Family Finance Favs: June 2016

Thursday, June 30, 2016

Remind Kids That Lasting Love Is The Smartest Money Move

“I don’t care too much for money. Money can’t buy me love.” ~The Beatles

Money can’t buy you love, but lasting love can save you a whole lot of money.

Don’t believe it? Read a few tragic stories from Gold Diggers & Deadbeat Dads, like this one.

The right partner lifts you up when the chips are down.

The right partner keeps you grounded when the chips are up.

The right partner helps you play your chips with integrity.

The right partner never hides any chips.

The right partner never takes the chips and leaves the table.

The right partner keeps you grateful no matter where the chips may fall.

32 years ago today, I married the right partner. Jackpot.

Smartest money move I ever made. Smartest move period.

Remind your kids to choose their spouses and partners wisely. No, money can’t buy you love, but the two aren’t unrelated. Picking a partner definitely means putting all your chips on the line.

Wednesday, June 29, 2016

Introduce Your Teen To The Richest Man In Babylon

Today’s fantastic family finance article is:

The Richest Man in Babylon

The Richest Man In Babylon communicates the timeless principles of personal finance through a series of parables set in ancient Babylonia. There’s no complicated money jargon in this book, just basic yet powerful rules of thumb wrapped in memorable short stories.

It’s the perfect way to introduce your teen to common financial sense that is all too uncommon.

Pick up a copy today.

Tuesday, June 28, 2016

Grill Your Teen In A Mock Job Interview

Today’s fantastic family finance article is:

How to Craft Perfect Answers to Any Interview Question

What can you tell me about your work history? Ummm.
Why do you want to work here? Ummm.
What’s your biggest weakness? Ummm.
Have you ever had trouble with a co-worker? Ummm.
Why should we hire you? Ummm.

Have you told your teen what to expect in a job interview? Ummm.

Don’t let your teen walk into a job interview unprepared. Share these basic interview tips to help her seal the deal:

Catalog the obvious questions. Think about it. It’s pretty straightforward to figure out what interviewers are likely to ask. Sit down and make a list.
Tell stories instead of reciting facts. Facts are dry. Stories are engaging, memorable, and authentic. Encourage your teen to wrap answers in real stories. Watch the video in today’s article to see how it’s done.
Map interviewer questions to your answers. Henry Kissinger once started a press conference with the line: “Does anyone have any questions for my answers?” Coach teens to bring the conversation back to what they know.
Practice. Practice. Practice. Writing responses down is a good start, but nothing beats live practice. Tell your teen to rehearse responses out loud in front of the mirror. Then conduct a few mock interviews with a parent in the hiring manager role.

With a little practice and mentoring from you, your teen will soon be tackling the easiest interview question of all: When can you start?

Monday, June 27, 2016

Explain This Chart To Teens Before Bothering With Brexit

Today’s fantastic family finance article is:

Brexit: What We Are (And Aren’t) Doing

“Dad, what’s Brexit?”

This week, the kids are probably overhearing lots of adult banter about Brexit. They may not know what the UK’s exit from the European Union is all about, but they’re getting the general idea that, whatever it is, it’s causing a lot of parents to panic about their stock portfolios.

Except you.

Why? You’re armed with a broadly diversified portfolio, a long term view, and the perspective inducing chart in today’s article courtesy of The Motley Fool.

It shows a 140 year stretch of the US stock market adjusted for dividends and inflation. As you can see, if you zoom far enough out on a broad collection of stocks like the S&P 500, it’s all up and to the right.

That’s the key. Zoom out far enough. Think decades not days. All the dips disappear eventually. That includes the Great Depression, the DotCom Crash, the Great Recession, and before you know it, Brexit.

So explain index funds, dollar cost averaging, and this chart to your teens before you bother with Brexit.

Sunday, June 26, 2016

Don’t Give Cash To Your Teens

Many parents are afraid of giving teens a card instead of cash. Time to reconsider.

Here are six reasons to ditch the cash:

It isn’t clean. Did you know cash is infested with up to 3,000 types of bacteria. Yuck! Cards are nice and clean. (Okay, unless your teen is a bit of a germaphobe, this is more of a fun fact than a real reason.)
It isn’t safe. If cash is lost or stolen, your teen is out of luck. Cards can be locked to prevent unauthorized use. If unauthorized purchases do occur, they can be reported and recovered.
It isn’t transmittable. Cash can’t be teleported to your teen in an unforeseen situation or emergency. Parents can load a teen’s card immediately in a pinch.
It isn’t tracked. Cash disappears without a trace. Cards automatically track purchases and running balances. That means more transparency, accountability, and awareness. Tracking is also the first step toward budgeting.
It isn’t online. Cash can’t be used for online purchases. Every teen consumes goods and services online. That means your teen must be using online accounts linked to your card. That’s a financial disaster just waiting to happen.
It isn’t reality. Your teen won’t be using much cash as an adult. The future of money is more virtual, not less. Better to learn the ins and outs of cards and electronic money now under your tutelage while the stakes are still low. As the saying goes, “If you think education is expensive, try ignorance.”

So what kind of card is appropriate for your teen?

Try starting with a reloadable prepaid debit card or a bank debit card. That way, there’s no risk of your inexperienced teen running up debt with a credit card. Debt is one parental fear about cards that I wouldn’t reconsider.

The bottom line: dollar bills are bad for your teen, and so is debt. Go debit.

Saturday, June 25, 2016

Outsource Freelance Gigs To Your Teen

Working with freelancers has become a staple of the Internet economy. If you’re running a small business or a side project, you’ve probably come across outsourcing websites like Upwork, Fiverr, and TaskRabbit. Post your project description to an outsourcing site, and a marketplace of freelancers compete to complete it.

If you’ve worked with Internet freelancers, you’ve probably discovered that certain types of projects work better than others. The most reliable results come with tasks that are small, well-defined, and somewhat repetitive: filling in a spreadsheet, tweaking an image, reviewing web analytics reports, monitoring social media accounts, researching stats for a blog post, or triaging inbound emails.

You know, the kind of well-defined task you could easily hand off to a motivated teenager.

Hey, wait a minute, you have one of those! (Or, maybe there’s one just down the block.)

Why outsource a well-defined task to some random person across the globe when you could assign it to that kid living under the same roof?

Okay, back-talking and eyeball rolling are two valid concerns.

But consider the benefits: Your teen will get some insight into modern day entrepreneurship, hone some practical skills, learn how to deliver on a project, gain some freelancing experience, earn some spending money, and...wait for it...possibly even help you.

So, the next time you turn to the Internet gig economy to fulfill a task, look down the hall to your teen’s room instead.

P.S. The image editing for the last three posts was done by my 14 year old gigster.

Friday, June 24, 2016

Let Your Kids Catch You Doing Something Good Today

“A little thought and a little kindness are often worth more than a great deal of money.” ~John Ruskin

Parenting gurus remind us: “Catch your kid doing something good.” It does wonders for your kid’s self esteem and encourages positive behavior. Makes sense.

But what about the reverse?

When was the last time your kid caught you doing something good?

Giving your remaining quarters to the next person in the laundromat.
Greeting your server with a warm smile and a friendly word before they greet you.
Racing ahead to hold the door open for the person juggling a tray of coffees or a stroller.
Leaving a handwritten note with a tip for the person who cleaned your hotel room.
Offering to help someone struggling to lift something heavy or awkward.

Nothing elaborate. Just a simple little act of kindness. Observe the impact. It has an incredible compounding effect.

So when you’re out with your kids today, let them catch you doing something good. You’ll find it’s wonderfully contagious.

Thursday, June 23, 2016

Help Your Kids Hop Off The Money Bandwagon

Today’s fantastic family finance article is:

Bandwagon Effect

“If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away.” ~Henry David Thoreau

“But Dad...”

Everybody is buying frappuccinos after school.
Everybody is eating out instead of bringing a bag lunch.
Everybody is buying the latest iPhone.
Everybody is taking out big student loans to go to college.
Everybody is carrying credit card debt.
Everybody is financing a new car.
Everybody knows it’s better to buy a home than to rent.

Sure, everybody is jumping on a money bandwagon of some kind, why not your kid?

Because your child isn’t everybody. Your child is somebody — a lucky individual — who through frequent discussions with you has come to learn that money decisions are personal. The popular decision by everybody may not be the proper decision for somebody. That’s because individuals have unique circumstances, goals, and values. That’s why it’s called “personal” finance.

The next time your kid wants to spend (or even save) money like everybody, sit down and talk about how a certain somebody might be different.

Help your kid hop off the mindless money bandwagon, and march to a different, more mindful drummer.

Wednesday, June 22, 2016

Show Your Kids Random Acts Of Resourcefulness

Today’s fantastic family finance article is:

Okay, I’m Financially Independent. Now What?

“Life can be much broader once you discover one simple fact: Everything around you that you call life was made up by people that were no smarter than you. And you can change it, you can influence it, you can build your own things that other people can use.” ~Steve Jobs

How can you help your kids discover that simple fact?

Random acts of resourcefulness.

The next time something minor breaks in your home, don’t replace it, don’t call in an expert. Fix it. With your kids in tow.

Show your kids this simple pattern of resourcefulness that Jim Wang describes in today’s featured podcast:

Here’s a problem.
You don’t know how to solve it.
You figure it out. (Hint: YouTube and search are your friends here.)
And now you do know how to do it.

Jim captures the incredible power of resourcefulness: “Someone has given you this gift that not everyone else has. Now you’re part of this club of people that can solve this problem. There’s discovery and joy in that.’

And confidence. Before long, your kids will be saying: “I can fix that.”

Not long after that, they’ll be saying: “I can build that.”

Another entrepreneur will have joined the club. And somewhere, Steve will be smiling.

Tuesday, June 21, 2016

Teach Kids A Financial Plan Starts With Awareness

Today’s fantastic family finance article is:

Economic Security

“Plan for the future, because that is where you are going to spend the rest of your life.” ~Mark Twain

The problem is, you can’t plan for the future if you don’t know where you stand today. A plan starts with awareness.

Financial awareness is something you can teach even your youngest kids today. Make sure they know how to track the dollars coming in and the dollars going out.

Why? Financial awareness today lays the groundwork for financial security tomorrow.

There's a saying: “The person who doesn't know where his next dollar is coming from usually doesn’t know where his last dollar went.”

Don’t let your kid be that person, or she could end up spending the rest of her life in the financial past. Cleaning it up.

Monday, June 20, 2016

Focus Kids on Value Not Cost

There’s an old proverb: Buy cheap, buy twice.

Replacing or repairing a low quality item is like buying it all over again. Not a good deal.

Show your kids how consumers fall into four camps:

Frugal consumers pay low prices for high value.
Cheap consumers pay low prices for low value.
Extravagant consumers pay high prices for high value.
Clueless consumers pay high prices for low value.

The next time your kid evaluates a purchase, pull out the chart. Where does the item fall in the price/value spectrum?

Buy frugal. Buy once.

Sunday, June 19, 2016

Keep Sharing Your “Dumb” Dad Money Lessons

“When I was a boy of fourteen, my father was so ignorant I could hardly stand to have the old man around. But when I got to be twenty-one, I was astonished at how much he had learned in seven years.” ~Mark Twain (maybe)

Your teen thinks your little money lessons are ridiculous. You know, like the gems in this article:

Don’t Throw Good Money After Bad
Do a Job You Love, and You’ll Never Work a Day in Your Life
Buy Cheap, Buy Twice
Don’t Buy Champagne on a Beer Budget
You’re Never Too Young to Save
There’s Nothing Wrong With Second-Hand
Don’t Shop on an Empty Stomach

Why do you keep repeating your little sayings when they’re clearly bouncing off your kids?

Because they aren’t. They’re lodging in their minds like little dormant seeds ready to germinate as your child matures.

As Paul Michael says about throwing good money after bad:

“When my dad first told me this one, I was too young to really understand it. Honestly, even in my mid teens I wasn’t exactly sure what he was getting at. Then, when I became an adult with an income, and the means to make my own purchases, I got it.”

With a little context and experience, those seeds are going to sprout.

So keep at it dads. Upon emerging from their teen years, your kids will be astonished at how wise your little money lessons have suddenly become.

P.S. Happy Father’s Day, Dad. You continue to astonish. Thank you for the priceless life lessons.

Saturday, June 18, 2016

Convince Kids To Be Market Owners, Not Stock Pickers

Jack Bogle, Vanguard founder and index fund pioneer, counsels:

“Don’t look for the needle in the haystack. Just buy the haystack! ”

What’s Jack talking about? One of the smartest ways to invest.

You have to be insanely lucky to pick winning stocks. Even the pros can’t do it consistently. So just buy the whole market instead.

How? With an index fund.

Here’s how to get your teens in on the investing hunt:

Save part of each paycheck. Convince your teens to save some fraction of that first summer or part time job income. How? Free money. See step 2.
Offer a parent match. If you can, offer to match your teen’s savings, just like an employer would with a 401(k).
Open a Roth IRA. If your working teen is eligible (most are), open a Roth IRA so her money can grow tax free.
Invest in a low cost index fund. Take Jack’s sage advice, and invest the money in low cost funds that track the whole market.

Decades later, your teen will have a haystack with lots of golden needles.

Friday, June 17, 2016

Make Kids Submit Written Proposals For Questionable Purchases

“Why can’t I buy it? It’s my money!”

What parent hasn’t heard that refrain?

If “it” is cigarettes, that’s a short conversation.

If “it” is some harmless, yet ill-advised item. Well, that’s how kids learn to spend their money wisely.

But what if “it” is in that gray area for a youngster of your child’s age? Maybe some form of entertainment that you find borderline at best.

Then what?

Instead of an argument, try the written proposal tactic: “I’m not in favor of this purchase because it appears to go against the principles we’ve just discussed. But if you write a thoughtful essay defending the purchase, I’ll at least consider it.”

Why not just put your foot down and say “no”?

You’ll cool the temperature. Conversations quickly escalate. Emotions accelerate. Writing slows things down. Writing is more rational.
Your child might agree after quiet reflection. After thinking through an essay, your child might just come to the same conclusion — maybe for the same reasons, maybe not. No harm. No foul. No purchase.
Your child will be heard. You’re familiar with the laments: “But you don’t understand!” “You never listen to me!” The written word is often easier to “hear” than the spoken (or yelled) word.
You might agree after quiet reflection. Often, kids will put a surprising amount of research and thought into making a compelling case. You might see a benefit, maturity, or motivation that you hadn’t anticipated. All things considered, maybe this purchase is reasonable after all.
Your kid will define and own the boundaries. Kids are smart. They know your objections. They know they’re going to have to propose some strict rules to secure the deal. Often, their rules end up being stricter than what you had in mind. The cool thing is: when your kids get to define the boundaries, they’re more likely to abide by them.

So, next time your kid wants to purchase something that falls in the gray area, tell her to submit a proposal in writing. (See here for an example.) That way, even “no” will be a learning experience.

Thursday, June 16, 2016

Don’t Let Your Kid Become A Financial Dinosaur

If I had stopped learning about personal finance as a kid, I’d be eating some serious financial dust today. Why? In the late 60’s and early 70’s, the following financial opportunities didn’t even exist:

Online banking. I’d still be wasting my time waiting in line at my local bank.
Automated bill pay. I’d still be writing checks, licking stamps, sealing envelopes, and missing payment deadlines.
Personal finance management software. I’d still be wondering where my money was going, or working way too hard to figure it out.
Real time account text alerts. I’d still be surprised to find out my credit card was compromised a month or two ago, or that I over-drafted my checking account.
401(k)s. I wouldn’t have automatically saved for retirement with each paycheck, reduced my taxable income, or received free matching money from my employer.
Roth IRAs. My retirement investments wouldn’t be growing tax free. And my teens wouldn’t even have retirement accounts yet.
529s. I’d be letting taxes eat away at my kid’s college savings.
Low cost index funds and ETFs. I’d still be gambling on individual stock picks, getting poor returns, and paying outrageous investment fees.
Automated saving apps. I’d still be lacking the willpower and energy to take advantage of everyday opportunities to sock away some spare change.
Prepaid cards. I’d still be using cash, bank debit cards, or (gasp) credit cards to teach my kids the financial ropes.
Personal finance blogs and podcasts. I’d still be in the dark about most of the items above or struggling through boring finance books. I wouldn’t be perusing thought provoking posts on Mr. Money Mustache or laughing along to Stacking Benjamins.

And you? What would you be missing out on?

Make a list of the smart financial inventions that have emerged since you were young. Share it with your kids.

Sure, they’ll make fun of you for being a old fossil. But they’ll also absorb a crucial message: if they don’t keep learning about personal finance, they could be the financial dinosaurs of the future.

Wednesday, June 15, 2016

Prepare Kids For The Emotional Roller Coaster Of Stock Volatility

Today’s fantastic family finance article is:

FoolFest - A Festival of Fools

Here are two stock stories to share with your teen.

Story number one:
Joey buys $500 of a stock. Just 3 months later, the stock is down 53%. Disgusted, he sells the stock and winds up with just under $250 in his pocket. Ouch.

Story number two:
Jenny buys $500 of a stock. 4 years later, the stock is up 275% and worth about $1,875. Sweet.

Who picked the better stock?

Duh! Jenny did, right?

Actually, they both did.

How’s that possible?

Two stock stories, one stock. They both bought Facebook in May 2012. Joey panicked early and bailed. Jenny kept her cool and hung on for the ride.

As Tom Gardner of The Motley Fool points out in today’s podcast (about 13 minutes in): “All of your stocks will fall more than 50 percent at some point.” Even the most awesome ones, like Amazon, Starbucks, and Berkshire Hathaway which weathered drops of 60%, 83%, and 50%. That’s because stocks are volatile investments. Their value can change rapidly and unpredictably. Expect it. Ride it out.

A stock drop is a lot less scary when you know it’s coming. Teach your teens to stay buckled (and diversified), and they’ll be fine.

Tuesday, June 14, 2016

Teach Teens It’s Expensive To Ignore Expense Ratios

Today’s fantastic family finance article is:

Pay Attention To Your Fund’s Expense Ratio

You opened a Roth IRA for your teen when she got her first summer job. Brilliant!

You matched her contributions as an extra incentive. Bonus!

You coached her to invest those contributions in a diversified index fund. Bravo!

You compared fund expense ratios to make sure she got the best deal. Oops...

Expense ratios measure how much it costs in fees each year just to own the fund. An expense ratio of 0.80% means you’ll pay 80 cents for every 100 dollars invested.

The weird thing is, two funds that invest in the exact same collection of stocks can have dramatically different expense ratios. Take the funds represented by the ticker symbols RYSOX and VOO. Both track the same popular basket of stocks — the S&P 500. Pop their ticker symbols into Google, and you’ll find that RYSOX currently has an expense ratio of 1.6% while VOO’s is just %0.05. That’s 32 times more expensive! Why pay so much more for the same thing?

Over decades of investing, that could cost your teen thousands of dollars. Oops indeed.

Now you’re teaching your teen how to compare expense ratios for similar funds in seconds. Bingo!

Monday, June 13, 2016

Nip The Credit Card Balance Carrying Myth At The Bud

Today’s fantastic family finance article is:

5 Credit Card Myths You Shouldn’t Believe

What does the Greek god Atlas carry on his shoulders?

The Earth, right?

Nope. The sky.

It’s a common misconception about a Greek myth. Zeus condemned Atlas to hold up the sky for eternity. Classical art represents the sky as the celestial spheres which look a lot like a globe. The confusion is understandable. Fortunately, it’s harmless.

What happens when credit card holders carry a balance from month to month?

It improves their credit scores, right?

Nope. Not one bit.

It’s a common misconception — a persistent financial myth. Why? Sadly, parents often unwittingly perpetuate the fallacy and misinform their kids. Unfortunately, it’s far from harmless.

Don’t be one of those parents.

Teach your kids that paying the minimum amount due on a credit card and carrying a balance month to month does not improve their credit score. It simply means they’ll be paying more money at extremely high interest rates.

The bottom line: pay credit card balances in full every month. Period.

Financial myth debunked. Greek tragedy averted.

Sunday, June 12, 2016

Don’t Let Marketers Fool Your Kids With Money Anchors

Today’s fantastic family finance article is:

The Cognitive Biases That Lead to Bad Money Decisions

Why do sailors drop anchors? So their boats won’t stray far from a spot.

It turns out sellers drop anchors too. And if you want your kids to be savvy consumers, they need to be aware of the technique. It’s called anchoring.

Anchoring relies on the fact that people are biased by the first piece of information they hear. That’s the anchor, and your brain tends to stay near it. Clever marketers use the maneuver all the time to make overpriced items seem reasonable.

Here’s how you can teach your kids the trick. Next time you’re in a restaurant, ask the kids to find the price on the menu that sticks out first. That’s typically the anchor price. It sets the expectation bar high. That way, anything nearby that falls below it seems much more reasonable. Even if it isn’t.

“Whoa, the steak sandwich is $25. This $15 bacon cheeseburger is a great deal!”

Not really. If you hadn’t seen the anchor first, you’d recognize it as a rip-off.

What’s the antidote for money anchors? Research. Coach your kids to figure out what a reasonable price is ahead of time.

That way, your kids will drop their own money anchors first, and sellers won’t be able to cast their finances adrift.

Saturday, June 11, 2016

Teach Kids How To Tell Dollars Where To Go

Today’s fantastic family finance article is:

30 Second Micro Money Message: Tell Your Dollars Where To Go

Roger Babson, the entrepreneur and economist who founded Babson College in 1919, once quipped:

“More people should learn to tell their dollars where to go instead of asking them where they went.”

Indeed.

So, how do people tell their dollars where to go? With a budget.

Give your kids an early taste of budgeting with this simple recipe:

Pick one category. Choose something you’re currently paying for that your kid really cares about. Clothing? School lunches? Entertainment?
Negotiate the amount. Let your kid do the math first. Then, bargain a bit to tighten things up. Are designer jeans really necessary? Swap in the discount ones.
Set light boundaries. Identify any purchases that are strictly off limits, but allow as much freedom as you can.
Hand it over. It’s crucial for your child to own the funds, the decisions, and the consequences.

Remind your kid: when it’s gone, it’s gone. That’s the learning part.

And what if the budgeted dollars disappear early? At least they know where they went! That’s progress.

Friday, June 10, 2016

Quiz Your Kids On Inflation

Today’s fantastic family finance article is:

A Three-Question Test of Financial Literacy

Challenge your child to this pop financial literacy quiz:

Suppose you put some money in a savings account earning an interest rate of 1% per year. Suppose inflation is 2% per year. After one year, how much will you be able to buy with the money in this account?

More than today

Exactly the same

Less than today

Puzzled look?

Imagine pouring water in a leaky bucket. Pour less in the top than is draining out the bottom. What happens? The water level sinks. Eventually the bucket will be empty.

The bucket is like a financial account.

The water poured in the top is like the interest earned by the account.

The holes in the bottom are like inflation.

The water level is the value of the money — its purchasing power.

The bottom line: if an account doesn’t gain more in interest than it’s losing to inflation, it’ll be worth less and less over time. In other words, you won’t be able to buy as much stuff with the money in your account tomorrow as you can today.

Now here’s the parental portion of the quiz: Is your kid’s long term savings in a slowly draining bucket? What are you teaching your kid about beating inflation?

Maybe it’s time to teach your kid another “I” word: Investing.

Thursday, June 9, 2016

Teach Kids To Forget Sunk Costs

Today’s fantastic family finance article is:

The Cognitive Biases That Lead to Bad Money Decisions

“Those who cannot remember the past are condemned to repeat it.” ~George Santayana

We’ve all heard variants of that famous quote. A history teacher has probably already dropped it on your kids.

When it comes to money though, the quote can be dead wrong. In fact, the memory of the past often condemns us to repeat bad financial decisions. Behavioral economists call it the sunk cost fallacy.

Here it is in action:

Dad: “I don’t see you playing that online game you bought. Why don’t you cancel?”

Kid: “Yeah, I found out it isn’t that fun. But I already paid for two months, so I really need to start playing next month.”

Wrong. That’s called throwing good money after bad. It’s the sunk cost fallacy in action.

The only sensible reason to pay for next month is if you truly want to play next month. The fact that you paid for two previous unused months is irrelevant. That money is sunk. Gone. Dead. Buried. You can’t get it back, so forgetta about it!

Coach your kids to listen for the sunk cost fallacy pattern. It usually sounds something like: “But I spent X in the past, so I better...” Stop. Ignore the X dollars, the X time, the X hassle. Evaluate financial options on the future value alone.

So when it comes to money at least, remind your kids that those who remember the past are often the ones condemned to repeat it — by throwing good money after bad.

And, no, your kid can’t cut history class now.

Wednesday, June 8, 2016

Teach Kids The Self Billing Trick For Annual Expenses

“Happy Birthday, Dad!”

“Thank you, son.”

“Can I borrow some money?”

“What for?”

“To buy you a present...”

Lame.

Time to teach your kid the self-billing trick for annual or infrequent expenses. It’s simple:

Open a separate savings sub-account, prepaid card, envelope, or jar. Name it after the expense. Like “Dad’s Birthday”, or “Holiday Gifts”, or “Spring Break.”
Calculate the total expected annual expense and divide by 12. That’s the monthly bill.
“Pay” the bill each month by moving money to the dedicated account — ideally with an automated transfer. Want to make the payments smaller? Ratchet up the billing cycle to weekly, and adjust the math accordingly.

Viola! No last minute panic loan. The money is right there ready to go each year.

Happy Birthday Dad.

Tuesday, June 7, 2016

Get A Clue About 529s

Do you know what a 529 is?

Don’t be embarrassed if you don’t. A recent Edward Jones survey says you’re in good company. It estimates 3 out of 4 Americans don’t know about the tax-advantaged college savings plans set up by Congress back in 1996.

If you’re a parent, it’s time to get a clue about 529s though. Why?

Tax free growth. The investments in a 529 account grow tax free.
Tax free withdrawal. No taxes are due on withdrawals if used for qualified college expenses for the beneficiary — like tuition, room and board, or even a computer.
State tax benefits. Some plans include special state tax benefits like being able to deduct contributions from taxable income.
Flexible assignment. Funds can be reassigned to qualifying relatives of the beneficiary — like a sibling.

Those are 4 good reasons to start doing some research if you have (or are related to) any kids who will be heading off to college someday.

Is a 529 plan the perfect savings vehicle for your kid’s college future? Probably. But you’ll never know if you don’t learn what one is.

Monday, June 6, 2016

Put Some Responsibility On Your Kid’s Shoulders

Today’s fantastic family finance article is:

The Importance of Chores for Our Children

Remarking on chores, columnist Tom Westfall observes:

“In today’s highly automated world, many kids grow up with so few responsibilities, in terms of their family, that they often feel like fifth wheels — unimportant and almost in the way.”

Giving kids chores is a chore, but it’s our responsibility to give our kids the responsibility.

Why? It gives them purpose and stability. As Pauline Phillips, aka Abigail Van Buren famous for her Dear Abby advice column, said:

“If you want children to keep their feet on the ground, put some responsibility on their shoulders.”

Chores are about belonging, participating, responsibility, purpose, character.

What are they not about? Perfection. Efficiency. Yes, you can probably do it better and faster — and, hopefully, with a lot less whining.

But that’s not the point.

So, it’s time to stop whining about the hassle of giving your kids chores. Put in the extra effort to make your kid feel like a big wheel around the house, not a fifth wheel.

Saturday, June 4, 2016

Paint The Right Money Picture For Your Kids

Today’s fantastic family finance article is:

Is Lizzie Grubman a Changed ‘Party Girl’?

A New York Times article profiles Jack’s mom.

The author paints a picture of pomp: the latest Prada, outsized platform shoes, and a “Givenchy Antigona black leather tote, whose oversize zipper teeth made it look like a document shredder for money.”

When asked to characterize his Mom, 7 year old Jack offers: “She buys us stuff. And she talks on the phone a lot.”

See the connection?

How would an author paint your picture?

How would your child describe you in two offhand sentences?

Do you think the external perceptions would align with your internal money values?

Make sure you’re painting the right money picture for your kids today, or you’ll cringe at the picture others paint tomorrow.

Start the College Affordability Talk By 9th Grade

Today’s fantastic family finance article is:

How to Talk to Kids About College Costs

“Mom, Dad, how much money do you make?”

Awkward? Get used to it. By 9th grade.

Why? Your teen needs to know what to be shooting for when it comes to college. In under 4 years, your child will be making one of the biggest financial decisions of her life. She needs all the financial facts on the table ahead of time to make an intelligent one.

What are you able and willing to kick in for college?
How much does your teen need to save, borrow, earn, or win to fill the gap?
What’s a reasonable target? Community college? Local state school? Private college? Community college followed by a transfer? (Excellent option!)
How long will it take for her to pay off any student loans after graduating?

Looking for a good resource to help you start framing the awkward money discussions with your kids? Check out Ron Lieber’s bestselling book, The Opposite of Spoiled.

Still worried about divulging your financial info to your teen? Get over it. You’ll be coughing it up for the FAFSA form in 12th grade anyway.

And senior year is too late to start putting together a sensible plan. Start today.

Friday, June 3, 2016

Teach Your Kids To Plug Their Money Leaks

Today’s fantastic family finance article is:

30 Second Micro Money Message: Know Your Money Leaks

Today’s micro money message: know your money leaks.

As Ben Franklin said:

“Beware of little expenses; a small leak will sink a great ship.”

In other words, you don’t have to hit a financial iceberg and go down like the Titanic. You can slowly nickel and dime your way to the bottom.

Make your kids inspect their little money rowboats for leaks. Fast food? In-game purchases? Online music and video subscriptions?

The key message here: Make sure your kids track where their money is going, so they can keep their financial boats afloat.

After all, you won’t be bailing them out.

Right?

Thursday, June 2, 2016

Charge Teens For A Share Of The Cell Phone Family Plan

“Huh? It costs money every month to use my smartphone?”

OK, not an unreasonable surprise for an 8 year old. But a 35 year old?! That would be crazy, right?

Maybe not when you consider that one poll found 40% of parents with adult children between the ages of 18 and 35 were still paying for their kids’ cell phone service.

Sure, the family plan is a great deal. But that doesn’t mean Junior can’t chip in. You won’t be doing your grown kids any favors if they don’t have a clue about what everyday shared services actually cost. Educate them before they leave the nest.

How? Make sure your kids share some skin in the family plan by allocating some of the costs to them each month.

How much per month? Your call, but the average amount parents are currently billing on FamZoo.com is $18.33 per month.

Getting a little static from Junior about your cost sharing scheme? Tell him to go research what it would cost to have his own plan.

Surprise!

Welcome back to the family plan, Junior.

Wednesday, June 1, 2016

Impose A Savings Tax On Your Kid’s Spending

Today’s fantastic family finance article is:

Turn Small Cash Windfalls into Wealth

How do you get your kids to think about saving when they are spending?

Try a savings tax.

Anytime your kids make a purchase, have them kick in a little savings to a savings jar, account, or card.

How much? Here are 3 options to consider:

Save the change: Round the purchase up to the nearest dollar. Save the difference. For example, $4.20 rounds up to $5.00. The difference — 80 cents — goes to savings.
Match the sales tax: Look for the sales tax line on the receipt. The tax amount goes to savings.
Save a percentage: Agree on a savings tax rate. Multiply the rate by the purchase amount. The result goes to savings. For example, a savings tax of 10% on $4.20 would be 42 cents.

You might even be able to find a banking app that does all that automatically, or at least makes the tiny transfers simple.

A savings tax on your kid’s purchases means more mindful spending and more consistent saving all bundled together. That’s a personal finance two-fer!