Tim Connolly

Discipline in kids, money management, teaching teens

6 Expert Ways to Make Your Kids Financially Successful for Life

Posted on April 9, 2021 by Tim Connolly

Many think of teenagers being fiscally irresponsible. Everyone wants to focus on the money management for children, but somehow, a lot of them never get there. It makes letting them go that much more difficult. You don’t have to push your child to be an entrepreneur just so they will understand how to manage money. Actually there are some simple ways to accomplish this task even if you struggle with money yourself.

Recently I discussed this topic with Asheesh Advani, CEO of Junior Achievement (JA) Worldwide, a massive global organization that educates more than 10 million young people per year. I had long thought JA was primarily focused on teaching kids about entrepreneurship. In actuality, JA has three major pillars of how they help children become productive and resilient in society. Aside from entrepreneurship, they teach career readiness and most importantly financial literacy.

Advani, a member of the Young Presidents’ Organization (YPO), has extensive financial experience having built two financial services companies from startup to acquisition. The first was sold to Richard Branson as part of the Virgin Money group and the second was sold to Interactive Brokers, one of the largest brokerage companies in the world.

Now, heading up the rapidly growing global organization at JA Worldwide and teaching young people fiscal responsibility in more than 100 countries, he has seen what works best. Here are his insights for getting your kids on the road to financial freedom.

1. Get them started early.

Most parents wait to involve their kids with money because they don’t see the necessity. Starting at a young age removes ignorance and reduces risk of bad habits. Advani points out they can see the value of compound interest while still young. “For saving, take a trip to the local bank and open an account when your kids turn 10,” advises Advani. “There’s nothing like receiving an interest payment (even if it is a few cents) in your name for the first time!”

2. Let them make mistakes with their money.

While no one wants to see anyone waste money, children benefit from learning the consequences poor financial decisions. “For spending, let your kid make some mistakes by spending too much on a toy, concert ticket, or mobile app they could have got for less,” says Advani. “Lessons come quickly when regret kicks in. Low-risk mistakes make for great conversation and learning that can save more costly mistakes down the line.”

3. Demonstrate how money equals work, work equals money.

A lot of parents give their children seemingly everything, but then the children don’t associate value to material items. Advani advises that parents need to make the connection of work with reward. “The best way for kids to realize this is to earn money for chores and for self-initiated projects,” adds Advani. “Create opportunities for small projects to earn money. If everything is provided freely, nothing will be valued.”

4. Make sure they appreciate what they have.

Not everyone has enough money, and some may never have more than enough to barely get by. Children who are insolated from poverty are less inclined to value the privileges they have. “Teaching empathy goes hand in hand with teaching financial literacy,” asserts Advani. “Ensure your kids appreciate the plight of others so they can appreciate the value of money.”

5. Have them share their wealth with others.

The value of money lies not only in your own reward, but also enabling what you can do for others. Advani says charity helps get children thinking about how they can use their money for good. But simply donating means little if the children can’t see how the money helps. “For giving, set aside 10% and make it real,” says Advani. “Take your kids to meet the recipients of their charitable gift, whether it is a small soup kitchen or a large non-profit with local presence. Even if they give a small amount of money, seeing its impact will drive the point home.”

6. Set the best example you can.

Children are sponges when it comes to learning–they soak everything in, including what they observe from their own parents’ behaviors. So if they see you frequently blowing money at the mall or burning through your savings account, don’t be surprised to see them get involved with similar habits as they get older. “If your kids see you waste money or treat savings frivolously, they will pick up your habits,” notes Advani.

Discipline in kids, Financial freedom, money management

How pocket money can improve children’s financial future

Posted on April 9, 2021 by Tim Connolly

Pocket money: when & how much? | Raising Children Network — How pocket money can improve children’s financial future

That’s according to Andrew Megson, executive chair of My Pensions Experts, who thinks that by getting your children thinking about money early on, you are helping to safeguard their financial future.

By giving them pocket money, he said, parents can help in the financial education for kids, also about budgeting, saving and even getting a good deal on a purchase.

A report last year raised concerns young people were not receiving adequate education about financial matters, and this was leaving them woefully unprepared for the future.

It called for schools to increase the amount of time they spend teaching teenagers about financial education.

But Megson thinks there is plenty parents can do themselves to improve the chances of their children being savvy with money when they reached adulthood.

Pocket money

He said budgeting was a good place to start – and they can start thinking about this by using their weekly pocket money or monthly allowance.

He said: “Whilst it may be tough saying ‘no’ to your children if they ask for extra money, you’ll be teaching them the valuable lesson of spending discipline, setting them in good stead for when they have to budget their future salary.”

Getting into the savings habit

Megson thinks it’s important children understand the importance and significance of saving – albeit for a treat at the end of the month or just for a rainy day.

He suggests encouraging your children to save a small amount of their pocket money or allowance each week as this will get them into the habit of putting by sums of money – good practice for pension saving.

The joy of a good deal

Showing children the benefits and the joy of getting a good deal on something can be hugely beneficial to their financial understanding, said Megson.

He explained: “Your children don’t need to wait until they grow up to understand the satisfaction of a good deal.

“Get them thinking about better deals as early as possible by explaining to why you went for the Buy One Get One Free offer in the supermarket. This will help them understand why shopping around for a better deal can be very satisfying and better value for money.”

Explain all the options

This is probably one for older children, but teaching them that there are more options when it comes to retirement income than just a pension could be helpful.

Megson said: “Teaching them about retirement alternatives, such as annuities, will help them understand all options available to them. This will mean that, when the time comes to make decisions about retirement options, they have the knowledge to choose the best option for them.”

Discipline in kids, Financial freedom, money management, teaching teens

Should You Give Your Child A Credit Card?

Posted on April 5, 2021 by Tim Connolly

Getting a Credit Card for a Child - Experian — Should You Give Your Child A Credit Card?

We seem to be moving closer to being a cashless society, meaning more kids are being exposed to digital wallets, money apps and yes, credit cards. While digital wallets and apps can be great learning tools for older kids who understand money – credit cards can be dangerous (at any age).

As a financial planner who sees so many buried under massive debt, I typically discourage the use of credit cards (at any age). According to the Federal Reserve, total credit card debt is its highest point, surpassing $1 trillion. Data from CreditDonkey.com states the average individual credit card debt stands at $5,331 in 2019. Additionally, on a monthly basis most Americans don’t pay their credit card balance in full every month, leading to interest fees.

Normally I say something like, these numbers aren’t meant to scare you…but these are! Taking on a credit card shouldn’t be taken lightly by anyone, especially when it comes to your child.

Credit card debt is easy to grow, and with the average credit card interest rate on new offers at 19.24%, it can be difficult to pay off.

However, credit cards can provide some valuable benefits to the older kids if done in the right way. If your teenager uses it responsibly, having a credit card can establish and build credit and can be a great tool to practice money management.

Should You Give Your Child A Credit Card?

On the other hand, if they overspend and/or don’t pay on time, both you and your child can get into trouble. If you are a parent and considering giving your child a credit card, there are some limits already set up for your child’s protection. Below are two scenarios where a child could get a credit card, and how to do it responsibly.

If your child is not over the age of 18, they aren’t considered a legal adult and cannot get a credit card in their own name. If this is the case you could make your child an authorized user on one of your credit cards. This means they could use the card and it would show up on their credit report, but your child wouldn’t have any legal responsibility for the account.

This allows your child to begin building credit and practice using a credit card without the consequences. As a parent, if you go this route be sure to set boundaries up front as to when your child can use the credit card. This may be a card only to be used for emergencies, or maybe it’s for gas, school supplies and food.

Whatever the parameters, be sure to monitor the spending – one way is to set up alerts if your child goes over a specified amount. Some cards also let you set up credit limits for the authorized user, which will prevent costly mistakes.

Young adults who are over 18 but under 21 can get a card in their own name, but they either must 1) make sufficient income to pay back borrowed funds or 2) have a cosigner. If you cosign, your child will get a card in their own name and will be legally responsible for any debt associated with the account.

Keep in mind, as a cosigner you will also be responsible for that debt. If you cosign for a card, be sure the credit limit is something you are comfortable with – the lower the better initially. Once they’ve demonstrated they can use it responsibly, it can be increased.

Helping your child have a credit card can be a jumpstart towards the financial education for kids, how to manage money and building credit. But like everything else in life, there has to be limits and it needs to be done responsibly.

Make sure your child understands the potential dangers of credit card use upfront; explain to them that you are giving them a card because you want them to learn how to use it responsibly as an adult, meaning never carrying a balance and always paying on time.

Financial freedom, money management, Parenting, teaching teens

4 WAYS TO HELP YOUR TEENAGED CHILDREN TO MANAGE MONEY

Posted on April 5, 2021 by Tim Connolly

How to Manage Your Money: 19 Tips to Do it Right — 4 WAYS TO HELP YOUR TEENAGED CHILDREN TO MANAGE MONEY

Shaping a child’s financial behavior and attitude towards money depends on their parents. Most teenagers look up to their mom and dad as an example when it comes to managing finances. Hence, as a parent, it is important to set great standards and teach money management to children. We would like to share a few tips as they might be of help:-

Share responsibilities

Share your responsibilities with your child. You can assign at least 1 household chore to your child, for example, she/he could be required to bring milk and eggs every day for everyone. If you link small monetary incentives with it, teenagers will understand the value of earning their pocket money as against just demanding it.

If there could be a nice user interface like a mobile app that can show them what they have earned and how well they have managed their expenses, it would give teenagers some of the finest lessons in money management.

5 Tips to Managing Your Money During the COVID-19 Pandemic — Drucker Wealth Management

Create a budget

Assign a monthly budget to your child to help them to manage their finances for that month. For example, if you set a budget for your child to manage travel and project expenses within a budget of some dollars every month, it would get them to think, plan and save as well as learn the art of money management. Using the Create Budget feature, you can accomplish this for your children in 5 minutes.

Empower with guide rails

Give your child a monthly allowance all at once. But what if she/he spends the entire money in a day or in one transaction? It is here that you can leverage technology to empower with guiderails.

You can start giving the monthly pocket money and set limits per transaction, per day etc. This will ensure that your child doesn’t spend excess money in a day while also having the freedom to take their money decisions independently.

How To Manage Your Money Like A Freelancing Pro | Bit Rebels

Kids, money management

1 in 4 Americans Don’t Believe Kids Should Get an Allowance

Posted on March 20, 2021 by Tim Connolly

Teaching kids about money is child's play - The Globe and Mail — 1 in 4 Americans Don’t Believe Kids Should Get an Allowance

For many Americans, managing their finances is a struggle. In fact, we found in a previous survey that most Americans don’t have a savings goal and two in five have less than $1,000 in savings. In another study, we learned that most Americans could not pass a basic financial literacy quiz.

Americans’ lack of financial knowledge often translates to poor financial habits. It makes you wonder how things might turn out if Americans start learning about money earlier, like when they start earning an allowance.

Allowances are one of the first times that most Americans probably handle their own money, so how much do they really help? We surveyed 2,000 Americans to see if they thought allowances make a difference and when kids should start earning.

Key Findings:

More than 1 in 4 Americans believe kids shouldn’t get an allowance
Nearly three-quarters of Americans believe getting an allowance teaches kids about money management

More Than a Quarter of Americans are Anti-Allowance

Twenty-eight percent of Americans we surveyed weren’t fond of the idea of giving kids allowances at all. This attitude may reflect in the total allowance kids receive. A recent Finder survey found that kids receive an average of $17 a week for allowance.

Regardless, many more Americans are still pro-allowance. However, the age kids should start receiving an allowance is where opinions differ.

Most Americans Still Believe in Allowances, but Can’t Agree on When to Start

Americans have different opinions about when kids should receive allowances. In our findings, close to 17 percent of respondents felt that kids should start getting an allowance as early as age five or six. A handful of studies actually agree with the idea of starting earlier rather than later.

A study published in the Journal of Consumer Affairs finds that kids are capable of learning about savings as early as age five. The study also found children who grew up with a savings account were more likely to accumulate more savings and other things as young adults.

Science Daily reported on a study published in the Journal of Family Issues that recommends teaching kids about money management at a younger age when stakes are lower. This study found that early learning helps kids develop good financial habits before living on their own.

Despite having split feelings about when they should start, many Americans believe that allowances are a viable way to teach money management to kids.

Most Americans Believe in Allowance as a Teaching Tool

Sixty-four percent of Americans all agree that allowances teach kids about money. However, experts agree that giving allowance alone isn’t enough to fully teach kids about money. Kids need guidance to understand bigger concepts like saving and spending.

In an interview with the Atlantic, Arizona State University psychologist Suniya Luther isn’t opposed to allowance but says that kids should understand that certain chores should be done because it keeps the household running and not solely because they’ll receive a payment.

Robert Gauvreau, CPA and partner at Gauvreau and Associates says allowances are a great tool to introduce finances, but we need to take the steps necessary to effectively teach children.

“We have to go above just providing an allowance and help them understand how the entire spectrum of finances work, how things could go wrong, and how best to prepare for their financial futures,” he said.

A few things he recommends include:

Educate them about how money is earned through a job and how there are government obligations such as taxes that need to be paid from that money.
Introduce the idea of making financial decisions such as retirement savings or saving for a home renovation and the importance of saving first before committing to financial obligations.
Understand credit (credit cards, loans, student debt, etc.).
Discuss high-dollar items, how to pay for them and the costs associated with maintaining them (such as a home).
Discuss the importance of personal savings and how this can provide security for any future tough financial times.

Financial literacy is important for the entire family, especially if any member has fallen on difficult times. If you need help understanding your credit report, give us a call to learn how our credit repair services can help you work toward your credit score goals.

Methodology

This study was conducted using Google Surveys. The sample consists of no less than 2,000 completed answers. Post-stratification weighting has been applied to ensure accurate and reliable representation of the total U.S. population ages 18 and older.

Kids, money management

Ideas to Teach Money Management to Children

Posted on March 20, 2021 by Tim Connolly

5 Ways to Teach Your Kids About Money Management | Complete Controller — Ideas to Teach Money Management to Children

While shopping in a mall or a grocery store, children typically demand things they find attractive. You cannot tell them that you do not have money to buy. In situations like these, I have an exercise that always did the trick for me. I would ask my daughter to make the list of things she really needed; mind you use the right word NEED not WANT. During our mall visits, we use to look around and then I would give her 10min to list. Together we would strike the things, which were not needed. This trick saved me from a lot of unnecessary expenditure. Now when we go to a store, and anyone of us picks up something that we do not need, she is the first one to question.

Being transparent and clear to your child always helps. On my daughter’s 5th birthday, I took her to Hamleys, as we entered the store, the excitement on her face was matchless. She went around the store looked at things, picked up two toys and then came to me to do the math.

As they grow and start calculating bigger numbers, please encourage them to make payments at the cash counter in stores. Such activities initiate confidence in dealing with and handling money. At the same time, also introduce kids to the concept of a piggy bank. I was introduced to the idea of the piggy bank when I was 5. All the money that we would get as gift use to go in that piggy bank. We use to break it every year on Diwali. I continued this tradition with my daughter.

There is a fine line between lecture and discussion, and that line is listening. In these early years little things matter, so answer their questions and listen to their stories. At the age of seven, I started giving my daughter pocket money. At the age of 8, We went to the bank with all her piggy bank money and opened a junior savings bank account. She was excited to fill the deposit slip and interact with the banker. Now, She enquires about how the money is growing in her bank account.

So, here is a ready reckoner of simple things that you can do with your kids.

1. Create three jars – Saving, Spending and Sharing along with your child, and you should also regularly let them handle money.

2. Help them set goals – next step to making a list while shopping could be helping them establish a goal. Please encourage them to save for the item they need and set a reasonable time frame for it. Remember to fill in if they don’t reach the desired amount.

3. Compare prices of items while shopping. Discuss with them why you buy a particular brand and why you do not want to buy the other. Talk to them about quality, quantity, and durability.

4. Involve them in more significant decision making by just letting them know about it. I remember my father telling us about the loan that he took for building our own house and thus he will be getting home a little less money for the few coming years.

5. As they enter teens, you can start talking to them about the power of compounding. Talk to them about how money grows when we invest, and that saving is not enough.

Teaching money management to children will give them an enormous advantage in their adult life. Children can gain financial independence in adulthood from the solid foundation created when they are young.

Kids, money management

7 Smart Things to Teach Kids About Money

Posted on March 20, 2021 by Tim Connolly

Growing up in my family, the first rule of money was this: We don’t talk about money. All I ever knew is that we had more than enough. While my parents did encourage me to work both around the house and at part-time jobs, there wasn’t a whole lot of guidance when it came to learning how to save or control my spending. Teaching money management to children is a critical life skill. By the time a child is old enough to leave home and head out into the world on their own, the best opportunities for teaching them about how to best manage their money are over. While most children do not have a lot of money, childhood is a very useful time to teach your children basics about money that will stick with them for decades.

TAKE BACK CONTROL OF YOUR HOME LIFE

And while the following list is certainly not all-inclusive, these are the seven things I mostwant to teach my kids about money:

1. Money Comes From Work

It is pretty scary to realize that most kids these days—and even many parents—don’t understand this very basic concept. Dave and Rachel recommend setting up a commission system—where kids get paid for the work that they do—rather than offering them a weekly allowance. That commission then gets split into 3 separate envelopes—one to spend, one to save, and one to give.

We have set this up in my house, and let me just tell you, it works! The closer it gets to payday, the more enthusiastic my girls become about helping out around the house. They absolutely love filling the check marks in their chore chart, (we use the ones in this Financial Peace Jr. set) then counting up their money at the end of the week. Our payday happens on Sunday night so they have all weekend to boost their payout. Their chores and pay scale are based on their age—7-year-old Maggie has a few harder tasks that can earn more money, while 4-year-old Annie simply earns a quarter per checkmark.

2. When it is Gone, It’s Gone

Teaching kids that actions have consequences is a lesson that goes far beyond money. It is so hard to let your kids fail sometimes! Both my husband and I have a really hard time with this, especially when it comes to money. Rather than letting them make bad choices and then experience the consequence of that choice, we simply say, “no, you can’t buy that,” and all their money stays in the bank. After reading Smart Money, Smart Kids, I realized that we do need to let them experience the process of spending the money that they earn so that they can also learn that when it is gone, it is gone.

3. It’s Okay to Wait

We live in a world of instant gratification, one that is becoming more so all the time, and there are sadly far too many kids who grow up thinking that if they want it, they should have it right now.

A few years ago, as the director of a large day spa, I saw this all too frequently with my entry-level front desk employees, who were mostly girls in their late teens and early 20s who thought working at a spa would be glamorous and easy. I can’t even tell you the number of times one would ask for a raise after just a week—or sometimes even a few days–of work. They had been so accustomed to being rewarded for nothing, they had no concept of delayed gratification. It was sad, and as an employer, extremely frustrating!

Through their commission system, my own girls are slowly learning that it is okay to wait and save for the things they want. Right now they are each saving for a (ridiculously overpriced) Lego play set. $65.00 is a huge number when you are only earning $0.25 at a time, but they are both doing great. Each week they get a little closer to their goals, and each week they become a little more motivated to work harder. I’m pretty sure I will cry the day we finally get to go to Target with their jar full of money to pick out the toy they worked so hard for!

4. It’s Not All About You

Not long ago I was stopped in my tracks by one simple but life-changing question: What are you doing with God’s money? As a Christian, I believe that what I have is not my own. It is a responsibility I take seriously. I am called to be a good steward of the resources I’ve been given, and just importantly, I am called to teach my children to do the same.

But in all honesty, this calling is not a burden. There is no greater joy than teaching my kids how to give! We do this in lots of different ways, especially at Christmas, and our favorite ways to give are with our time, not our money. Even so, it is important that my kids understand that they money they earn needs to be shared.

Each week, at payday, they first put a portion aside to put in their give envelope. They get to decide how much they will give, and they also get to pick the recipient, since at this point we are far less concerned with who they give to than that they experience the joy of giving. I’m sure our giving plan will evolve and adapt as they get older, but it will always be an important part of their financial education.

5. Tell Your Money Where to Go

Right now our primary focus is teaching our kids the basic concept that money comes from work. Even so, by teaching them to divide their money each week into their spend, save, and give envelopes, we are also trying to set the foundation for learning how to budget their money. We want them to learn while they are very young that if you don’t tell your money where to go, it will go away. It is a concept I wish I would have learned much earlier in life!

While the envelope system works great for younger kids, older kids need to be given even more responsibility for their own budgets. By the time they are teenagers, kids should know what their main expenses are–everything from entertainment & activities to clothing, food, and savings–and how to create a simple budget each month to make sure they are living within their means. (There are some fantastic tips for exactly how to set this up in Smart Money, Smart Kids.)

6. Don’t Buy Things You Can’t Afford

In today’s society, our instant gratification mentality has also transferred to our wallets, where we buy things we can’t afford with credit cards so that we can have them right now. Teaching my kids that credit is not the answer means that I have to be willing to live by this philosophy too. After all, if they see me buying whatever I want, regardless of my ability to pay, my warnings not to use a credit card won’t mean a whole lot, especially as they get older. Instead, our goal is to model for them a cash budget system, one where we save for the things we really want just like they do.

As they get older, they will have to learn how to save for bigger things like college or their first car. While car payments and student loans have become the norm, they shouldn’t be. Kids today are graduating from college saddled with huge debts that in many cases could have been avoided with more planning and better choices. We are determined to not let our kids become a statistic by teaching them now that credit is not the answer.

7. Choose Contentment

While all this other stuff is important, helping my kids learn to live with a spirit of contentment is by far the most important lesson I will ever teach them. A wise person once said that there are two ways to be rich—one is to have everything you want, and the other is to be satisfied with what you have.

At our house we call this our “Attitude of Gratitude,” and it is a subject that comes up a lot, especially when my kids start to get whiney or entitled. Last month, for instance, we decided to surprise the girls and two friends with a visit to Disney on Ice, which was touring nearby.

Kids, money management

How to Help Your Kids Understand Credit! {8 Easy Tips}

Posted on March 18, 2021 by Tim Connolly

Teaching Kids Financial Skills: Here Are 5 Things Children Need to Learn About Money | Kids | 30Seconds Dad — How to Help Your Kids Understand Credit! {8 Easy Tips}

#1: Start Teaching Your Kids About Money Early On

Your kids will learn so much when you turn your personal purchases into teaching moments. You can show them how different things cost money. You can also talk about what you are buying and why you are buying it. Then share how you like to save money by buying things on sale and using coupons.

When you have time, consider letting your kids take their own money to the store to make their own small purchases. You can make the whole experience even more fun by getting them a cute purse or wallet to carry their cash.

One of the very best things you can do for your kids is to teach them how to save. Help your kids start saving money today by helping them open their own savings account. Then have them save part of their allowance every month. You can keep them excited about saving by showing them their bank account statement and how much interest they’re earning every month!

#2: Help Your Kids Create a Budget

A great way to teach your child financial discipline is by helping them create and use a simple budget for their monthly allowance. This tool will help them learn how to save money and earn interest using their own savings account. Plus, you can also use the budget to teach them how to be generous by giving gifts to their family for holidays, or giving to those in need. By helping your child set spending and saving boundaries early on, it will help them wisely manage larger amounts of money as they get older. So don’t underestimate the impact of what you are teaching your kids. These lessons about money will truly benefit them for the rest of their lives.

You can start your child out with something as simple as this budget example for a $50 monthly allowance:

Savings Account: $20
Charitable Giving: $5
Gifts for Others: $5
Fun Money: $20

#3: Encourage Your Kids to Earn Their Own Money

One of the easiest ways to teach your child the value of money is by giving them opportunities to earn some of their own money. Likewise, if our kids are always given money and never earn it, it will be very difficult for them to understand how much it’s actually worth. That’s why it’s so important for your child to earn at least some their own money.

There are so many creative ways to teach money management to children. To start, you can pay them a small amount for doing some extra chores or projects around the house. You can also have them participate in a family garage sale by selling some of their own stuff they no longer use. As they get older, they can make money running a lemonade stand, babysitting, pet sitting, doing yard work for neighbors, and even by getting a part-time job in their later teens.

#4: Explain What a Credit Score Is

Don’t make the mistake of thinking it’s too soon to talk to your child about credit. In fact, the more you talk about money and credit now, the better equipped your kids will be to handle their own finances as they become adults.

Here’s an easy way to explain to your kids what a credit score is. Your credit score is a grade you are given for how well you pay your bills and manage your debt. A higher score means you’re doing a good job paying your bills on time and managing your debt. A lower score means you need to do a better job paying your bills and that you might have too much debt.

#5: Tell Them Why Credit Scores Are Important

It’s important to also help your child understand the positive benefits of having good credit. Having good credit is a lot more exciting when they realize it will help them save money on cell phones. Plus, they’ll love knowing it will help them get their own house and car when they’re older, just like Mom and Dad!

#6: Teach Your Kids How to Check and Monitor Their Credit

As a parent, we want to teach and protect our kids. So in addition to teaching our kids about credit, we also want to help protect the credit of our kids!

With data breaches so common and credit so vital to the future of our kids, what can we do to protect them? To start, you can actually get a free copy of your child’s credit report from AnnualCredit. It’s important to know that when requesting a credit report for your kids, some additional documentation may need to be physically mailed to the different credit bureaus. Once you’ve received a copy of your child’s credit report, review the report to make sure it is accurate. If you’re comfortable showing the report to your child, it can also be used as a tool to help them learn more about their credit and how it works.

If you do see any problems after reviewing your child’s credit report, now is a great time to do something about it. To start, there are some really helpful tools available from CreditRepair to help clean up credit scores! .

#7: Explain How Credit Cards Work

Wouldn’t you love the peace of mind of knowing that you were the one that taught your kids about credit cards? You can use credit cards to teach your kids so much about credit, including the benefits and the risks. You can explain to your kids how credit cards are small loans from the bank. If you pay back whatever you owe on your credit card every month, you don’t have to pay any interest. But if you don’t pay the money back every month, you can actually pay a lot of interest. A higher rate of interest than what you would have to pay on most car and home loans.

Be sure to also explain that credit cards should never be used if you don’t have the money to pay what you owe. Don’t be afraid to share about how common it is for people to struggle with credit card debt. Ultimately, we want to teach our kids to be careful with credit cards and to avoid getting hurt by credit card debt.

You can also share with your kids the benefits of credit cards. Explain that if they use credit cards responsibly, they can help build their credit. For example, they can build their credit by using their card every month, always paying their bill on time, and only using a small part of the available credit.

A great way to teach your kids how to use a credit card responsibly is by having them practice using prepaid credit cards. You can supervise their use of the card and manage how much money is spent. Plus, you can gradually give them more freedom to use the card, so they can learn healthy spending habits.

#8: Have Them Watch You Organize Bills and Pay Them

I was pretty naive about money as a kid. Crazy as it sounds, I didn’t even know you had to pay for a home phone or water bill. So trust me, you’ll be doing your kids a huge favor by simply taking some time to explain to them what bills you have and how you pay them. You can also show them how to organize and pay bills on time. Just like cleaning their room and brushing their teeth, kids need to learn how to keep their finances organized and how to pay bills. In fact, teaching your kids to organize and pay bills on-time is the first step toward building and maintaining good credit.

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Starting early: How to use allowance as financial education

Posted on March 18, 2021 by Tim Connolly

Top 10 Tips on Teaching Kids About Money — Starting early: How to use allowance as financial education

For many families, allowance is just that — money that children can use at their discretion. But allowance can also be used as a valuable tool to give your kids a head start on learning about money, including how to budget, how to prioritize needs and wants, and how banks work. Starting early is key to building strong financial foundations. So, to help you get started, Union Bank & Trust has put together some tips on how to turn an allowance into learning opportunities.

Start with the basics

The amount of allowance you give your children is up to you, but even younger children can start learning financial management skills. Experts suggest $0.50 a week for each year of a child’s age; for example, 5-year-olds would receive $2.50 a week, and 10-year-olds would receive $5 a week. Decide on an amount and frequency that makes sense for your family, then give them their allowance in cash — this helps them to visually see their money increase or decrease when they save or spend.

Set expectations

As you discuss allowance with your kids, it’s important to establish guidelines. How long do they need to make the allowance last? Do they need to ask your permission before making purchases? Do they need to earn the allowance with chores, or is it freely given? Once you decide on terms for allowance, work with them to divide their cash into different buckets to spend, save, and give. A good target is to delegate 10% to savings, 10% to charitable giving, and the rest as spending money. This is also a great opportunity to teach your little ones about charities, nonprofits, and the importance of giving back and helping others in need.

Add in best practices

It’s never too early to set up a savings account for your child! Savings accounts give them a dedicated place for their money, and having the money safely tucked away in a savings account can help prevent impulse purchases. Savings accounts will also teach compound interest and can help motivate them to save more for the bigger things they want to buy. Additionally, tracking and monitoring their savings and their purchases can help develop both their math and banking skills.

Develop financial responsibility

As your kids get older and more experienced in their money management, give them more responsibility and higher expectations of what they earn and manage for themselves. If you feel comfortable, increase the amount of money you give them and what expenses they are responsible for. Giving them a certain amount for lunch, clothing, and necessities each month lets them practice budgeting but also lets them fail in a safe space. The average person takes three months to get a handle on their budget, so failing is expected, and important! For example, if they spend all their lunch money in the first week, they have the natural consequence of relying on home lunch for the rest of the month. It might seem harsh, but by doing so, you can help guide them through spending and saving for bigger expenses, like college or a car. As your child gets older and well versed in budgeting and savings, you can also introduce other categories of saving and spending, such as a checking account with a debit card or an investment account.

Teach by example

Money doesn’t have to be a taboo subject with your children — in fact, consider walking them through your own bill-paying process and how you save. Exposing a child early to the reality of money, expenses, budgeting, and saving sets them up for success as they become adults and eventually manage their own money.

No matter how you handle the specifics in your home, an allowance is a powerful tool for teaching kids about money and the importance of saving.

money management, Parenting

Money, Honey Teaching Kids the Power of Financial Literacy

Posted on March 18, 2021 by Tim Connolly

Teaching your kids the value of money | Randell Tiongson — Money, Honey Teaching Kids the Power of Financial Literacy

There was a time when financial literacy for children was pretty simple. Counting and saving pennies in a piggy bank, which could be raided for an occasional treat, went a long way toward teaching kids what they needed to know about managing money.

Today, finances are not nearly so concrete. They’re characterized by highly abstract notions like credit and interest, and by transactions that occur invisibly and magically over the Internet. Teaching money management to children is more complex, yet, perhaps more critical than ever before.

On budgeting:

Beyond identifying types of money and their associated value, even the youngest children (beginning at age 3) can learn to budget. Provide jars labeled “Save,” “Spend” and “Share” and have your child divide his money among the three. This allows him to think ahead about how to spend and promotes the habit of setting funds aside for future uses (therefore teaching deferred gratification), rather than spending it all right away. When he gets older, have him use envelopes or bank accounts to divvy up his loot.

On choosing:

Shopping trips are great times to teach children about making choices. Help your elementary school-aged child understand that if she spends all her money on a doll, she won’t be able to buy an arts and crafts kit, too. Are there two things she can buy for the same amount she would have spent on one? (This is a great opportunity to sneak in some math and analytical thinking, close cousins to financial literacy.) It’s important to resist the urge to buy additional things your child wants but can’t “afford.” Otherwise, she won’t experience what it feels like to make choices.

Savings and interest:

Older children can and should begin to tackle concepts that are more mathematically sophisticated. Plug in some figures on the Investment Calculator tool, which can be found at Investment.gov, to see how compound interest and regular contributions “grow” a savings account over time. The exercise may inspire your child to save early and contribute often. Having a specific goal to save toward, like a new skateboard, car or college fund, can also be motivating.

Credit cards and interest:

Navigating the world of credit card and other debt can be more challenging but is also incredibly important. As plastic and electronic devices have largely replaced using coins, bills or checks, spending may not even seem very real to your child. But the impact of accumulating debt that outpaces his ability to pay can quickly become a huge burden. According to one source, the average American household’s credit card debt last year was $5,700, but the nearly 40 percent of households who carried debt month-to-month owed more than $16,000. Ensure your older child understands how credit card companies charge interest and how it compounds when balances are not fully paid each month. A pair of shoes that cost $50 could cost $200 or more by the time the “principal” (or original charge) and accumulated interest is paid.

Other types of borrowing:

At the same time, borrowing to finance certain big-ticket items like higher education or a home may be unavoidable. So, while children should be wary of debt, they must also know how to borrow responsibly. Talk to your child about how interest works on a loan as opposed to the “revolving” debt of a credit card. Look at specific loan scenarios, including total time to pay off the loan, projected monthly payment and how much total interest would be paid over the life of the loan. Armed with information, your child may be more motivated to defer or save up for bigger purchases. When your child does borrow, encourage him to shop around for the best available terms. Studentaid.gov contains a lot of good information about student borrowing and other types of financial assistance.

At the end of the day, it may be most important to remind children that, in small and large matters alike, what may seem like a “need” may actually be a “want,” and that “wants” can be deferred or perhaps satisfied through less expensive alternatives. Once they become adept at knowing the difference, children and teens are in an infinitely better position to make good financial choices and to have more funds available for what is most important.