actual emergency moments from my five kids’ earlier years. I’m not naming names...

Unless my family is completely abnormal, you’ll also have plenty of opportunities to deploy some emergency funds long before your child’s passage to adulthood.

So here’s a simple 4 step plan for making your kids emergency fund savvy:

  1. Set up a separate emergency fund for your kid. Add an extra jar, account, or prepaid card to your standard set of buckets.
  2. Divert a slice of allowance, chore, or odd job income to fill the fund. Temporarily amend your kid’s spend-save-give allocations to factor in the new emergency bucket. Revert to the original allocation once the emergency fund hits the target — maybe $25 for a youngster, $100 for a pre-teen, and $500 for a teen.
  3. Share some skin on the next emergency. Some emergencies may extend well beyond your kid’s means. Sharing the costs on a case-by-case basis is fine. As long as there’s some shared skin in the game, the lesson will be learned.
  4. Replenish the fund. Return to step 2. Rinse and repeat as childhood’s little emergencies arise.

Don’t wait to make your kids take those first emergency fund baby steps. Baby steps now might mean no crawling out of debt later.

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Monday, September 26, 2016

Take Your Family Swear Jar Online

Digital Swear Jar

The swear jar is a time honored family tradition for breaking bad habits.

Let loose with a four letter word around the house, and into the jar a payment goes.

But now, like everything else payment related, the penalty pot is going online.

Hip families are setting up a separate prepaid card or subaccount to replace the brick and mortar cuss container.

Make a transgression, and, boom, the penalty payment is just one tap away. No more chasing down the offender to cough up cash or coins for the jar. Instead, it’s:

  • An instant electronic transfer from the offender’s account to the swear jar account,
  • Captured in a permanent transaction history for handy perusal the next time the offender whines about being low on funds, and even
  • Real-time text alerts broadcast to the family — just to rub it in a little. Nothing like a little group schadenfreude!

And swear jars aren’t just for cussing. Any bad habit will do. Here are just a few infractions (gathered anonymously) that have racked up demerits within families this month:

  • Hurting a sibling (Biting is a favorite!)
  • Blowing off chores
  • Cell phone data overages
  • Being home late
  • Messy room
  • Screeching
  • Backtalk (A teen classic that includes muttering under your breath. And, yes, your mom can hear you!)
  • Slamming doors (another teen classic)
  • Attitude (the teen catch-all)
  • Lying (future politicians anyone?)

What should families do with their overflowing swear jar accounts? Donate the proceeds to charity, or spend them on something that benefits the whole family.

So do family swear jars really curb bad behavior?

Who gives a shiitake! At minimum, they’re just good clean family fun.

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Sunday, September 25, 2016

Calibrate Chore Payments With Real Data

Little girl pushing fake lawn mower

13.8% of families using our family banking service compensate kids for chores.

If you’re in the pay-for-chores camp, how do you decide the going rate? You can make it up, ask other parents in your network, rely on survey data, or calibrate using actual data. A mixture of all four might be the way to go.

On the survey side, Country Financial released new stats this month.

I decided to see how their survey stats stack up to the actual data we see from current, paying FamZoo families. I say “paying”, because free trial families might just be messing around. Paying families are serious. As they say, “money talks, bullcorn walks.”

Here’s a chart comparing the Country Financial survey data with actual FamZoo data for selected chores in 2016:

Chore Survey
Mow Lawn $6.28 $7.90 $0.90 $25.00 $5.00
Do laundry $2.82 $1.38 $0.02 $25.00 $0.75
Vacuum $2.55 $1.67 $0.02 $8.00 $1.00
Do dishes $2.03 $0.83 $0.01 $3.50 $0.50
Set/Clear Table $1.31 $0.64 $0.02 $4.50 $0.50
Make Bed $1.18 $0.41 $0.05 $2.00 $0.25

For our data, I include the average as well as the maximum, minimum, and median.

Pay attention to the median. It’s the number you would find if you lined up all the amounts from lowest to highest and picked the one in the middle such that half of the numbers are on the left and half are on the right. When the median is lower than the average, you’ve got some big outlier numbers on the right that you may want to ignore.

Why do some kids get paid as much as $25 to mow the lawn while others make less that $1? Well, for one thing, a “lawn” in the country might be measured in acres, while a lawn in a suburb or city might be measured in feet. Similarly, vacuuming might mean one carpet or the whole house.

The bottom line: use stats as a sanity check when calibrating chore payments, but ditch the outliers, favor actual data over survey data, and factor in your own judgement to get the best results.

Come to think of it, that’s a good maxim to share with your kids in general.

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Saturday, September 24, 2016

Fix The Way Your Doing Your Kid’s Allowance

A tuned racing car engine.

Do cars hurt people?

No, drivers do.(Defects and self-driving glitches aside.)

Does allowance spoil kids?

No, parents do. Allowances are just the misused vehicle of choice.

Used correctly, allowances don’t spoil. They teach kids to be responsible and thoughtful with money.

If you’re seeing otherwise, your allowance approach needs a tune-up.

A well-tuned allowance:

  1. Tracks a budget. Why guess at the right amount? Sit down with your kid. List the things the allowance should cover. Put it in concrete terms. Calculate the right amount accordingly. Little knick-knacks for youngsters? Set the allowance to the price of a favorite regular treat plus a smallish fraction of a modest toy purchase — enough to require plenty of patient saving to close the deal. Clothing for a teen? Put your teen in charge of a budget proposal for the season or year. Review and revise to negotiate the final amount. Consider using the premium price rule: allowance covers the bargain price. Anything above is on your teen.
  2. Forces trade-offs. When is an allowance too much? When you don’t see your child agonizing over tough financial choices. As Oprah says, “You can have it all, just not all at once.”
  3. Allows mistakes. Aside from a few obvious ground rules (no beer or cigarettes!), let your kids make the purchase decisions. A bad purchase is a learning opportunity. My now twenty-something daughter still remembers torching her annual clothing budget on that Neiman Marcus chiffon gown for high school prom. Total times worn: one. Pro tip: make kids submit written proposals for questionable purchases.
  4. Enforces consequences. Going cold turkey on clothing for the remainder of the school year is what made my daughter’s gown decision so memorable. A bail-out from mom and dad would have erased the memory. (A formal loan might be an acceptable alternative though.) A budget-based allowance is an up-front agreement. Stick to it.
  5. Prompts ongoing discussion. There’s a middle ground between dictatorial and laissez-faire allowance policies. Your kids need and deserve your experienced counsel. Discuss, just don’t dictate.
  6. Saves you money. Yes, you read that right. A well crafted allowance plan doesn’t create extra spending. It pays for things you would have purchased anyway. Even better, it constrains spending. It transforms ad hoc, emotional spending on kids into controlled, mindful spending by kids. That’s a recipe for saving. And learning.

If your allowance policy is spoiling your kid, don’t junk it. Just tune it up.

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Friday, September 23, 2016

Ditch The Say-Do Disconnect Over Money With Your Kids

Say-Do Signpost

When you tell your kids one thing about money, do they see you do another?

You say: “Always use cash.” They see you swiping a card in the store and entering your account info online.

You say: “Never borrow money.” They see you financing the car and the house.

You say: “We can’t afford that.” They see you splurging on occasional luxuries.

Those disconnects are confusing for kids.

If you use credit or debit cards, tell your kids when they’re appropriate and how to use them responsibly.

If you borrow money to finance large purchases, tell your kids when loans are appropriate.

If you occasionally purchase little luxuries, tell your kids how you factor “fun money” into your overall spending plan.

Kids pay attention when it comes to money. They hear what we say. They see what we do. When the two don’t match, they get confused. Ditch the disconnects. Tell it like it is, and give your kids money clarity.

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Thursday, September 22, 2016

Teach Your Kids What You Wish Your Parents Had Taught You About Money

Marty and Doc discussing money lessons

“What’s the one thing you wish you had learned about money growing up?”

Farnoosh Torabi used to pose that question to every guest on her So Money podcast.

Sifting through the responses from 81 episodes, I found a few common themes:

  1. Compound interest. “I wish I had learned about compound interest! Ah! If I had known what that was, I know I wouldn’t have spent all my money on glazed donuts and Mountain Dew.” ~Steve Stewart
  2. Investing early. “I wish my dad had said to the 22-year old me, ‘Look, just put 150 bucks a month away and forget about it.’ Even if I had just done that, now that I’m 43, it would have been a pretty colossal sum of cash. But, I didn’t know that enough.” ~Michael O’Neal
  3. Abundance mindset. “I wish I had known growing up that I’ll always be able to make money, and this is true of everyone. There was so much fear around money that was unnecessary.” ~Dave Asprey

What do you wish you had learned about money growing up?

Me? I wished I had learned about diversification earlier.

Your kids? What will they say someday?

It’s up to you. Maybe they’ll respond like Rebecca Jarvis: “I can’t answer that. I’m sincere in this, because I think my mom did a really good job.”

Wouldn’t that be so money?

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