Friday, September 30, 2016

Go Agile When Teaching Kids About Money, Not Waterfall

The Secrets Of Happy Families Book

In the early days of software, products were designed using the the “waterfall method”. Requirements were gathered first, then came design, then came implementation, then came verification, and then came maintenance. The lion’s share of the work was done up front — set in stone before the recipient even had a chance to respond. Once one phase was done, there was no turning back. Everything flowed in one direction. Downward. Like a waterfall.

So, what if the downstream recipients — the end users of the software — discovered that the upstream assumptions were incorrect? Oops. Too bad!

The result? Lots of bad software that didn’t meet the needs of its users.

These days, software is built using “agile techniques” instead. Now the water flows rapidly in both directions. Work is done in short iterations. Assumptions are tested with end users at every turn. Course corrections happen repeatedly.

The result? Good software that meets the needs of its users.

In his bestselling book, The Secrets of Happy Families, Bruce Feiler argues that parents should apply that same agile approach to building strong families. And money habits are a key part of the picture. See chapter 5, “The Buck Starts Here”, featuring yours truly.

The old-school waterfall approach to parenting, characterized by one-way phrases like “do as I say because I said so” or “do it because that’s how it was when I grew up”, doesn’t work.

Why? Kids have different personalities, evolve over time, and live in a different circumstances than we did. Constant change demands constant refinement.

So, take a page out of the agile book instead: constantly test new approaches with the kids, gather feedback, and refine accordingly.

Listen to this excellent Digital Dads podcast episode with Bruce Feiler to learn more.

As Bruce says: the secret to happy, high functioning families comes down to one simple principle: an ongoing “commitment to thinking about it and working on it — the commitment to trying.”

The bottom line: if you want to raise kids who are thoughtful, responsible, and high functioning with money, go agile not waterfall. Test, gather feedback, refine. Repeat.

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Thursday, September 29, 2016

Let Your Kids See You Leave Stores Empty Handed

Empty Hands

Stores are very clever at turning the act of entering one into a sense of obligation.

Time spent helping you, a special discount, a free sample. All play off the powerful pull of reciprocity. The store has given you something, so naturally you owe them a sale in return.

No you don’t.

It’s OK to politely say you didn’t find what you were looking for, or you need some time to think things over. It’s OK to leave empty handed.

The next time you’re in a store with the kids, challenge them to identify all the subtle reciprocity techniques at play. The free samples in a grocery store are a classic example.

Show your kids how you’re perfectly comfortable leaving stores empty handed. When you do, explain why the product, the service, the price, or the timing wasn’t quite right. Make sure they realize who’s boss: the buyer, not the seller.

The more your kids understand retail reciprocity tricks, the more comfortable they’ll feel leaving stores with nothing in their hands and dollars in their pockets.

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Wednesday, September 28, 2016

Resist Retail Therapy With The Kids

A mood free shopping bag.

“Retail therapy is shopping with the primary purpose of improving the buyer’s mood or disposition.”

Scenario 1: Your kid is feeling a little blue. So you head out to the local ice cream parlor, saddle up to a double scoop, and share a little relaxed one on one time.

You just spent some money to improve your kid’s mood.

Problem? Nope.

The spending was just a modest backdrop. The focus was on quality time. No budgets were harmed along the way. No buyer’s remorse later.

Scenario 2: Your kid is feeling a little blue. So you head out to the mall, fill up your shopping bags with things you don’t need, and revel in the act of consumption.

You just spent a bunch of money to cheer up your kid’s disposition. (Perhaps you even did it to improve your kid’s feelings toward you.)

Problem? Yep.

The spending was the therapy. The focus was the act of consumption itself. You may have even torched the family budget along the way. Hello buyer’s remorse.

OK, those are obvious examples. But sometimes the line between retail normalcy and retail therapy can be a lot harder to discern. That’s why it’s always good to have the discussion with your kids:

“What’s the purpose behind this purchase?”

The more conscious your kids are about retail therapy, the less likely they are to seek it as adults.

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Tuesday, September 27, 2016

Add An Emergency Fund To Your Kid's Money Bucket List

A hole in a fence from errant lacrosse balls.

Spending? Check.

Saving? Check.

Giving? Check.

Emergency? For kids? Nah.

Most people don’t learn about emergency funds until they’re off on their own. And usually it’s after they’ve already dug themselves into a big financial hole. That’s why an emergency fund is the very first step in Dave Ramsey’s famous 7 baby steps to help people dig out of financial distress.

But what if we taught people about emergency funds much, much earlier? Why not take that first financial baby step as a kid?

Kids and teens certainly have plenty of little emergencies to cut their teeth on. Like:

  • That third lost sweatshirt.
  • The new shoes left on the soccer field, never to be seen again.
  • The hockey puck through the garage door window. Six times.
  • The gaping holes in the fence from constant lacrosse ball shelling. See evidence in picture above.
  • The glass pane in the side door cracked by a hurled cell phone. The culmination of a hormonal teen tantrum, the dramatic origins of which have been long forgotten...
  • The massive data plan overage charge.
  • The gold license plate replacement for the snooty Jaguar owner on the receiving end of a fender bump in the Starbucks parking lot.

Some or all of these may or may not have been actual emergency moments from my five kids’ earlier years. I’m not naming names...

Unless my family is completely abnormal, you’ll also have plenty of opportunities to deploy some emergency funds long before your child’s passage to adulthood.

So here’s a simple 4 step plan for making your kids emergency fund savvy:

  1. Set up a separate emergency fund for your kid. Add an extra jar, account, or prepaid card to your standard set of buckets.
  2. Divert a slice of allowance, chore, or odd job income to fill the fund. Temporarily amend your kid’s spend-save-give allocations to factor in the new emergency bucket. Revert to the original allocation once the emergency fund hits the target — maybe $25 for a youngster, $100 for a pre-teen, and $500 for a teen.
  3. Share some skin on the next emergency. Some emergencies may extend well beyond your kid’s means. Sharing the costs on a case-by-case basis is fine. As long as there’s some shared skin in the game, the lesson will be learned.
  4. Replenish the fund. Return to step 2. Rinse and repeat as childhood’s little emergencies arise.

Don’t wait to make your kids take those first emergency fund baby steps. Baby steps now might mean no crawling out of debt later.

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Monday, September 26, 2016

Take Your Family Swear Jar Online

Digital Swear Jar

The swear jar is a time honored family tradition for breaking bad habits.

Let loose with a four letter word around the house, and into the jar a payment goes.

But now, like everything else payment related, the penalty pot is going online.

Hip families are setting up a separate prepaid card or subaccount to replace the brick and mortar cuss container.

Make a transgression, and, boom, the penalty payment is just one tap away. No more chasing down the offender to cough up cash or coins for the jar. Instead, it’s:

  • An instant electronic transfer from the offender’s account to the swear jar account,
  • Captured in a permanent transaction history for handy perusal the next time the offender whines about being low on funds, and even
  • Real-time text alerts broadcast to the family — just to rub it in a little. Nothing like a little group schadenfreude!

And swear jars aren’t just for cussing. Any bad habit will do. Here are just a few infractions (gathered anonymously) that have racked up demerits within families this month:

  • Hurting a sibling (Biting is a favorite!)
  • Blowing off chores
  • Cell phone data overages
  • Being home late
  • Messy room
  • Screeching
  • Backtalk (A teen classic that includes muttering under your breath. And, yes, your mom can hear you!)
  • Slamming doors (another teen classic)
  • Attitude (the teen catch-all)
  • Lying (future politicians anyone?)

What should families do with their overflowing swear jar accounts? Donate the proceeds to charity, or spend them on something that benefits the whole family.

So do family swear jars really curb bad behavior?

Who gives a shiitake! At minimum, they’re just good clean family fun.

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Sunday, September 25, 2016

Calibrate Chore Payments With Real Data

Little girl pushing fake lawn mower

13.8% of families using our family banking service compensate kids for chores.

If you’re in the pay-for-chores camp, how do you decide the going rate? You can make it up, ask other parents in your network, rely on survey data, or calibrate using actual data. A mixture of all four might be the way to go.

On the survey side, Country Financial released new stats this month.

I decided to see how their survey stats stack up to the actual data we see from current, paying FamZoo families. I say “paying”, because free trial families might just be messing around. Paying families are serious. As they say, “money talks, bullcorn walks.”

Here’s a chart comparing the Country Financial survey data with actual FamZoo data for selected chores in 2016:

Chore Survey
Mow Lawn $6.28 $7.90 $0.90 $25.00 $5.00
Do laundry $2.82 $1.38 $0.02 $25.00 $0.75
Vacuum $2.55 $1.67 $0.02 $8.00 $1.00
Do dishes $2.03 $0.83 $0.01 $3.50 $0.50
Set/Clear Table $1.31 $0.64 $0.02 $4.50 $0.50
Make Bed $1.18 $0.41 $0.05 $2.00 $0.25

For our data, I include the average as well as the maximum, minimum, and median.

Pay attention to the median. It’s the number you would find if you lined up all the amounts from lowest to highest and picked the one in the middle such that half of the numbers are on the left and half are on the right. When the median is lower than the average, you’ve got some big outlier numbers on the right that you may want to ignore.

Why do some kids get paid as much as $25 to mow the lawn while others make less that $1? Well, for one thing, a “lawn” in the country might be measured in acres, while a lawn in a suburb or city might be measured in feet. Similarly, vacuuming might mean one carpet or the whole house.

The bottom line: use stats as a sanity check when calibrating chore payments, but ditch the outliers, favor actual data over survey data, and factor in your own judgement to get the best results.

Come to think of it, that’s a good maxim to share with your kids in general.

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Saturday, September 24, 2016

Fix The Way You're Doing Your Kid’s Allowance

A tuned racing car engine.

Do cars hurt people?

No, drivers do.(Defects and self-driving glitches aside.)

Does allowance spoil kids?

No, parents do. Allowances are just the misused vehicle of choice.

Used correctly, allowances don’t spoil. They teach kids to be responsible and thoughtful with money.

If you’re seeing otherwise, your allowance approach needs a tune-up.

A well-tuned allowance:

  1. Tracks a budget. Why guess at the right amount? Sit down with your kid. List the things the allowance should cover. Put it in concrete terms. Calculate the right amount accordingly. Little knick-knacks for youngsters? Set the allowance to the price of a favorite regular treat plus a smallish fraction of a modest toy purchase — enough to require plenty of patient saving to close the deal. Clothing for a teen? Put your teen in charge of a budget proposal for the season or year. Review and revise to negotiate the final amount. Consider using the premium price rule: allowance covers the bargain price. Anything above is on your teen.
  2. Forces trade-offs. When is an allowance too much? When you don’t see your child agonizing over tough financial choices. As Oprah says, “You can have it all, just not all at once.”
  3. Allows mistakes. Aside from a few obvious ground rules (no beer or cigarettes!), let your kids make the purchase decisions. A bad purchase is a learning opportunity. My now twenty-something daughter still remembers torching her annual clothing budget on that Neiman Marcus chiffon gown for high school prom. Total times worn: one. Pro tip: make kids submit written proposals for questionable purchases.
  4. Enforces consequences. Going cold turkey on clothing for the remainder of the school year is what made my daughter’s gown decision so memorable. A bail-out from mom and dad would have erased the memory. (A formal loan might be an acceptable alternative though.) A budget-based allowance is an up-front agreement. Stick to it.
  5. Prompts ongoing discussion. There’s a middle ground between dictatorial and laissez-faire allowance policies. Your kids need and deserve your experienced counsel. Discuss, just don’t dictate.
  6. Saves you money. Yes, you read that right. A well crafted allowance plan doesn’t create extra spending. It pays for things you would have purchased anyway. Even better, it constrains spending. It transforms ad hoc, emotional spending on kids into controlled, mindful spending by kids. That’s a recipe for saving. And learning.

If your allowance policy is spoiling your kid, don’t junk it. Just tune it up.

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Friday, September 23, 2016

Ditch The Say-Do Disconnect Over Money With Your Kids

Say-Do Signpost

When you tell your kids one thing about money, do they see you do another?

You say: “Always use cash.” They see you swiping a card in the store and entering your account info online.

You say: “Never borrow money.” They see you financing the car and the house.

You say: “We can’t afford that.” They see you splurging on occasional luxuries.

Those disconnects are confusing for kids.

If you use credit or debit cards, tell your kids when they’re appropriate and how to use them responsibly.

If you borrow money to finance large purchases, tell your kids when loans are appropriate.

If you occasionally purchase little luxuries, tell your kids how you factor “fun money” into your overall spending plan.

Kids pay attention when it comes to money. They hear what we say. They see what we do. When the two don’t match, they get confused. Ditch the disconnects. Tell it like it is, and give your kids money clarity.

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Thursday, September 22, 2016

Teach Your Kids What You Wish Your Parents Had Taught You About Money

Marty and Doc discussing money lessons

“What’s the one thing you wish you had learned about money growing up?”

Farnoosh Torabi used to pose that question to every guest on her So Money podcast.

Sifting through the responses from 81 episodes, I found a few common themes:

  1. Compound interest. “I wish I had learned about compound interest! Ah! If I had known what that was, I know I wouldn’t have spent all my money on glazed donuts and Mountain Dew.” ~Steve Stewart
  2. Investing early. “I wish my dad had said to the 22-year old me, ‘Look, just put 150 bucks a month away and forget about it.’ Even if I had just done that, now that I’m 43, it would have been a pretty colossal sum of cash. But, I didn’t know that enough.” ~Michael O’Neal
  3. Abundance mindset. “I wish I had known growing up that I’ll always be able to make money, and this is true of everyone. There was so much fear around money that was unnecessary.” ~Dave Asprey

What do you wish you had learned about money growing up?

Me? I wished I had learned about diversification earlier.

Your kids? What will they say someday?

It’s up to you. Maybe they’ll respond like Rebecca Jarvis: “I can’t answer that. I’m sincere in this, because I think my mom did a really good job.”

Wouldn’t that be so money?

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Wednesday, September 21, 2016

Show Kids How To Escape The Captive Audience Tax By Buying Ahead

Two Pricey Snack Bars And A Receipt

I just paid a whopping $8.10 for two piddly snack bars instead of $2.11. Doh!!!

Why? I’m a “captive” in this hotel. It’s over a mile in either direction to the nearest grocery store. Of course, they have a “convenient” little shop in the lobby that’s right on the way to the conference session I’m hustling to attend. Cha-ching!

This is a classic example of a vendor leveraging the powerful combo of captivity and convenience to raise prices and profits.

If consumers have nowhere else to conveniently go for an alternative, vendors know they can command super premium prices. Common captive venues include airports, sporting events, and movie theaters.

Next time you’re out with the kids, see if you can find some classic price gouges driven by the captivity and convenience combo. Work out the math together to see what the items would have cost in a non-captive venue. What kind of markups do you find?

In my case, if I had remembered to purchase snack bars in advance and in bulk at the grocery store, the math would have been:

  • Nature Valley Oats ’n Honey bars: $4.79 for 12 with 2 in each pack = $0.20 per bar. (Yes, the hotel convenience shop sold “special” packs with only one skinny bar inside instead of the typical two.)
  • Clif Oatmeal Raisin Walnut bars: $22.90 for 12 = $1.91 per bar.
  • $0.20 + $1.91 = $2.11

The $8.10 I paid is almost four times what I could have paid!

People often underestimate the size of the “captive audience tax.” In my case it was an astounding 284%. Yikes!

The money message for kids: Don’t let your wallet be abducted by the “captive audience tax.” Anticipating a captive venue and buying in advance can liberate big bucks.

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Tuesday, September 20, 2016

Help Kids Resist Scarcity Marketing Tactics Right Now!

An ad using scarce marketing tactics.

“Act now!”

“While supplies last!”

“Only 3 items left in stock.”

“Lightning deal. Today only!”

“Only 2 hours, 34 minutes, and 20 seconds left to reserve your spot.”

“You must complete this form and click Purchase within 90 seconds, 89 seconds, ...”

Breathless pronouncements of dwindling time and dwindling supplies dominate everyday marketing messages.

Why? Scarcity is one of the most effective sales tools there is. It’s one of the big six (along with reciprocity, commitment/consistency, social proof, authority, and liking) identified by Robert Cialdini in his classic book, Influence: The Psychology of Persuasion.

Marketers manufacture fake scarcity to convince people to buy. The bottom line: FOMO drives sales.

The next time you’re with the kids shopping in a store, browsing online, or watching commercials, see how many examples of scarcity marketing you can identify together. How many are legitimate? How many are a stretch? How many are completely absurd? Limited supply on a digital download? Really?

The more your kids can understand, identify, and even mock classic manipulative sales tactics like scarcity, the easier it will be for them to resist their lure.

So hurry! Time is running out! Educate your kids about scarcity marketing tactics now before it’s too late!

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Monday, September 19, 2016

Teach Kids To Pay Attention Not Extra Money

Kid Watching Carefully

As personal finance coach, Steve Stewart, often says on his popular No Debt, No Credit, No Problems podcast:

“Pay attention, not interest.”

It turns out, merely paying attention can save you money in all kinds of ways. Not paying interest is just one. It’s an excellent message to regularly reinforce with your kids of all ages — especially in today’s “click-through”, attention deficit world. Here are just a few examples to share with your kids and teens.

Pay attention, not...

  • High prices for small quantities. Teach your kids to pay attention to unit prices. Is there a discount for buying in bulk? (If so, will they actually use it all?)
  • Late fees. Teach your kids how to pay attention to when items are due back or when bills must be paid to avoid incurring unnecessary late fees. The lessons can start early with returning books on time to libraries and schools. Older kids can learn to meet monthly billing obligations. Start by charging them a share of the monthly family cell phone plan. Impose a parental late fee if they can’t cough up the funds on time.
  • Hidden fees. Teach your kids to scour the terms and conditions of the financial products they use. Play bank fee bingo.
  • High recurring rates. Teach kids to pay attention to all the payment plans available for recurring services. Does paying for a longer term in advance reduce the rate for that online gaming service or that prepaid card?
  • High investment expenses. When your teens open a Roth IRA after that first summer or part time job (with a match from you!) and select an investment, teach them to pay attention to the expense ratios of candidate funds. Why pay hefty investment fees when your teen can buy a very low cost, broadly diversified index fund with an excellent track record?
  • Credit card interest. Teach your older teens how to pay attention to credit card terms. They need to understand that paying just the minimum balance might sound attractive, but it really means taking out an expensive loan and paying hefty interest. Of course, the alternative is to avoid credit cards altogether (Steve’s advice) or use them in very controlled ways.
  • High loan rates. Teach older teens how to pay attention to their credit scores. A higher credit score means qualifying for lower rates on future loans or landing better rental opportunities.

If you help your teens pay attention to money matters now, they won’t be paying extra prices, rates, fees, expenses, or interest later.

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Sunday, September 18, 2016

Know Why Banks Must Know Your Teen’s SSN


“Why do you need to know my teen’s social security number?”

That’s one of most common questions I hear when opening prepaid card accounts for families.

Short answer: it’s the law.

Longer answer: the law has its origins in the 2001 USA PATRIOT Act which provides tools to intercept and obstruct terrorism. Section 326 of Title III stipulates that financial institutions must take reasonable steps to identify owners of bank accounts as a means of counteracting money laundering operations. That means putting in place a Customer Identification Program (CIP). You’ll also hear banks refer to this as Know Your Customer (KYC). Section 326 of the PATRIOT act was implemented by federal regulations in 2003. The bottom line: financial institutions must collect the name, date of birth, address, and social security number or other government identification number (passport number or other similar information in the case of foreign persons) for the legal account holder at the time a new account is opened.

Super long answer for insomniacs: read the FAQs for Final CIP Rule from the Treasury Department’s Financial Crimes Enforcement Network. Or, read through the actual federal regulations: 31 CFR 103.121. Zzz...

Why is Social Security Number part of the requirement? Your SSN is the one piece of identifying information that is:

  1. Universal. Any US citizen who wants to hold a job or receive any government benefits needs an SSN. That’s pretty much everyone.
  2. Unique. Government clerical errors aside, each SSN identifies one and only one individual in the US.
  3. Unchanging. Unlike your address or even your name, your SSN sticks with you throughout your life.

So, if you’re opening a financial account for your teen and a social security number is not part of the identification requirements, your question should really be:

“Why don’t you need to know my teen’s social security number?”

Or, if you really want to get technical, ask: “How are you complying with 31 CFR 103.121?”

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Saturday, September 17, 2016

Survey The Stats On Allowance vs Paid Chores vs Both vs Neither

Allowance Stat Pie Chart

Like any skill, managing money takes hands-on practice. So what’s the best way to put some funds in your kids’ hands? A regular fixed allowance? Payments for specific completed chores or odd jobs? A combination of the two? Or, perhaps neither — just make one-off transfers when necessary.

Here’s what parents are doing based on anonymous statistics collected from paying families in the last 60 days:

  • Allowance: 68.8% of parents delivered regular allowance payments, but no payments for specific chores.
  • Chores: 6.8% of parents delivered payment for specific completed chores, but no regular allowance payments.
  • Hybrid: 7.0% of parents delivered both allowance and individual chore payments.
  • Ad Hoc: 17.4% of parents delivered funds as needed with no regular allowance or chore payments.

So what’s ideal? Of course, it depends on your family’s situation and values. But the simplicity and structure of a regular allowance is clearly popular.

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Friday, September 16, 2016

Put Some Pain In Your Kid’s Cashless Payment (Video)

Today’s post is a video version of yesterday’s popular post: Put Some Pain In Cashless Teen Payment With Instant Notifications.

Can’t see the embedded video? Watch here.

Video Transcript

Hey, Bill here. As always, thank you for the nice mentions on social media.

Studies confirm people spend less when they use cash. Why? People feel more emotional “pain” and a sense of loss when they part with physical money. Cashless methods like cards and electronic wallets feel relatively “painless.”

So here’s the problem: like it or not, our kids are making more and more transactions online. Cash simply doesn’t fly there.

So how do we as parents manufacture some tangible pain around cashless payments to keep our kids’ spending in check?

Instant parental notifications. Find a payment solution for your kids that let’s you set up instant activity notifications that can be delivered to multiple family members. That means mom and/or dad can receive a text message as soon as Junior swipes the card. Now Junior knows a questionable purchase will likely lead to an immediate, painful interaction with mom or dad. The notification arrangement will certainly give Junior some pause before each swipe. And that’s a good thing.

Now, is this invasive parental meddling? Some might think so. But I think it’s more about establishing transparency, accountability, and mindfulness — especially for inexperienced spenders. Think about it: Should your kid really be buying anything you can’t discuss openly?

Instant parental notifications put a little pain in your teen’s cashless transactions.

I say: No pain, no restrain.

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Thursday, September 15, 2016

Put Some Pain In Cashless Teen Payment With Instant Notifications

Card With Notifications

Studies confirm that people spend less when they use cash. Why? “The pain of payment” is what Avni Shah, a professor at U of T Scarborough, calls it. People feel more “pain” when they spend with tangible bills, and less when they spend with cashless methods like cards and electronic payment.

But, like it or not, online commerce is becoming an ever increasing part of our teens’ lives. Cash simply doesn’t fly there.

So how do we manufacture some tangible pain around cashless payments to keep our teens’ spending in check?

Notifications. Give your teen a cashless payment solution with the ability to configure alerts that can be immediately broadcast to multiple family members. That means mom and/or dad can receive a text message as soon as Junior swipes the card. That, in turn, could lead to a slightly painful parental exchange, depending on the purchase. The arrangement will certainly give Junior some pause before each swipe.

Is it invasive parental meddling? Some might think so. But I call it transparency and accountability — especially for inexperienced spenders. Should your teen really be buying anything you can’t discuss openly?

Instant parental visibility puts a little pain in your teen’s cashless transactions.

No pain, no restrain.

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Wednesday, September 14, 2016

Coach Teens To Avoid Sharing Money Confessions On Social Media

Facebook Confessional

Today, a young man posted the following in a popular personal finance group on Facebook:

“Does anyone have any real experiences with audits on HSA accounts? Does it happen? I’m realizing now that I may have made some deductions on some ‘unqualified expenses’.”

This fellow just announced to the world that he may owe the IRS back taxes and a hefty 20% penalty because he used his Health Savings Account to pay for something he shouldn’t have.

While it’s laudable if he wants to correct his potential mistake, a public electronic forum isn’t a smart place to be making financial confessions attached to your real name.


  • It’s a public invitation for an audit. He may as well have posted: “IRS: please audit me.’ Someday, I wouldn’t be surprised to learn that IRS computers are mining public social media data to automatically identify audit candidates. Maybe they already are — like bill collectors. An audit is never a pleasant process, whether innocent or not. Better to determine how to correct your tax mistakes in private than publicly invite an audit.
  • It’s a public invitation for scammers. This fellow may now receive Facebook messages from people trying to take advantage of his ignorance: “Pay me $X, and I’ll fix the problem for you.” Or, worse, extortionists: “Pay me $X, or I’ll turn you into the IRS.”

A better approach?

  1. Do some basic research. A simple web search turned up some quick answers to his underlying question — like this article: What If You Use Your Health Savings Debit Card For Take-Out?
  2. Consult a trusted advisor. Once armed with some preliminary findings, follow up with a certified tax professional for some expert advice. In private.

The message for your kids: just because it’s easy to ask a personal financial question on social media doesn’t mean you should. Financial confessions belong in private, not on Facebook.

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Tuesday, September 13, 2016

Turn Your Kid’s Next Treat Outing Into A Mini Budgeting Lesson

Kid In A Candy Shop

Headed out to the ice cream parlor, the candy shop, or the dollar store? Here’s a nice simple technique for turning the next treat outing with your child into a mini budgeting lesson:

  1. Set a quick budget for the outing. No tedious haggling, or the deal is off!
  2. Parent covers the budgeted amount.
  3. Spend more? Kid picks up the difference. (The Premium Price Rule.)
  4. Spend less? Kid pockets the remainder.

The arrangement invariably leads to interesting discussions about personal finance basics like comparison shopping, impulse buys, pricing, relative value, marketing, and perhaps a little buyer’s remorse in the end.

Short. Sweet. Educational.

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Monday, September 12, 2016

Train Kids To Avoid Overdraft Fees By Dinging Prepaid Declines

Mom Decline Fee

One of the things that makes prepaid cards such great financial training wheels for kids is that good ones don’t charge overdraft fees under any circumstances — not even on recurring automated billings like many bank debit cards do. With the typical overdraft fee weighing in at $34, that can be a huge savings for inexperienced cardholders.

But if kids never experience the pain of overdraft fees on their prepaid cards, how do they learn to avoid them when they transition to traditional checking accounts as adults?

That’s where the Bank of Mom/Dad steps in.

Whenever your kid gets a decline for insufficient funds, assess your own Bank of Mom/Dad overdraft fee. Maybe start with $3 instead of $34. If the habit persists, you may need to ratchet it up until you find the right pain point to curb the bad habit.

If you’ve set up a family banking system with your prepaid cards, you can ding your kid immediately with a card-to-card transfer back to your parent card — assuming there are sufficient funds to cover the fee. If not, record an IOU on a sticky note, the fridge, or a spreadsheet. Then, the next time a transfer is due for an allowance, chore, or odd job payment, deduct any pending fees first.

You won’t be raking in $5.1 billion in overdraft fees annually like America’s three biggest banks, but at least your kid won’t be feeding that beast later as a young adult.

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Sunday, September 11, 2016

Share The Todd Beamer “Let’s Roll” Story With Your Kids

Todd Beamer Memorial

Early one morning in 2001, I sat in my California office at Oracle Corporation exchanging messages with my colleagues in the UK. Our disbelief mounted as the ghastly events of 9/11 unfolded in real time.

Meanwhile, Todd Beamer, another Oracle employee, huddled with a few brave passengers and crew in the back of the cabin of Flight 93 hatching a plan to storm the terrorists in the cockpit.

Todd kicked off the mission with the immortal words, “Let’s roll.”

You’ll find a short video of the Todd Beamer story here.

I never had the honor of meeting Todd, but he will forever be one of my personal heroes. A symbol of selfless, calm action under intense pressure.

RIP Todd. Your memory and your message rolls on.

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Saturday, September 10, 2016

Warn Teen Account Holders To Watch For Unauthorized Openings

The Identity Theft Stagecoach

America’s third largest bank opened over 2 million unauthorized deposit and credit card accounts behind the backs of its own customers. 5,300 bank employees essentially behaved like identity thieves. Why? To meet aggressive sales quotas and generate more banking fees.

Truly shocking. A handful of bad apples in a large company is understandable, but 5,300? That’s systemic.

It’s hard to know who to trust.

What’s the message for your account holding teens? Build a habit of regularly reviewing all financial accounts.

  1. Review any monthly paper statements. Don’t shred or file them without a quick review. Any unrecognized accounts or transactions?
  2. Review online accounts weekly or monthly. Sign in and review all the accounts on the summary page, as well as all recent activity. Set up real-time notifications too.
  3. Check credit reports regularly. A credit report will show any credit card accounts in your name. Scan all open accounts and inquiries for anything out of the ordinary. Show your teen how to get a free credit report every 4 months here.

When identity thieves work inside our own major banks, your teens can’t be too careful. Sad but true.

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Friday, September 9, 2016

Run A Family Banking System With Prepaid Cards

Prepaid Card For Your Child

Prepaid cards are excellent financial training wheels for your kids. Kids learn the responsibility of managing a real account and a real card without the hassle, risk, or fees of a typical credit card or bank debit card.

The best prepaid card offerings will have:

  • No risk of debt. Unlike a credit card, your kid can’t spend more than what’s on the card.
  • No overdraft fees. Unlike a bank debit card.
  • Subaccounts for kids. This should include web and mobile access with parent visibility and controls.
  • Instant, free transfers between family members. Unlike bank to bank transfers that can take up to 3 days and as much as 3 bucks a pop.
  • Instant lock/unlock card. Comes in handy when a card is lost or stolen, which happens a lot with kids!
  • Instant text alerts for any card activity. And, by the way, the text message should show the remaining balance — a great, simple way for kids to stay on budget.
  • No hassle online ordering and card replacement. No need to visit a physical branch office.
  • FDIC insurance and protection from unauthorized purchases. Yes, good prepaid cards have appropriate protections!

So, once you can find an offering like that, here’s how you set things up:

  • Get one main card for you, the parent. I call mine my Bank Of Dad Card. Load it up every once in awhile from the outside world with a chunk of funds. I load mine with a bank transfer from my checking account.
  • Get sub-cards for your kids. In fact, my kids each have multiple cards for spending, saving, and donating so they learn to bucket their funds.
  • Move money between your main card and your kids’ cards frequently and in smallish amounts. Credits might include a regular allowance, an odd job or chore payment, a parent-funded interest payment to encourage saving, or a reimbursement for a purchase that you’ve decided to cover. And money can move in the other direction back to the parent card too: like a family billing for your kid’s portion of the monthly cell phone plan, or a penalty for blowing off chores, or even a repayment on a Bank of Mom or Dad loan.
  • Periodically reload your parent card from the outside world again when it gets low.

Now you’re running your own little family banking system and family economy with a set of prepaid cards where you control all the knobs and dials and consequences, not the bank.

Once your kids train up and prove themselves in your family banking system, they’ll be ready for the real banking system. Which, as we all know, is a whole lot less forgiving!

P.S. Watch the video here:

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Thursday, September 8, 2016

Let Kids Know Legitimate Services Don’t BCC You

BCC Phishing Email

My brother just emailed me. Apparently, he wants to share something with me on Google Docs. Just click on the link.

Hmm, weird. The To line in his email is empty. My email address is in the BCC line instead.

Red flag!

Let your kids know that legitimate services — financial or otherwise — do not send emails with the recipient on the BCC line instead of the To line.

Sure enough, my brother didn’t send the email. It’s fraudulent. Glad I stayed away from that link!

All it takes is one hasty click on a link and one careless download to put a fraudster on a path toward your financial accounts. You just can’t remind your kids enough: cyber security and financial security go hand in hand.

Share this example with your kids so they don’t get blindsided by a blind carbon copy phishing email. Learn more about detecting and handling fraudulent communications in my earlier post: Teach Kids How To Catch Phish.

Phishy emails can come from anywhere, even your own brother. Teach your kids to sniff them out.

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Wednesday, September 7, 2016

Remind Kids It’s 3 PIN Strikes And Your Card’s Out

ATM PIN Decline

Do your kids know they typically get three tries to get the PIN right when using debit cards?

After three incorrect PIN attempts, most card processors will automatically block the card to protect against fraud. That means all subsequent purchases will be denied — not just PIN purchases.

Talk about a hassle and a panic when your kid needs access to funds in a hurry! To lift the automatic fraud prevention block, the cardholder typically needs to call the number on the back of the card and supply convincing evidence of identity.

I just checked. In the last 30 days, “too many PIN attempts” was the 5th most popular reason for declines among FamZoo cardholders (behind insufficient funds, billing address verification failures, card security code issues, and getting the PIN wrong the first three times).

So, when you get your kid that first bank or prepaid debit card, be sure to set the PIN to something secure and memorable. Though disturbingly popular, 1111 and 1234 are not wise choices! Nor is a birth date. Nor is simple a pattern on the keypad. Nor is keeping your PIN on a piece of paper next to the card in a wallet or purse. Check out some good tips for making secure PINs and keeping them safe here.

Oh, and make sure you kid carries some backup cash too. After all, even the mighty Casey struck out once in a while.

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Tuesday, September 6, 2016

Warn Teens About The Automatic Billing Overdraft Loophole On Debit Cards

Automatic Overdrafts

Does your teen have a bank debit card?

If you’re a banking nerd, you might know that Regulation E prevents banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless you explicitly opt in to an overdraft service. (Yes, it’s confusing!)

So perhaps you wised up and decided to opt your teen out of your bank’s debit card overdraft service. Steering clear of the debit card overdraft service means when your teen attempts an ATM or one-time debit card purchase without the required funds, one of two things will happen:

  1. The transaction will be declined (most cases). The result: no overdraft or fee, but an embarrassing reminder for your teen to check the card’s balance beforehand and keep a little cushion in the account for little emergencies or miscalculations.
  2. The transaction may be honored by the bank, but no overdraft fee can be assessed. The result: typically a negative balance until the account is replenished with a sufficiently large deposit or transfer.

So, your bank debit card toting teen is safe from dreaded overdraft fees as long as you opt out properly, right?


Notice how I said “one-time” debit card transactions above. That’s because overdrafts from recurring charges are not protected by Regulation E. So, whenever your teen registers a debit card as the source for automated monthly or annual billing, there’s a risk of incurring overdraft fees. Think Spotify, Netflix, online gaming subscriptions, or even that monthly gym membership. In those automated repeat-billing cases, your bank or credit union is free to charge a fee for an overdraft, whether you opted out of the debit card overdraft service or not.

So, find out how your bank or credit union handles the overdraft situation with automated repeat billings. If your teen incurs an overdraft, ask them to waive it. Sometimes they will.

Better yet, find a reloadable prepaid debit card offering for your kids that guarantees no overdraft fees of any kind, ever. I happen to know of one here. There are others. Shop around and compare.

When it comes to overdraft, I’ll take my teen’s embarrassment over $35 fees every time, not just one-time.

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Monday, September 5, 2016

Share 13 Work Related Quotes With Your Kids On Labor Day

Working On The Ranch

Looking to spark a conversation with the kids about the vital role work plays in building the character of an individual and a nation?

Here are 13 work related quotes to help you get the dialog rolling (with a couple humorous ones sprinkled in for levity):

  1. “Opportunity is missed by most people because it is dressed in overalls and looks like work.”
    ~Thomas Edison
  2. “Industry, perseverance, and frugality make fortune yield.”
    ~Ben Franklin
  3. “My formula for success is rise early, work late and strike oil.”
    ~J. Paul Getty
  4. “Work is a surefire money-making scheme.”
    ~Dave Ramsey
  5. “I never dreamed about success. I worked for it.”
    ~Estee Lauder
  6. “Son, if you really want something in this life, you have to work for it. Now quiet! They’re about to announce the lottery numbers.”
    ~Homer Simpson
  7. “The only place success comes before work is in the dictionary.”
    ~Vince Lombardi
  8. “If you want children to keep their feet on the ground, put some responsibility on their shoulders.”
    ~Abigail Van Buren
  9. “Look for a situation in which your work will give you as much happiness as your spare time.”
    ~Pablo Picasso
  10. “I think the girl who is able to earn her own living and pay her own way should be as happy as anybody on earth. The sense of independence and security is very sweet.”
    ~Susan B. Anthony
  11. “Every day I get up and look through the Forbes list of the richest people in America. If I’m not there, I go to work.”
    ~Robert Orben
  12. “I am a great believer in luck. The harder I work, the more of it I seem to have.”
    ~Coleman Cox
  13. “Motivation is when your dreams put on work clothes.”
    ~Benjamin Franklin

Happy Labor Day!

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Sunday, September 4, 2016

Offer Parent Paid Interest For Saving, Giving, And Even (Not) Spending

Three Jars With Interest

Yesterday, a FamZoo parent inquired:

“Hello — is it possible to apply the interest rate to all accounts and not just the savings account? I like the idea of dividing deposits into different accounts with different goals, but I don’t want to ‘penalize’ my kids for setting aside money for charitable donations.”

Excellent point.

You offer your kids an awesome Bank of Mom/Dad interest rate on savings accounts because you want to encourage the patient accumulation of funds for long term goals — that first used car, college, a Roth IRA contribution.

Saving is a critical life skill. Motivating it with interest makes sense.

But what about giving? Why not offer that same encouragement for accumulating charitable funds? Encourage your kid to take the time to make a well-considered donation. Send the message that giving is just as important as saving. It turns out philanthropy is a critical life skill too.

OK, then what about spending? Does it make sense to offer an interest rate on your kid’s spending account too? Crazy talk? Not necessarily. Paying interest on a spending account rewards NOT spending. It also rewards maintaining a cushion — a nice little buffer that acts as a mini-emergency fund for that forgotten recurring charge or unanticipated expense. That’s an important life skill too. Stuff happens.

If you’re only rewarding saving, you might be sending the wrong message about giving and NOT spending. Offering interest on all three types of accounts might just make a lot of sense.

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Saturday, September 3, 2016

Help Giving Hit Home For Young Kids With A Homeless Happy Birthday

Happy Birthday Candle

“Did you know you’ve built up a whopping $53.15 in your charitable giving account?”


“So, where would you like to donate the funds?”

“I dunno.”

Sometimes philanthropy can be very abstract for young kids. No cause really seems to hit home.

Try reading this article with your youngster: How Do You Throw a Birthday Party When a Child Is Homeless?

It’ll spark a conversation.

“Can you imagine what it would be like if nobody celebrated your birthday?”

“No, that would be horrible.”

“Can you imagine being 9 years old and never having blown out a candle on a birthday cake?”

“No. that’s really sad.”

“Can you imagine how happy a kid your age must feel to be having that very first birthday party?”

“Yes. That must be really awesome.”

Something tells me your youngster just found a cause that hits home.

About that $53.15...

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Friday, September 2, 2016

Put Cash Back In Your Teen’s Wallet (1 Min Video)

Teen Cash Back Reward Video

Here’s a one minute video rendition of how to run your own teen card program that rewards LESS spending:


Hey, Bill here. As always, thank you for the nice mentions on social media.

Thanks to the endless marketing of big banks, when it comes to cards and reward programs, all teens hear is: spend more, get more.

Spend more, get more points. Spend more, get more rewards. Spend more, get more cash back. Thank you Samuel L Jackson.

Parents know it’s just a seductive marketing lie. We know the reality for most people is: spend more, get more debt.

It’s time to de-program our teens.

Create your own parent-financed cash back reward program. One that rewards NOT spending.

How does it work?

Just get your teen a prepaid debit card or a bank debit card.

Offer a bonus credit for NOT spending. Maybe a percentage point or two.

So each week or month, multiply that bonus percentage by the current balance to calculate their cash-back reward. Credit the amount to your teen’s card.

Soon, your teen will be trying to keep more money on the card to score a bigger bonus.

Boom! It’s a cash-back program that pays out a bonus for NOT spending.

If we can get the incentives in the right place for our kids, saving might just become a habit they can’t shake. Wouldn’t that be cool?

So, what’s in your teen’s wallet?

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Thursday, September 1, 2016

Start Money Conversations By Kindergarten With These Classic Books

Siblings Reading

“Research by the Consumer Financial Protection Bureau and others indicate that the personal traits, habits, and behaviors that lead to financial well-being in adulthood start to form as early as preschool.”
~CFPB Money As You Grow Book Club Guide

Parents often ask me: “When is the right age to start teaching kids about money?”

My standard response is: “As soon as they ask for something at the checkout stand, they’re ready.”

How do you ease into financial concepts with the younger set? A fun story. Try an age-appropriate money-themed book.

The Consumer Financial Protection Bureau makes the case well in their implementation guide for the Money As You Grow Book Club Guide

“Reading books with children is a creative way to learn about the many sides of money management. Talking about the mistakes Alexander makes with his money in Alexander, Who Used to be Rich Last Sunday can help children more carefully consider similar decisions. Talking about how Mom can help her children accept ‘no’ as the answer when they have the ‘I wants’ in Mercer Mayer’s Just Shopping with Mom can help children understand and better cope with a ‘no’ in real life.”

The guide recommends nine introductory books for young children:

  1. Alexander, Who Used to be Rich Last Sunday
  2. A Bargain for Frances
  3. Just Shopping with Mom
  4. A Chair For My Mother
  5. Ox-Cart Man
  6. Sheep in a Shop
  7. The Berenstain Bears & Mama’s New Job
  8. The Berenstain Bears’ Trouble With Money
  9. The Purse

The guide includes a matrix of the key ideas covered in each book, suggested related activities, and tips for how to get the most out of the reading experience. It’s a bit formal and dense (hey, it’s a government publication!), but it’s worth skimming.

If you’re looking for a more accessible and personal rundown on the books, check out this delightful post by Jim Wang over at WalletHacks. He sat down and read through each book with his five year old son. You’ll get a good sense for the reception and key takeaways you can expect from a typical youngster.

If you tackle all nine books and hunger for more or need to satisfy an older audience, check out my crowd sourced list: Best Children’s Books for Money Lessons. If you have a favorite and don’t see it on the list, be sure to submit a nomination.

Now is the perfect time to curl up with your youngster, enjoy a good money-themed book together, and give your kid an early jump-start on the road to financial well-being.

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