Saturday, April 30, 2016

Try The 30 Day, 3 Second, 3 Word Spending Awareness Challenge With Your Kids

Interesting Expense

Most of the time, spending just happens. It’s automatic. Reflexive.

Thinking about spending often happens at the end of the week, or the end of the month. When the money runs out. Lots of negative thoughts. Lots of judgement.

Carl Richards wants you to try an experiment. For 30 days, every time you make a purchase, pause for 3 seconds, and ask yourself 3 words: “Isn’t that interesting?”

Seem weird? It’s all about simple awareness. In the moment. Read more about it in Carl’s article.

For fun, expand the exercise to include your kids. Whenever you’re out together buying something, consciously examine the receipt together and say: “Isn’t that interesting?”

See where the conversation leads from there.

It’ll be interesting. And educational.

Friday, April 29, 2016

Show Kids How To Compartmentalize Money

Today’s fantastic family finance article is:

Mixed Up Money Vs Organized Money

“Hmmm... Do I have enough to go out to the movies tonight? Lemme think... I know I’m setting aside some money for emergencies, and I’m saving toward my first car, and something else... Can’t remember off hand. Oh well, I probably have enough...”

When all your money is in one account, it can be very difficult to keep your financial priorities organized in your head. Spending meddles with saving.

Show your kids a better way. Show them how to keep money compartmentalized. Divide it into separate buckets, each labeled for a specific purpose.

Start the habit early. For youngsters, those buckets might just be labeled jars or titled accounts in a family bank spreadsheet. Older kids might use separate prepaid cards or bank subaccounts.

Clearly bucketed money has a way of staying put until its intended purpose comes calling. Mixed up money has a way of wandering at the first opportunity.

Keep your dollars in the right compartments.

P.S. Share the other smart saving tricks in today’s article with your kids too.

Thursday, April 28, 2016

Teach Kids To Think In Absolute Dollars, Not Relative

Today’s fantastic family finance article is:

Relative Money Amounts

When you’re thinking about money in absolute dollars, you might have a conversation like this:

Me: “Hey, can I have $20?”

You: “What? Are you crazy? That’s a lot of money!”

When you’re thinking about money in relative dollars, you might have a conversation like this:

Me: “For just 4% more, I’ll throw in this super fancy case for your phone!”

You: “Yeah, sure. Why not? That’s a small fraction of the $500 I’m already forking over!”

See what just happened there? The same $20 magically became less valuable in your head. Jedi mind trick. Salespeople play it all the time.

Teach your kids to resist the relative money mind trick. Teach them to ask: “Would I consider this a lot of money if someone simply walked up out of the blue and asked me for it?”

Teach your kids $20 is $20. Period.

Wednesday, April 27, 2016

Sketch The Lifetime Value Of Your Kid's Next Purchase

Lifetime Value Comparison Charts

“Dad, the Joneses have a trampoline. It’s awesome! Can we get one too? Plllleeaasse!!!”

Day 1. Indeed, awesome!

Day 10. Yeah, pretty fun.

Day 100. Meh...

The awesomeness of a fancy new “want” inevitably decays over time. In fact, the initial drop is often quite steep. Sometimes, it can crash from delightful to dull in just days.

The next time your kids ask for that shiny new thing, pull out the graph paper and plot a projection of its awesomeness over time.

Shade the area under the curve. That represents its lifetime value.

Things like trampolines often start high on the awesomeness scale, but descend rapidly. They’re just novelty items with a rapidly decaying fun factor.

On the other hand, things like ordinary bikes might start relatively low on the awesomeness scale. But if you ride your new bike every day, it delivers consistent long term value that ultimately exceeds that of the long abandoned trampoline.

So, focus your kids on buying things with lots of area beneath that value-over-time curve, especially when it comes to expensive items.

Does that mean your kids never get to enjoy a fancy want? Nope. As Mr. Money Mustache points out, they just need to figure out how to extract that initial high value without paying for the low value long tail.

The upshot: buy the bike, but visit your friend’s house for the trampoline.

Tuesday, April 26, 2016

Coach Kids On the Differences Between Making Money And Managing It

Today’s fantastic family finance article is:

Benjamin Basketball Hoop

“Rich people don’t need to worry about money, right Dad?”


Teach your kids that making money and managing it are two very different skills. Just like offense and defense on the basketball court.

The stunning reversal-of-fortune stories profiled in today’s article serve as memorable cautionary tales from some of the highest paid NBA athletes of all time. The moral of each story: even the biggest salary can’t overcome bad money habits.

Here are just a few poster children on the NBA wall of financial shame:

Player Earned Blew It On Result
Charles Barkley $40M A bad agent, compulsive gambling. Broke after 4th year in NBA. Lost as much as $10M gambling. Has rebounded financially since.
Derek Coleman $91M Bad investments in Detroit. Filed for bankruptcy in 2010.
Latrell Sprewell $100M Yacht, multiple million dollar homes. Yacht seized, homes foreclosed.
Vin Baker $100M Bad investments, an entourage known to spend over $10K on a single meal, a pricey mansion. Went broke. Sought job as manager at Starbucks.
Allen Iverson $200M Casinos, gratuitous bling, gated estate with gutters made of pure copper, credit cards, hand-outs. Told divorce judge in 2012 that he didn’t have enough money to afford a cheeseburger.

Everybody needs to learn how to manage money wisely, regardless of income level. Without basic personal finance skills, even the largest fortune can evaporate.

Coach your kids to play both ends of the financial court, or they’ll wind up on the bench.

Monday, April 25, 2016

Match Coupons To Encourage Your Kid To Shop Smart

Today’s fantastic family finance article is:

Coupon Search

Using coupons is a classic savvy shopper maneuver. And, these days, it couldn’t be easier to find them.

Often, a simple online search of the desired brand name or product followed by the keyword “coupon” will turn up a deal.

Next time your kid is zeroing in on an item, make sure a coupon search — along with some product research and comparison shopping — is on the pre-purchase checklist.

Consider adding a little extra incentive buy offering to match the value of any coupon found. Call it the savvy shopper cash back offer.

Sunday, April 24, 2016

Warn Kids That Loans Between Friends Can Be A Shakespearean Tragedy

Today’s fantastic family finance article is:

Polonius Ponders Loans

Does your child know the risks of lending money between friends?

Try a little drama to get the point across. Specifically, Act 1, Scene 3, Lines 75-77 of Shakespeare’s classic tragedy Hamlet:

Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

Can your child decipher the 3 risks?

  1. Default. A loan that “loses itself” is one the borrower never repays. The lender risks never seeing the money again.
  2. Resentment. A loan that “loses a friend” is one that creates resentment in a personal relationship. Friendships and money are a risky mix.
  3. Laziness. “Husbandry” refers to the careful, thrifty management of resources. Why work hard to earn and manage your own money when you can easily borrow it from a friend?

When it comes to friends, to loan or not to loan is indeed a tricky question.

Saturday, April 23, 2016

Teach Kids Net Worth Is Important, But Unrelated To Self Worth

Today’s fantastic family finance article is:

Self Worth As Non-Function Of Net Worth

Net worth is a measure of your financial value. It’s a very important number to teach your kids how to calculate and track.

Here’s how you do it:

  • List the key things you own. List the current balances of any checking, savings, and investment accounts. List the trade-in value of your car if you have one. If you owned a home, you’d list its current market value. Leave out the little stuff, or things that can’t be realistically converted to cash.
  • Add all those numbers together. That’s your total assets.
  • Now list all the things you owe. These are typically loans of some form. Your current credit card balance. The amount owed on student loans or a mortgage.
  • Add all those numbers together. That’s your total liabilities.
  • Now subtract your total liabilities from your total assets. That’s your net worth.

To recap:

Net Worth = Total Assets - Total Liabilities

Some key observations to share with your kids:

  • You can have lots of fancy assets — a mansion, a beach house, a Maserati — and still have negative net worth. How? Big hefty loans to finance all those fancy possessions.
  • You can have very modest assets — a small bank account, no home, no car — and still have positive net worth. How? No loans, no debt.
  • Negative net worth means stress. Loan payments due every month. Snowballing credit card debt. Bill collectors calling. No extra cash to handle emergencies. No freedom to pursue your dreams.

So knowing your net worth is important. More net worth means less financial stress and more financial freedom.

But net worth does not measure your kindness.

It does not measure your talents.

Nor your character.

Make sure your child knows that net worth and self-worth are not connected.

Financial value and human value are two unrelated scales.

The bottom line: It’s important for your child to know what net worth is. And what it isn’t.

Friday, April 22, 2016

When Your Kid Poses An Awkward Money Question, Ask "Why Do You Ask?"

Awkward Money Question From Child

“Mom, how much money do you make?”

“Are we in debt?”

“Are we rich like Jenny’s family?”

“How come we don’t get to go to Europe for a vacation?”


Do you...

  • Ignore?
  • Change the topic?
  • Stall?
  • Engage?

Try a little bit of stalling and a lot of engagement.

What’s the stall tactic?

Ask your child: “Why do you ask?”

Be sure to use a friendly tone, not an indignant one. You want to encourage communication, not scare it off.

Now you’ll have a few moments to gather your thoughts and think through an age-appropriate response. More importantly, you’ll gain some insight into the question behind the question. Is your child anxious about the family’s financial situation? Being teased by peers? Feeling inadequate? Jealous? Randomly curious?

Those answers may lead you to a very different conversation. And a more thoughtful, helpful one.

As Ron Lieber says: “Every conversation about money is also about values.” So embrace the awkward money conversation, but find out where it’s coming from first.

To learn more about having thoughtful money conversations with your kids, read Ron’s excellent book, The Opposite of Spoiled.

Thursday, April 21, 2016

Ask 4 Questions To Avoid Overspending On Your Kids

Overspending Kid Questions

Phyllis Diller once quipped:

“I want my children to have all the things I couldn’t afford. Then I want to move in with them.”

That’s funny.

A recent T. Rowe Price poll found:

46% of parents have gone into debt to pay for something their kids wanted.

That’s no joke.

The same poll found:

58% of parents worry they spoil their children.
57% of kids say they expect their parents to buy them what they want.

If you find yourself on the wrong half of any of those statistics, ask yourself why.

  • Competition? Are you trying to keep up with what other parents are buying their kids?
  • Guilt? Are you feeling guilty about not spending enough time with your kids? Trying to compensate with purchases?
  • No structure? Does spending on your children lack structure? Handing over money willy-nilly? Do you have a system for keeping wants in check? A budget-based allowance?
  • No ownership? Are there opportunities for your kids to earn their own income? Spending your money is easy. Spending their own money? Much tougher.

After all, if you’re going to be moving in with your kids, you better teach them the money skills they’ll need to afford you.

Wednesday, April 20, 2016

Should Your Kid Pay For A Lost Coat?

Old Jacket New Jacket

You child left a coat at school. Days later, it hasn’t turned up at the lost and found.

What’s the right parental response?

Certainly not to produce a new coat out of thin air with no discussion. There’s no learning there.

But, which of the following responses is best:

  • “You’ll need to help pay for a replacement so you learn to be accountable for your belongings.” (Related tip: Add an emergency fund to your kid’s money bucket list.)
  • “You’ll need to make do with an old coat we have in the closet.”
  • “These things happen. Since this is the first time, we’ll purchase a replacement for you, but let’s be more careful going forward.”
  • “What do you think is the best way to handle this?”

The answer is: it depends.

As this thoughtful story points out: “we don’t have to pick a one-size-fits-all style from parenting’s extremes.”

Your situation. Your child. Your values. Each has nuance and context that you’re in the best position to evaluate.

Pick a solution that fits your child. Like a snug coat.

Tuesday, April 19, 2016

Tell Kids Why They Should Care About Money

Today’s fantastic family finance article is:

Who Cares Hundred Dollar Bill

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

Do your kids care about money? Why? Why not?

Where do their feelings about money come from? Friends? Media? Social media? Music?

If you’re not on that list, the answers might surprise or even shock you.

Have the “Why money?” conversation with your kids. Have it often. After all, the influences in a young person’s life change very rapidly.

Not sure what to emphasize? Today’s article includes some handy points.

  • Money can’t buy love, but a shortage can ruin relationships. Money related issues top the list of reasons for divorce. Caring about money helps you get on the same financial page with your partner.
  • Money can’t buy good luck, but it can bail you out of bad luck. As they say, “stuff” happens. When it does, you’ll probably need money to help fix it. Caring about money helps you set aside the funds you’ll need to rebound gracefully from life’s inevitable emergencies.
  • Money can’t buy happiness, but it can prevent a lot of unhappiness. Unhappiness is not being able to put food on the table or cover your other basic needs like clothing and shelter. Unhappiness is never being able to indulge in occasional “wants.” Unhappiness is dealing with late payments, overdraft fees, payday loans, bill collectors, or even bankruptcy. Caring about money helps you develop the skills and habits you’ll need to avoid financial stress.
  • Money can’t buy meaning, but it can give you the freedom to pursue it. Caring about money helps you build the financial reserves you’ll need to do what you want to do with your life. Without financial independence, you’ll remain beholden to someone else’s agenda.

So, it’s true, money can’t buy you love, luck, happiness, or meaning. But it’s definitely worth caring about. Make sure your kids hear why. From you.

Monday, April 18, 2016

Teach Kids How To Catch Phish

Phishing Text

“Hey dad, the bank just texted me. What’s my account number, PIN, and security code again?”

Uh oh. Your kid is about to swallow a phishing attempt hook, line, and sinker.

Make sure your kid knows that any email, text message, or phone call asking for sensitive information is most likely fraud. Do not click. Do not call. Do not respond.

If the message is from an unknown source, has odd grammar or spelling, or makes a ridiculous offer from a Nigerian prince, coach your kid to just delete it.

Even if the message seems legitimate, coach your kids to look up the contact information for the institution separately. Look on the back of the card. Look at a recent account statement. Google the name. Then, contact the institution directly to see if there is a valid issue.

When it comes to communicating about sensitive information, make sure your kids are the ones casting the line, not the ones taking the bait.

Sunday, April 17, 2016

Teach Your Kids More Money Skills With A Spreadsheet Bank Account

Today’s fantastic family finance article is:

Spreadsheet Bank Account For Kids

It’s time to move beyond the piggy bank.

Your kid is ready to learn critical money concepts and skills like:

  • How bank accounts work.
  • The power of compound interest.
  • How to track spending.
  • The pain of costly debt.
  • How to set and achieve financial goals.
  • The reality of money as an abstract number — beyond just physical cash and coins.

But setting up bank accounts for young kids can be a real hassle. There might be overdraft fees and other hidden gotchas too. And traditional savings accounts don’t pay enough interest to be remotely interesting.

So, try a simple spreadsheet instead. Today’s article shows how to open up your own little family bank in Google Docs with a handy template.

Retire the piggy bank. Open a family bank in a spreadsheet. Take your kid’s financial IQ to the next level.

Saturday, April 16, 2016

Don't Leave Teens Wondering "What The FICA?"

FICA Withholding

“OK, I get that some money comes out of my paycheck to pay for income tax, but what are these two other withholding boxes?”

“Oh, that’s FICA.”

“Who the heck is FICA?!”

Introduce your teen to FICA before that first paycheck arrives.

Here’s a quick bio:

  • FICA is the Federal Insurance Contributions Act — a federal law that requires a tax for Social Security and a tax for Medicare to be withheld from each paycheck.
  • FICA’s Social Security tax is 6.2%. So $6.20 will be pulled out of every $100 in your paycheck to help provide a safety net for retirees, the disabled, and children of deceased workers. Social Security was created in the 1930s following the Great Depression.
  • FICA’s Medicare tax is 1.45%. So $1.45 will be pulled out of every $100 in your paycheck to help provide hospital insurance benefits for the elderly. Medicare was created in the 1960s.
  • FICA taxes are matched by your employer. So workers and employers are both contributing to a piece of the social safety net.

Now your teen will know what to expect before meeting FICA for the first time.

Friday, April 15, 2016

Teach Teens How Progressive Tax Rates Work

Today’s fantastic family finance article is:

A Progression of Benjamins

Ask your teen this money math question: “Let’s suppose you make $40,000 of taxable income. That puts you in the 25% federal tax bracket. How much income tax do you pay the IRS?”

You’re likely to hear some reasoning like: “Well, that means 25% of $40,000 which would be $10,000. Right?”

“Wrong. Try $5,793!”


Time to teach your teen how the progressive tax system works in the U.S.

The income you make is chopped into portions. The first portion is taxed at one rate — the lowest rate. The next portion is taxed at a higher rate. The next one a higher rate still. And so on. The ranges that define the sizes of each portion and the corresponding tax rates are known as tax brackets.

Here’s what the tax calculation looks like for our example:

Tax Bracket Income Portion Tax Owed on Portion
on first $0 to $9,225
$9,225 $922
on next $9,226 to $37,450
$28,225 $4,234
on next $37,451 to $90,750
$2,550 $637
TOTAL $40,000 $5,793

The right-hand column shows the amount owed on each portion of income as each is taxed at a progressively higher rate. The total tax owed adds up to $5,793.

If we divide the total tax owed by the total taxable income of $40,000, we get 14.48%. That’s called the effective tax rate.

The rate in the highest tax bracket that applies to you is called your marginal tax rate. In this case, it’s 25%.

Key points to emphasize:

  • You pay different rates on different portions of your income — not just one rate.
  • Everybody pays the same tax rate on the first portion of income. Everybody pays the same higher rate on the second portion. And so on.
  • The highest rate that applies is your marginal tax rate. That’s the one most people talk about.
  • Your effective tax rate is typically quite a bit less than your marginal tax rate.
  • You never "lose money" by earning more money and pushing yourself into a higher tax bracket.

If all that makes your kid’s eyes glaze over, you can always regress to the simpler Conan O’Brien tax lesson:

“Just taught my kids about taxes by eating 38% of their ice cream.”

Now you’ve got their attention!

Thursday, April 14, 2016

Show Kids How To Set But Not Forget Finances

Financial Automation With Notification

Good financial habits require strong doses of willpower, self control, discipline, and objectivity.

These words are not typically uttered in the same sentence as teenager. In fact, they don’t particularly pair well with human.

The solution? Automation.

  • Automated transactions don’t forget, or get tired, or agonize, or get distracted.
  • Automated payments don’t incur late fees.
  • Automated deposits don’t act impulsively.
  • Automated investments don’t react emotionally to market swings.

But financial automation can have a dark side: complacency and neglect.

  • Automated payments don’t negotiate a better rate.
  • Automated payments don’t check to see if you’re still using the service.
  • Automated deposits don’t adjust when your goals or situations change.

The solution? Notifications.

Teach your kids to couple financial automation with notification. Show them how to set up email and text alerts for their automated financial transactions.

The automation enforces the discipline. The notification forces the awareness.

That’s how to set it but not forget it.

Wednesday, April 13, 2016

Teach Teens What a W-4 Is For

Today’s fantastic family finance article is:

Surprise Amount Due

“Sweet! Look at my huge tax refund!”

“$#@%*! How can I owe that much in taxes?”

Two very different tax-time reactions from your working child.

Same problem though.

Your teen has no idea how a W-4 form affects tax withholding from a paycheck.

Teach your teen this key concept: entering more allowances on the W-4 means less taxes will be paid along the way. Enter too many allowances, and you could be staring at a big unexpected tax bill come April 15. Enter too few, and you could be seeing a tax refund instead. Exempt means no taxes will be withheld.

For a teen getting that first part-time job paying a few thousand dollars or less, 0 allowances or exempt is likely the way to go.

For a young single grad getting a first full-time job, it’s probably a 1 in the allowance box.

Eyes glazing over with this tricky tax talk? Just teach your teen this handy limerick:

There once was a dude named Theodore,
Who was totally baffled by his W-4.
Allowances sounded good,
So he entered more than he should.
Surprise! Now he owes taxes galore!

Tuesday, April 12, 2016

Pitch Savings As Profits To Kids

Today’s fantastic family finance article is:

Boring Savings Versus Cool Profits

Try the following conversation with your kid:

  • “Guess how much it costs Apple to make an iPhone?” About $225.1
  • “Guess how much people pay for it at the store?” About $649.
  • “So, how much does Apple keep on every iPhone?” About $424. Wow!
  • “What’s that extra money called?” Profit.
  • “What fraction of Apple’s price is profit?” About 65% since 424 / 649 = 0.65.
  • “What’s that percentage called?” Profit margin.
  • “What do you think Apple does with all that profit?” Banks it. Builds new stuff. Sends some to stockholders. Whatever they want!
  • “Does profit make Apple stronger?” Indeed.

How’d your conversation go? Pretty good, huh?

Most kids find profit naturally interesting. Apple is piling up some serious cash. Pretty impressive. Pretty powerful.

Now, pivot the conversation while the iron is still hot.

  • “How much money did you spend last week?”
  • “How much money did you earn?”
  • “So, how much money did you keep?”
  • “What’s that extra money called?” We could call it savings (boring), or we could call it profit (cool).
  • “What fraction of your earnings did you keep?”
  • “What’s that percentage called?” We could call it savings rate (boring), or we could call it profit margin (cool).
  • “How does your profit margin compare to Apple’s?”
  • “If you have a healthy profit margin too, what can you do with your growing cash?”

The answer to the last question might be: whatever you want.

And that’s the key point to drive home. Running a personal profit week after week means freedom. Freedom from debts. Freedom to make your own choices.

Freedom is cool.

1Source for iPhone figures here.

Monday, April 11, 2016

How To Get Paid To Go To College

Today’s fantastic family finance article is:

College costs are out of control.

What if there was a recipe for going to college for free? What if it didn’t involve sports, the military, or valedictorians?

Today’s article reveals one such recipe.

Here’s what it entails:

  • Expectations. Mom and dad made it clear early on that Blake’s goal was to emerge from college debt-free and to cover expenses with scholarships.
  • Work ethic. For months, Blake dedicated hours during the week and on Saturdays to write essays and attend interviews. Sacrifices had to be made.
  • Story. Blake wasn’t perfect (not the highest ACT scores of his peers), but he had a solid story. Blake wasn’t afraid to tell it.
  • Planning. A master checklist tracked progress, and files were maintained for each school.
  • Persistence. Hundreds of essays were written and submitted. As Blake says, “If you never ask, you’ll never know.”

The recipe isn’t easy to follow, but it isn’t impossible either.

Time to start gathering the ingredients.

Sunday, April 10, 2016

Show Teens Minimum Payments Mean Maximum Damage

Today’s fantastic family finance article is:

Minimum Credit Card Payment Chart

“You can run into debt, but your have to crawl out.”
~American Proverb

Your teen just got that first credit card. Here’s the conversation you want to head off at the pass.

“Dad, I went a little crazy this month with that phone upgrade. I owe $500 on my credit card bill. Fortunately, I see I can just make a minimum payment of $20. Phew!!!”

No, not phew. More like pee-YOO. As in: that debt is gonna stink big time.

Ask your teen to guess how long it would take to pay off a $500 balance making just the minimum payments each month. Assume typical credit card terms. Let’s say 18.9% interest rate and 4% minimum payment.

The answer? Wait for it...

3 years and 8 months.

Oof. That’s almost as long as your teen will be in college. (Well, hopefully).

What if your teen paid a steady $20 every month instead of the minimum balance every time?

2 years and 9 months. Better, but still a crazy long time to a teen.

Of course, that assumes every other additional purchase on the card is fully paid off each cycle. Every. Single. One. Toss in a few unpaid purchases each month, and your teen will find credit card debt is a constant smelly companion.

That’s exactly how the story plays out. Time after time.

Change the story. Coach your teens to never make credit card purchases they can’t pay off at the end of the month. In full. When that credit card bill arrives, always pay as much as possible as soon as possible.

To make the message memorable, use this online calculator with your teen. Play with some scenarios. Have your teen plug in the price for an expensive item that’s all the rage. Check off the minimum payments option. Watch the chart expand. Minimum payment equals maximum damage.

Your teen needs to know credit card debt stinks. And the smell lingers. Fortunately, armed with your minimum payment lesson, your teen’s credit history will wind up smelling like a rose.

Saturday, April 9, 2016

Invest More Time Than Money In Your Kids

Today’s fantastic family finance article is:

Father and Son

Parenting is a crazy ride. Throw in the demands of career and family obligations, and it’s often just a blur.

Here are two favorite quotes to remind us to slow down and invest more time with our kids.

“The best thing to spend on your children is time.”
~Unknown Wise Person
“If you want your children to turn out well, spend twice as much time with them, and half as much money.”
~Abigail Van Buren

The kids are off on their own before you know it, and they’ll benefit from your wisdom before they go.

Don’t worry if it seems like they aren’t listening much. They are.

[Insert teen eyeball roll here.]

Someday, they’ll even thank you.

Friday, April 8, 2016

Don't Protect Your Kids From Magic Money

Cash To Digital

“Don’t give your kid a credit card — or even a debit card — for as long as you possibly can.”
~Beth Kobliner

Many parents echo this cash-only mantra for kids. And Beth isn’t just “any parent.” She’s a personal finance commentator and journalist, author of Make Your Kid a Money Genius (Even If You’re Not), and a member of the President’s Advisory Council on Financial Capability.

Here’s the expert rationale: cash makes kids more mindful of their spending. It’s tangible. Kids feel every transaction. On the other hand, cards and electronic payment methods discourage mindful spending. The money seems invisible, magical, infinite.

And therein lies the rub.

“Protecting” your kids from non-cash forms of money only prolongs their ignorance. It’s a very dangerous ignorance. Consider that cash transactions will be a vanishingly small fraction of the financial reality your kids will be experiencing as young adults.

So take the time to explain to kids how all forms of money work. Demystify the “magic” of electronic payment. Give your kids hands-on experience with appropriate versions of the payment methods they’ll be using as adults. Your kids are smart. They’ll pick up on the concepts rapidly.

Sure, they’ll still make mistakes. But better to make those mistakes with this “magic money” early, while the repercussions are minimal. Later, those mistakes will be far more costly, if not debilitating.

And what about mindful spending? Turn on real time transaction alerts that report the remaining balance after every purchase. Instant awareness.

Don’t protect your kids from the more magical forms of money. Educate them.

Thursday, April 7, 2016

Teach Kids That Looking Rich Can Make You Poor

Today’s fantastic family finance article is:

Bling On Teen

“Before you try to keep up with the Joneses, be sure they’re not trying to keep up with you.”
~Erma Bombeck

As a teen, the author of today’s article grew up in a wealthy neighborhood. Private schools. Kids driving flashy cars. Fancy prom dresses. Sweet 16 parties. Spring break vacations.

But her parents wore cheap clothes, bought used cars, paid up front in cash, planned meals, and recycled for redemption value.

Doh! How embarrassing. Her parents were middle class posers in an upper class neighborhood. Imposters!

Well, except for the paid off mortgage. The ample college fund for the kids. The comfortable retirement.

How many of the outwardly swanky Joneses were privately swimming in debt? Who were the real imposters in the neighborhood?

Teach your kids that looking rich doesn’t mean you are. Spending money on appearances can make you very, very poor. Too poor to spend money on the things that really matter.

“Strive to be anonymously rich rather than deceptively poor.”
~Len Penzo

Wednesday, April 6, 2016

Make A Money Roadmap For Your Kid

Today’s fantastic family finance article is:
Money Roadmap Milestones

“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where–” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“–so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
(Alice’s Adventures in Wonderland, Chapter 6)

Like Alice in Wonderland, your youngster — not surprisingly — has no idea where she’s headed financially, or how to get there.

That’s where you come in.

Unlike the Cheshire Cat, you have a firm idea of what your child’s destination should be. Take the time to map out the waypoints — the key financial skills you’d like your child to learn along the journey from preschool through elementary, middle, and high school. Even onto college and beyond.

Looking for a sample roadmap? Check out Trae Bodge’s example in today’s article. Customize the steps to match your family’s unique values and goals.

Don’t panic. You don’t have to get it right all up front. Adjust and fill in more detail along the way. The key is to be intentional about the path as early as possible. You’ll find the trip is over before you know it.

If you don’t map out your child’s financial journey ahead of time, she’ll end up down a financial rabbit hole that, more often than not, circles right back to your doorstep.

Tuesday, April 5, 2016

Teach Kids Not To Touch Investments

Today’s fantastic family finance article is:

Don't Touch Investments Sign

“Just leave it alone. Fiddling with it will only make it worse!”

Sounds like something you’d tell a teen about a pimple.

Well, the same holds for investing.

Check out the chart in today’s article. It compares what investors could have made by sticking with diversified long term investments versus what they actually made do to impulsive trading.

The average investor just doesn’t know how to leave well enough alone. They get worried when things start to look ugly, so they pick at their investments. The result? A failure to capture almost 1.8% of annualized total returns over 10 years. Over the long haul, that kind of gap can translate into bleeding away hundreds of thousands of dollars of potential earnings. Ouch.

So, teach your kids to leave those long term diversified investments alone. They’ll be rewarded with unblemished returns.

Monday, April 4, 2016

Teach Kids To Resist Bad Bargains

Today’s fantastic family finance article is:

Bad Shirt Bargain

Shirts are $10 each.

But there’s a bargain offer of 4 shirts for the price of 3. $30 instead of $40. Sweet deal!

Your teen comes home with 4 shirts.

“Look dad, I saved $10.”

“How many shirts did you need?”

“Umm. One.”

“You didn’t save $10. You lost $20.”


Teach your kids to be wise to the classic buy-more-for-the-price-of-fewer sales tactic.

Like the saying goes:

“A bargain ain’t a bargain unless it’s something you need.”
~Sydney Carroll

Sunday, April 3, 2016

7 Reasons Part Time Work Makes Sense For Your Full Time Student

Fast Food Hat and Graduation Cap

Fewer and fewer students are holding down jobs while attending high school or college. That’s a shame.

Here are seven reasons part time work makes sense for your full time student:

  1. Better grades. Research has shown that part time work can actually improve grades. Working students are often motivated to study harder. They know firsthand what kind of job they don’t want after graduating.
  2. More effective time management. Kids with jobs are forced to allocate their time more efficiently. They also know the importance of showing up on time.
  3. Stronger job prospects. Working kids have more to put on their resume. They also develop realistic expectations of workplace requirements and norms of behavior. The maturity comes across in an interview.
  4. Less student debt. Working can defray everyday expenses and some college costs, like books. That translates to smaller student loans.
  5. Smarter spending. Kids tend to spend their own precious funds judiciously. Mom and Dad’s money? Not so much.
  6. Bursted bubbles. Minimum wage work environments don’t coddle students like parents and schools do. Working kids learn to deal with negative feedback.
  7. Tax free investing. A working teen with qualifying W-2 income is eligible to open a Roth IRA where funds can grow tax free for decades. Offer to match your teen’s contributions if you can. More info here.

The bottom line: part-time job work doesn’t interfere with school work. It often enhances it.

Saturday, April 2, 2016

Private College Rejection: More Blessing Than Bummer?

Today’s fantastic family finance article is:

Rejection With Silver Lining

Here’s an April Fools Day story from The Onion that may be more truth than spoof.

Emily Harrison’s academic failure to get into USC saves her from a $370,000 financial disaster, loan repayment struggles, credit card debt, and crushed dreams of owning a home. Congratulations!

Seriously though, this comic story of spiraling college costs might be less tongue-in-cheek and more wits-at-end. Especially when you consider that a private college pedigree may not pack much of an extra pay punch.

So, be sure to do the math with your teen on that private college degree before submitting the application.

Unlike lucky Emily, your teen might just get accepted. Doh!

Friday, April 1, 2016

Make Sure Your Kid Is No Money Fool

Today’s fantastic family finance article is:

Money Dunce In Corner

April 1st is April Fools Day. Duh. No kidding.

April 1st is also the first day of Financial Literacy Month.

That makes April 1st the perfect day to start thinking about how you can make sure your kid doesn’t grow up to be a fool with money.

Not sure what to cover? Today’s article features an April calendar with 30 wise money conversations to share with your child — one for each day of Financial Literacy Month. Check it out here.