Financial freedom, money management, Parenting, teaching teens

19 Ways to Teach Kids How to Save Money Responsibly at Any Age

Posted on August 14, 2020 by Tim Connolly

According to a MarketWatch report, children between the ages of 4 and 14 received an average annual allowance of $471 in 2018. That’s about $9 per week, which isn’t a bad take for kids too young to join the workforce.

The report, on a study by chore-tracking app RoosterMoney, had even better news: Nearly half (42%) of children who receive an allowance save some of it. Although kids clearly don’t have the same financial obligations as their parents, that nevertheless bodes well for the next generation’s financial fitness.Sign up for a BBVA Online Checking account by 8/21/2020 and get up to a $250 bonus and no monthly fees.

If your kid isn’t among the many already socking cash away for a rainy day, you can take some commonsense, age-appropriate steps to raise their saving game.

Here’s what parents can do, and when, to prepare their kids to spend and save money wisely as they grow – and to ensure that they continue to practice good fiscal hygiene when they finally leave the nest.

Elementary School and Earlier

1. Talk Openly About Money With and Around Your Kids

Time and again, I hear the same refrain: “It’s never too early to start focusing on how to teach kids about money.”

Take this logic one step further and resolve to speak openly about money with and around your kids. In other words, feel free to discuss sensitive financial matters, such as salary negotiations and the status of your retirement accounts, in the presence of your kids. Talking about money around young children might feel awkward at first, but there’s no good reason to shoo them out of the room so that “the grown-ups” can have a frank discussion.

Young kids might not understand everything you discuss, but that’s okay. They don’t understand all the words in the stories you read with them either. That doesn’t stop you because you trust that they’ll pick more up with repetition and age.

2. Lead by Example

Practice what you preach, if you prefer.

You’re your kids’ most visible and important role model. (This may change during their rebellious adolescent years, but they’re all yours during elementary school.) By visibly following through on the fiscal wisdom you dole out to your kids, you show them that it’s possible to live within your means.

Kids are perceptive, and they’ll often pick up on cues even when you don’t explicitly call them out. But your message will ring clearer – and stick longer – with some good-natured repetition.

So, when you want to convey a money management concept to your child, explain why and how you’re doing it. And look for teachable moments wherever you go. Mundane activities, like shopping outings, are ripe for reinforcement. It takes just a few seconds to explain to your kid why you chose the cheaper generic option over the functionally equivalent name-brand option – why pay a premium for a fancy label?

3. Give Them Fake Money

It’s not as cruel as it sounds. Fake money is a great way to teach young kids about the value of money without actually entrusting them with any hard-earned cash. Think of it as training wheels for budding consumers, with you (the parent) playing the dual role of banker and merchant. Set reasonable values for various chores (cleaning up after a meal), privileges (stretching bedtime), and items (snacks)

And, yes, you can use Monopoly money if that’s what you happen to have on hand.

4. Avoid an “Open Wallet” Policy

Don’t give your kids an open line of credit. Instead, set constraints on spending, even if you can afford to spoil them every once in a while.

You’ve surely gotten used to telling your kids “no” on other matters. Putting your foot down on requests for cash or parent-aided purchases is no different. It’s important to lay out this marker early in your kids’ financial education. The longer you wait, the harder old habits will die.

How hands on you’d like to be is up to you. You can go so far as to set up a household “bank” – not a real custodial account in an FDIC-insured bank, but a pile of money whose balance is known to you and your children. This way, your kids will know exactly how much they can spend each week or month – and they won’t be surprised when they hear “no.” Over time, they’ll realize that they have to save up for bigger purchases.

5. Be Equitable

If you dole out an allowance to young children without requiring work, make sure it’s equitable on an age-weighted basis (you can give “raises” every year or quarter). If you pay wages for chores, assign equal amounts of work and an equal pay rate.

The younger your kids are, the easier it is to treat them equitably. Or so you’d think. According to data from BusyKid, a personal finance app for kids, girls receive less than half the weekly allowance given to boys – a starker divide than the gender pay gap for adults. That’s not fair, and not consistent with the principle that every kid deserves the same chance to succeed.

Eventually, extenuating circumstances might render equitable financial treatment impractical – for instance, you’ll probably need to provide more support to the kid who gets into Princeton than the kid who enrolls in a technical certificate program at the local community college. But that’s likely years off – we’re talking about kids in elementary school here. There’s no reason not to start your little ones out on a level playing field.

6. Use Praise and Tough Love

Use a combination of praise and tough love to instill fiscal discipline in your brood. When your kid makes a deposit into your home’s “bank” or tucks a dollar bill away for a future purchase, tell them they’re doing the right thing. If you’re feeling exceptionally generous, throw in a low-cost treat, like an extra half hour of screen time that evening.

By the same token, you can encourage your kids to make sound financial decisions by holding your financial fire when temptation strikes. Remind them that, by spending today, they’re deferring or forgoing future purchases that they may value more. Don’t punish them for overspending; just make it crystal clear what they’re missing.

7. Use Age-Appropriate Spending and Saving Apps

You use apps for everything else these days. Why not at-home financial education?

There are too many legitimate financial apps for kids to name. These apps were specifically called out by my sources, but I’d encourage you to look for additional resources from legitimate sources like the Consumer Financial Protection Bureau.

Greenlight. Greenlight bills itself as “the world’s first smart debit card for kids that enables parents to pick the exact stores where their children can spend,” says co-founder Tim Sheehan. In other words, it’s a reloadable prepaid debit card for kids that parents supervise and control. Features include instant loading, real-time notifications every time the kid uses the card, the ability to instantly turn the card on and off, and a change collection setting that lets parents keep their kids’ change. In short, says Sheehan, Greenlight lets “parents give all the advantages of digital payments to their kids, while keeping them safe and showing them how to save and spend their money in smart ways.”
Raise. Raise is a popular platform for buying and selling gift cards online. “Once you purchase a card, sold at a discount by a seller who no longer needs it, you can instantly redeem it online or in stores by showing the barcode on your phone,” explains George Bousis, founder and CEO of Raise. “There’s no need to worry about forgetting your cards at home in a drawer.” While Raise is not designed specifically for financial education, it’s useful for illustrating supply and demand in a way that even young kids can understand (and profit from). Sought-after gift cards typically sell at a smaller discount to face value – a great reminder that, when everyone else wants what you want, you may have to pay a premium for it.
BusyKid. BusyKid is another reloadable prepaid debit card that lets parents control how much kids spend and save. It also allows kids to buy publicly traded stocks with their allowance, providing a peek around the corner at more advanced personal finance concepts.

8. Pay Kids Fairly for Age-Appropriate Chores

I mentioned above that pay equity appears to start as soon as kids start earning money for household chores – well before they enter the formal labor market.

Assuming you’re okay with paying your kids equitably for equal work, you need to give them jobs to do. A properly instituted household chore schedule is the definition of a win-win. For parents, it’s a dumping ground for mundane, low-value tasks for which they lack the time or patience. For kids, it’s a buffet of practical learning opportunities – a long, low-stakes introduction to the sorts of rote tasks they’ll soon enough need to complete on their own.

What you don’t want your chore schedule to become is a “make work” project. Even in elementary school, your kids’ chores should be tasks that actually need to be done: washing dishes, dusting around the house, taking out the trash and recycling, cleaning and vacuuming floors, detailing furniture, and so on.

Chores are controversial though. Many parents question whether they should compensate kids for household chores at all; parents don’t get paid for doing the dishes or taking out the trash, after all.

A happy medium may be in order. Identify chores that, due to their physical or temporal demands, might be “worth” more than basic, everyday tasks. Think mowing the lawn, cleaning the bathrooms, or weeding the garden. Pay kids enough to encourage them to look forward to – or, at the very least, not actively avoid – these tasks.

9. Pay Them Interest

If you’re not ready to open a custodial or joint bank account for your child, find a way to pay them market-rate interest on the money they save.

This is a great way to convey to your kids that a penny saved truly is a penny earned – or, perhaps, two pennies earned – and that frugality pays off in the long run.

It’s also a great way to introduce very young kids to more complicated investing concepts, such as compound interest, and get them ready for middle- and high school math class in the process. Your kids won’t understand every step right away – I still don’t really understand compound interest, to be honest – but every bit of repetition helps.

Adolescence

10. Open a Custodial Bank Account for Them Early

Once you trust your kids enough to make their own spending and saving decisions without the aid of a piggy bank or closely supervised app like Greenlight, open a custodial bank account in their name.

There’s no real downside to getting this done early, given that your joint bank account opens a whole new world of teachable concepts, but younger kids won’t participate as actively in account management and may not take interest at all. You’ll definitely want to cross this item off your list by the time your kids hit tweendom – say, 10 or 11 years old – to give them plenty of time before high school (and, hopefully, their first job outside the home) to get up to speed on banking.

11. Get Them Excited About Money Management

This is an admittedly subjective directive, but the point is to get your kids jazzed about something – anything – that involves sound financial decision-making.

For instance: Although checkbooks are obsolete today, some personal finance experts recommend ordering checks on joint accounts anyway. Balancing a checkbook is a great way to demonstrate basic money management concepts.

If your family regularly donates to nonprofit organizations, get your kids involved in the process of selecting recipients and setting aside funds for quarterly or year-end giving. More likely than not, they’ll embrace the purpose-driven nature of the exercise; nothing conveys the power of a dollar like seeing firsthand its potential to do good in the world.

12. Teach Them About the Importance of Avoiding High-Interest Debt

Many parents discourage kids from using credit cards altogether. That’s a perfectly valid approach to financial education – one that keeps them away from one of the most common drivers of consumer debt altogether.

Even if you’re fine with your kids using credit cards when they’re old enough, be sure to have the “debt talk” with them before cosigning a credit card application, warning in particular about the risks of carrying high-interest balances from month to month.

The “debt talk” isn’t just appropriate for budding credit card users. You can also use it to warn kids off from uglier forms of debt too, such as payday loans. This shouldn’t be a difficult sell, given the litany of consequences of bad credit: higher interest rates, higher car insurance rates, trouble renting an apartment or securing a cell phone contract, difficulty securing a job or obtaining a security clearance.

Anyway, sound credit management practices are sound money management practices. Every dollar they your kids don’t have to pay toward a carried credit balance is a dollar they can sock away – a dollar that’ll earn interest in an FDIC-insured savings account or grow in an investment account.

High School & Beyond

13. Teach Them About Taxes and Accounting

Millions of kids work part-time in high school. Before they take their first tentative steps into the labor market, they need to understand the difference between gross pay and net pay.

If you use a human accountant to prepare your household’s taxes, take your child to this year’s appointment. This is a simple way for your kids to learn that even parents must make financial tradeoffs – and that not all of the money you earn is actually yours.

If you prepare your taxes online, sit down with your kid and show him or her how the process works. If you or your kid don’t have time to complete the process in one sitting, just show them the ropes as you can. Should you find yourself in the market for a new tax prep portal, grab your kid and check out our regularly updated list of the best free online tax preparation software options, along with our head-to-head-to-head comparison of the three most popular tax prep products: TurboTax, H&R Block, and TaxAct.

If your family uses a certified financial adviser or financial planner, loop your kids in on those meetings too. Get them familiar with any online financial tools you use as well, including your brokerage or robo-advising suite. This goes back to the point I made earlier about transparency and frankness – you want your kids to have the whole picture.

14. Involve Them in Grown-Up Money Decisions

Why stop there? As your kids get older, involve them in grown-up financial choices – without using their input as the last word for any consequential decisions, of course.

There’s no limit to the complexity or duration of these grown-up decisions. The long, multi-step process of buying a house is a perfect opportunity to walk kids through a complex financial transaction that requires months of planning and preparation. Along the way, you’ll have countless opportunities to illustrate specific financial concepts, like down payments and amortization.

Not every family with teens and tweens is eager to move, of course. But buying a house is just one example. Buying a car is another great opportunity – and a more common one.

15. Encourage Them to Apply for Scholarships

The cost of higher education is rising faster than the rate of inflation. According to U.S. News & World Report, the rate of increase in private university tuition outpaced the prevailing inflation rate by more than three times between 1996 and 2015. The rate of increase in in-state tuition at public universities outpaced inflation by more than six times during the same period.

The case for higher education scholarships has never been clearer. For parents and students, every scholarship is a win-win proposition, simultaneously defraying tuition costs and providing crucial budgetary breathing room.

Plus, students are young, and their earning power in the workplace is modest. It’s likely more cost-effective for the average student to apply for a scholarship or two rather than slave away at a minimum wage job (and take crucial time away from studying) to earn a comparable amount. A relatively modest ACT score increase – say, from 28 to 32 – may net several thousand dollars in merit-based scholarships.

Here’s an example. If your kid studies 100 extra hours to raise her ACT score by 4 points and claim a $2,500 scholarship, they’ve effectively earned $25 per hour. Needless to say, $25 per hour is not a realistic wage expectation for most high schoolers, unless they’re coding savants. Traditional service industry jobs rarely pay more than $15 per hour, even with tips. Besides, income taxes further erode wage earnings; scholarships are tax-free.

I’ve seen the power of scholarships firsthand. I qualified for two academic scholarships in high school, collectively offsetting about $2,500 per year in tuition. This was basically a drop in the bucket for my private college, but every little bit helped. And, initially, I put most of my scholarship money into a CD, withdrawing funds as needed to cover tuition payments, buy books, and living expenses. I didn’t get rich on the interest, but it was a nice bonus, and a worthy exercise in self-restraint to boot.

16. Open a Brokerage Account for Them

By the time your kids are in high school, they’re old enough to learn the basics of investing.

Broach the idea of investing their own money with them, making sure to explain the potential risks – that they could lose principal, for example. If they’re interested, set up a custodial brokerage account and have them set aside a modest amount of their own money to invest. Encourage them to research companies they’re interested in, and read market and economic reports, before putting any of their money to work.

If you’d prefer to explore investing strategies other than traditional stock-picking, nudge your kids toward index ETFs and mutual funds with low expense ratios and favorable ratings. It’s easier to build a diversified portfolio – and convey the all-important concept of diversification – with low-cost index funds anyway.

17. Help Them Budget and Apply for Student Loans

Though it’s likely to be among your kids’ least favorite financial exercises, applying for student loans and budgeting for post-graduation repayments is a piece of the financial education puzzle. Kids who aren’t prepared to set aside significant chunks of their take-home pay for student debt service simply aren’t set up for frugal-living success.

18. Teach Them the Three Types of Personal Savings

Before they leave the nest, make sure your kids understand the three main types of savings: personal, emergency, and retirement. Give them an overview of each type of savings – what it’s for, when to contribute, and (most importantly) when to draw upon. If you need guidance, check out our article on the three types of savings.

19. Encourage Them to Open a Student Credit Card Account

Last, but not least: When your kids are old enough, encourage them to open a student credit card account.

Responsible credit card use is actually an effective savings strategy. When you pay your balance off in full each month, you avoid costly interest charges that eat away at your budget and stunt the growth of your personal savings.

But that’s not the only reason you should consider nudging your young ones to apply for a credit card once they’ve reached the right age. Many entry-level student credit cards earn cash back rewards on spending – usually 1% to 1.25% on every dollar spent, and sometimes more on spending in select purchase categories.

Some credit cards promise extra rewards for diligent students. One popular option, Discover it for Students Card, pays out a $20 bonus every year you keep your GPA above 3.0.

Encourage your kids to save their earned credit card rewards. This simple exercise can add up fast: If your college-age child charges $5,000 per year to a Discover it for Students Card account that earns an average of 1.5% cash back and maintains a 3.5 GPA, they’ll put away an extra $95 per year. For the typical ramen-chomping student, that’s a pretty good haul.

If you’re not surewhich student credit card is right for your youngster, check out (or ask your kid to check out) our regularly updated list of the best student credit cards on the market today.

Final Word

Kids are like snowflakes – they’re all different. So are parents.

You might not agree with every piece of advice I’ve collected here. That’s perfectly fine. As a parent, you have wide latitude to teach your kids the value of money and instill sensible spending and saving habits.

However you choose to teach your kids to save, never forget that it’s in your financial interest to ensure that they know how to manage and grow their own money for years to come. After all, you might rely on your kids’ thrifty habits to support you long after you hang up your hat for good.

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

How To Teach Your Kids Good Money Habits

Posted on August 14, 2020 by Tim Connolly

As a parent, you want the best for your children. This doesn’t necessarily mean you want them to have the best clothes, the latest toys or coolest gadgets. Most likely, it means you want them to be safe and secure. And you want to lay a foundation that they can build upon to do well in life.

The question, then, is whether you’re teaching your children a key lesson that will impact whether they will do well. That lesson is about money.

“Without a working knowledge of money, it is extraordinarily difficult to do well in life,” says Sam X Renick, co-creator of Sammy Rabbit, a children’s character and financial literacy initiative. “Money is central to transacting life, day-in and day-out. Where we live, what we eat, the clothes we wear, the car we drive, health care, education, child-rearing, gift giving, vacations, entertainment, heat, air-conditioning, insurance—you name it, money is involved.”

Yet, plenty of parents aren’t helping their kids become financially literate. T. Rowe Price’s 11th Annual Parents, Kids & Money Survey found that nearly half of parents said they miss opportunities to talk to their kids about money and finances. And a quarter said they are very reluctant or extremely reluctant to discuss financial topics with their children.

Kids, on the other hand, are eager for their parents to share their wisdom. Half of the children surveyed said they wish their parents taught them more about money.

Even if you’re not teaching your kids, they will learn lessons about money one way or another. If you want to play a key role in shaping your children’s feelings, thinking and values about money, you need to give them the gift of financial literacy from an early age. Here’s how.

Start With the Basics at a Young Age

Renick has been teaching kids about money through his Sammy Rabbit storybook character since 2001. He has found that the earlier you start a child’s financial education process, the better. Lessons should begin before age seven, he says, because research shows that money habits and attitudes are already formed by then.

Once your kids are old enough to know they shouldn’t be sticking pennies in their mouths, you should introduce them to coins and cash. Explain what money is and how it is used. Actually, showing them how money works is more effective. So let them see you making purchases with cash.

Even if you pay with a debit or credit card, explain to your kids that you’re using your money to make purchases. Chase Peckham, director of community outreach for the San Diego Financial Literacy Center, did this with his son and daughter when they were preschool age. When they shopped together, Peckham would show his kids receipts with the amount he paid. “By doing it over and over again, it became habit to them,” he says. “As they got older, they started to understand. That’s how we introduced money.”

Peckham says that his son understood how money worked by the age of 4, thanks to the receipt strategy. He had more trouble getting through to his daughter. But, by being consistent, he knew that “the light bulb would turn on” for her—and it did.

Instill a Habit of Saving

Your kids’ early interactions with money will likely involve spending. They see you using it to purchase things, including things for them. So it’s important to teach them from a young age that money isn’t just for spending—they should be saving money regularly, too.

Learning to save isn’t just an essential money habit. “Saving teaches discipline and delayed gratification,” Renick says. “Saving teaches goal-setting and planning. Saving stresses being prepared. Saving builds security and independence.”

Help your kids get in the habit of saving by giving them a piggy bank or savings jar where they can deposit coins or cash. Then use short, simple messages to encourage your kids. Renick offers these examples:

Saving is a great habit.
I love to save.
It feels good to save money and build my future.

With young kids, though, you’ll likely have more luck teaching them to save for short-term goals—such as a toy they really want—rather than for the future, says Tim Sheehan, co-founder and CEO of Greenlight, a debit card for kids with parental controls. The father of four says that encouraging his kids to set short-term goals when they were little helped them learn the value of delayed gratification. As they have gotten older, they are now able to save for longer-term goals.

Parents also can encourage their kids to save more by agreeing to match the amount they save dollar for dollar or by a certain percentage. If your children are old enough to advance from a piggy bank to a real bank, you could take advantage of a service such as Greenlight or FamZoo. These prepaid debit cards and apps allow parents to transfer money to their kids and pay them interest—at a rate of their choosing—on any of the money the kids choose to stash in savings.

Create Opportunities to Earn Money

Kids need to have money of their own so they can learn how to make decisions about using it. An allowance can accomplish that. However, you should consider requiring your kids to do certain chores to earn their allowance. “Just about everyone values money they earn differently than money they receive,” Renick says.

Both Peckham and Sheehan say they wanted their children to learn that money is earned. There are some chores the kids have to do without pay because they’re expected to help out as part of a family. But if they want to get paid, they have to complete certain tasks.

Sheehan says his two youngest children who are still at home get a weekly allowance in an amount equal to their ages. Peckham did that initially with his kids but says they now get a “salary” that is deposited directly into their bank accounts each month. His kids have negotiated raises for their salaries by agreeing to take on additional jobs around the house, he says.

Help Kids Learn to Make Smart Spending Decisions

In addition to wanting his kids to understand that money is earned, Sheehan introduced an allowance system so they could learn to live within a budget. His two youngest children, who are 16 and 11, would constantly ask for money and “spend like drunken sailors,” Sheehan says. When he started paying them an allowance, he told them that was all the money they would get and that it was up to them to manage it.

“Amazingly, it worked,” he says. They track how much they have coming in and going out and how much they’re saving using the Greenlight app. Learning how to budget now will help them when they enter the real world, Sheehan says.

Peckham has allowed his kids to make decisions about their money since they first started earning an allowance. He gave them three jars for spending, saving and giving. Peckham told his kids they had to put some of their allowance in each jar but didn’t specify how much. The decision was up to them.

Peckham also is teaching his kids that spending isn’t always about buying things you want. He wants them to learn that they will have to spend money on things they need when they’re adults and can make the choice to pay people to do things for them. So if his kids don’t do certain things they’re expected to do to help out around the house, it will cost them.

In essence, they’re paying their parents to do those things for them. And the money comes out of their allowance. “I wanted them to make decisions about what they were willing to pay for and what they weren’t,” he says. “I want them to realize, for every choice they make, there will be a repercussion. Personal finance is about decisions.”

Show Kids the Value of Giving

A key reason that it is important for you, as a parent, to teach your kids financial lessons is because you can share your money values through those lessons. If you value giving to others, you can instill that value in your children by helping make it a habit for them from an early age.

You could do as Peckham did with his kids when they were little and create spending, saving and giving jars. The Greenlight and FamZoo apps allow kids to create giving accounts. Or you could help your kids set up a special savings account for giving.

Then help your children plan their giving by discussing what groups or causes they want to support. They can visit CharityNavigator.org to find highly rated organizations.

Teach Kids How Their Money Can Grow

Saving money is a great habit. But if you want your kids to learn how to truly build wealth, teach them about investing, Sheehan says. “I’ve tried to pass on this knowledge and insight to my kids,” he says.

All four of his children have custodial investment accounts he set up for them (minors can’t open their own accounts). Sheehan started teaching his two oldest children, who are 20 and 18, when they were young about how they could invest their money and see it grow at a faster rate. He’s still working to get his younger two children to understand. “Some are ready for it at a young age,” Sheehan says. “Some maybe a little bit later.”

If you don’t understand investing well, you could give your kids a book that explains how it works. Renick says his father introduced him to the personal finance classic The Richest Man in Babylon when he was 12 or 13. “That book really motivated me to want to invest and spend less than I earned,” Renick says.

You can help children get started investing by opening a custodial account with a brokerage such as Charles Schwab, E*TRADE, Fidelity or Stockpile. And Greenlight will start offering an investment option with its accounts later this year.

Model Good Financial Behavior

Just as important as the lessons you teaching kids about money are the ways you discuss and handle money when you’re around them. For example, if you complain about having to spend too much on certain things and then take your kids on a shopping spree, you’re sending mixed messages.

Instead, make sure you model the behaviors around money that you want your children to adopt. Renick says that not only would his father encourage him and his brothers to do work around the house, but also he would jump in and help them out.

“Some of my favorite childhood memories are of having my father assist me washing cars and cutting grass,” Renick says. “He would also use those experiences to talk to my brothers and me about the importance of work and managing our money. He would share things like, ‘It is not how much you make, but what you do with what you make, that makes a difference.’”

If you want your children to develop good spending and saving habits, they need to see you making smart spending and saving choices. In short, practice what you preach. And preach with consistency. Educating your children about personal finance is a process that can take time. But if you put in the effort and continuously communicate a clear message about money, you will instill good habits that will serve your children well.

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

Are we ready for a cashless society?

Posted on August 14, 2020 by Tim Connolly

What might a cashless country look like?

By ‘cashless country’, we mean one where all payments are made digitally: by debit/credit card, contactless, mobile or online. A country with no physical currency.

In this context, going cashless might not seem like such a big deal. But doing away with notes and coins could actually have massive consequences for much of society – if it’s not handled well.

Benefits

So why get rid of cash?

Crime depends on cash

Criminals use cash because it can’t be traced. All digital payments are tracked in one way or another. Get rid of cash and it’s much harder to move money illegally. And if someone steals your wallet, your cash is gone but you can block your card immediately.

It’s easier to travel cashless

If you’ve got a draw full of leftover foreign currency, you’ll appreciate how much easier travelling cashless can be. And with favourable deals on specialist credit cards and peer to peer services, it can be better value, too.

It’s easier to manage your money

Keeping everything cashless means, you can use money management apps, which can help you track your spending, give you AI assisted money advice and automatically set money aside for savings.

Risks

There are risks to not having cash as an option.

Connection issues can block payments

Cashless works fine if you’ve got solid phone and internet connections. For much of rural UK, that just isn’t the case. If you’re in a black spot, you may not be able to make payments. And 10% of British households still don’t have internet. That means they can’t access online banking, which could lock them out of economy if there’s no cash.

Older people and those on lower incomes may struggle

Perhaps most importantly, older people, disabled people, and those on lower incomes tend to use cash to manage their money. It’s often an issue of trust as much as habit – although that comes into it too.

Countries closest to a cashless society

Sweden is a shining example of how a cashless society might work. Cash already accounts for less than 15% of all transactions in the country, and much of Stockholm simply won’t accept physical currency.

They’re projected to become entirely cashless by 2023. And thanks to careful infrastructure planning, it seems to be working. Small traders can use Stockholm-based iZettle to take payments, and there is a task force looking into ensuring older people aren’t locked out of society.

On the other hand, India banned cash overnight in 2016 with disastrous consequences – costing at least 1.5m jobs and 1% of GDP – a cautionary tale of diving in without planning.

Britain is somewhere in the middle. We have better systems in place than India, but could certainly do with a bit more Swedish-style planning.

So far, it seems to be working OK. But there are real risks to eliminating cash altogether without making sure the proper infrastructure’s in place.

In today’s time being a parent its your responsibility to focus on financial education for kids as it is going to benefit them in the long run.

Financial freedom, money management, Parenting, teaching teens

How to educate your children on the cost of living

Posted on August 11, 2020 by Tim Connolly

For most teens, the promise of independence is exciting – moving away from their parents gives them the freedom to rule their own roost.

However, like everything else in life it comes at a cost. Whether they are planning on getting a room in University halls of residence, renting their first shared house or even buying their first flat.

You might have heard that our kids are waiting for longer than ever to move out with more than a quarter of 20 – 34-year olds still living with their parents, which is a record high. In part, this is probably due to the massive increase in the cost of renting. Although of course, it could just be that they can’t stand the thought of missing mum’s Sunday roast.

We all want our kids to be ready to deal with the costs of flying the nest. The question is – how can we help prepare them and to be true the best way is to start with teaching teens about money. We’ve been having a think about the practical ways to encourage your kids to think about the cost of living so they learn by doing.

Here’s a few ideas we came up with:

1

Set your kids a challenge. Ask them to list how much they think all the household bills cost each month… though you might need to offer them a reward to get them interested. Keep it simple, try using a template and look at their answers at the end. How close are they? After a few attempts, chances are their guesses will be on the money.

2

Set them the task to find you a cheaper energy provider online. Sure, it’s not the most exciting task in the world, spice it up for them. Transfer the anticipated annual costs (based on previous years) into their bank account and tell them that they can keep anything they manage to save by shopping around – it’ll be worth their while! The sooner they learn to navigate comparison websites and getting familiar with finding the best deals online, the more they’ll save over the course of the lifetime.

3

See if you can convince them to do the weekly shop for a few weeks by incentivising it in a similar way – tell them if they can make any savings without compromising on quality they can keep the leftovers for themselves.

4

Tell them when your insurance policies are up for renewal and see if they can make a saving. This is a particularly interesting way to teach your kids about the costs of living because they may not profit immediately. Instead, it will reward them for setting a reminder that your policy is coming to an end later in the year – so long as they put in the effort and find a better deal.

5

Encourage them to create a monthly report or spreadsheet to keep track of all the bills. Try and position this in a way which emphasizes how much it will help you, rather than them – this way it seems more like a valuable family responsibility and less like extra homework.

Whether it’s offering an incentive to help out with household bills or simply having a chat to encourage good habits, there’s plenty we can do to help our kids understand the cost of living. Don’t be afraid to think outside the box. Giving them responsibility will be both rewarding and educational. They’ll thank you in the long term – well, if they ever move out…

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

Five steps to help teach children the value of money

Posted on August 11, 2020 by Tim Connolly

Although schools are now required to teach children financial literacy as part of the National Curriculum, this only takes place after the age of 11. By this stage children may have already picked up good and bad habits from their parents.

The way children view money will often carry through into adulthood, so it’s important to give kids a good financial grounding from a young age.

Here are five ways to help your kids with their finances in childhood and early adulthood.

Give your child a piggy bank

A great way to start financial education for kids is by giving them a piggy bank, allowing them to start saving for themselves. At first this will probably be small amounts of pocket money, but in time this could teach them how to save money towards something they really want.

If they would like to buy a new toy, make them slowly save up over a number of weeks to instil financial discipline from an early age.

Teach children basic maths early

Even before they start nursery or school, you can give your children a boost by showing them basic maths. By teaching your children some simple maths skills, such as addition and subtraction, you can give them an understanding of the subject before they start school.

You don’t have to be a mathematical whizz yourself, resources are available for free online for parents to help teach their children the basics.

Open a bank or savings account

Some banks and building societies will let children open an account from the age of seven. This can be a good way to show how saving in a bank can help your money grow, and teach children how interest accumulates.

Some accounts also offer debit cards or cash cards when your kids get a little older, meaning you can show your children that spending on plastic costs the same amount as in cash. Giving them this responsibility can be a good learning curve.

As they enter their teenage years and take on a paper round or other part time job, you could encourage your children to investigate savings accounts of their own.

You may have already opened a Junior ISA for them. If so, when your child turns 16 they’re legally allowed to take over the management of the account. They still can’t access the money until they’re 18 years old. But getting them to engage with their savings could be a good way to teach them about money management, interest and investments – depending on whether it’s a cash account or stocks and shares.

Make them consider their financial goals

While a young child is probably more concerned about buying their favourite toys, as your children get older it is wise to get them thinking about bigger financial goals, such as buying a first car or holiday.

There are also a variety of apps to help with everything from money management, to saving as you spend.

Give them a helping hand towards independence

As your children enter adulthood, they will start to think about leaving the family home. Whether that is in rented accommodation, university or buying for themselves, make them consider the costs of living alone.

As well as rent or mortgage payments, there are:

Household bills
TV license fee
Council tax
Car tax

Teach children and teenagers the basics to help them understand the true cost of independent life. You might decide to charge your young adult children rent, or ask they contribute to household bills.

Many young people also rely on parents to help fund the cost of a house deposit. While some parents are able to provide financial support, many cannot offer large gifts to their children. Parents who wish to give their children a financial boost should consider saving on their behalf from a young age.

Even a small amount, such as £20 a month can quickly add up, building a nest egg to pass on to your children in later life.

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

Use these 6 tips to teach your kids lifelong money lessons during the pandemic

Posted on August 11, 2020 by Tim Connolly

It’s a sticky subject in the best of times. These days, it’s downright scary, as the pandemic rages and the economy tanks.

Many parents are generally reluctant to talk about how to teach kids about money, says Thomas Henske, a certified financial planner and partner at Lenox Advisors in New York. However, now is an especially good time to teach your kids some basic financial info and allay their fears.

Experts say it’s easier than you think to teach your kids about money, whether you start chatting with them about it or turn to some engaging books.

Questions from kids like, “How much money do we have?” or “Are we rich?” could make some people uncomfortable, but they are great conversation starters, Henske says. And they don’t have to be directly answered if you don’t want to.

More from Invest in You:
Not a saver? Learn these skills and end your year with a nice stash
‘I wasted so much money…’ Millennials want Gen Z to learn from their mistakes
If you need cash, try these less-obvious sources

Try answering with questions of your own, such as “What do you mean by rich?” or “How much money do we need?”

Henske didn’t feel ready to reveal his net worth when his children asked about it, so he turned the exchange into a conversation about what they thought the figure was — “They gave horrendous answers,” he said — along with the value of their house and their mortgage.

Here are six dos and don’ts to help your kids, no matter their age, learn about money.

1. Talk about it

Not discussing money is like not discussing sex, Henske says. Just as most parents have some kind of conversation about intimacy so their kids go out into the world prepared, he recommends talking about money openly, too.

“We still treat personal finance and money as a kind of taboo,” said Liz Gendreau, 40, who blogs about family finance on her website, Chief Mom Officer. Gendreau has three sons, ages 16, 12 and 5.

By the time kids are in their teens, parents can talk about college costs or buying a car.

“They benefit from learning how to budget,” said Gendreau, who lives in Hartford County, Connecticut. “The more you can educate your kids through real-life examples, even things you wish you’d done differently, the better.”

2. ‘No’ is an option

“Parents sometimes sacrifice too much for their kids,” Gendreau said.

It’s a mistake to give kids everything, especially if it comes at the cost of saving for a parent’s own retirement, says Gendreau. Whether it’s expensive college tuition or a lot of after-school activities, parents should balance their own financial needs with those of their kids.

“It may not be something they want to hear, but you have to make choices with your money,” Gendreau said.

People commonly confuse loving with giving. The amount of time you spend with someone is more meaningful. “That is finite, and it’s the ultimate currency,” Henske said.

A pandemic bonus: Canceled programs and plans give you an opportunity to show your kids what together time really means.

3. Teach the basics

What’s credit, what’s debt and what’s the difference?

“It’s really important to sit down with your kids if they’re still young or even have a conversation with a young adult, and really teach them about the dangers of using credit cards,” said Brad Klontz, author of “Mind Over Money” and co-founder of the Financial Psychology Institute.

People don’t understand how credit works — “You’re actually taking a loan from a bank at a very high interest rate,” Klontz said — or how misuse can spark financial disaster. In fact, three out of five Americans say their credit has been harmed by the pandemic, and about three-quarters worry about paying their bills and making good on loans.

Debit cards work on money that is yours. When you use the card, you’re subtracting money from your own account.

Kids who don’t understand how credit works can face financial disaster when they first sign up for a card, which may be in college, Henske says.

4. Make them wait

Young kids need to learn the difference between a need and a want.

Teach them strategies and have discussions around how much they want something to avoid tantrums when you say no to a purchase.

When Henske’s kids were small, he used to have them put things on a list, a strategy he recommends starting at age 5 or 6.

Older kids can write down what they want in a notebook. Younger kids can, with your help, print out a picture online of the desired object.

Two days later, they may find they no longer want it, Henske says.

5. Include them in big purchases

Kids should be part of the conversation when a family buys a car or plans a vacation, Henske says. Otherwise, that’s a lost opportunity to teach them the value of a dollar, since they rarely understand how much big things cost.

The experience will come in handy when they need to make informed decisions about choosing a college or thinking about careers. “They don’t understand the income and lifestyle that a specific income affords you,” Henske said.

Don’t forget another facet of buying: arguing for refunds.

The pandemic has created a chance to let kids see how you negotiate for a refund on plane tickets for a canceled trip.

6. Don’t pay for everything

Always let kids contribute something financially.

High school students might pay for their car insurance. A teenager who wants an expensive iPhone might pay for the data service portion of the bill. “It doesn’t have to be an unworkable amount,” Henske said.

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

Six Ways To Teach Your Kids About Saving Money

Posted on August 11, 2020August 11, 2020 by Tim Connolly

Saving money is one of the most important aspects of building wealth and having a secure financial foundation. Yet many of us have learned the importance of saving money through trial and error, and more importantly, experience.

In school, we aren’t really taught about the importance of saving and many of us find that as adults, we have to fend for ourselves although money management for children is such an important point to be discussed.

But there are ways to empower the next generation, and that starts by teaching children the importance of saving from a young age. If you are a parent, here are 6 ways to teach your children about saving money.

START WITH A PIGGY BANK

A piggy bank can be a great way to teach your kids the importance of saving, while giving them an easy way to do it. Tell your kids that the goal is to fill up the piggy bank with dollars and coins, until there is no room. Illustrate that the piggy bank is for saving money for the future and that the more they save, the more their money will grow. Here is how Kevin O’Leary of Shark Tank used a piggy bank to explain compound interest to his own kids.

OPEN UP A BANK ACCOUNT

Once the piggy bank is full, take your child to the bank to open up a savings account for them. Have them count how much money is going to be deposited, so they can have a physical understanding of how much money they have. Show them the final number and reinforce the idea of interest.

It can provide a great source of motivation for your kids if they understand that their money will grow over time as long as they don’t touch it.

USE SAVINGS JARS

When your kids really want the latest and greatest toy or a new action figure, let them know they will have to save up for it. Give them a jar for each of their desired purchases and offer them a small allowance each week in a denomination that encourages savings.

For example, if you give your child five dollars a week, give it to them in one dollar bills. They can save all their cash for one purchase, or they can contribute to different “jars” for various savings goals.

To encourage saving up for their short-term goals, put a picture of their desired toy or item on the jar, so they have a visual reminder of what they are working towards.

CREATE A TIMELINE

As a kid, the concepts of money and time can be hard to grasp. Research has shown that the impact of a one hour financial lesson wears off after about five months. In order to make the message stick, money education should be timely and ongoing. If you know your child receives a $50 check for their birthday each year, the moment to talk about budgeting is right before receiving that check.

One way to keep money lessons ongoing is to create a timeline so that your child can visualize when they will reach their goal.

Let’s say you give them five dollars a week and they want to save up fifty dollars. If they saved one hundred percent of their allowance, they’d reach their goal in ten weeks, or roughly three months.

Start by getting a long piece of paper and a marker. Have $0 on one side and $50 (or whatever goal amount) on the other side. Create checkpoints on the paper for when they reach 25%, 50% and 75% of their goal.

Every time an amount is saved, draw a line illustrating how much was saved. Let your kids know that they will get small rewards at each checkpoint. Small rewards can encourage kids to keep going. Visuals are also helpful in illustrating their savings goals and how their money is growing.

LEAD BY EXAMPLE

Children learn by example, so the best way to teach your child about saving money is to save money yourself. Have your own jar of money that you put funds in regularly. When you’re out shopping, show your children how to discern between various prices and explain why buying one item makes better sense than another.

Reiterate the message that every time you get paid, you save a portion of your check to help prepare for the future.

Teach your kids about why and how you are saving for their college education. If you do not yet have a college savings account, take a moment to understand Our Five Steps to an A+ College Plan.

START A CONVERSATION

One of the most important things you can do is to start a conversation about money and the importance of saving. Money doesn’t have to be scary or a taboo. Use financial discussions as teachable moments. An innocent question such as “Are we rich?” can be answered in a way that emphasizes family values, such as hard work and responsible spending.

Let your children know they can have an allowance, but it’s up to them to save up for things they really want. In addition, illustrate how much their money can grow over time if they save.

Also discuss the difference between needs and wants and tell your children you are always open to talking about money and new ways to save. Ask them about what they want to save up for. Ask them what they want their future to look like.

Asking good questions can get them to think long-term and have a positive relationship with money. Letting them know you’re always open to have a conversation about money can encourage them to ask questions of their own to keep learning. The graphic below from the JumpStart Coalition for Personal Financial Literacy can provide you with learning benchmarks based on your child’s age.

Teaching kids how to save money may seem like a tough task. It has even been said that parents are more likely to talk to their children about sex than about money. But using these tips, you can make your child’s understanding of money fun and accessible. It’s an investment in knowledge which truly pays the best interest.

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

How to Teach Your Kids About Money So They Become Financially Responsible Adults

Posted on August 11, 2020August 11, 2020 by Tim Connolly

How early is too early to familiarize your kids with core money concepts like earning, spending, saving, debt, credit, and investing and focus on financial education for kids? Money can seem like an inappropriate or simply overwhelming topic to bring up to your kids, but it doesn’t need to be—in fact, it absolutely shouldn’t be.

“Would you ever let your child climb behind the wheel of a car and drive away without instruction, practice, or tips on how the car works? Of course not, because doing so could have a devastating outcome,” says Gregg Murset, a certified financial planner and the founder of chore and personal finance app BusyKid. “The result of a child growing up without a clue of how to earn or manage money can be just as problematic to the entire family.”

The earlier kids are introduced to the basic life skills of money management, the more comfortable and self-sufficient they’ll be out in the real world as adults (which might be crazy to think about if you have really young kids, but it’ll happen one way or another).

From the basics to the complex, here’s how to start instilling important financial skills in your kids in a way that sticks with them for life.

Know That There’s No “Right” Time to Broach the Subject

“All kids learn differently, so there probably isn’t one right way to tackle the topic of money,” Murset says. “However, it’s critical to address it.

A recent study showed that people who learned about money as a child were three times more likely to have a personal annual income of $75k or higher than those who didn’t. Now if that doesn’t motivate you as a parent to sit your kids down, nothing will.”

Should you try to lecture your 6-year-old about taxes or compound interest? Probably not. But should you talk about many times they’ll need to help take out the trash and mow the lawn before they can afford that new bike? Absolutely.

Don’t Make Money an Off-Limits Topic

If and when it comes up, it’s OK to be transparent about money and how much day-to-day things cost, like groceries, clothes, and household upkeep. “For example, parents should share more about household expenses so their kids can already be making mental notes on what it costs to leave lights on or waste food,” Murset says.

You don’t want to burden your kids, make them feel responsible, or start them worrying about money—but giving them a real-world sense will help them grasp bigger concepts about smart spending, wants vs. needs, and not taking possessions for granted.

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

Why it’s important to teach kids about money from a young age

Posted on August 11, 2020 by Tim Connolly

Why is it important to teach kids about money from a young age?

Teaching kids about money is really very important as the more earlier a child learns about money, savings and investment, the better money managers they will become. Such skills help children to understand the difference between earning, spending and saving, making them better money managers who’re able to budget. It also helps children understand the value of money at an early age and help them make better financial decisions.

How does your upbringing and ‘money conversations’ from childhood affect you as an adult?

Money conversations from childhood help people grow into adults that have a healthy relationship with money. Research shows that money habits as well such as getting an allowance, helping the caregivers in the home budget for household items also teaches the principle of efficiently allocating scarce resources. These all contribute to increasing the growing child’s financial sophistication, thus giving them a better financial outcome later in life.

Why are initiatives such as ‘Mmmm Yum Kidz Tuckshop’ important?

With the high unemployment of the youth and lack of entrepreneurial and financial literacy in our schools, it’s important to have such initiatives to make sure that we teach the children skills at a young age. When they grow up they’ll be able to create employment for themselves and make sound financial decisions.

What are you hoping to achieve with the campaign?

We hope our involvement in this initiative will teach the participants business principles usually reserved for an MBA program, introduce them to real-life entrepreneurship and money management tensions, and give them push to start their own business. Ultimately, we want to positively contribute to the learners’ financial outlook.

Is the spirit of entrepreneurship at this age important?

Learning about the spirit of entrepreneurship at a young age will allow children to learn all types of concepts focused on starting and operating a company. This can help prepare them for the real world where they’ll have to think on their own and come up with solutions to all types of problems. Employers look for candidates who’re entrepreneurial, think outside the box and can work on their own with minimal supervision.

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

Free and Low Cost Business Ideas for Teens

Posted on August 6, 2020 by Tim Connolly

Teens are less likely than ever to get an after-school job. In fact, a 2019 report by the Pew Research Center found that only 35% of teens get summer jobs (and even fewer get jobs during the school year).

That’s not to say today’s teens are lazier than ever. There can be lots of challenges that complicate traditional employment for teens.

Lack of transportation, being too young to get a job, or lack of job opportunities are just a few of the reasons some teens struggle to find work. But, if your teen still wants to earn money, starting a business may be an option.

Surveys show the vast majority of young people want to own a business someday. Thanks to TV shows like the Shark Tank, becoming an entrepreneur has become a big dream for many teenagers and young adults.

The good news is, your teen can start a small business at any age. And there are many small businesses that cost very little to launch.

Here are a few businesses that almost any teen could start with little to no cost:

1. Web Site Designing

Teens often take their computer skills for granted because they’ve grown up surrounded by technology. Not only do most of them take classes that enhance their computer skills, but most teens spend a lot of time playing on computers.

Even without advanced training, many teens have computer skills far beyond the skills of the average adult. Teens who understand the basics of website design can earn money creating basic websites for small businesses. There are lots of web design programs that make building websites a fairly simple process for technology-savvy teens.

2. Babysitting

With typically low pay but huge responsibility, babysitting is a common part-time and summer job for young workers. Teens should learn basic first aid and possess skills working with children. Teens who receive high recommendations from parents are likely to be in high demand, which can allow them to increase their pay.

3. Creating and Selling Crafts

From yarn bracelets to homemade soap, teens can earn a handsome paycheck manufacturing and selling crafts. Crafts can be sold in a variety of places, from online auction sites to local stores. A teen who finds success selling homemade items may earn a chance to sell those products to retail stores.

4. Lawn Service

Lawn mowing is another common job for teen workers but some treat their lawn mowing services as a real business. They acquire many customers and offer a variety of services. Some teens starting lawn mowing businesses have grown these start-ups into full-time careers.

Landscaping, tree grooming, and other basic lawn services can be combined with lawn mowing. Any teen wanting to start a lawn mowing service should be dependable, however, so that customers can count on getting their lawn taken care of according to their needs.

5. Reselling

A teen who is good at bargain shopping may find success buying and reselling items. Plenty of people earn a decent living by shopping at their local thrift stores and then selling the items on auction sites, like eBay.

Clearly, your teen will need a little start-up money to purchase the initial items. And as with any business, there’s some risk involved because the items may not sell for more money. But, it can be a wonderful learning opportunity for a teen.

6. Seasonal Jobs

For some teens, a seasonal business will work best. A teen who is too busy during the school year to commit to employment may do best with a summer business for example.

Other teens may be busy with family vacations, sports camps, and recreational activities during the summer and may only be able to manage a business during the winter.

Seasonal businesses can include anything from gardening to snow shoveling.

7. Blogging

Blogging isn’t an easy way to make money, but many people have created highly successful blogs that allow them to earn a lot of money with advertising space.

Similarly, popular YouTube videos can help people earn money. But, your teen should understand that it isn’t an easy way to get rich, and it can take a lot of work to get a blog started.

8. Graphic Designing

Artistic teens may be able to earn some decent money through graphic design. The internet has opened up possibilities for any aged artist to create and sell drawings, logos. Teens can use various software programs to create images and there are many websites where teens can advertise their creations and offer their services.

But most of all it is really important to money management for children for better future of kids.