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!

The Holidays are Here

Our goal is not to repeat the annual gift giving “feeding frenzy” at the holidays. The scene you may remember could have been watching your kids wildly ripping open gifts, hardly looking at each then tearing the next one open. It couldn’t get worse… or could it?  This year, let’s not repeat going into debt the way many people did last year. This holiday season is by far the largest in terms of spending. The total Black Friday spending this year rose 6.6 percent over last year; including online and in-store sales. Online revenue boasted a growth of 24.3 percent over last year. Despite the economy, 2010 spending was an astonishing $135.16 billion, a 5.5 percent increase from 2009. With that trend in mind, 2011 holiday spending is expected to reach an astounding $142.6 billion or more, suggesting we are certainly in a repeat “feeding frenzy.”

It seems that those good ole’ days when gift giving brought a message that “I care about you” are gone.  Wouldn’t you love to instill—or re-instill-- those traditional values in your children?  If you do, you can start by using some of these helpful tips.

First, make sure everyone in the family has a gift-planning calendar. Since you already know the dates of Hanukkah, Christmas, Kwanza or any other holidays on which your family exchanges gifts, it will be simple to get started creating a calendar. Next, mark birthdays, anniversaries, graduations or any other special events that will require a gift. Your children will want to include their friends’ birthdays, too.

But that is just a start. Knowing when a birthday is coming up is important…but knowing when to begin to save for the gift is just as important.  A “start saving” date should be marked on everyone’s calendar…or in the desktop organizer on the family computer.

Make sure your kids understand the importance of appropriate giving.  An over generous gift can indicate too much need for approval or control, it can embarrass the recipient or it can signal the beginning of unhealthy materialistic competition.

You can explain to kids that parents and grandparents love all gifts equally, no matter how much has been spent on it. And suggest that the kids “pool” their resources to buy one gift for special relatives, each child contributing as much as they can afford based on a percentage of their allowance.

Once your children know how much they’re going to be spending on gifts, they can begin to make a saving schedule.  By dividing the cost of a gift by the number of weeks needed to save for the purchase will help them determine when they should begin to save.  Then they can mark the date on the calendar and set their saving plan in motion.

For those very important gifts–perhaps parents or grandparents–you may want to help your kids get that special gift.  The kids should continue to work towards their goal of saving the money needed to buy something special for Grammy and Grandpa but you can help them with a matching fund. In other words, if they’ve saved diligently according to the saving schedule they’ve set up, you’ll match the total.

Gift giving is mostly about “thoughtfulness.” A gift says, “I care.” It comes through most eloquently by how much thought has gone into the gift’s selection not its price.

And don’t forget you don’t have to spend money on every gift. In fact, you shouldn’t. Some gifts shouldn’t be “money-based.”  Help your children to give “gift vouchers” for something.  And that could be the best gift of all.

“Gift vouchers” can be geared to the recipient’s interests.  Like cleaning golf balls for your favorite golfer, cooking a vegetarian meal for the family vegan or cataloging a collection of baseball cards for your baseball lover.

“Gift vouchers” can be redeemed for running errands to the store, for yard work or for babysitting. One of the best ones was suggested by my own children.  It’s called a “No Fighting Zone” voucher, good for three fights. If my children started squabbling, I pulled out the voucher and the kids had to stop fighting. (P.S… This actually works!)
Let your kids come up with their own ideas for giving, just remember: “I care” and “I love you” never comes with a price tag.

Off To College: Credit Cards & Budgets

The mere words “off to college” and “credit cards” should give you goose bumps.  The scary news is that half of all college kids have at least four credit cards and will graduate with over $4,000 of credit card debt and $20,000 in student loan debt.  Not a great way to start out their career life!  This debt load means that 18-24 year-olds will spend almost 30% of their monthly income solely on debt repayment.
 
Now for the good news!  Most college students admit they need more financial management education — so teach them!  The beginning of any financial arrangement is always a budget.  Simply, a budget is a description of “Money In” and “Money Out.”  As a parent, you have some control over the “Money In,” especially if you’re supplying it.  But in most cases, your child will control spending the “Money Out.”  Your overall goal is to start having “Money Management” become a real life skill.  If you haven’t started money lessons yet, it’s never too late.  I call this process my “No Magic Money Log”.

It’s no magic where your money went – you spent it.  Have your kids carry file cards to write down everything they’ve spent money on.  This way, they can really decide what they “need” as opposed to what they just “want”.  Go through the list with your student and build a real budget.  It should include things such as phones, Internet, food, entertainment, and transportation.  Books and clothes may be one-time expenses and may not reoccur during the semester.  Let them report their budget to you on a monthly basis.  The more responsibility they have the more they’ll own their budget…and hopefully this will help you get a good night sleep.