Thursday, August 2, 2018

Train Kids To Connect The Address Verification Dots

Address verification dots.

Your daughter is off at college.

Your son is at his stepfather’s house for the weekend.

Your family moved recently.

Your youngster hasn’t learned your street address or zip code.

You may soon be hearing:

“Dad, my card doesn’t work!”

Why?

The address verification system used by VISA, Mastercard, Discover, and American Express.

Kids need to know that almost every debit or credit card has an associated address on file. It’s typically the home address of the legal cardholder collected at the time of issuance.

Kids need to know that most online sites will request a billing address during checkout for a purchase. Alternatively, the site may use a billing address stored in a billing profile from an earlier transaction.

To complete the purchase successfully, the billing address supplied on the site must match the address associated with the card. If the two don’t match, the purchase will fail.

That’s address verification.

The point is to reduce fraud. Address verification thwarts those thieves who get a hold of sensitive card info, but can’t cough up the correct address of the cardholder.

So, if your kid shops online and supplies a temporary college address, another parent’s home address, an old home address, or simply doesn’t know her address, she’ll be thwarted just like the thief.

I know this happens frequently. At 21.7% in the last 30 days, address verification failure is the second most common decline reason for kids on our family finance site — right behind insufficient funds (62.4%).

Teach your child:

  1. What the cardholder address is, and how to update it.
  2. What a billing address is, and how to update it on websites that store it.
  3. How to match the two during checkout to prevent address verification declines.

In other words, teach your kids where the address verification dots are, and how to connect them.


Want to turn these tips into action? Check out FamZoo.com.

Thursday, April 26, 2018

Coach Teens To Leave a Tip Cushion On Their Cards

Restaurant bill with embarrassing emoji.

Here’s a restaurant riddle for you:

Your teen takes a date to a restaurant. The bill comes for $40. Your teen’s prepaid card has a current balance of $47. Your teen hands the card and the bill to the waiter intending to pay a total of $46 with tip included. The waiter returns with the card and informs your teen that it has been declined. Embarrassment ensues.

Why was the card declined for insufficient funds? After all, there was clearly enough on the card to cover $46.

Stumped?

When your teen hands over the bill, the restaurant doesn’t know what the final tip will be. Naturally, they’d like to make sure your teen can leave a nice one. After all, their service was impeccable! So, the restaurant preauthorizes the purchase for the amount plus a generous anticipated tip.

Unfortunately, the restaurant’s anticipated tip (likely 20%) is more than your teen intends to leave. So, the restaurant’s anticipated total of $48 ends up exceeding the $47 on the card, and the preauthorization attempt fails.

The bottom line: teens need to be coached to leave a healthy tip cushion on their cards.

20% should be enough, but maybe 25% just to be safe. That way, the preauthorization with the restaurant’s aspirational tip will sail through, and the waiter will return with the bill sans the humiliation.

Then your teen can write the actual tip on the restaurant’s copy of the receipt. Later, when the restaurant finalizes or “settles” the bill, they’ll adjust the total transaction amount to reflect the actual tip amount. Your teen’s prepaid card balance will be restored accordingly.

Here’s an example of the proper sequence for a $40 restaurant bill charged to a prepaid card with a $50 balance. Watch how the balance adjusts at the end.

Step Card
Balance
1. The bill arrives showing the meal costs $40. $50.00
2. Teen hands bill and card to waiter. $50.00
3. Waiter preauthorizes card for $48.00, tacking on $8 (20%) to account for expected tip. $2.00
4. Waiter returns bill and card to table. $2.00
5. Teen writes in a tip amount of $6 (15%). $2.00
6. Restaurant settles bill for adjusted amount of $46. $4.00

So, spare your teens some embarrassment and maybe even some compensatory dish washing duties at the restaurant. Clue them in on the need to keep a safe tip cushion on their cards when dining out.

P.S. Running your prepaid card near empty can be a real problem at the gas station too, where you’ll often see a $75 preauthorization at the pump, even if you only intend to fill up for $20. Yet another reason to teach your teens to keep a hefty balance buffer on their prepaid cards.


Want to turn these tips into action? Check out FamZoo.com.

Tuesday, April 10, 2018

Keep Up The Good Fight With Kids And Chores

Are you struggling in the parenting trenches right now? Battling to convince your kids to do chores regularly, or to save patiently, or to give thoughtfully?

This excerpt from my conversation with Andy Hill on his Marriage, Kids and Money Show might give you some solace.

Andy: Some people are listening right now, and they’re saying:

“This is all well and good. It sounds like you guys have some kids that really want to help out. I haven’t even started asking my kids to contribute around the house. Where would I even start?

What would you say to that person?

Bill: So, first of all, let me disabuse you of the notion that my kids wanted to help out. I think what is really interesting and fun — now that most of my kids are in their twenties — is you realize that the good fight was worth it.

In other words, you think they’re not listening to you. You think the fact that they don’t pick up their clothes for the thousandth time is because you’re a crummy parent. You couldn’t convince them that work was important or to pull their own weight for the family.

Then they grow up and move away, and you start seeing the fruits of your labor.

Sometimes the messages are all getting through. They’re just not prepared or ready or mature enough to receive them. And then when they go out in the world and learn a little bit of what the world is about, you realize that all the messages are still floating around in there, and they start to land. And it’s really gratifying.

My kids wouldn’t leap to give money. Or, they wouldn’t leap to save. Or, any of those things necessarily. Sometimes they did. Sometimes they didn’t. They were normal, good kids. Good kids are going to act out every once in a while.

Being a parent is so humbling. I didn’t realize how stupid I was until I had kids. If I saw a kid acting out, my first reaction before I was a parent was:

“What’s wrong with that kid’s parents?”

And then, it turned out, I was the volunteer soccer coach whose kid was lying down in the middle of the field, pounding the grass, swearing at the referee.

“Hey coach, whose kid is that?”
“Uh, that would be mine...”

And, now, that particular kid? (I’m not going to name any names, I’ve got 5 so I can hide it among them) He is one of the most thoughtful, caring individuals. (OK, I’ll give it away: he’s a dad now too.)

So, keep up the good fight. And keep with the consistent messaging — even if you don’t see the immediate results. I bet if you’re consistent with your messaging and you’re consistent with your efforts, you’ll see the long term results.

And there’s no reason not to hedge your bets anyway. So stick with it.

Andy: That makes me feel good for someone who’s in the trenches of it right now.


Want to turn these tips into action? Check out FamZoo.com.

Thursday, March 29, 2018

Charge Kids A Mediation Fee For Dispute Resolution

A mom gavel that makes kids pay.

“Mom, Taylor took more than half the ice cream!”

“Yeah, but Haley had more last time!”

“No I didn't!!”

“Yes, you did!!”

“Moooooommmmmmmm!!!”

Here comes the judge!

You know the drill. It’s dispute resolution time. Never pretty.

What if the kids just resolved these little kerfuffles peacefully themselves? Yeah right.

Well, maybe it’s possible...

A dad named Jon K. shared this clever conflict resolution hack on Facebook:

We try to encourage [our kids] to solve their own disputes. We tell them that they can get my wife or I involved to figure out a resolution. But we charge a “mediation fee” (usually $.50 or $1) from each, and we promise that if their dispute goes to mediation, we’ll find a way to make sure that neither “wins”.

We’ve seen parents charge kids for inconveniences on our family finance site before — chauffeur fees, cleaning fees, you name it. But never mediation fees. Brilliant.

So, from now on kiddos, think twice before you call mom or dad to mediate. We’ll make you pay!


Want to turn these tips into action? Check out FamZoo.com.

Tuesday, February 13, 2018

Pop Up A Family 401(k) In Five Easy Steps

Pop Up A Family 401(k) In Five Easy Steps

Chris loves personal finance. Of course he does. He’s an accountant.

But he hates all the complexity and technical jargon that prevents “normal” people from taking action.

For example:

I’d like to see every eligible W2 earner make a non-tax deductible contribution in the amount that is the lesser of one’s taxable earned compensation (not adjusted gross income) and the allowable limit set by the IRS as dictated by age and subject to certain modified adjusted gross income limits into a Roth individual retirement account established by the Taxpayer Relief Act of 1997 in the first allowable year and every allowable year thereafter to grow tax-free in a passive, low cost, broad market index fund until age 59.5.

What the...?

That’s exactly the kind of techno-jargon Chris laments. He’d prefer to present personal finance topics simply and briefly. That’s why he created the short-form podcast Popcorn Finance.

So, what I meant to say was:

I want all parents to set up Family 401(k)s for their working teens. Pronto.

Why? It will save their financial lives.

What’s a Family 401(k)?

Grab a bag of popcorn, kick back, and fire up episode 43 of Popcorn Finance.

Chris and I break down the Family 401(k) into 5 easy steps. Listen and you’ll learn my favorite family finance tip in the time it takes you to make — and perhaps eat — a bag of popcorn.

Here’s the cheat sheet:

  1. Get a job. Like a corporate 401(k) deal, the Family 401(k) starts with work. In our family, I insist on a summer or part-time job that issues an official W-2. That way, I know we’ll be in the clear with the IRS.
  2. Open a Roth IRA. Help your working teen open up a Roth IRA account at a reputable broker. I chose Schwab. For teens under 18, you can set up a custodial account.
  3. “Family-source” contributions. So your teen spent the earnings on gaming and pizza already? Time to hit up the grandparents and rich uncle Phil for some cash to contribute to the Roth. See if your teen can "family-source" enough funds to max out the contribution.
  4. Invest. Don’t let the funds wallow in cash. I like a low cost all-market index fund like VTI for the long term win. Don’t try to time the market either. You can’t.
  5. Rinse and repeat. Keep doing this every year whenever eligible. Congratulations, now your teen knows the wisdom of dollar cost averaging. Oooh, fancy jargon!

After decades in the market with steady contributions enjoying tax-free growth, your teen’s gonna be sitting pretty on a sweet retirement stash come age 59 and a half.

Which brings us to Chris’ bonus step: Step 6. It’s the ultimate parental payback. It’s like the butter on the popcorn.

Listen here to find out what it is. It’s only 10 minutes long. Pop. Pop. Pop.


Want to turn these tips into action? Check out FamZoo.com.

Friday, December 29, 2017

Try a Top Ten Family Finance Tip With Your Kids

Resolve to teach your kids personal finance skills in the New Year!

Not sure where to start? Pick a few tips from this top-ten list.

My 10 most viewed family finance tips from the last 12 months are:

10. Offer Kids A Savings Match With Strings Attached

Encourage your kid to save by offering a matching contribution, but attach some of these strings to send the right message.

9. Pre-Negotiate Your Teen’s Summer Paycheck Savings Split

Agree on this summer paycheck strategy to teach your teen the Warren Buffett saving rule. Instill a smart payroll deduction habit early.

8. Review 529 Statements With Your Teen Every Quarter

Here are 6 valuable lessons your teen can learn from 529 statements if you’re willing to make a 15 minute investment every 3 months. See if you’re up for the challenge.

7. Motivate Kids To Maintain Value With A Trade-In Deal

Don’t want your kids being cavalier about their possessions? Try this trade-in value trick.

6. Replace Chore Charts With Money Requests

Help your kid get from dog-eat-dog to top dog in tomorrow’s work world with this proactive alternative to chore charts and allowance.

5. Fully Fund Your Working Teen’s Roth IRA

Here’s why it makes sense to max out your working teen’s Roth IRA, even if they already blew through all their paychecks.

4. Clean Up Your Kid’s Spotty Bill Payment Record

Can your kid handle making consistent monthly payments for an online subscription like Spotify? FamZoo data says many can’t. Here’s why it’s time to make your kid face the music.

3. Post Wants On The Fridge To Chill Your Child’s Spending

Here’s a clever parenting trick for putting a chill on impulse spending by kids.

2. Show Teens The Top Of the Stock Market

Try this fun visual prop for teaching your teen some important investing wisdom: timing the stock market is a fool’s errand.

1. Show Kids What The S&P 500 Looks Like

Kids hear about stock indexes in the headlines all the time — the Dow is down, the S&P is up, the NASDAQ is flat. But do they have any idea what an index is? Here’s an easy, fun way to show them the what and why.

See any that fit your family?

Pick even just one, and you’ll have a quick victory to claim on your New Year’s resolutions. Better yet, you’ll make a lasting impact on your child’s financial future.

Happy New Year!


Want to turn these tips into action? Check out FamZoo.com.

Friday, December 8, 2017

Use Parental Money Controls for Transparency Training Not Micro-Management

Money Helicopter

Parental controls are all the rage when it comes to prepaid card apps built for kids and teens.

Sounds like a helicopter parent’s dream.

Back in the day, my mom had no clue about half the things I bought with untraceable cash as a kid. Phew.

Sure, close monitoring certainly makes sense when kids are young.

But teens? They crave autonomy and privacy.

Don’t shared parental controls undermine both? Aren’t they just another invasive instrument of today’s high tech helicopter parents?

It sounds like ditching the controls when kids become teens makes sense too.

Despite being a fan of giving teens plenty of leash, I have a different view.

Parental controls help your teen develop financial transparency — if used properly.

Why is that important? Teens who become comfortable discussing transactions with parents now are more likely to evolve into adults who are comfortable discussing finances openly with a spouse or partner in the future. That’s a good thing. Financial transparency in a relationship reduces conflict and aligns everyday money habits with shared goals.

That said, kids who strongly resent parental controls will evolve in the opposite direction. They’ll become more secretive about money, not less.

So how do parents use parental controls to build comfort instead of resentment?

  • Don’t make it a surprise. Before you roll out the prepaid card app, make sure the kids clearly understand the visibility you’ll have. Give them a tour of all the parental control capabilities. Make transparency part of the deal up front: “You get access to money, I get visibility on your spending — fair enough?” Yep.
  • Don’t make a fuss. Mistakes will happen. That’s how they learn. Set the precedent early that the inevitable money mishaps elicit calm, rational discussions instead of raging reprimands.
  • Don’t react to everything. Let the little things slide. Bite your tongue when the stakes are low. Nagging is a surefire way to stoke teen resentment.
  • Don’t always be first to comment. Let your kid broach the topic when mistakes happen. She knows you already know. When your kid gets comfortable mentioning mistakes first, you’ll know you’re getting it right.

So, ditch the helicoptering, but keep the parental controls at a reasonable altitude. Help your teen practice gaining comfort with financial transparency. A future spouse or partner will thank you someday.


Want to turn these tips into action? Check out FamZoo.com.