Try a Top Ten Family Finance Tip With Your Kids

Resolve to teach your kids personal finance skills in the New Year!

Not sure where to start? Pick a few tips from this top-ten list.

My 10 most viewed family finance tips from the last 12 months are:

10. Offer Kids A Savings Match With Strings Attached

Encourage your kid to save by offering a matching contribution, but attach some of these strings to send the right message.

9. Pre-Negotiate Your Teen’s Summer Paycheck Savings Split

Agree on this summer paycheck strategy to teach your teen the Warren Buffett saving rule. Instill a smart payroll deduction habit early.

8. Review 529 Statements With Your Teen Every Quarter

Here are 6 valuable lessons your teen can learn from 529 statements if you’re willing to make a 15 minute investment every 3 months. See if you’re up for the challenge.

7. Motivate Kids To Maintain Value With A Trade-In Deal

Don’t want your kids being cavalier about their possessions? Try this trade-in value trick.

6. Replace Chore Charts With Money Requests

Help your kid get from dog-eat-dog to top dog in tomorrow’s work world with this proactive alternative to chore charts and allowance.

5. Fully Fund Your Working Teen’s Roth IRA

Here’s why it makes sense to max out your working teen’s Roth IRA, even if they already blew through all their paychecks.

4. Clean Up Your Kid’s Spotty Bill Payment Record

Can your kid handle making consistent monthly payments for an online subscription like Spotify? FamZoo data says many can’t. Here’s why it’s time to make your kid face the music.

3. Post Wants On The Fridge To Chill Your Child’s Spending

Here’s a clever parenting trick for putting a chill on impulse spending by kids.

2. Show Teens The Top Of the Stock Market

Try this fun visual prop for teaching your teen some important investing wisdom: timing the stock market is a fool’s errand.

1. Show Kids What The S&P 500 Looks Like

Kids hear about stock indexes in the headlines all the time — the Dow is down, the S&P is up, the NASDAQ is flat. But do they have any idea what an index is? Here’s an easy, fun way to show them the what and why.

See any that fit your family?

Pick even just one, and you’ll have a quick victory to claim on your New Year’s resolutions. Better yet, you’ll make a lasting impact on your child’s financial future.

Happy New Year!

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Use Parental Money Controls for Transparency Training Not Micro-Management

Parental controls are all the rage when it comes to prepaid card apps built for kids and teens.

• Get an activity alert every time Junior spends.
• Require approval before Junior makes a purchase.
• Lock the card if Junior needs a financial time-out.

Sounds like a helicopter parent’s dream.

Back in the day, my mom had no clue about half the things I bought with untraceable cash as a kid. Phew.

Sure, close monitoring certainly makes sense when kids are young.

But teens? They crave autonomy and privacy.

Don’t shared parental controls undermine both? Aren’t they just another invasive instrument of today’s high tech helicopter parents?

It sounds like ditching the controls when kids become teens makes sense too.

Despite being a fan of giving teens plenty of leash, I have a different view.

Parental controls help your teen develop financial transparency — if used properly.

Why is that important? Teens who become comfortable discussing transactions with parents now are more likely to evolve into adults who are comfortable discussing finances openly with a spouse or partner in the future. That’s a good thing. Financial transparency in a relationship reduces conflict and aligns everyday money habits with shared goals.

That said, kids who strongly resent parental controls will evolve in the opposite direction. They’ll become more secretive about money, not less.

So how do parents use parental controls to build comfort instead of resentment?

• Don’t make it a surprise. Before you roll out the prepaid card app, make sure the kids clearly understand the visibility you’ll have. Give them a tour of all the parental control capabilities. Make transparency part of the deal up front: “You get access to money, I get visibility on your spending — fair enough?” Yep.
• Don’t make a fuss. Mistakes will happen. That’s how they learn. Set the precedent early that the inevitable money mishaps elicit calm, rational discussions instead of raging reprimands.
• Don’t react to everything. Let the little things slide. Bite your tongue when the stakes are low. Nagging is a surefire way to stoke teen resentment.
• Don’t always be first to comment. Let your kid broach the topic when mistakes happen. She knows you already know. When your kid gets comfortable mentioning mistakes first, you’ll know you’re getting it right.

So, ditch the helicoptering, but keep the parental controls at a reasonable altitude. Help your teen practice gaining comfort with financial transparency. A future spouse or partner will thank you someday.

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Make a Money In 'N Out Spreadsheet With Your Teen

For many kids, money can be a bit too easy come, easy go — especially in today’s digital world.

But tracking and categorizing money thoughtfully will always be a key life skill. Dollars deserve a purpose whether digital or not. So how do we get our kids to be more mindful of money as it ebbs and flows?

Build a Money In ’N Out Spreadsheet with your child. It’s a simple tool for pinpointing the sources for money coming in and the purposes for money going out.

Here’s a recipe I used with my son in college:

1. Import last month’s transactions. Most prepaid cards or bank cards have a way to export transactions, so this step is often just a quick cut and paste. If your teen uses cash, then have her manually enter every transaction in the spreadsheet for the current month.
2. Add “Money In” columns. Sit down together and figure out the main types of income. Create columns for each. In our case, money coming in was either:
   • a “stipend” from dad,
   • reimbursements I’ve agreed to make for certain types of purchases,
   • aggressive parent-paid interest to encourage my son not to spend, and
   • money from my son’s summer job savings.
3. Add “Money Out” columns. For money coming out, let you child suggest the key categories of spending as you browse the transactions together. Less is more here, so steer it toward high level groupings. We ended up with:
   • eating out,
   • eating in,
   • health,
   • gaming, and
   • phone.
   The right categories will depend upon what your child is responsible for purchasing directly. If your teen has very few transactions, that’s probably a sign you need to relinquish more purchasing responsibility. Either create some appropriate budget-based allowances or use a reimbursement strategy, or both.
4. Copy the transaction amount into the right in or out column. For each transaction row, copy the amount into the appropriate income or spending column. In rare cases, you may need to split the amount between spending columns. But if you’re doing that a lot, your categories are probably too granular. Keep it simple — like the In-N-Out menu.
5. Sum up the totals. Add a final row that sums up the amount column, the income columns, and the spending columns. The sum of the amount column will indicate the net change for the month. If it’s negative, more was spent than earned during the period.
6. Make in ’n out pie charts. Create an “in” pie chart for the income totals, and an “out” pie chart for the spending totals. Any surprises?

   

   

7. Have a non-judgmental discussion. Here’s where you want to be long on listening and short on lecturing. Let your child make the observations. Offer constructive alternatives, like maybe a parent bounty for taking a bag lunch instead of eating out.

I created a Money In N Out spreadsheet template in Google Docs that you can copy and adjust to your liking. Check it out here.

Try the exercise with your teen, and see if it takes the money coming and going in a more mindful direction.

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Plot Your Longest Market Losing Streak Since High School

My longest market losing streak since high school is pretty epic.

If I had invested $5,000 in the S&P 500 on January 1, 2000, it would have been worth less than that for 12 years in a row. Ouch.

But, as Tom Petty said, “Even the losers get lucky sometimes.” Especially if they wait long enough in the market. By October 2017, that original $5,000 investment would have turned into $8,976.49. Not too shabby!

But, remember, Tom also said, “The waiting is the hardest part.”

Here’s a simple spreadsheet exercise you can use to convince your teens (or your spouse or even yourself) to invest patiently in the market — even when the going gets tough.

Plot your hypothetical market winning and losing streaks dating all the way back to high school.

My spreadsheet shows what would happen to an investment in the S&P 500 from a given year til now for every year since my freshman year in high school. That was 1976 in case you were wondering.

This is one of those rare times where the older you are, the better it gets. So, if you’re a young parent, you may want to use grandpa or grandma as a reference point instead.

Here’s how to make a spreadsheet like mine in Google Docs:

1. Find a source of historical S&P 500 data. I found mine here at multpl.com.
2. Add a price column for every year since the beginning of high school. Pro tip: I was able to do this very quickly by copying the data table entries on multpl.com from the top down to the 1976 entry, pasting them vertically into a temporary sheet, sorting the data by date descending, selecting the sorted data, creating a new sheet, and using Edit > Paste Special > Paste Transposed to lay out the data horizontally across the sheet. Beats the heck out of typing!
3. Define an annual contribution. Insert a couple rows up at the top, enter an amount for your fixed annual contribution size, and use Data > Named Ranges... to assign the amount to a name (like “contrib”). Then you can use that name in your formulas.
4. Enter rows representing the investment performance for each year. Find the column for the starting year, and enter the initial contribution amount as the formula “=contrib”.

   Fill out the remaining columns with the formula that calculates the value of the investment a year later by using the historical price data up above. My price data is in row 4, so the formula for the first anniversary of my initial investment in cell B5 looks like: “=A5+((B$4-A$4)/A$4)*A5”.

   The cool thing is I can now just select that cell along with all the cells to its right and type Control-r to copy the formula across the row. Now I’ll see the value of the initial investment each year from inception to present day.

   I repeat this for each successive row starting one column over to the right each time until I get to the current year. At the end, it looks like an upside down ramp.

5. Add conditional formatting to call out winning and losing years. A winning year is when the current cell’s value is greater than the initial contribution. Make those cells green. Otherwise, make the cell red to mark a losing year. You can create the conditional formatting rules from the Format > Conditional formatting... menu entry.
6. Add running totals across the bottom. Summing the rows for each column will give the total value of all investments for each year across the bottom. I like to compare that with what would happen if I had just kept the contributions in cash the whole time.

Check out my win/loss plot.

Step back and admire all that green. It dominates. And, at the moment, there isn’t a single row that hasn’t turned green ultimately.

At the bottom right, compare the total ending value of the investments versus just stashing the same contribution in cash year after year. In my case: $1,719,627.25 vs $210,000.00.

Wow.

By the way, I’m ignoring dividends and expenses to keep things simple. With or without them, the point remains loud and clear: Dollar cost averaging plus low cost index funds for the win!

Despite an occasional epic losing streak, your simple market win/loss spreadsheet will prove to your kids that patient, consistent investing kicks cash’s backside over the long run.

All the more reason to start your teen’s Family 401(k) asap!

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Show Teens The Top Of the Stock Market

The stock market can be a mighty dry topic for teens. That’s a shame, because jumping in early is a huge advantage.

So, you’ll need a compelling hook to capture attention and make your key points stick. Points like: don’t miss out by trying to time the market.

Try this clever teaching prop. It’s a picture of the history of the “top” of the market. It’s a classic I see floating around the Internet periodically in one form or another.

Visual. Amusing. Instructive. A teen teaching trifecta!

This picture makes it pretty darn clear that nobody knows for sure when the top of the market will come.

And even if this is the top of the market now, the odds are pretty darn good it won’t be down the road. Like decades from now when your teenager is 59 and a half.

You know, the age your teen will start selling off those index funds in that killer Roth IRA you set up.

Wait, what? You’ve been holding off on plunking your teen’s Roth contributions into an index fund? Well, it would be dumb to start Junior off at the top of the market, right?

Study that picture again.

Whether the market is at the top, the bottom, or somewhere in between, just jump in. And keep jumping in year after year.

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Get Real Family Finance Tips From These Five Finalists

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

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

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

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

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

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

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

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

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

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

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

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

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

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Shell Out Parent-Paid Interest To Encourage Saving

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

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

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

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

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

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

Worth a try, don’t you think?

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

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

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Motivate Kids To Maintain Value With A Trade-In Deal

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.

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Spur More Money Talk With Tech, Not Less

“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 conversation about money, not less.

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?”

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5 Reasons To Turn Card Activity Alerts On For Your Kids

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.

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Teach Kids To Memorize Their Social Security Numbers

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.

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Help Kids Practice Philanthropy When Disaster Strikes

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.

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Teach Kids How To Read The Free Trial Fine Print

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

We hear that a lot at our family finance site.

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

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

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

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

No subscribing without learning how to cancel first.

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

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

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

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

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

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

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

Rule number two for your card-toting kid:

No free trial without a cancellation reminder.

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

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

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

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

It’s back-to-school season.

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

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

1. Start money conversations by kindergarten with these classic books — The traits, habits, and behaviors that lead to financial well-being start to gel as early as preschool. Here are nine books to get your youngster headed in the right direction.
2. Roll out the Premium Price Rule while back-to-school shopping — Impulsivity and peer-pressure can blow a hole in the back-to-school budget. Focus your kid on value and get some shared skin in the game with the Premium Price Rule.
3. Go refurbished on the back-to-school computer — The sooner your kids learn they don’t need the latest, greatest shiny object, the shinier their financial futures will be. If your kid needs a computer for school, it’s a perfect opportunity to make that point. Here are some key things to consider when going the refurbished route.
4. Fix your kid’s allowance — Are you doing allowance right? Here’s a six point checklist to find out. The beginning of the school year is a good time for a tune-up.
5. Boost college savings with an allowance — It seems counter-intuitive that giving kids an allowance could help parents save for college. Here’s the behavioral finance trick to making it work.
6. Pay for studying, not the grade (if at all) — Do you have an opinion on paying kids for good grades? Either way, you’ll want to check out this study. It might change your mind.
7. Plan your lost coat strategy — It’s inevitable. Your kid is going to lose a coat at school this year. At least once. It can get expensive. Here are some ideas for planning your parental response.
8. Get your kid a card by middle school — The data from our family finance site shows that middle school is the perfect time to start putting plastic in your kid’s hands. As long as it’s the right plastic, with the right controls, no risk of debt, and plenty of educational features. Check out the age distribution data for FamZoo cards.
9. Show your kid the average price of a homemade sandwich — Your kid could save you almost $500 during the school year by eating a homemade sandwich instead of a quarter pounder with cheese. Here’s the data.
10. Pay your teen to brown bag it for lunch — As kids get into the teen years, frugal habits like the brown bag lunch come under pressure. Here’s one way to make the brown bag lunch cool, or at least profitable, for your teen. You can afford the bribe. You’re already saving over $500 with the homemade sandwiches (see above).
11. Use real stats to set fast food boundaries — Brown-bagging it or not, junkets to the local fast food joint are a classic teen rite of social passage. Use these purchase statistics to set reasonable boundaries.
12. Get ready for that Starbucks peer-pressure — The data from our family finance site pinpoints when kids start to feel the pressure (or desire) to head off for Starbucks. How you can prepare.
13. Help kids rehearse for awkward money scenes with friends — “Come on, let’s go get pizza. It’s only 10 bucks. You can afford it!” When it comes to your kid’s money dialog with friends, ditch the improv. Here’s how to script a solid response ahead of time.
14. Help your kid embrace a frugal persona — The “strategy of identity” can help people form desirable habits. Here’s how to apply the strategy to your kid’s money habits in the face of peer pressure.
15. Encourage your kid to learn to code — If you have any opportunity to expose your kid to writing software. Do it. Here are 223,054 reasons why.
16. Put your kid in charge of a narrow budget — It’s shocking how many kids enter college with zero experience managing a budget. Don’t let that happen. Try this simple strategy this school year.
17. Reward your student with a spot bonus — Spot bonuses. They always make you feel appreciated as an employee. They’ll make your kid feel appreciated too. Catch your kid doing something good this school year. 56 examples from real parents.
18. Don’t necessarily discourage a part-time job — It’s a shame that fewer and fewer students are holding down part-time jobs while in school. Here’s evidence we should reverse that trend.
19. Show teens there’s a scholarship for that — Your kid may think that scholarship opportunities only exist for math and science whizzes. Not true. There's a scholarship out there for darn near anything. Even drawing ducks. Show kids how to find them.
20. Review 529 statements with your teen every quarter — Here are 6 valuable lessons your teen can learn from 529 statements if you’re willing to make a 15 minute investment every 3 months.

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

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

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

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

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

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

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

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

Looking for some other tips for delaying gratification? Try:

• The 48-hour Rule.
• The Abandon Cart Rule for online purchases.
• The Written Proposal Rule for questionable purchases.

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Pay Your Kid To Do Some Dirty Work

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

Bonus cleanup of dog throw up

$5.00

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

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

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

Or, you could shift to rats:

Change rat bedding

$1.50

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

Empty pee bucket

$0.25

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

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

Washing Dogs and Cleaning Kitchen	$13.00
Upholstery cleaning	$25.00

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

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

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

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

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

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

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

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

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

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

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

Parents are putting the onus on the kids to:

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

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

Child Request	Parent Response
$10.00 “Mowed lawn front and back.”	Approved $10.00. “Thank you!”
$16.00 “Monday: Worked 3 hrs Add $1 because I put G*** to sleep in the bed. Total owed: $16.”	Approved $16.00. (Nicely played with the proactive bonus work.)
$2.00 “I helped T*** with the plants, and I am awesome so I deserve it anyways.”	Approved $2.00. “Lucky I didn’t decline.” (Looks like a shot across the bow from Mom to polish up those negotiating skills!)
$10.00 “I helped you with gardening stuff yesterday for 3 hours... ($2.50/hour + $2.50 for no whining!)”	Approved $10.00. “Thank you! I couldn’t get done so quickly without you!!! And the No Whining is SO NICE ;).” (Clever touch with the no-whining surcharge.)
$5.00 “I helped clean up the pool deck.”	Approved $15.00. “You worked really hard. Thank you for all of your help! You deserve $15 instead of $5. Love, Dad” (Ka-ching! Over-delivery scores the big payoff!)
$250.00 “I would like this because I am the best human being on this planet. No one can ever out do my awesomeness or be as good as me! (Plus I also really want a laptop and a phone and a shopping spree) Please keep this notified in your mind! Warm Regards, Your Favorite child of all times.”	Declined. $0.00. (As they say, talk is cheap. No results, no money!)

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

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

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

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Build Your Teen's Credit Score With A Secured Card

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

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

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

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

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

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

Consider a secured credit card instead.

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

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

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

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

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

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

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

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

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

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

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Base Your Kid’s Movie Theater Budget On Real Data

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

It should comfortably do the job in most cases.

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

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

The average spent per theater visit was $19.22.

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

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

Some other fun facts:

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

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

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

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Review 529 Statements With Your Teen Every Quarter

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

Nothing?

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

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

I have a radical suggestion.

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

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

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

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

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

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

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

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

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

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

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