My friend and colleague, Eric Gelb, has written a guest column telling us about how he teaches his daughters to manage money and know the value of a dollar. Thank you, Eric!
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Money Smarts: Teaching Your Kids How to Manage Money!
In today’s consumer-happy society, kids are bombarded with ad messages and want “IT” and Now.
But, there’s a solution that works and what’s more teaches children how to manage their money – an important lesson for a lifetime.
Almost 9 years ago, my daughter Ilana, then 7, wanted an American Girl Doll – $84, an arm and a leg. Ouch.
At the same time, Ilana claimed I owed her $1,000 because I failed to give her, her $1/week allowance. And whenever we went to the supermarket she “needed” a Barbie or new videotape. Enough.
I bought her and her younger sister, Sara, Ledger Books. I tracked their money, deposited their allowance and other sums for gifts and odd jobs. I serve as the bank and even pay interest.
Within a couple of months, both my girls learned the value of a dollar! When they would ask me for a gift, sometimes I’d buy, but often I’d say, “I’ll pay half” or “I’m saving money this month/money is a little tight…” “BUT you can use your ledger book money.”
Interestingly enough, more often than not they decided Not to buy that supposedly much-needed item.
After 9 years, my now 16-year old and 13-year old each has almost $1,600 in their book. Nice start for college spending money.
More important, they take pride knowing that they have some money, have saved a healthy sum of money, and they know how to make financial choices and budget their money.
A true winner!
Eric Gelb
Another run to the bank.
May 14, 2009
Jon hasn’t been to the bank in a while. For some reason the kid has over $350 swimming around upstairs in his room.
It’s time to go to the bank.
Jon has been going to the bank to deposit money for a long time now. I am thinking that Jon started when he was one or two years old. Jon is now thirteen years old.
But Jon still isn’t sure how to endorse a check. He counts his money up and says he is ready to go to the bank to make the deposit.
“Jon, have you endorsed your check?”
“Uh. No.”
He gets a pen. “How do I endorse again?”
I remind Jon, for about the 25th time in his life, that he signs the back of the check and then writes, “For deposit only.”
I remind Jon that he writes, “For deposit only” so that someone can’t cash his check in their own account if they get a hold of his check. Jon isn’t so sure that he needs to do that.
So I tell the story of my friend, Eydie, when we were in high school. Eydie and I both worked at Hot Dog on a Stick. We got paid every week with a check. Eydie had endorsed her check and put it in her purse. She signed the check, but didn’t put “For deposit only.”
Someone stole Eydie’s purse. The biggest pain that Eydie felt was that someone cashed that check. And they could, because she had failed to put the words “For deposit only” on her check. I still remember that Eydie was really, really miffed. Even thirty years later.
I told this story to Jon to make the lesson come alive. Jon agreed that he would be miffed if someone took his money by cashing his check that he had not adequately safeguarded by putting “For deposit only” on it.
I hope he will always remember to do that.
Justine
Max’s Birthday – It’s all about money.
April 28, 2009
Max celebrated his 11th birthday yesterday. Max asked for two things for his birthday: a new watch and $150 for his stock trading account. Now that is easy!
We celebrated Max’s birthday by going out to a family dinner and having a birthday cake at home. Max actually got his watch a few weeks ago, for a camping trip. So now we just have to follow through on the cash for the stocks.
What is great about this gift is that it’s not just about the cash and buying stocks. It’s about spending time together. This weekend, while everyone else is away, Max and I will sit down on the computer together and log into his stock trading account. We will make a deposit into his account from my checking account. And then we will go shopping for stocks together.
Max has been getting some good practice in trading stocks by playing on a website called UpDown.com. I have a feeling when Max and I sit down together this weekend, he will be telling ME a thing or two about which stocks he should buy, since he’s been trading quite a bit on UpDown.com.
So I am really looking forward to looking at his portfolio again with him and finding some new stocks for him to buy. We haven’t done this in a few months, so it will be a good exercise for us to do together. And it will be a great way for me to continue to build my relationship with my younger son.
Max received a few checks for his birthday, as well. Both sets of grandparents sent him checks. He loves getting checks because he likes putting the money into his savings accounts. But he also got a Target gift card from his aunt. So he likes to spend money at his birthday, as well.
So along with shopping for new stocks, Max has also asked that we go to Target and find some ways to spend the gift cards burning a hole in his pocket.
I am looking forward to a one-on-one weekend with Max. And helping him learn just a little bit more about money.
Justine
Jon’s complaint about his bank statement
April 6, 2009
Jon recently read his bank statement. My kids do not do a very good job of reviewing their bank statements each month. Frankly, I think the bank statements are a little boring. Other than Hannah’s checking account, the children just have simple savings accounts. Once you’ve been teaching kids about their savings accounts for ten years, well, they get a little boring. It’s not like the kids have a bunch of transactions to reconcile each month. They just see how much money they have. And considering they make deposits only every two months or so, it’s not like there is much going on in their accounts from month to month.
But once in a while my kids really look at their bank statement and revel in how much money they have saved.
But Jon had a different reaction the last time he looked at his bank statement. He finally took some interest in looking at other parts of his statement, and figuring out how the statement really works. He noticed that he has a starting balance, and then Interest Earned, and then (if there were no deposits that month,) the ending balance.
Ouch, Jon did not like that Interest Earned number. Jon has over $3,000 in his savings account, but he earned only $.36 in interest last month. And he saw that he earned only $3.64 for all of last year on his balances.
Jon wanted to know what happened. Isn’t his money worth more than that? I told Jon that, certainly, his money was worth more than that. He just needed to find someplace where his money would be more valued and someone would pay him more for keeping his money there. We talked about Certificates of Deposit and other alternative places to save his money.
And that was that. Jon hasn’t moved his money. Not yet at least. But at least he noticed the problem and that is part of learning.
Justine
Jon makes another deposit at the bank
February 2, 2009
Jon Tobin is becoming an old hand at making bank deposits. He made another deposit the other day, for $270. Didn’t Jon just go to the bank?
This time, I really did no work at all in helping Jon prepare to make his deposit. Jon came and told me over the weekend that he needed to make a deposit. I asked him for how much and he said $270. Wow.
I told him to put the appointment – to go to the bank – on my calendar so that we wouldn’t forget. And he did.
Jon did come around and ask me about endorsing checks. He had two checks that he needed to endorse. He wasn’t quite sure about the two things one should put on the back of the check. I reminded him that he needed to sign the back of the check. Then I also reminded him that he needed to write, “For Deposit Only,” in order to protect himself in the case the check got into the hands of someone else.
We went to the bank and Jon made his deposit. I just hung in the background. The teller said, “Right on the mark.” I asked for clarification.
“Jon, did you count the money so that your figure matched hers?”
The teller nodded yes. This is always a big deal for my kids – counting the money correctly. And it was a really big deal for Jon because he didn’t get any help from me in counting the money.
Then the teller said, “I had no idea of how to endorse checks when I was his age.”
I told her that I love teaching my kids about money.
As we left the bank, Jon said that he was happy that he deposited $270, but when he first counted up his money, he was worried because he seemed a little short. Then he remembered – he had just paid his $100 for his spring break trip.
More on that tomorrow.
Justine
Jon’s Bank Statement and his Financial Goals – Part 2 of 2
December 18, 2008
Yesterday I told you about Jon opening his monthly bank statement and evaluating the information in that statement against his financial goals that he had established for himself for the year.
Financial goals are something all of us should have. And it it important to teach kids to have financial goals.
As I mentioned, I don’t do a great job of that, but Jon has financial goals and that rubs off on my other two kids.
And their perspective rubs back off on him. (Some of the fun of having lots of kids!)
Jon evaluated his statement closely after looking at the actual amount he had in the bank. He pointed out to me that he has only made $3 in interest this year. I told Jon that this is part of the problem of having money in a savings account. Savings accounts don’t pay high interest rates, or rates of return, to depositors.
I asked Jon what his interest rate is on his savings account. This was a good exercise in getting him familiar with financial documents. And it was a “teachable moment” because he was interested in the topic, right there and right then. Much better than trying to sit your kid down and teach them about money when they aren’t really interested.
“It’s .25%, Mom.”
Me: “Ouch. That is low.”
Hannah, Jon’s older sister piped in, “That’s why I have some of my saving in a CD, so I can earn more money in interest.”
Jon: “How much more?”
So I walked Jon through it. I told him that I thought Hannah was earning a rate of about 4% on her money, which on $3,000 would be about $120.
Jon says, “Wow, that is a lot of money.” And he smiles.
So Jon is going to explore CDs this weekend.
Justine
Jon’s Bank Statement and his Financial Goals.
December 17, 2008
Jon found his monthly bank statement in the mail and ripped it open. Jon was a bit disappointed to see that he only had $2,400 in the bank. Then he looked at his bank statement a little harder and realized he had read the statement incorrectly. He had looked at the Beginning Balance number and not the Ending Balance number. So the number he was looking for was $2,800.
But Jon was still disappointed. He had developed a personal financial goal of having $3,000 in the bank by the end of this year, in just a few weeks. But then he stopped, and smiled.
“I’ve got $200 in my room upstairs.”
He knew that I knew what that meant. That once he went and made his deposit, he will have met his financial goal and will have $3,000 in the bank. Bully for him!
Point of interest: Sometimes I am gonna tell you our “numbers.” Yes, in this country we all respect our own financial privacy and each other’s financial privacy. But at the same time, we love hearing other people’s “numbers” so that we can get an idea of where we should be or are already.
Nobody’s numbers are right or wrong. But if I tell you some of our numbers, maybe that will help you think about your numbers and what numbers might be right for you. Some of you will have numbers that are “bigger” than ours. And some of you will have numbers that are “smaller” than ours. It is not a measurement game. The person with the biggest number doesn’t win.
This is all just about learning from each other.
Financial goals are something all of us should have. And it it important to teach kids to have financial goals.
I don’t do a great job of that, but Jon has financial goals and that rubs off on my other two kids.
Justine
Jon’s deposit
December 1, 2008
Jon is making another deposit today. Teaching kids to make deposits, even after all of these years, is still kind of a complicated process.
Since Jon last went to the bank in September, he has raked in another $400. Jon has made money by mowing our lawn every other week, by bagging leaves, and by baby sitting for neighbors.
Getting the cash bills in order, all facing the same way, is still an issue for Jon. We had to show him that putting cash ‘in order’ facilitates the counting process. This is another way to show kids that ‘neatness counts.’ Counting a few hundred dollars in cash is also a pretty complicated process. It took several ‘counts’ for Jon and his dad to agree on the amount of cash he was holding. Counting by twenties, and then by tens, and then by fives and then by ones takes a lot of concentration and thought. But it is a great learning experience and a good thing to practice as a child learns to handle and manage money.
We had to review with Jon how to fill out a deposit slip, placing the information regarding both the cash and the checks in the right areas of the deposit slip. Jon lets his babysitting customers pay him by check and I wrote Jon a check, as well, because I owed him a significant amount of money and didn’t have the cash on me – and didn’t want to spend the cash on him! He really didn’t need $80 more of cash sitting around and he could take a check since he needed to make a bank deposit anyway.
Jon filled out the deposit slip, finally got the amounts correct, and is now going to the bank to make the deposit with his dad. Some good father/son time, at the bank. That is a wonderful thing.
Justine
Philanthropy – The fun of choosing a charity – Part 2
October 31, 2008
OK, so we are talking about teaching our kids about philanthropy.
I promised that I would ask Jon about the charity he gave his money to that one day that we are recollecting.
Jon can’t remember. Neither can I. It was cute at the time, I promise.
But I did talk to Joe B yesterday, a parent that is a colleague of mine. He is an amazing parent. I asked him a about philanthropy in his family.
Joe B told me that when his kids make deposits, they lay out all of the money. Then their calculations are that they give 10% away, they can spend 10% and they bank the rest.
I love that – Joe B has really thought through this and he knows what he believes and he teaches it to his kids.
Joe B used the word “tithe” in speaking to me. Giving 10% of one’s gross earnings is commonly known as tithing and Joe B is teaching his kids to tithe. I suspect that the tithe is going to the religious institution of choice. That was an important value that Joe B imparted to me in our conversation. Although I did not ask for specifics on his children’s philanthropic targets.
Tithing is a great lesson to teach one’s kids. I think it is great that Joe B is doing that.
Philanthropy is a good thing.
PS – DON’T WORRY! WE START CREDIT CARDS ON MONDAY!
Justine
Philanthropy – The fun of choosing a charity
October 30, 2008
We talked yesterday about teaching our kids to give some money away. I think that this is another area where we need to teach our kids and to help them learn about managing their money. If we want our kids to be charitable when they grow up, it is best to teach them – at home – now.
That one day that I described when we split our saved money into threes for
- saving,
- spending and
- giving away
we realized that we, as kids and as a family, were going to have to decide to whom we wanted to give our money. And each of the children found a charity that they supported, financially, with that money.
Hannah has been a fan of the local Raptor Center that helps rehabilitate injured birds of prey. She had been out there several time with us as a family, as well as with one of her community clubs. Hannah thought the Raptor Center would be a good cause to support with her donation. So Hannah sent her money, a simple $10, to the Raptor Center.
We knew that a decent charity would appreciate every dollar that they received, particularly from a child. And the Raptor Center filled that bill. They wrote Hannah a thank you note and highlighted her contribution in a newsletter. Sadly, Hannah’s contribution seemed to be unusual. Thankfully, the organization took notice and used the contribution as a valuable tool in telling others about it, as well as in thanking Hannah publicly (but only by first name, of course. We appreciated that….).
Max gave his money to the local animal shelter run by the county government. Actually, he couldn’t really find a way to GIVE them his money, but I helped him find the website where he could buy a T-shirt that the shelter sold for fundraising purposes. So Max bought the T-shirt, online, with his money (and some of mine…. I was happy to kick in.)
I can’t remember what Jon’s charity was – I will ask him when he comes home and tell you tomorrow.
I do know that my children don’t give away enough money – I’ve been forgetting to teach this lesson regarding giving away a little bit of what you get. I need to get better about that…..
Justine
