Teaching Our Kids Important Money Skills Through the ATM

Without realizing it, many of us unconsciously leave our children with the impression that the ATM/debit or credit card in your wallet or purse is the way you get money.  When we run our errands, we often run our card through the machine or give the check-out person our card without explaining to our children what we are doing.  Think about it; even as babies, strapped in a car seat, they accompany parents as they use the bank drive-thru window.  It’s no wonder our kids think of these as magic pieces of plastic.

Part of a child's financial life needs to include the understanding and responsibility of using these cards. We also use language like “Oh, I don’t have money, I’ll just put this on my credit card.” We need to finish that thought and explain that the card is only a substitute for real money until the bill arrives and you have to pay that bill.  If your children are older, you can even show them the credit card bill and explain to them that now you are paying the bill.

First, children need to understand that our ATM card represents an account we have in a financial institution – a bank or credit union. If they haven’t been with you when you go inside the bank, take them along next time.  You can point out that the person behind the window is a teller and that the plastic card you carry is an ATM or Automated Teller Machine card.  While tellers are there only while the bank is open, the ATM works 24 hours a day, 7 days a week, without a break. Another advantage is that, since these machines are part of a network, the machine you use does not have to be at your own bank. The ATM allows you to access money in many different places, whether in a bank lobby, food or retail store, and other establishments around any town or city.

Help your kids to understand what happens when you put your card in the machine.  That thick black stripe on the back of the card contains information that tells the ATM who you are and identifies your account information.  One of the first things that happens is that you are asked to input your secret code using the key pad. This code, or PIN (Personal Identification Number), is one you have selected which you keep secret.  Anyone who tries to use the card without knowing that secret code will be unable to carry out any transaction at the ATM.  Your kids can think of this as the same kind of security we have with our passwords on our computers.

Another element of the ATM or credit card is the variety of transactions it enables. Our children usually see us obtain cash, but they should understand that you can also deposit money, move money from one account to another, or even just check to see your account balance. The machine gives you a receipt for each transaction.  Remind your kids that, if the machine you use does not belong to your bank, you may be charged a fee.

Now get out there and start teaching your kids important money skills!

Do We Instill Personal Values Through Consumerism?

So, you think that your personal values are only taught in church, mosque, or synagogue? Think again. There are few buying decisions that you make, which may supersede conventional wisdom and, believe it or not, this is allowed.

Usually these decisions are based on your personal convictions. They can be for political or religious reasons, or out of personal loyalty. For instance, do you refuse to drive anything but an American-made car? My stepfather did. Do you shy away from buying items made by anti-American countries? Or do you buy certain products because you or someone in your family works for that company?

Whatever the reason, if it strongly influences your buying decisions over all other considerations, you may want to explain your position to your youngster.

You know that one of my passions is to make U.S consumers aware of the impact of teaching values through the buying decision, particularly when purchasing things with the label, “Made in America.” This is a subject that is growing in importance; not only because of the recession, but also because many U.S. jobs are being permanently moved offshore.

If buying products made in the U.S. and producing jobs for our workers is important to you – discuss that with your children. Explain that the reason you want to buy goods made in the U.S., means that people here are working in jobs to make those products (continue the process for your youngsters). If people are employed here, they also pay their taxes. If they pay taxes, our government has to borrow less to pay for all of the services to keep the country going. Also, explain that, even for something as insignificant as a $20.00 t-shirt, buying an import could eliminate an American manufacturer who gives people jobs. So, fewer jobs now means more people need the government’s help and more tax burdens for the people who still are working.

Try not to scare the kids, but older teens can handle real-life economics and understand how these small decisions affect the larger community. Think about it:  If every American spent $64 on something made in America, we could create 200,000 jobs right now. The only way to figure out where something is made is to read the labels.  Teach your kids to do that. If they are buying online, see if they can inquire as to where the product was made, as well.

When I recently hosted “Moneytalk,” a national radio show, normally hosted by Bob Brinker, one of the callers told me an interesting thing. I have not been able to verify this, so let me know your thoughts. The caller said, that with most major product call centers, if you are transferred to a customer service representative in a foreign country, you can request to speak to a supervisor and ask to be transferred to a rep in the U.S.  Try it next time and let me know.

Never A Borrower Or Lender, Be ( especially if you are a child!)

An issue facing kids is borrowing and lending. Just as some societies distinguish themselves from the rest of the world by setting up elaborate barter systems, an important element of preteen and teenage custom is borrowing and lending money. You’re not going to change that. But you can discuss it and channel it before it becomes a problem.

One step toward helping your children understand borrowing and lending is to incorporate loans into the Allowance Jar System you’re using. Occasionally, your child will want to buy something that’s “on sale” right now or that it may be a “limited-time opportunity,” like spending when on vacation. The purchase price may not be out of range of their budget – they could easily afford it with four weeks of Medium-Term Savings – but they don’t have the ready cash right now.

But if you loan them the money to buy it, are you caving in and abandoning your system? Certainly not. You can work out a repayment schedule, with just a small rate of interest. After all, you’re not trying to make money off your kids. The interest payment can go into a family vacation fund, for instance. The point is that you want your kids to understand how borrowing and lending work. Charge them a flat interest of 10 cents per week on every dollar borrowed. They will start to feel the bite of interest, and that’s the point.

You can also use borrowing and lending situations to teach your children about establishing credit. If your child repays the loan on time they’ll be eligible for another, perhaps larger loan later. If not…they become a credit risk and won’t be eligible for another loan until they’ve proven their responsibility to your satisfaction.

When it comes to putting these lessons into practice outside the family, one rule changes right away. If your kids are loaning money to a friend, they shouldn’t charge interest. It’s a bad precedent to set between teenage friends. The most important thing to teach your child is that money lending is an exchange that has rules. If they’re going to lend money to a friend there should be a clearly defined repayment schedule. Your teen should discuss with the borrowing friend:  (1) How much money they want to borrow; (2) What the money is for; and (3) When the loan will be repaid.

More importantly, your young lender should know that this transaction is about “money” not “friendship.” The friend may not repay the loan on schedule, for instance. Explain that someone can be your good friend, yet still be irresponsible with money. With a contract (even a verbal contract), clearly understood by both parties, if a borrower fails to keep up their end of the deal, it doesn’t have to spell the end of a friendship. Your teenage lender should make it clear to their friend that there surely won’t be anymore loans available to them. However, another important lesson every lender should know in advance is that they should never lend more than they can afford to lose. Tough lessons, but real life!