Teach Kids to Set Financial Goals – Video

Here’s the next in my Kids and Money video series:  Setting Personal Financial Goals

The Mystery Charge – A Teachable Moment

The cell phone bill came in.  It was a little higher than usual, not by much, but enough to get me looking for the reason why. 

I consider the cell phone bill a fixed expense.  Technically, it’s not since there is always the possibility that we could go over minutes at which point the charges skyrocket.  I know this.  Two teenage boys with their first girlfriends and, well, let’s just say they finally understood what I meant by girls can be expensive

But even so, we pretty consistently pay around $98/month, give or take a few pennies.  So it’s a fixed expense in my budget.

Both boys pay for their portion of the bill.  John and I take care of the family plan charge which leaves the boys with their $10 extra line charge and $5 unlimited texting fee.  That plus taxes and surcharges and the kids each owe me $17.04 monthly.  It’s a steal, really.

I located the extra charge.  It was for $5.99 and showed up under Ryan’s portion of the bill.  Ryan recently upgraded to a new phone.  His second in three years.  That’s what happens when kids have to pay for their own stuff.  They discover that they really don’t need the whiz-bang latest technology.  The old stuff works just fine, thank you very much.

Since the rest of us were not charged this fee, I figured it had something to do with Ryan’s new phone.  But instead of me picking up the phone to figure out what was going on, I decided it was time for Ryan to handle his own inquiries.  He’s 15 and quite capable.   He was also quite willing.  Again, when you have to pay for your own stuff, a $5.99 charge is worth looking into.

So he dialed the number and talked with the representative.    Here’s what he found out:  Apparently, out of the goodness of their hearts (it wasn’t in the contract), TMobile decided to enroll him in their insurance plan for his new phone.  It was $5.99 a month and would cover the cost of a new phone minus the $40 deductible (he’s familiar with deductibles) should he lose his.  He asked me what he should do.

“Have you ever lost your phone before?” I asked him.

“No,” he replied.

“Well, there’s always the chance that you will.  Is it worth it to you to pay six dollars a month on top of a $40 deductible should you lose your phone?   That’s up to you to decide.” 

I could tell he was thinking really hard about it.  He had his old phone for three years and never lost it.  He’d been scared that he had a couple of times, but we always found it.  Besides, his new phone cost him $150 plus taxes.  Minus the deductible, that would leave $110 that he was insuring at $6/month.  He decided it wasn’t worth shelling out the additional money. 

He finished his conversation with the representative who reversed the charges for him.  But the lesson is not over.  When the next bill comes in, I’ll have him confirm that it was reversed.  

Dealing with this sort of thing is definitely not fun.  It’s time-consuming and a hassle.  But I’m thrilled that both boys are at the age where they are capable enough to handle these on their own.  It puts them one step closer to being ready to go out in the world on their own…and do okay.  Sort of a bittersweet moment for me.

Teaching Kids to be Wise Consumers

Teaching kids to be wise consumers requires that we have them reflect on their purchases…before they spend the money. And an easy way to do this is to teach them the Three Money Questions:

Do I need it?
Can I afford it?
Does it add value to my life?

Do I need it? This gives kids practice in thinking about the difference between needs and wants. If the item is clearly not a need, and for kids this is the majority of their spending, then at least they have acknowledged that they are pursuing and willing to plunk money down for a want. Which leads us to…

Can I afford it? This one is simple – if you don’t have the money, you can’t afford it. This is a good opportunity to help your child create a goal and work towards it.

Does it add value to my life? This takes time to learn. Most kids will insist that they can’t live without the particular item/experience and will move forward with their purchase. Revisit their decision after several days or weeks by having them reflect on whether or not their choice truly enhanced their life.

The key to the Three Money Questions is to model them with your kids. When considering a purchase, talk through the questions out loud so that your kids can “see” how decision-making happens. It may seem silly at first, but if we want our kids to learn how to problem-solve through a potential purchase, they’re going to need to hear how that happens.

If your child is considering an expensive purchase, a good strategy is to have her create a pros and cons list. This helps to clarify her thinking in a very visual way. And it’s an unbelievably wonderful tool that she’ll be able to carry with her beyond simple money purchases. Should I marry this guy or not? Let me make a pros/cons list. Okay, I’m kidding, but you get the idea. 🙂

The Cell Phone: A Powerful Learning Tool

There was a huge graphic of a cell phone on the front page of the Sacramento Bee this morning. It was all about the love affair tweens and teens have with their cell phones confirmed in a study by Pew Internet and American Life Project.

If you have a tween or teen, this is not front-page news to you. But I thought it the perfect opportunity to re-print here a section from Raised for Richness, my parent kids and money primer:

Parents have been handed an unbelievable tool to help teach their tweens and teens money management. The cell phone. Yup. That object of love and hate. Done correctly it becomes an object of learning. Here’s how.

Teens need to stay connected to their friends. This is normal as they figure out their place in the world. Cell phones keep them connected. Using their “need” for a cell phone as the motivator, we can teach them basic money management skills such as budgeting, paying bills, and living within your means.

First, tweens and teens need to know that along with a cell phone comes responsibility. Keeping track of your cell phone, resisting the temptation to text during dinner, and paying your phone bill. Kids paying bills? You bet! And the best time to teach them is while they’re still hanging out with you. At least you’re not going to turn the heat off on them!

Next, it’s important to establish what part of the phone bill your child is responsible for. For example, you may pay the family plan fee but maybe your teen pays the additional phone line fee, texting, and any upgrades. If your child is old enough, you can even see if the bill could go go directly to her.

If you haven’t set up an allowance yet, this is the time to do it. Most kids don’t have jobs so it’s important to get money in their hands for the purpose of learning how to manage it. You can tailor the amount of allowance based on the responsibilities that come with it.

Now comes the fun part. Kids learn to manage their money in the context of something they love…their cell phone! Upgrades? They pay. Overages? They pay. New phone? They pay. Lost phone? They pay. Unpaid bill? No phone. See how simple it is? Okay, so it’s going to take a few months before everyone understands how the whole thing works, but when that happens, it’s a thing of beauty. Kids are happy; as long as they pay the bill, they stay connected to friends. Parents are happy; their kids are learning real life skills. It’s another win/win.

You may even find that your kids become pretty savvy consumers. Just how important is it to have the latest phone with all the gadgets? When it’s their money on the line, the difference between needs and wants takes on a whole new meaning! And that got-to-have-phone may be the perfect time to introduce them to the idea of setting a financial goal.

It’s true that some parents feel the peace of mind that comes with a cell phone is worth paying for the phone themselves. But wouldn’t you also want the peace of mind knowing that your child is ready to take on the financial challenges that await her out there? Don’t miss this silver-platter opportunity. With tweens and teens, they’re few and far between.

What are your thoughts?

Is It Worth It?

Ryan just spent $204.44. He didn’t do it lightly. That’s because he knows just how long it took him to earn that money. His one-day-a-week paper route earns him $11/week. That’s 19 weeks of folding and throwing papers.

But he also gets $10/week in allowance. Enough to help him get some of the things he wants, but not everything. (That explains the paper route.)

With the allowance, his total time was reduced in half. To a 15-year old, that’s still a long time. The good news is, he had the money saved already. But knowing the work hours needed to spend the money is a good way for kids to understand the value of the dollars they’re considering spending.

Ryan came in to my office this morning wanting to know whether he should buy an iTouch, which was $180 (minus shipping). I had no idea he was considering this; I don’t even know what an iTouch is. But Ryan rarely spends his money, so I was glad to see that something had piqued his interest.

“What are the pros and cons of getting the iTouch?” I asked him.

We set out to make a list. This is an excellent way to have kids think through a decision.

His pros:
-the iTouch can use lots of apps
-30 hours of battery (his current iPod is so old he only gets one hour of use out of each battery charge)
-it’s more stylish
-it holds 8 gigs

His cons:
-the $180 cost (he told me this counted as two cons)
-he already had an iPod
-he doesn’t really need the 8 gigs

I was leaning towards having him buy the iTouch but I didn’t want to make the decision for him. Then he throws out, “Or I could get the iPod nano fifth generation which is $60 cheaper.”

He said that he wouldn’t be able to have the apps on the iPod.

“You really like playing games,” I reminded him and his eyes lit up.

“That’s like the main thing,” he replied. That’s when I knew it was the iTouch or nothing.

Letting go of money can be just as hard for some people as saving money is for others. Teaching kids this balance is important. I couldn’t stand it any more.

“Buy the iTouch,” I said. “You’ve worked hard for the money and deserve to spend some of it on something that you’re going to get a lot of joy using.”

Within five minutes I received an email from eBay for the purchase of an APPLE IPOD TOUCH 3RD GEN 8 GB MP3 PLAYER WI-FI + BONUS.

I’m not sure who is more excited about the purchase. Saving money is good. But knowing how to spend it wisely is just as important. I’m glad to see that Ryan is developing this healthy balance.

He Spent How Much On A Jersey?

Ryan and Nathan share their new Sharks jerseys

John and the boys traveled to the Bay Area this past weekend to attend a San Jose Sharks game with John’s brother, Thomas. The Sharks are an ice hockey team and Thomas has season tickets. Nice.

All four of them had a blast. Apparently it was a nail biter near the end. And those are the best games.

When the boys got home yesterday afternoon, they were both wearing Shark jerseys. Uncle Thomas had bought them for the boys. He wants them to come back to a future game and thought being prepared with the right fan gear was a must. After all, he was wearing his jersey.

“I’d say about 60% of the people there were wearing jerseys,” said Nathan.

Shoot. Those must be the die-hards.

“And they were wearing the really expensive jerseys; they all had numbers on them.”

I noticed both boys had jerseys with no numbers. “How much were the ones you’re wearing?” I asked.

Both boys in unison, “$135. Each.”

I about fell out of my chair. Are you kidding me? One hundred thirty-five dollars for a jersey? Granted, they were really nice looking jerseys. But one hundred thirty-five dollars nice? Sheesh. How much did the numbered jerseys cost?

Nathan and Ryan were giving me that yikes, that’s a ton of money look. I’m sure they knew that, had they gone to the game with just me and John, they’d have walked out of there with maybe a plastic soda cup with the Sharks logo. And that’s only if they got unlimited refills (although I’m pretty sure that’s not how it works).

So it got me thinking about what people spend their money on. Nathan has top of the line golf clubs because that’s his thing. Ryan has all the best running gear because that’s his thing. And, apart from the occasional gift, both of them bought most of it themselves. Because that’s what they spend their money on…when they spend it.

So an authentic Sharks jersey for $135 really isn’t that much if you’re a die-hard Sharks fan that goes to most of the games (which is an additional exorbitant expense). For those fans, going to the game to enjoy an evening watching their favorite team all decked out in teal and black jerseys – well that’s their thing, their passion.

And I know the boys were thinking it’s really nice having an uncle who wants to share his passion with us. The next time they all go to watch another game, it’ll be Thomas, Nathan, and Ryan showing their team spirit…and John sitting next to them in his faded gray sweatshirt.

$100 Jeans

I love watching commercials.  Especially with Ryan.  He wants to go into marketing as a career so it’s always fun to critique commercials with him.

But last night, Ryan wasn’t with me while I had tuned in the Olympics so John got to hear me get annoyed at the t.v. instead.  It was a Tide commercial and a young girl, about 12 years old, came on and started complaining about not being able to get the $100 pair of jeans she wanted because her mom was able to get the stain out of her older sister’s jeans, turning the jeans into hand-me-downs.

I get the reference in the commercial to saving $100 on a pair of jeans by using the right laundry soap.  It’s become almost ho-hum to hear a commercial talk about saving money.  (On a side note:  Ore-Ida does a pretty creative job of listing a bunch of ways for families to save money…however, these families are simply not willing to compromise on their choice of french fries.  Brilliant.)  Money-saving commercials are in vogue and Tide wants to fit in.

But, honestly, do 12-year old girls really need $100 pair of jeans, and are their parents buying them?  Kudos to the mom in the commercial for making the young girl wear the hand-me-down jeans.   But I couldn’t help think about the message that was being sent about 12-year-olds wearing such expensive  jeans.

I say, if the girl wants those jeans so bad, then have her pay the difference between the “regular” cost of a pair of jeans and the designer cost.  Let’s see if that doesn’t change her attitude pretty quickly.  And, heck, if you gave her a clothing allowance and put her in charge of buying her own clothes, I’ll bet those hand-me-downs may not look all that bad.  It’s always amazing how frugal kids become when it’s their money they’re spending.

And, although he wasn’t with me, I know Ryan would agree.  He finally succumbed to his torn-in-the-knees jeans (not a cool look anymore) and bought himself one new pair…on sale…with his clothing allowance.

Girls = $

We were driving home from Nathan and Ryan’s basketball game yesterday when I asked Nathan what he planned on giving his girlfriend, Shea, for Valentine’s Day.  “I bought her a rose,”  he said. 

“My math teacher did an equation in class the other day where he proved girls were evil,”  said Ryan.

Ryan often throws out what I think are non sequiturs, but which actually turn out to fit in with the conversation.  It just takes a few additional questions to get there.  I wasn’t sure where Ryan was going with this one, however, and I would have been pretty surprised if his math teacher really believed it, so I asked him to explain.

“Mr. Williams did an equation where he said that girls equals time times money.”  Okay, I was with him so far.  “Then he said that time was equal to money so that makes girls equal to money squared.”  Hmmmm…. “Then he said that greed is the root of all evil so that makes girls equal to the square root of evil.  Cancel out the square and square root and you end up with girls equal evil.”  Double hmmmm.  And apart from the early reference to money, I think this was actually a non sequitur.  And I was a little concerned about the impact of his “equation”, especially on girls. 

“He’s only kidding, mom.”  I’m sure he was, but his equation was implying that girls were expensive and things that are expensive are evil.  But let’s focus on the expensive part for a moment.

I have to take issue with the perception that girls are expensive; I know plenty of girls who are much more frugal than their male partners.  That said, I do feel that high school is the time when boys are exposed to the cost of females.  That’s because it’s typically the time when boys and girls start dating and along with that comes expenses.  And from listening to the stories Nathan and his friends share about girls and their expectations (i.e. money spent on them), girls expect a lot.   Nathan is finding this out as he had to put out for last week’s Valentine’s dance ticket and dinner.   I know Nathan, and my guess is that he compares these expenses to a tank of gas.  The dance cost him two tanks of gas.

“I’ve decided that instead of going out to dinner and spending lots of money for Valentine’s, I’m going to take Shea to a little pond that Ronnie, Jimmy, and I discovered on one of our bike trails.  We can have a little picnic and then I have two movie ticket gift cards so we can go to the movies after that.  It won’t cost me a penny,”  he said with a pretty wide grin.  No, it’ll cost me money since it’s my food he’ll be using.  But that’s perfectly fine with me.  He’s learning some important lessons.

Then Ryan pipes up again.  “My friend is waiting until after Valentine’s to ask one of his friends to be his girlfriend.  He says he’ll save a lot of money that way.”  No non sequitur here.  That message came in loud and clear and made perfect sense…in a frugal, money-saving kind of way.  I wonder if his friend is in Mr. William’s class…

To Share…But Not With My Sister

I was in a third grade classroom today doing a lesson on saving and spending wisely.  It’s a fun lesson because kids get to “buy” things with $25 that I “give” them.  With third graders, it’s important to let them know that the money isn’t real, nor are the items they buy.  I learned this the hard way last year.

Part way through the lesson I allow the kids to choose to save their money, spend it on another item, or share some of it.  They record this on a worksheet I designed specifically for the lesson.  Once they’ve recorded this part…the lesson continues.  It culminates in whether or not they get to go to Water Wonderland with their bestest buddy depending on how much money they have.  I’ve also learned the hard way that I need to make sure, up front, that the students know that Water Wonderland exists only in my imagination.  I had a second grader cry over this.

But mostly it’s a fun activity because kids get to peel off stickers.  And the stickers have cute little pictures on them.  Much more fun than “filling out” a worksheet.  Except for the very last worksheet “requirement”.  I ask the students to write down at the bottom what they learned from the activity.  I do this to see if I’ve made my point.  Then I collect the worksheets, read them (usually when the students are out at recess), and then send them home.

I was quite surprised at the answers to this third grade group of students when it came to filling out the part about saving, sharing, or spending more.  About 2/3 chose to save and the other 1/3 chose to buy another item.  No-one chose to share any of their money.  It made me wonder about how I presented it.  I made the assumption that they would know that they could share it with those less fortunate or maybe a cause that they are passionate about.

Turns out, my assumption was wrong.  I did the exact same lesson in a different third grade classroom later in the day.  This time, when we got to the sharing part I asked them who they could share some of their money with.  This is what they told me:  my brother, my sister, my cousin, my friend.  When I pressed for other ways they could share, I got all blank stares. 

That’s when the teacher stepped in.  “Remember when we collected money for our SPCA community project?”  Heads bobbed up and down.  “Well, weren’t we sharing some of our money to help the animals?”  More bobbing.  “Can you think of other organizations or people who might need our help?”  Yes, the could:  the homeless, poor people, the elderly, the families in Haiti…  And they all thought sharing with these was a good idea.

Alrightie, then.  I clearly hadn’t explained myself very well.  Their definition of  ‘share’ related to their everyday sharing experiences:  share a cookie, share a toy, share their crayons.  But then, why was it that no-one wanted to share their money with a sibling or a friend?  It didn’t occur to me until later to ask, so I don’t have an answer.

But another question occurred to me.  Why didn’t any of these kids associate sharing with giving to those in need?  Could it be that they aren’t accustomed to sharing money, or, at the very least, aware that mom and dad share money?  Third graders are quite capable of understanding the sharing concept.  Perhaps we need to do a better job of getting them involved.  After all, sharing is a good thing, not only for the recipient, but for the giver.  We do not want to deny this for our kids.  Note to self:  create a lesson based solely on having kids share their “money”.  Stay tuned…

Too Much of a Hassle?

I was talking to a friend of mine recently about setting up an allowance program for her six-year-old daughter.  Six is the perfect age to get an allowance going.  Kids this age understand a lot about money and it’s time to start giving them some responsibility managing some so that they can begin to get into healthy habits.

“She’s not interested in money at all,” my friend told me.  “She doesn’t like to go shopping and never asks for anything.”

I was a little surprised since most of the six-year olds I know are pretty clear about what they want.  And then I glanced around their house.   Her daughter already had just about everything she could possibly want. 

“What happens when she wants a new webkinz?” I asked.

“Well, I’ll usually buy it for her.”

Hmmm, I thought.  No wonder she’s not interested in money; she doesn’t need any.   So I recommended that she stop buying everything for her daughter and give her a small weekly allowance.  That way, when her daughter eventually wanted something, she could buy it herself.   And if she spent all her money and wanted something else, she would be out of luck.    Advances are not an option.  That defeats the whole purpose.

I’m not sure I convinced my friend who, I think, feels the whole thing would be too much of a hassle.  Hmmm, again.  I wonder what kind of a hassle it might be to have to deal with a young adult who doesn’t know how to effectively manage her money?