Sunday, January 31, 2016

Make a Money Saving Meal Plan with the Kids

Money Saving Meal Plan

Planning and saving money go hand in hand. That’s a critical financial concept for your kids to appreciate.

Here’s a simple recipe to drive the point home with the kids.

  1. Sit down with your kids and calculate what it costs to go out to dinner as a family at your favorite go-to-in-a-pinch restaurant. Maybe you have a recent receipt handy that you can use for the figure.
  2. Now, make a list with your kids of 1 to 3 simple home cooked meals. Given school obligations, it might make the most sense to target Friday, Saturday, and Sunday. Make sure each kid is in charge of at least one meal.
  3. Find recipes and fill out the shopping list together.
  4. Go to the grocery store together. Have the kids find the ingredients for their own meals. Bonus points: show them what unit prices are and how to use them for comparison shopping.
  5. Compare the grocery bill to the total in step 1 multiplied by the number of meals. Cheaper? Should be! Bonus points: split the savings between the kids as a reward or use the savings for a family ice cream outing.
  6. Cook, eat, and clean together each night. Bonus points: consider expressing gratitude together before each meal.

Give yourself a hand! You’ve taught your kids the financial power of planning ahead through firsthand experience. You’ve probably also taught them a bit about comparison shopping, how to cook a meal, the power of gratitude, and perhaps even a little appreciation for your nightly efforts.

That’s a pretty full menu of life skills packed into a few simple meals.

Saturday, January 30, 2016

Get the Granny Match for Your Teen's Roth IRA

Today’s fantastic family finance article is:

Roth IRA Granny Matches

Bravo to grandparents who are in a secure financial spot! But that can pose a bit of a problem if they’re lavishing gifts or cash on your teens — stuff your teens don’t need or stuff you’d rather not see them receive. Alternatively, grandparents may have no idea what to give your teens.

Here’s a great solution: the “Granny Match” for working teens. Open up a Roth IRA for your teen using the recipe here. Get the grandparents to provide the matching portion in step 3. Note: even if your teen can’t contribute a cent, the grandparents can still provide up to the contribution limit as a gift.

Now read some of the other ideas in the article to decide how to invest those funds within the Roth. (Hint: VTI is one of our favorite options!)

P.S. Consult your financial advisor first.

Friday, January 29, 2016

Show Your Kids What a Stock Is With This Simple Infographic

Today’s fantastic family finance article is:

The stock market has proven to be one of the most effective ways to make your money grow over the long term. If kids have one thing on their side we don’t, it’s time. So, the sooner they understand the basics of stocks and investing, the better. Use this simple stock infographic to introduce your child to the definition of a stock, how stocks are traded, and basic investing definitions like:

  • stock exchange
  • initial public offering
  • shareholders
  • profit
  • retained earnings
  • dividends
  • broker
  • index

Learning about how an individual stock works is a good start. But, please, please, please, don’t stop there. Before your kid makes that first serious investment, be darn sure she knows about low cost index funds, dollar cost averaging, and holding for the long term.

Teach your kid diversified, consistent, patient investing for the win!

Thursday, January 28, 2016

Teach Your Teens the Torment of the Payday Loan Treadmill

Today’s fantastic family finance article is:

Payday Loan Predicament

Fast forward to your kid's future.

  • Your young adult child needs money to pay the rent.
  • Your young adult child is too embarrassed to ask you for help or advice.
  • Your young adult child decides a payday loan is a good option. (Hey, the lenders are everywhere and it's easy!)
  • Your young adult child just stepped on the treadmill of painful payday loan debt.

Why? Because you forgot to explain the brutal economics of payday loans. Fix that. Sit down with your teen and review this simple, clear payday loan infographic from Pew Research.

Wednesday, January 27, 2016

Park Your Teen's Tax Refund in a Roth IRA and Match If You Can

Today’s fantastic family finance article is:

Family 401(k)

Dan Kadlec reports that Fidelity has finally joined others in providing custodial Roth IRA accounts for kids under 18. Bravo. Let’s hope that prods parents to make one of the smartest financial moves possible for their working teens: setting up a “Family 401k.”

If your teen made some W-2 income at a part-time or summer job last year, here’s the quick recipe:

  1. Open up a Roth IRA (as a custodial account if your teen is under 18).
  2. Convince your teen to contribute some of those summer earnings to the Roth. Already spent? How about that tax refund? (Hint: sit down together with an online compound interest calculator. The power of compounding over 50 years is an eye-opener for even the most jaded teen!)
  3. Match your teen’s contribution if you can, ideally up to the limit.
  4. Invest the money in a low cost, broadly diversified index fund.
  5. Repeat starting at step 2 next year! (Bonus discussion: dollar cost averaging.)

Dan explains in more detail.

P.S. Consult your financial advisor first.

Tuesday, January 26, 2016

Keep Sexism Out of Your Chore Payment System

His and Hers Piggy Banks

Wage discrimination based on gender starts very, very early according to Sheryl Sandberg. She informed the 2016 World Economic Forum audience: “we have a toddler wage gap” in allowance payments that sets the stage for the adult wage gap in the workplace.

Are you paying your son more than your daughter for doing the same household chores? If so, you might be planting some unfortunate seeds.

Or, perhaps not...

Carrie Lukas thinks Sheryl Sandberg has it wrong. “Parents may be responding to natural differences in what motivates girls and boys.“

Gender aside, certainly any parent of multiple kids quickly realizes that what motivates one child doesn’t necessarily motivate the other.

If you are compensating your kids with different amounts for the same tasks, just make sure you’re doing it for the right reason. And take the time to explain it to your kids.

Monday, January 25, 2016

Help Your Teen Control the Story with an Emergency Fund

Today’s fantastic family finance article is:

Emergency Fund Story

This article uses some very indelicate language (you’ve been warned — share with older teens only at your discretion!) to tell a delicate story with two very different endings. Emergencies come in many forms, and sadly that includes abusive relationships at home or in the workplace. Ending A shows how the lack of an emergency fund can make it difficult to exit a bad situation. Ending B shows the opposite.

An emergency fund means the freedom to walk away. Teach your teens how to build up an emergency fund now. Keep the funds in a separate account — safely partitioned from everyday spending. Keep the funds in a very liquid, non-volatile asset (like cash or money market, not stocks). That way, if (heaven forbid) your daughter finds herself in a similar story, she can avoid ending A and safely land at ending B, happily ever after. The same goes for your son.

Sunday, January 24, 2016

Kindle the Charitable Spirit in Your Child with a Good Giving Book

Today’s fantastic family finance article is:

Charitable Giving Book

Philanthropy should be an integral part of every kid’s money education. Kick off the curriculum with a good book. The folks at A Mighty Girl collected 19 favorites to help kids understand the value of compassion, generosity, and service. The list has two sections:

  1. Why we give: 8 books that explain charity to children. The first 7 cater to kids in the toddler through tween range. The 8th is an outstanding practical guide for parents who seek to raise kids who are grounded, generous, and smart with money: Ron Lieber’s The Opposite of Spoiled.
  2. Taking action: 11 books on donation, volunteering, and community service with selections suitable for toddlers to adults and everything in between.

On your way to the book store (or library or web page) with your child, set the stage by discussing this quote from Martin Luther King, Jr.: “Life’s most persistent and urgent question is: ‘What are you doing for others?’”

Saturday, January 23, 2016

Teach Your Teen to Tally the Total Cost of Car Ownership

Today’s fantastic family finance article is:

Car for Sale

Most teens don’t think beyond the sticker price when dreaming about their first car. In fact, some don’t even think that far! Make sure your teen understands all the costs that go into owning a car. Use this handy Cost of Automobile Ownership infographic to kick-start the conversation. If your teen has a specific dream car in mind, you can delve a bit deeper with Edmund’s True Cost to Own Calculator. After that little financial wake-up call, you might transition to talking about how it might be cheaper to use Uber or Lyft instead. In fact, one young adult saved nearly $1,000 a month using car sharing services instead of owning her own car. What would your teen do with an extra grand a month? That’s something to dream about.

Friday, January 22, 2016

Go Hybrid When Linking Allowance to Chores

Today’s fantastic family finance article is:

Hybrid Chore List

David James of the Parenting Squad weighs the pros and cons of giving his youngster an allowance. If you’re thinking about (or rethinking) an allowance and chore system, you’ll want to think through David’s 8 points on both sides of the ledger.

Regarding the classic quandary of whether to link allowance to chores, consider a hybrid model:

  1. unpaid regular chores that are an expected part of being a contributing household member, plus
  2. paid extra jobs that are an opportunity to earn some extra cash.

You’ll teach the economic value of hard work, while emphasizing the importance of pitching in for the common good. The best of both worlds!

Thursday, January 21, 2016

Make Sure Your College Kids Understand Their Student Loans

Today’s fantastic family finance article is:

Clueless Loan Application

Here’s a video you definitely don’t want your college kids starring in. A few highlights:

  • What is an interest rate? “Something that you do in finance.”
  • What type of student loans do you have? Subsidized? Unsubsidized? “Ummm...not sure...no clue.”
  • Do you know what FAFSA stands for? “Federal...And...State...ahhh no.”
  • Who is Sallie Mae? “Sounds familiar. Is she hot?”
  • What is a co-signer? “I have no idea.”
  • What is the total amount of student loan debt in the US? “$2 million.” (Just a few zeros short. Try $1.2 trillion.)

Funny? Frightening? Yep. These kids might want to brush up on their answers here: studentaid.ed.gov

Make sure your college age kids understand their student loans, or they’ll be in for a very painful financial “education” down the road.

Wednesday, January 20, 2016

Teach Your Teens 6 Money Facts That Many Adults Get Wrong

Today’s fantastic family finance article is:

Money Facts

  1. Many adults think being bumped into a higher tax bracket means they’ll pay a higher rate on all their income. Nope. They don't understand how progressive tax brackets work.
  2. Many adults think when they sell an investment, they pay tax on the full sale price. Nope. They don’t understand the concept of capital gains (or losses).
  3. Many adults think putting money in a 401(k) means earning tax-free income. Nope. They don’t understand tax deferral.
  4. Many adults think buying a house is always better than renting. Nope. They don’t understand how to do the cost-benefit analysis of buying versus renting.
  5. Many adults think getting a big tax refund is a good deal. Nope. They don’t understand they’ve given the government a free loan and the opportunity cost of doing so.
  6. Many adults think having “that thing” will make them happy. Nope. They don’t understand the hedonic treadmill phenomenon and what really drives sustained happiness.

Don’t let your kids become those adults. Read Trent’s article for clear, concise explanations of each misconception. Then sit down with your kids and help them get their basic money facts straight.

Tuesday, January 19, 2016

Explain How Overdraft Protection Means Overdraft Penalties

Overdraft Red Card

What’s worse? A little embarrassment at the checkout counter over a declined purchase, or a $30 hole blown in your bank account?

Money savvy teens will pick red in the face over red in the account every time.

Make sure your teen knows that overdraft protection is one of those things that sounds good, but really isn’t. You don’t have to take my word for it though. Listen to the director of the Consumer Financial Protection Bureau, Richard Cordray, who warns:

“Consumers who opt in to overdraft coverage put themselves at serious risk when they use their debit card.”

So, teach your kid how to opt out of overdraft protection to protect her balance instead of her pride.

Unfortunately, most kids don’t get the overdraft protection memo until after college. In fact, some college kids pay as much in overdraft fees annually as they do on books.

Ouch. That’s a real red card.


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

Monday, January 18, 2016

Write a Formal Loan Rejection Letter to Your Child

Dad Savings and Loan Denied Stamp

What do you say to a chore-evading, free-spending son who wants a loan for $20?

No.

Why? Because you said so!

Or, you could:

  • Type up your response on an official Dad Savings And Loan letterhead.
  • Explain to your son that he has insufficient funds in his account.
  • Mention that his poor on-the-job performance has destroyed his employer’s good will and any chance of an advance.
  • Explain that he has already burned through 80 dollars of discretionary spending funds since Christmas, and how that kind of free-wheeling spending isn’t sustainable.
  • Explain the protocol for disputing this ruling via the complaint resolution department, which coincidentally matches Mom’s cell phone number. (Nice touch, Dad.)

In other words, you could say “no” to your kid’s next unwarranted money request in an incredibly clever, memorable, and educational way — just like one dad did with this mock loan rejection letter.

Now that’s a “no” and a life lesson that just might stick!

Sunday, January 17, 2016

Express Gratitude Together Before Family Meals

Today’s fantastic family finance article is:

Plate with Thank You

Saying grace together before each family meal is a very simple way of consistently expressing gratitude. Why bother? More gratitude correlates to higher grades, more life satisfaction, more social integration, less depression, less envy, and (in our opinion) less entitlement. (Find more info on the benefits of gratitude here.) Need a non-religious grace ritual? Try this: hold hands before digging in, and simply say: “For what we are about to receive, may we be truly thankful.” That’s it. Short and sweet.

Saturday, January 16, 2016

Try a Four Bucket Allowance Allocation for Your Kid

Four Buckets

Sahara Pirie describes her thoughtful allowance philosophy and system for teaching her daughter good money habits in the post Why We Don’t Link Allowance to Chores. She describes its evolution from Kindergarten to her daughter’s current age of 16.

Check out her 4 bucket setup:

  1. Play Now — immediate spending money,
  2. Buy Later — short term savings goals,
  3. Financial Freedom — passive long term investment income, and
  4. Give — charitable contributions to others.

Also note the introduction of the separate monthly clothing allowance at age 13 to cover basic needs — forcing her daughter to kick in for any trendy “extras.” On the bonus side of the ledger, the reimbursements awarded for any costs incurred sewing her own clothes is a brilliant idea too.

Friday, January 15, 2016

Teach Your Kidpreneur to Seek Opportunities and Negotiate Compensation

Today’s fantastic family finance article is:

Kidpreneur Negotiating

Instead of doling out a regular allowance, Cameron Herold (the entrepreneur behind 1-800-GOT-JUNK? who grew it from $2M to $106M) encourages his kids to look for work opportunities around the house and negotiate fair compensation for completing those jobs. His goal is to spark an entrepreneurial drive early on. Similar approaches include encouraging kids to sell their old toys or their own creations, complete expertise/skill building tasks for pay, or tutor/coach other kids in an area of competency. Ideally, kids would learn “how to make money doing what they love.” Have you ever tried a similar system with your kids?

Thursday, January 14, 2016

Pay Your Kid More Interest on Savings Than Any Bank Would

Today’s fantastic family finance article is:

Kid Holding Penny

Putting your kid’s birthday check in a traditional savings account is more of an anti-savings lesson than a savings lesson. Why? Interest rates are near zero, and out-of-sight means out-of-mind. There’s a better way to motivate your kid to save: pay the interest yourself, pay it frequently, and pay it handsomely. That way, the habit just might stick. This article shows you how to set up a high interest “Bank of Mom/Dad” savings account for your budding saver, just like Mr. Money Mustache does!

Wednesday, January 13, 2016

Give Your Kid a Prepaid Card for Online Gaming, Save $7,625.88

Today’s fantastic family finance article is:

Gamer and Credit Card

The folks at GamenGuide share yet another horror story of a kid going to town with in-game purchases on his parent’s credit card — to the tune of thousands. Ouch! There’s a very simple solution (assuming you don’t want to charge your own child with fraud to get the money back):

  1. Get your kid a reloadable prepaid card.
  2. Load it periodically with a gaming budget.
  3. Link the card to your child’s gaming account(s) instead of using your own card.

Bingo. Armageddon (and just plain old overspending) avoided. Any attempt to overspend on the card will be met with a declined transaction. Your credit card will thank you. Your child will learn what a budget is. Win, win.

Tuesday, January 12, 2016

Teach Your Kids This Equation: Work Equals Money

Today’s fantastic family finance article is:

Work Money Calculation

Linda’s mom taught her a very important equation: work = money. How? Mom owned an apartment building. Mom paid Linda to paint and clean units for the new tenants. Mom also took the time to teach Linda about investing. Smart mom! In this touching post, Linda P. Jones pays tribute to her mom (who passed away recently) and the wonderful financial lessons she shared. What kind of financial lessons will you be leaving with your kids? Are you helping your kids solve the work = money equation?

Monday, January 11, 2016

Share a Frugal Football Star Story with Your Kids

Today’s fantastic family finance article is:

Football Approaching Money Goal

Financial flameout stories featuring football stars abound. Finally, here’s a money story about NFL players that showcases GOOD money habits! These high paid gridiron stars favor frugality over bling because they’re thinking about their long term financial health. Kudos. These guys are role models on and off the field. Share with your kids!

Sunday, January 10, 2016

Make a Money Index Card for the Kids

Today’s fantastic family finance article is:

Money Index Card

Dealing with personal finance and investing issues often feels overwhelming and complex. Frequent result: paralysis. But what if you could boil down the most important money To-Dos to a single index card? Ahhh. Simple. 8 experts do just that in this New York Times Your Money column by Ron Lieber. Ron distills the 4 key items common to all the cards to make things even simpler. It’s still worth flipping through all 8 including the last one from Dilbert’s Scott Adams. You’ll quickly notice which note card authors have kids in the house — look for mention of 529s and explaining things to kids. What would your money note card have on it? What would a note card for your kid have on it?

Saturday, January 9, 2016

Show Your Teen How to Turn $500 into $520,367

Today’s fantastic family finance article is:

Stock data and charts.

Jeff Rose shows a teen the incredible power of long term diversified investing by running through a very concrete example using an average mutual fund and real historical data. Brilliant! Maybe this exercise will motivate your teen to open a Roth IRA and put some of those summer earnings into a low cost index fund. (Bonus points: offer a parent match to create a Family 401k!)

Friday, January 8, 2016

Give Your Kid (Fractional Shares of) Stock or an ETF

Today’s fantastic family finance article is (really a podcast):

Stock chart with tips

Want to teach your kid about investing in 2016 without breaking the bank? Listen to this interview with the founder of SparkGift on the Stacking Benjamins podcast to see how you can give fractional shares of a favorite stock or ETF for as little as $20.

Update: On June 16, 2016, SparkGift announced its acquisition by Stockpile.

Thursday, January 7, 2016

Write a Money Letter to Your Kids

Today’s fantastic family finance article is:

Sitting down and writing a letter to your kids about money (and values and life) is a wonderful, valuable exercise. Typically, parents do it when the kids head off to college, but there’s no need to wait. Here’s a great example from Brian at Debt Discipline to his 3 teenagers (13, 16 and 16).