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.