Thursday, October 12, 2017

Get Real Family Finance Tips From These Five Finalists

Tired of reading the same old puff pieces on kids and money in the mainstream media? Instead of boring platitudes from “experts” (some of whom haven’t even raised kids!), how about some real insights from real parents in the new media trenches?

Start with these five Family Finance finalists for this year’s Plutus Awards for independent financial publishers. I’ve picked a representative post or podcast from each to help you dive in:

  1. Chief Mom Officer: Cell Phone For Kids — Why My Kids Don’t Have One (And a Tell-All Interview).

    Does your kid need a cell phone? Would you cover its cost? Most parents answer “yes” and “yes” — especially by the time a kid is 12. Not Chief Mom Officer. She and her kids (10 and 14) challenge the new normal. Find out why going against the grain might make sense in your family too. Whether you agree or not, there’s plenty of good food for thought here.

  2. Montana Money Adventures: 3 by 3: Minimalism with Kids.

    Ms. Montana describes a clever toy rotation scheme for encouraging moderation in younger kids. The year long experiment has helped her kids derive more joy from less, lengthen their attention spans, increase creativity, decrease fighting, and reduce clutter. They’ve become mini minimalists. Sound like magic? See how she did it.

  3. Mama Fish Saves: Why Tough Summer Jobs Beat Summer School For Teens.

    After reading this, you’ll want to ship your kids off to a tobacco farm instead of summer school. Well, maybe. Chelsea shares five important life lessons she learned working long, tough hours during the summer. Every kid could benefit from a session at the School of Hard Knocks. See why you might want to enroll your teen next summer.

  4. Couple Money: 4 Ways Parents Can Teach Their Kids About Money.

    Elle hosts one of the few podcasts squarely focused on family finances. Her episode with yours truly is a good place to start your binge listening streak. Naturally, we discuss teaching kids good money habits. Listen in as we share our favorite systems, tips, and stories.

  5. Catherine Alford: Reflections on 7 Years of Blogging & Turning 30!

    Wrangling kids. Agonizing between building out a risky but flexible home-based side hustle versus returning to the steady but inflexible 9 to 5. Holding down the home fort while your partner slogs through long hours at a demanding workplace. Wrestling with health issues. Balancing it all through midlife can be pretty overwhelming. Impersonal self-help platitudes from main stream media aren’t worth much. Real stories from real people like Cat might just be the gold you’re looking for. Plus, you can actually talk to her in the comments. Bonus.

So, if you really want to learn more about family finance, skip the mainstream puff and pick the independent plums. More educational. Less boring.


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

Friday, October 6, 2017

Shell Out Parent-Paid Interest To Encourage Saving

Girl with savings interest text.

You’ve already heard me harp on the virtues of aggressive parent-paid interest. (If not, see here.) It’s my favorite technique for getting kids fired up about saving and thinking twice about spending: “Look at that sweet interest deposit I just got on my card! I’m going to build up my balance so I can earn even more.” Music to my ears.

I decided to run some numbers on our family finance site today to see just how much interest parents are shelling out in a typical month.

Last month, kids who received parent paid interest on their prepaid cards earned an average of $3.74. Nice! Infinitely more motivating than a traditional savings account.

One kid raked in a whopping $60. How? The kid’s parents offer a super sweet deal: 1% of the the current card balance per week capped at a maximum payout of $12. Now that’s aggressive! The kid bagged 5 maximum payments in the month because September had 5 Saturdays this year. Bonus!

OK, so $60 a month is over the top for most families, but $3.74 isn’t.

That steady drumbeat of encouraging text messages just might cement a lifelong savings habit.

Worth a try, don’t you think?

Here’s the discouraging news: only 4.3% of the kids using our cards in September earned parent-paid interest.

So, here I am harping on it again. Time to step up and shell out, parents.


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

Wednesday, September 27, 2017

Motivate Kids To Maintain Value With A Trade-In Deal

Trade-in value graph on a broken phone.

I remember the time my oldest son thrashed an expensive laptop shortly after I bought it for him. Man, did that grind my gears.

I made him pay for the replacement by garnishing his allowance for 18 months. The lesson stuck. That replacement lasted a very long time.

That was an effective, yet reactive measure to teach my son to take care of his possessions. A proactive measure would have been better. Less wasteful.

Fellow youth financial literacy advocate, Amanda Grossman, has an effective proactive solution. She expands on a shared skin-in-the-game technique David Owen wrote about in his book The First National Bank of Dad, which happens to be one of my favorite books on teaching kids the value of money (the other being Ron Lieber’s The Opposite of Spoiled). For the details on Amanda’s solution and some great David Owen quotes, check out her recent post: Genius Hack to Get Your Kids to Take Better Care of Their Belongings.

In short, the recipe is:

  • Show your child how the resale value of a used item varies considerably with its condition.
  • Make a deal with your child to share a percentage of the proceeds when the item is eventually resold.

The key is to do this up-front, not after the fact. That’s what creates the incentive to take care of the item from the beginning.

As a concrete example, my youngest son and I just looked up the trade-in value of a 32GB Apple iPhone 7 on Gazelle.com. Here’s what we found:

Phone Condition Trade-in Value
Really Broken: doesn’t power on. $75
Fairly Broken: significant damage, but powers on. $110
Good: makes calls, no cracks or major scratches. $280
Flawless: looks and works like brand new. $310

It’s helpful to draw a bar chart to put the values in clear perspective.

To be honest, we were a bit surprised to see how much the broken phones fetched. I was hoping they’d be closer to zero to further bolster my point. Nonetheless, good to know in case his phone gets thrashed by an event beyond his control.

We both noticed the leap in value transitioning from broken to good. That’s the supporting point I was looking for. We discussed how the bar is probably pretty high to qualify for “Good” status and noted how close it was to “Flawless”. No cracks, no major scratches, no major scuffs. That can get pretty subjective, so best to shoot high when maintaining the phone’s condition. Music to my ears.

Looks like I won’t be needing to garnish my youngest son’s wages to replace a thrashed phone prematurely. Instead, he’s looking forward to a future windfall on a high value trade-in.


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

Thursday, September 21, 2017

Spur More Money Talk With Tech, Not Less

Mobile phone with money speech bubble.

“I worry these automated apps and debit cards will cause me to have fewer thoughtful money conversations with my kids.”

I hear that a lot. And it drives me nuts.

(It almost makes me as crazy as: “Don’t give your kid a debit card, use cash instead.” Nonsense. See my counterarguments here and here.)

The automation fear is frustrating because the effect of a well-designed family finance app is precisely the opposite. Thoughtful automation spurs more parent-child conversations about money, not fewer.

And, as Ron Lieber says: “Every conversation about money is also about values.” So, that’s a good thing.

Just because the manual mechanics are eliminated for things like:

  • remembering to deliver regular allowance,
  • accounting for chores or odd jobs,
  • calculating parent-paid interest,
  • and tracking transactions,

doesn’t mean the conversation disappears too.

In fact, it’s when the mechanics are not automated that the parents eventually fail to follow through, and the system collapses. No follow-through means no system means no conversations. Automation fixes that.

The app’s automated audit trail and real time alerts proactively prompt an ongoing stream of money discussions with your child:

“I see you made 6 cents in interest for the week. Let’s talk about how the incredible power of compound interest is putting your savings to work.”
“I see you spent $3.99 at a specialty tea shop. Let’s talk about whether it’s worth paying that much. Maybe, maybe not.”
“I see a $23.50 ATM transaction. Let’s talk about how that $3.50 fee is a 17.5% tax on your $20 withdrawal, and how to avoid it next time.”
“I see 20% of your allowance is still going to paying off that loan I made you for the latest iPhone. Let’s talk about whether you’d make the same choice next time. Maybe there’s some extra work you can do to pay it off faster.”
“I see your Spotify payment was declined again. Let’s talk about how that would cost you a $35 overdraft fee on a bank debit card and the importance of keeping a cushion in your account.”
“I see your donation to the disaster relief agency went through. I’m so proud of you. Let’s talk about how you picked the place to donate.”
“I see your payment to me for your share of the family cell phone plan came through today. Painful isn’t it? Let’s talk about finding a cheaper option.”
“I got your annual clothing budget proposal notification. Let’s talk about a compromise on the line item for jeans. Oh, and you forgot to include underwear.”
“I got your money request notification just now. Let’s discuss why you’re running short of funds before I approve or deny the request.”

Those are all good, thoughtful conversations to have. Regularly. Small steps and repetition are key ingredients to building good habits.

Without automation, your only consistent money conversation with your kid might just be:

“Dad, why do you keep forgetting my allowance?”

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

Thursday, September 14, 2017

5 Reasons To Turn Card Activity Alerts On For Your Kids

Taco Fraud Alert

My buddy Keith sent me a message this week about an odd $46 Taco Bell transaction on his daughter’s prepaid card:

Definitely stolen. [The card was lifted from her backpack.]

I’ll have her fill out the form.

On the plus side, had we not had text alerts on the purchases, it would have been A LOT worse.

Seeing the alert, they wisely locked the card. We can only hope all those tacos gave the thief a nasty case of Montezuma’s revenge.

Meanwhile, Keith is teaching his daughter a valuable personal finance habit: turn on activity alerts for your financial accounts.

I was disappointed to find Keith is in the minority of parents on our family finance site. Only 12.7% of the cards with purchase activity in the last 30 days have alerts turned on.

Why should they? Five good reasons:

  1. Nip fraud at the bud. As we learned with the taco fraudster story above, you’ll catch sketchy activity right away. Then you can lock your card to prevent further damage and order a replacement.
  2. Stay on budget. A good prepaid or bank debit card activity alert will report not only the amount and merchant in real-time, but also the remaining balance. Knowing your dwindling balance after each and every purchase makes spending more mindful and easier to resist. It’s a simple yet effective budgeting tool.
  3. Peace of mind. Once your kids head away for school, they may not communicate with you as much any more. Mine didn’t. Hey, they were busy! Card activity alerts are a simple way to know your kids are safe and sound without bugging them.
  4. Cancel forgotten or unused services. Still being billed for that online game you stopped using (or enjoying) a while back? You’ll be automatically reminded every month until you cancel.
  5. Deliver Just-In-Time advice. “You just paid how much for what?” Your kid is going to make some rookie purchase mistakes. Alerts shared with parents provide an opportunity to deliver some sage personal finance wisdom in the moment while the incident is still fresh. An ATM withdrawal alert for $22.00 instead of $20.00? That’s a $2.00 fee right there. Let your kid know there’s a free ATM down the block. Save a couple bucks next time. Just keep it positive. Mistakes are an essential part of the learning process.

Of the 12.7% of cards with activity alerts enabled, almost half (46%) are sharing the alerts with parents. That’s a good thing if it leads to thoughtful conversation and coaching. Not so much if becomes another form of nagging. Stay mindful of the difference for best results.

Sure, card activity alerts can notify you about fraudulent taco purchases. But, more importantly, they’re part of the whole enchilada when it comes to teaching your kids about personal finance.


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

Friday, September 8, 2017

Teach Kids To Memorize Their Social Security Numbers

Teen Social Security Card

3,000 miles away from home. Zero friends. Intimidated. Vulnerable.

That sums up my first day at college.

Picture your kid in a similar situation.

Then throw this little wrinkle on top:

"I'm sorry, your card has been declined."

Great. Add broke to your kid’s list.

The card’s app says: “The incorrect PIN has been entered 3 times. A security block has been applied. Please contact the card processor via the 800 number on the back of your card.”

Exasperated, your kid calls the number:

“Before we can help you with your card, we’ll need to confirm your identity. Please provide the last four digits of your social security number.”

Ummm... No clue.

“I’m sorry, we can’t help you.”

Far away from home. No friends. No confidence. And, now, no money. Total. Melt. Down.

“Mommmmmm...!”

Not the best start to school.

Fortunately, back in my day we used mostly cash.

But one of the young cardholders on our family finance site wasn’t so lucky last week. Mom told us it was the straw that broke the emotional camel’s back on a traumatic first day of school.

Which leads us to today’s tip: help your kids memorize their social security numbers.

A Social Security Number (SSN) is something every American needs to know. It’s a standard part of the identity verification protocol for a financial account. If you can’t remember your PIN, you’ll probably be asked for your your SSN or its last four digits. If you don’t know your SSN, well... A financial institution can’t help you if they can’t confirm your identity.

PINs and SSNs are among the last numbers modern kids need to memorize now that smartphones remember everything else.

In the past, I’ve covered a trick for picking a memorable PIN based on a favorite phrase and a smartphone keypad.

But how about memorizing an SSN? You don’t get to pick that number yourself.

Try the inverse:

Map the 9 SSN numbers to the letters on a mobile phone keypad.

See if your kid can devise a memorable phrase with words that start with the candidate letters.

For example, if the SSN was 778-95-4648 (no, that isn’t my SSN — sheesh!), the mapping could yield the following mnemonic phrase:

7 7 8 9 5 4 6 4 8
PQRS PQRS TUV WXYZ JKL GHI MNO GHI TUV
Parents Please Teach Your Kids Good Money Habits Today!

That’s a lot easier for me to remember than a string of numbers.

With that little trick in their hip pockets, your kids may still be intimidated on their first day of college, but at least they won’t be broke.


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

Friday, September 1, 2017

Help Kids Practice Philanthropy When Disaster Strikes


Shoe in water.

Houston, we have a problem.

No doubt your kids have seen the devastating images of families displaced by the brutal floods of Hurricane Harvey. Kids just like themselves have been driven from their homes.

It’s sad and scary.

Meanwhile, our kids are also witnessing the amazing grace and kindness of citizens pulling together to help those in need.

It’s inspiring and reassuring.

Even from afar, your kids can be a part of that helping spirit. Now is the perfect time to revisit that philanthropy discussion. Use one of these 20 great giving quotes to kick off the conversation.

Remember, no balance built up in a child’s charitable giving account is too small to make a difference. Encourage your child to consider a donation through a reputable organization. Looking at anonymous transaction data for kids on our family finance site, we’ve seen donations to The Salvation Army, The Red Cross, United Way of Greater Houston, Houston Food Bank, and local churches to name just a few. It warms the heart.

Part of the philanthropic discussion should include the importance of doing your homework on the charitable agency itself. That can be a surprisingly tricky and controversial task — even for the largest, most recognizable names. Here’s a prime example you might want to discuss with older teens.

Ultimately, you have to make your own judgement based on the information available. But kids should know that research is an important element of charitable giving. It’s more than just the swipe of a card.

The bonus is that altruism improves your own child’s well being. And, if your child can perform the transaction directly, it’s particularly powerful.

Houston, working together, we have a solution.


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

Thursday, August 24, 2017

Teach Kids How To Read The Free Trial Fine Print

Free trial fine print.

“We’re calling about a charge on Johnny’s card. He says he never bought this service.”

We hear that a lot at our family finance site.

More often than not, Johnny did buy that service. Eventually.

Of course, it started out free. And “free” is the only keyword Johnny saw or remembered.

Time to teach Johnny to look for another keyword: “cancel”.

In fact, here’s a good rule for your card-toting kid:

No subscribing without learning how to cancel first.

If your kid can’t locate the cancellation instructions, then either your kid is not ready or the service provider is too sketchy.

Be sure to review the cancellation terms in full. Some providers levy hefty extra fees for early cancellations. Check out this MoviePass example.

Sadly, lots of online services prey on unsuspecting or un-savvy kids. A classic example from a FamZoo customer service interaction:

“My daughter signed up for a “free” on-line subscription, thinking that it was free, but then keyed in her card and is now getting monthly fees — of $34.95 and $39.95.”

We’ve seen specific complaints about MovieLush and ReelHD to name a couple.

Be sure to turn on card activity alerts so you can be on the lookout.

If you notice a sketchy or unfamiliar charge, show your kid how to google the description along with the keyword “cancel”. You’ll either find instructions from the provider or stories from other bilked consumers that might include a hidden cancellation recipe. If a charge is not legitimate and the merchant refuses to refund it, show your child how to file a claim for the unauthorized charges.

Rule number two for your card-toting kid:

No free trial without a cancellation reminder.

Have your kid enter the reminder on an online calendar or a checklist that will trigger an alert a few days before the end of the free trial period. Include the cancellation instructions found from Rule 1.

That way, your kid will have ample opportunity to not buy the service if it turns out to be less than expected.

With a little education, we can keep those mystery charges off little Johnny’s card.


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

Wednesday, August 16, 2017

20 Back To School Family Finance Tips for Kids K-12

Kid headed to school.

It’s back-to-school season.

Let’s kick it off on the right financial foot.

Whether you’ve got kids headed to kindergarten, elementary school, middle school, or high school, you’ll find an idea or two to try here:

  1. Start money conversations by kindergarten with these classic books — The traits, habits, and behaviors that lead to financial well-being start to gel as early as preschool. Here are nine books to get your youngster headed in the right direction.
  2. Roll out the Premium Price Rule while back-to-school shopping — Impulsivity and peer-pressure can blow a hole in the back-to-school budget. Focus your kid on value and get some shared skin in the game with the Premium Price Rule.
  3. Go refurbished on the back-to-school computer — The sooner your kids learn they don’t need the latest, greatest shiny object, the shinier their financial futures will be. If your kid needs a computer for school, it’s a perfect opportunity to make that point. Here are some key things to consider when going the refurbished route.
  4. Fix your kid’s allowance — Are you doing allowance right? Here’s a six point checklist to find out. The beginning of the school year is a good time for a tune-up.
  5. Boost college savings with an allowance — It seems counter-intuitive that giving kids an allowance could help parents save for college. Here’s the behavioral finance trick to making it work.
  6. Pay for studying, not the grade (if at all) — Do you have an opinion on paying kids for good grades? Either way, you’ll want to check out this study. It might change your mind.
  7. Plan your lost coat strategy — It’s inevitable. Your kid is going to lose a coat at school this year. At least once. It can get expensive. Here are some ideas for planning your parental response.
  8. Get your kid a card by middle school — The data from our family finance site shows that middle school is the perfect time to start putting plastic in your kid’s hands. As long as it’s the right plastic, with the right controls, no risk of debt, and plenty of educational features. Check out the age distribution data for FamZoo cards.
  9. Show your kid the average price of a homemade sandwich — Your kid could save you almost $500 during the school year by eating a homemade sandwich instead of a quarter pounder with cheese. Here’s the data.
  10. Pay your teen to brown bag it for lunch — As kids get into the teen years, frugal habits like the brown bag lunch come under pressure. Here’s one way to make the brown bag lunch cool, or at least profitable, for your teen. You can afford the bribe. You’re already saving over $500 with the homemade sandwiches (see above).
  11. Use real stats to set fast food boundaries — Brown-bagging it or not, junkets to the local fast food joint are a classic teen rite of social passage. Use these purchase statistics to set reasonable boundaries.
  12. Get ready for that Starbucks peer-pressure — The data from our family finance site pinpoints when kids start to feel the pressure (or desire) to head off for Starbucks. How you can prepare.
  13. Help kids rehearse for awkward money scenes with friends — “Come on, let’s go get pizza. It’s only 10 bucks. You can afford it!” When it comes to your kid’s money dialog with friends, ditch the improv. Here’s how to script a solid response ahead of time.
  14. Help your kid embrace a frugal persona — The “strategy of identity” can help people form desirable habits. Here’s how to apply the strategy to your kid’s money habits in the face of peer pressure.
  15. Encourage your kid to learn to code — If you have any opportunity to expose your kid to writing software. Do it. Here are 223,054 reasons why.
  16. Put your kid in charge of a narrow budget — It’s shocking how many kids enter college with zero experience managing a budget. Don’t let that happen. Try this simple strategy this school year.
  17. Reward your student with a spot bonus — Spot bonuses. They always make you feel appreciated as an employee. They’ll make your kid feel appreciated too. Catch your kid doing something good this school year. 56 examples from real parents.
  18. Don’t necessarily discourage a part-time job — It’s a shame that fewer and fewer students are holding down part-time jobs while in school. Here’s evidence we should reverse that trend.
  19. Show teens there’s a scholarship for that — Your kid may think that scholarship opportunities only exist for math and science whizzes. Not true. There's a scholarship out there for darn near anything. Even drawing ducks. Show kids how to find them.
  20. 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.

Kids aren’t learning much about personal finance in school. So, if you only do one or two of the above, you’ll still get a gold star in my grade book.


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

Wednesday, August 9, 2017

Post Wants On The Fridge To Chill Your Child's Spending

Purchase sticky on fridge.

I love the delayed gratification system Joanna Hampton’s parents instituted for purchase requests over a certain dollar amount:

  • Write the desired purchase on a piece of paper. Sign it. Date it.
  • Post the paper on the family fridge.
  • Wait the agreed upon number of days.
  • Make the purchase. Or not.

Often, the bloom falls off the rose long before the waiting period is up.

The duration was 30 days in Joanna’s case, which seems a bit long. Pick what makes sense for your kids. In fact, you might scale the waiting period with the price: over $20? 2 days. Over $50? A week. Over $100? A month.

The digital variation on the fridge setup would be to have your child register the desired purchase in a text message, or in a shared google sheet, or on a shared google calendar, or via a money request in FamZoo.

Fridge or no fridge, it's a simple, effective system for putting the chill on instant gratification.

Looking for some other tips for delaying gratification? Try:


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

Thursday, August 3, 2017

Pay Your Kid To Do Some Dirty Work

Dog with mouth open wide.

In my anonymous tour through recent transactions on our family finance site today, I found this gem for an industrious 11 year old:

Bonus cleanup of dog throw up $5.00

One parent’s dirty work is another kid’s economic opportunity.

I won’t regale you with the keywords I used to locate similar transactions, but it turns out the bowser barf bonus comes up (so to speak) from time to time. Payments range from $3 to $5.

And barf pays better than the other end. The average pup poop patrol payment hovers around $1.00.

Or, you could shift to rats:

Change rat bedding $1.50

And finally, number two apparently beats number one according to this item:

Empty pee bucket $0.25

Hmm, I don’t want to know either, but let’s assume it’s on a farm somewhere!

On the less dirty and more lucrative side of the ledger, we have:

Washing Dogs and Cleaning Kitchen $13.00
Upholstery cleaning $25.00

Wondering how much to shell out for that dirty job? You might be able to calibrate your offer based on this payment data for more normal chores.

If you can’t think of any dirty jobs for your kids to do, how about some dangerous ones instead?

Otherwise, challenge the kids to come up with opportunities themselves. And let them negotiate their own compensation. It’s good practice.

Once the kids master some dirty work around the house for you, they’ll be ready to level up to a sucky summer job for somebody else next year.

Why push your kid to take on crappy work? It builds character. And, it pays.


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

Thursday, July 27, 2017

Replace Chore Charts With Money Requests To Promote A Proactive Work Ethic

Boy washing car

It’s a dog-eat-dog work world out there!

Workers need to be proactive problem solvers and savvy negotiators to thrive in today’s increasingly entrepreneurial, gig-oriented economy.

So, how do we encourage those skills in our kids early on?

Try ditching the parent-driven allowance and chore systems. Put the kids in charge instead.

That’s what we’re seeing some families do on our family finance site.

Parents are putting the onus on the kids to:

  1. Identify work that needs to be done around the house.
  2. Do the work.
  3. Negotiate payment.

How do I know? I sifted through some recent (anonymous) money request data from FamZoo.com. Here’s a sampling:

Child Request Parent Response
$10.00

“Mowed lawn front and back.”

Approved $10.00.

“Thank you!”

$16.00

“Monday: Worked 3 hrs Add $1 because I put G*** to sleep in the bed. Total owed: $16.”

Approved $16.00.

(Nicely played with the proactive bonus work.)

$2.00

“I helped T*** with the plants, and I am awesome so I deserve it anyways.”

Approved $2.00.

“Lucky I didn’t decline.”

(Looks like a shot across the bow from Mom to polish up those negotiating skills!)

$10.00

“I helped you with gardening stuff yesterday for 3 hours... ($2.50/hour + $2.50 for no whining!)”

Approved $10.00.

“Thank you! I couldn’t get done so quickly without you!!! And the No Whining is SO NICE ;).”

(Clever touch with the no-whining surcharge.)

$5.00

“I helped clean up the pool deck.”

Approved $15.00.

“You worked really hard. Thank you for all of your help! You deserve $15 instead of $5. Love, Dad”

(Ka-ching! Over-delivery scores the big payoff!)

$250.00

“I would like this because I am the best human being on this planet. No one can ever out do my awesomeness or be as good as me! (Plus I also really want a laptop and a phone and a shopping spree) Please keep this notified in your mind! Warm Regards, Your Favorite child of all times.”

Declined. $0.00.

(As they say, talk is cheap. No results, no money!)

These parents don’t have to remember to make allowance payments or set up chore schedules. If the kids need money, the ball is in their court. The rules are simple: Identify work that needs to be done, do it, and negotiate your own compensation.

Sounds like a pretty appealing system, doesn’t it?

Forcing kids to be proactive problem solvers and savvy negotiators today will give them a leg up in the business world tomorrow — from dog-eat-dog to top dog.


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

Thursday, July 20, 2017

Build Your Teen's Credit Score With A Secured Card

Teen holding secured credit card.

Your kids will probably be caught off guard the first time someone inquires about their credit history. For my kids, it was that first apartment rental in college. So building a solid credit score early can be a smart move. It’s also an important part of your child’s financial education.

Prepaid debit cards are excellent financial training wheels for kids and teens. They’re safe and accessible. But they don’t build a credit history.

Credit cards build a credit history. But safe and accessible for teens? Not so much.

Teens can do a lot of serious financial damage with a credit card in a very short period of time. Like when a kid racked up $7,625.88 on his parent’s credit card playing Xbox games.

Legally, a teen can’t get a credit card as an independent cardholder until age 18. But even then, most teens won’t qualify. They have to be able to demonstrate a sufficient steady source of income outside of Mom or Dad. Most can’t meet that bar.

You could add your teen as an authorized user on your own credit card, or you could co-sign for your teen on a separate card. But both routes put your own credit history (and budget) at risk.

Consider a secured credit card instead.

A secured card requires an up-front deposit. That security deposit dictates the credit limit on the card. Often they’re the same amount. If your kid falls behind, the card issuer can dip into the deposit to cover delinquent payments or late fees. When the card is closed or upgraded to a regular credit card, the security deposit (less any delinquent obligations) will be returned. The rules on this will vary and are spelled out in the cardholder agreement, like this one from Discover.

But before applying for the secured card, consider imposing two prerequisites for your teen:

  1. A sustained responsible track record with a debit card. If your teen can’t pass the No-Decline Challenge, he isn’t ready.
  2. The security deposit in hand. Make your teen come up with the security deposit, not you. If your teen can’t save the few hundred dollars required, she isn’t ready.

With the prerequisites met, you can check out sites like Magnify Money to compare secured credit card offerings. At the moment, the top pick is the Discover it Secured Credit Card.

I culled through the user reviews of the Discover card and found a few things to look out for:

  • Applying might be a hassle. “Applying for the card is like enlisting in the military, all the documentation required is ridiculous.”
  • Slow payment posting can cause unexpected declines. “The fact that it takes 10 days to adjust your available balance after the payment is taken out of my checking account, is a killer for me.” That means your teen could be bumping up against the card limit and getting purchases declined well after a balance payment is made.
  • Stinginess with limit increases. “I figured my limit would be increased as I use it and time passes but nothing has changed.”
  • Lengthy graduation period. “I have to wait a whole year to be converted to an unsecured card.”

To circumvent any issues with card limits and ensure your teen can pay the card off in full every month with low utilization, I recommend a hybrid strategy:

  1. Use the secured card in conjunction with a prepaid card.
  2. Put a few predictable or fixed recurring billings on the secured credit card that fall well below its limit and can be comfortably paid off each month.
  3. Leave the remaining discretionary spending on the prepaid card to stay on budget and avoid any risk of debt.

On budget. No debt. A solid credit score. Your teen is set.

And your teen’s eventual landlord won’t be coming after you as the cosigner for the rent either. Bonus.


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

Thursday, July 13, 2017

Base Your Kid’s Movie Theater Budget On Real Data

Kid at movie theater.

Will a twenty cover your kid’s typical movie theater outing?

It should comfortably do the job in most cases.

How do I know? Whenever a kid carrying a FamZoo card makes a purchase at a movie theater, the transaction is tagged with a Merchant Category Code (or MCC) of 7832. Assuming kids don’t hit the theater more than once a day, I can tally up all the transactions with an MCC of 7832 in a single day for a given (anonymous) kid to see what the total spend for each visit was. Then I can look across all such visits in a time period to get some interesting aggregate data.

Here’s what I found for June, the peak theater month for FamZoo card carrying kids:

The average spent per theater visit was $19.22.

The percentage of visits requiring a five, ten, twenty dollar bill or more were:

$5 or less 8.3%
$10 or less (but over $5) 19.2%
$20 or less (but over $10) 37.8%
Over $20 34.6%

Some other fun facts:

  • 15 years old was the average age for kids making a movie theater purchase.
  • 91 cents was the minimum purchase made in a visit. Weird, what in the heck can you buy for 91 cents at a movie theater?!
  • $81.16 was the maximum spent. Let’s hope some friends were included in that one!
  • 62.8% made just one purchase in the theater, presumably because the ticket was on mom/dad, or they stayed away from the snack bar.
  • The maximum number of purchases in a visit was 7. Wow. Hungry?!

So, if your kid is figuring movie costs into a discretionary spending budget, $20 sounds like a reasonable round number to use per visit. Or, if you’re funding a one-off excursion, you might state up front that anything over $20 is your kid’s responsibility. (It’s the old premium price rule technique.)

Either way, a twenty should cover your kid’s next theater visit.


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

Wednesday, July 5, 2017

Review 529 Statements With Your Teen Every Quarter

High school grad headed to college.

How much does your teen know about the 529 account you opened for college savings?

Nothing?

Or, maybe you’ve mentioned it once or twice, but you aren’t sure it really registered.

That’s the norm. Pretty dry stuff for a teenager.

I have a radical suggestion.

Review your 529 statements with your teen. And do it every quarter.

Yes, your initial sessions will be received with eyeball rolls, yawns, or worse. But keep up the good fight.

Through your consistent and repetitive efforts, your teen will gradually learn the following:

  1. How much college costs. Circle the ending balance on the latest statement. Your teen’s eyes may light up the first time. Mine’s did. Now, ask your teen to name a favorite university. Google the annual tuition. Divide your current balance by the tuition figure. That’s how many years you can afford right now. Buzz kill.
  2. Where it makes sense to apply. Armed with the sobering perspective from step 1, your teen will naturally start thinking more carefully about where it makes sense to apply. Maybe starting in community college would be appropriate. Maybe it’s time to look into scholarships. Did your teen know there are scholarships for just about every interest? Even drawing ducks. Who knew?
  3. How saving and investing works. This one will take some time to soak in, so be patient and start simple.

    Note how much money you’ve contributed to the account this period. Talk about how you’ve worked college savings into the family budget. If your contributions are automated, point out how that makes it easy to stay on track. If relevant, talk about how relatives have graciously contributed too.

    Now zero in on the Investment Summary section. Talk about how the 529 funds don’t just sit there. You’ve put the money to work through investing.

    Talk about how, early on when college was still far off, you had a pretty decent percentage in a low cost stock market index fund. That gave you a good shot at growing the money over time, even if the market went up and down a bit along the way. Circle the Total Portfolio Earnings entry to highlight that growth to date. Explain that now, with college getting closer, you’re shifting funds out of the market to reduce risk.

    Here’s where, over several 529 review sessions, you can communicate incredibly valuable lessons about basic investing principles in a relevant, tangible, repetitive way.

  4. What a tax-advantaged account is. When you circle the portfolio earnings, scribble the words “tax fee” nearby each time. That’s one of the special things about a 529. The investments grow tax free. This will remind your kid to always be on the lookout for tax-advantaged investment opportunities — like that Roth IRA account you helped your teen open with that first summer job. Right?!
  5. What a qualified withdrawal is. Circle the Withdrawals line item. Explain that it may be zero now, but eventually you’ll be seeing how much is being pulled out each quarter to pay for school. Keep reiterating that the withdrawals are for qualified expenses only! Tuition? Yep. Books? Yep. Spring Break? Nope. Withdraw funds for the wrong thing, and you’ll be looking at some nasty penalties. Good to know.
  6. Gratitude. If you stick with your 529 reviews, this could be the biggest bonus of all. You might start hearing some crazy talk from your teen, like: “I need to take this college thing more seriously.” And, perhaps: “I really appreciate what you’re doing here.” Or, possibly even: “Maybe I should start putting part of my summer paycheck in the 529.” Stranger things have happened!

So, that’s 6 valuable lessons your teen can learn from reviewing 529 statements for 15 minutes every 3 months. Tough to beat those quarterly returns. Ready to make the investment?


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

Wednesday, June 28, 2017

Find The Best Age To Give Your Kid A Prepaid Card

Age Distribution Chart for FamZoo Kids Using Prepaid Cards

A prepaid card can be a great option for kids just learning the money management ropes.

It’s safer than cash.

It’s smarter than handing over your own credit card.

It’s often cheaper than bank debit cards which have insanely sneaky overdraft fees.

And the more innovative cards include some great educational features — like parent-paid compound interest.

The bottom line: prepaid cards are excellent training wheels for adult-centric banking products like bank debit cards and credit cards.

But what’s the right age range for kids to be using prepaid cards? Data from our family finance site yields some insight.

Check out the chart above. It shows the current age distribution of children using FamZoo cards.

The sweet-spot is near the boundary between middle school and high school. Makes sense.

Some kids start using prepaid cards as early as preschool, but that’s unusual. Usage ramps steadily upward through elementary school and the pre-teen years.

Since most card offerings require the legal cardholder to be at least a teenager, you may be wondering how so many kids in the chart can be under 13. In the pre-teen case, kids use what we call “on behalf of” cards. The parent is the legal cardholder, but the card is dedicated to the child’s financial activity. Here’s how it works.

After the early teen years, usage ramps back down again through the end of high school and into college.

That said, even as older kids transition to traditional bank accounts, many retain their prepaid cards to keep a collar on discretionary spending and coordinate with parents throughout college.

In fact, usage can extend beyond college too. As Monte, a FamZoo reviewer on Facebook, points out: “Not just for children! FamZoo [prepaid cards] have helped my fiance and I use the envelope method for budgeting on hobbies. With a weekly allowance we can save, donate, and spend guilt free money all within a shared budget.”

Whether used as training wheels for youngsters or a budgeting tool for oldsters, prepaid cards are becoming an increasingly familiar fixture in the standard money management toolbox.

Maybe it’s time to get one for your kid.


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

Wednesday, June 14, 2017

Teach Your Young Gamer To Budget

Gaming Loot Microtransaction

Kids pay money to play online games.

But you already knew that. You recognize the names in their transaction alerts: EA, Minecraft, Roblox, Steam, Blizzard, Riot Games, XBox, G2A.

Kids also pay money to buy tchotchkies for their gaming avatars — skins, potions, weapons.

You may already know that too. If not, check out sites like realmstock.com — a marketplace for trading in-game items.

But did you know kids are even paying money to watch other kids play online games?

Yep, that’s a thing. Check out Twitch. Find a live streamer. Look for the subscribe button (probably upper right), and check out the options. Kids pay to get badges, emoticons, ad-free viewing, and other “benefits”.

In fact, one 14 year old FamZoo cardholder paid a total of $134.97 in the last 30 days watching other gamers game. Yikes.

Why do I know this? A Monday article piqued my interest in what kids are spending on gaming these days. The Wall Street Journal reported that gaming providers like EA are charging less for the games themselves while reaping huge profits from the little microtransactions inside the games.

And just how much are gamers spending on in-game microtransactions? A mind-blowing $71 Billion worldwide in 2016. That rivals the entire GDP of Cuba!

The article prompted me to dig into the FamZoo data around gaming related transactions by our child cardholders. That’s what alerted me to the Twitch trend mentioned above.

Some other discoveries:

  • The average spending in the last 30 days by teen gamers using FamZoo cards is $27.41.
  • The most spent in that same period was $262.09 by a 16 year old.
  • Some kids pay money to play chess online. Yes, that was my favorite discovery.

Obviously, gaming companies smell a profit opportunity with our kids.

Me? I smell a financial literacy opportunity.

Try this with your young gamer:

  1. Review the gaming related transactions over the last month.
  2. Agree on a monthly gaming budget. Use the data from step 1 as a point of reference, but not necessarily a benchmark — note the average monthly teen spending mentioned above.
  3. Track spending versus the budget each month. As they say, “What gets measured gets managed.”

You might even consider a separate prepaid card dedicated to online gaming. Load it each month with the agreed-upon budget. Any attempts to overspend will be harmlessly declined.

So, whether your kid is paying for games, paying for do-dads inside games, paying other gamers to game, or all of the above, you need to get your head in the game as a parent. Know what your kid is doing. Then, use your kid’s gaming habit as an opportunity to pass along some critical personal finance basics.


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

Wednesday, June 7, 2017

Stop Tolerating Fs On Your Kid’s Card Report

Dad and kid with prepaid card report

Kids aren’t making the grade when it comes to successfully transacting with prepaid cards.

Just take a look at these stats from FamZoo cardholders.

I sampled kids from active families who have:

  • used a card for at least 3 months, and
  • have made 20 or more purchase attempts in the last 90 days.

A decline percentage of 3% means that for every 100 purchase attempts, the cardholder would likely experience 3 declines. If those 3 declines were incurring average bank overdraft fees, the cardholder would be facing over $75 in penalties. Ouch.

Here’s how the kids break down by purchase decline percentages, which I bucketed into subjective grade levels:

Decline Percentage Percentage of kids Grade
0% 19.0% A+. Bravo!
5% or less (but over 0%) 12.1% B. Getting there.
25% or less (but over 5%) 32.8% C. Lots of work to do.
50% or less (but over 25%) 16.1% D. Pretty darn awful.
Over 50% 19.7% F. Yikes!

That’s a lot of kids bringing home bad money habit report cards.

I’ve written before about the 6 month Zero Decline Challenge as a test for bank account (or credit card) readiness. The good news is 19% of the kids from this sample are at least half way there. But the majority are nowhere close, with 19.7% flat out flunking.

I’ve also suggested assessing a parental overdraft fee as a way to curb declined transactions. It looks like the Bank of Mom/Dad would be clawing back a ton of fees from these kids!

But maybe you’d rather offer the carrot instead of applying the stick. A reward to encourage the good behavior instead of a penalty to curb the bad.

If so, consider paying out a bonus for making the grade each month. Of course, it’s your call as to which grades warrant a bonus and how much, if any.

To help kids make the grade, offer this simple study guide for avoiding declines:

  • Check the balance before a purchase. Most cards have handy apps that make checking the balance easy for kids.
  • Watch out for recurring bills. That’s where lots of the kids are going astray with declines. They sign up for services like Spotify and forget to leave a buffer on their cards for when the next billing hits.
  • Remember the PIN. Not only will the wrong PIN yield a decline, but 3 PIN strikes and you’re out. Help your child pick a memorable but secure PIN.
  • Locate the card security code. Typically, it’s on the back next to the signature panel. The code is a security measure intended to reduce fraud when the cardholder is not present for the purchase — like when purchasing online.
  • Match the billing address. Make sure your kid knows the address on file for the card. That’s the address your kid will need to supply for the billing address when purchasing online. If the two don’t match, the transaction will be declined.

After mastering those points, your child will be on the road to an easy A+.

Whether you opt for the carrot, the stick, or just a discussion when it comes to declines, make sure to pay attention. Ignoring bad habits won’t improve them. Turn on card activity alerts to detect declines right away, and coach your kids in real time.

Raising your kid’s money habit grades early will pay big dividends in the future.


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

Thursday, June 1, 2017

Get Your Kid A Just-In-Time Card For Smarter, Safer Spending

Phone with money request for prepaid card.

More and more parents are ordering “Just-In-Time” spending cards for their kids.

What are those? Prepaid cards used only at the moment of purchase.

Here’s how it works.

Normally, the balance on the Just-In-Time card sits at zero. Earnings from a kid’s chores, odd jobs, allowance, or part-time work accumulate in a separate short-term savings bucket. That savings card or account is never used for purchases directly.

When the child wants to make a purchase, she:

  • Checks the balance of her savings to ensure sufficient funds.
  • Requests an immediate transfer from her savings to her Just-In-Time card for the required amount.
  • Waits for her parent to approve and complete the transfer.
  • Makes the purchase using the freshly loaded Just-In-Time card.

Once notified of the purchase, the parent can return any remaining funds to savings and bring the Just-In-Time card balance back down to zero.

Sound like too many steps?

With the latest app-driven card offerings, the cycle can be competed in real time with just a few taps on a smartphone. More often than not, requests from my kids are sent, received, and approved (or not!) while waiting in line at the register.

Why bother with the Just-In-Time card two-step at all? Four solid reasons:

  1. Reduce impulse buys. Now your child will have to stop, consider, and justify each purchase. He can’t just swipe a loaded card willy-nilly on a whim.
  2. Increase dialog. No more silent purchases. A little discussion (often minimal) will accompany every purchase. More money discussions means more money skills. It also means more comfort with financial transparency — your child’s future spouse or partner will appreciate that. And, as Ron Lieber says: “Every conversation about money is also about values.” Bonus.
  3. Increase earnings on savings. Your kid’s money will spend most of it’s time in savings. If you’re offering a healthy parent-paid interest on his account, the funds can grow nicely. Further incentive not to spend.
  4. Thwart fraudsters. Chipotle, Target, the local restaurant, the gas station down the street, that weird gaming site: they’re all places your kid might use his card. What else do they have in common? They’ve coughed up payment card data to fraudsters.

    The chances keep increasing that any card your kid uses will be compromised and have its data sold off on the dark web. Down the line, someone somewhere will probably use that stolen data to hit your kid’s card with a fraudulent transaction.

    Fortunately, his Just-In-Time card has zero dollars on it. That fraudulent transaction will be declined. You’ll see the alert. You’ll order a replacement card without hassling over lost funds. Easy-peasy.

    Meanwhile, your kid’s savings card hasn’t been used anywhere, so its funds are safe.

With a Just-In-Time card, moving money at the very last moment will help your kid hold onto money over the long haul.


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

Wednesday, May 24, 2017

Show Kids What The S&P 500 Looks Like

S and P Index Map

Today’s Headline:
Financial stocks lifted the S&P 500 as the index notched a fourth consecutive session of gains.

You and your kids hear the names in the headlines almost daily. The DOW. The NASDAQ. The S&P.

“Dad, what’s the S&P?”

“It’s a stock market index.”

“Oh...What’s that?”

“Ummm... Ask your mom.”

The next time it comes up, don’t dodge it. Don’t pass the buck. But, don’t try to explain it either.

Sit your kid down in front of the interactive map at FinViz.com and show her instead.

  1. What are all those little tiles? Each tile is one of the 500 companies in the S&P 500. Fly over a few with the mouse. Recognize any?
  2. Why is the Apple tile called AAPL? Those initials are like the company’s nickname on the stock market. It’s called the ticker symbol.
  3. Why is AAPL so much bigger than the others? The more valuable the company, the bigger the tile. Apple is killing it. (That’s why they’re building a spaceship for their headquarters.) Can you find Starbucks? Disney? Nike? (Hint: Look in the Consumer Goods section. See the groupings and sub-groupings?) How do the company sizes compare? Any surprises?
  4. What do the colors mean? Green means the company got more valuable today. It’s stock price went up. People were willing to pay more for a share of the stock at the end of the day than at the beginning. Red means it’s value went down. Grey means it didn’t change. Mouse over the company’s tile to see a pop-up chart of how the price fluctuated throughout the day. Who are the big losers? The winners? Any surprises? There’s always a mix.
  5. But some of today’s losers seem like great companies. Did they just have a bad day? Use the little pull-down menu on the left to change the time frame to a longer period. Try 1 month, 2 months, 6 months, a year. What do you notice? What companies are green over all the periods? What about the overall color of all the tiles together? How does that change as the periods change? What’s more likely to be green over time: all the tile colors mushed together or one tile chosen at random? Try picking a few to see.
  6. So who picks these 500 companies anyway? Some group of nerdy economists. They get together and choose the 500 large companies they think are most representative of the overall U.S. economy. How do they figure that out? Go ask your mom...

Why does it matter if your kid knows what an index is? Because one of the world’s richest men and greatest investors, Warren Buffett, has some sage advice: invest in a low-cost S&P 500 index fund.

Now your kid knows what the S&P is and why buying all the stocks in it is a smart play (see #5 above).

And when your kid opens a Roth IRA with that first summer job, she’ll know exactly where to invest the funds for the long term. Move over Warren.


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

Wednesday, May 17, 2017

Pre-Negotiate Your Teen’s Summer Paycheck Savings Split

Teen On Job In Rickshaw Bagworks Factory

Parent: “How much did you save from your summer job last year?”

Teen: “Umm, nuthin’.”

Sound familiar?

Time for a preemptive strike before summer rolls around again.

As Warren Buffett says, “Do not save what is left after spending, but spend what is left after saving.”

So, negotiate a savings split deal ahead of time.

If your teen agrees to save 27.68% of every paycheck this summer, you will agree to do one or more of the following...

OK, so that last one is more of a mandate than a negotiation. It reminds me of Chris Rock’s definition of allowance.

With the negotiation (or mandate) firmly in place, make sure your teen has separate spending and savings accounts (or cards) ready to go.

When the job starts, help your teen automate the paycheck split if possible. Many employers support splitting direct deposits percentage-wise between multiple accounts. If not, turn on activity alerts for your teen’s main account so you’ll know to manually transfer the right percentage to savings as soon as each deposit hits.

The added payoff for these summer paycheck splitting experiences? Your teen will be more likely to get an early jump on employer matched retirement savings plans later as a young adult. It will just feel natural. Smart move.

So, what should your teen do with all the accumulated savings at the end of the summer?

Start a Roth IRA, of course.

Then, 50 years from now when someone asks your teen: “How much did you save from your summer jobs?”

The answer could very well be: “Oh, about a hundred thousand dollars.”

Compounding over decades for the win!


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