Teach Kids to Set Financial Goals – Video

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

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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.

How Does a 15-year old Save for a Car?

Ryan just bought a car. And she’s a beauty, too. 2002 baby blue Toyota Prius with only 57,000 miles. Owned by a 91-year old grannie who used it mostly to drive to church and back. No kidding. Problem is, Ryan can’t drive it; never mind he doesn’t have his license. He barely has his permit. And taking an online course to get his permit happened after he bought the car.

How does a 15-year old with no permit end up with a pretty snappy car sitting at the bottom of the driveway? It starts with a plan.

When Ryan was 11 years old he got his first job. He delivered papers once a week after school. Most of that money went directly into his savings account. Although he was responsible for all his discretionary spending, there wasn’t a whole lot he spent money on. John and I customized his interest rate (KidsSave was a great help in this area), so that the more he saved, the more he ended up with. This was a great incentive. But an even greater incentive was the offer his grandmother gave him. She would match him dollar for dollar on his first car.

Over the years he added soccer reffing, teaching math centers, and yard work for our neighbor to his list of jobs. He also did the occasional lemonade and root beer float stand. Then there were his buys and sells on ebay. Again, most of it went into his savings account. Although I have to mention here, just in case you may think he never enjoys spending money, he bought his own $350 mountain bike, an ipod touch, golf clubs and other pretty pricey items. He knows when to save and he knows when to spend.

But my main point is that, when you have a goal in mind, when you know what you want and have figured out the steps to get there, it’s easier to keep your eyes on the target. That’s the power of goal setting. It keeps us focused. Even when you’re eleven years old.

Four years later the perfect opportunity presented itself. We live near a community college which doubles as a used car lot on the weekends. Nathan and Ryan, just playing around on the computer one day, discovered that a used Prius would be on the lot. A Prius is exactly what Ryan wanted. He’s my little eco-friendly kid.

The stars seemed to be aligning for him. About six months ahead of when he had planned on buying a car, it was an opportunity not to be missed. An opportunity on a variety of levels. This was his first major negotiation and he wanted to do it himself. So John and I prepped him. He needed to know exactly what his maximum offer would be. Start low, move up.

The owner, through her grandson, was asking $10,000. Ryan went in at $8800. They came back at $9200 which was exactly what Ryan had hoped. He had just made his first deal.

After registration and taxes, the total came to $9796. Split with his grandmother, Ryan’s share was $4898. He paid in cash. That’s how a committed 15-year old buys his first car.

Teaching our kids to set personal financial goals when they are young is so important. It starts with the little things…a video game then a bike then an ipad. They learn it’s possible and begin saving for the bigger things. To see how it’s done, check out this video:

How To Encourage Kids to Save Money

This is the first in a series of Kids and Money Quick Tips videos that I will be putting together. This first one is on getting kids in the habit of saving money.

Getting Kids EXCITED About Saving Money

When Ryan was seven years old, John and I discovered he had a spending problem. As serious as a seven year old can have. It was all about Pokemon cards. Each week he would drain his money on the cute cards in hopes of striking it rich with a rare Charzard.

But not wanting that spending problem to grow into a bad spending habit, we decided to introduce Ryan to compound interest. We wanted to see if the idea of money growing on itself (because he saved it), would have an impact on him. We also wanted to have the idea of saving his money come directly from him.

So we sat him down at the computer, along with his brother Nathan who was a terrific saver already, and plugged 10% monthly interest (parents can do that!) into a spreadsheet. The graph that was generated on the initial $100 we set up, shocked him. Then on came the lightbulb when he realized that saving his money would mean he would end up with even more money. He was a believer. It was this moment that began our work on KidsSave.

Compound interest. Einstein, a very smart dude, called it the eighth wonder of the world. He also called it the greatest force in the universe. And if anyone should know about the universe and force, it’d be Einstein.

And it was compound interest, interest that grows on itself, that made Ryan the saver he is today.

So I’ve put together two videos to illustrate the power of compounding so that you can show your kids this “magic” and get them just as excited as Ryan got. Of course, you could also use our kids’ savings and money management software, KidsSave, as it was the very first thing we designed for the program.

Here’s my most recent video. It’s on the Rule of 72. Don’t know the beauty of the Rule of 72? Then take a peek. It’s pretty amazing. And if it gets your kids excited about saving, let me know!

And after you watch the video, ask your kids what would happen if they invested $2000 instead of $1000…

Watch this VERY COOL video.

Personal Finance for Kids?

So it happened again to me today, and it’s happened enough that I decided to write about it…and solicit your help.

I was chatting with a woman I just met about this, that, and the other, when, inevitably, the question so what do you do? comes up. She’s a stay-at-home mom, nice, and I told her I was a kids’ personal finance educator.

“You can teach personal finance to kids?” she, and just about everyone else, asks.

Now don’t get me wrong. Until my youngest, Ryan, began to exhibit extreme carefree spending tendencies, the idea had never really occurred to me, either. At least, not beyond giving him an allowance. But if you think about it, setting up an allowance system is most definitely a form of personal finance.

At least it should be.

It’s not enough that kids get money. It’s important that we teach them what to do with that money. Things that we do with our own adult personal finances: save, spend, share, invest, borrow, budget. We need to do it in a way that gives kids real, hands-on experiences with their money so that they’ll get the practice they need before we send them out into the world.

And the good news is, it’s not that hard to do. Even if you don’t feel “qualified”. And while we’re doing it, we need make ‘personal finance for kids’ a recognized phrase.

So I’d love to have your help. It would be great if you could help spread the word about the importance of teaching kids money while they are still young.

In addition, I want to be a resource for parents. My Raised for Richness Facebook page is filled with all kinds of tips and research studies. It’s a great place for parents to start.

I am also working hard to make our website a resource, as well. We’ve included a bunch of free stuff recently.

And then there are the Beyond-the-Piggy-Bank Challenges filled with the specific steps needed to begin teaching personal finance. I do these periodically and if you email me, I’ll get another one scheduled soon.

So let’s start a movement! Let’s get the word out make ‘kids and personal finance’ just a regular part of our everyday language. Together we can make a difference.

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. 🙂