5 Tips for Raising Money Smart Kids

  1. Remember that experience is better than lecturing.  When your kids are ready to learn about money, start letting them make some financial decisions.  It might be as basic as choosing between an ice cream treat and a soda, but let them decide and let them know it’s about deciding what to get, not getting everything they want.
  2. Start younger than you think you should.  Many kids in pre-school can make the ice cream vs soda decision.  Elementary school kids can have an allowance that let’s them buy some things that you used to buy for them.  In late middle school kids can start managing a budget to buy their own clothes.
  3. Lay out boundaries up front.  Let them know what they are not allowed to buy – clothes displaying profanity, dangerous objects like knives, whatever you decide is inappropriate for your family and their age.  Let them know they’re welcome to check with you if they wonder if a purchase is acceptable.  And let them know that if they buy something they shouldn’t, they either have to return the purchase for a refund or give the poor purchase to you for no refund.
  4. Let them be themselves.  They might spend money on things you would never want, but it’s what they want and let’s them start developing their own money personality and skills. 
  5. No bailouts!  If kids make bad choices, express your compassion for the error, ask how they might handle the situation differently in the future, and let them deal with the outcome.  Don’t give them money to recover their loss.  We all learn from our mistakes.  And if you bailout your kids from their financial mishaps, they learn that mistakes aren’t a problem, because you’ll always rescue them.  That’s a very expensive life lesson for them and for you. 

A Budget You Can Live With

Different people have different ways of managing their money.  Some people like working through what they spend in dollars and cents.  That’s workable and viable.  “If I spend less on dinner tonight I can have a more expensive lunch tomorrow.”  For these folks, each dime saved is rewarding. 

Other folks work better with general parameters.  I’ve seen this in my own family.  I know what we spend on an average dinner out with the whole family.  So instead of watching every dollar spent when we’re eating out, we keep track of how many times we eat out each month and everyone knows the basic rules of what we get.  For instance, we can share a few appetizers or all get dessert, but not both.  That’s comfortable for the kids (rather than having to ask what entrees on the menu they can get and what they can’t) and keeps the budget in line. 

Dining out is a specific example of part of the budget that can be tackled through different perspectives.  It can work with just about every aspect of spending.  Instead of buying every book you read, buy ones that you’ve read through the library and want to keep. Or have a Book Co-op.  Form a group where each member buys one book a month.  Everyone gets a week with each book, then pass it on.

Approach spending management in a way that makes sense for you and the others that share your income. 

The Money Pet

We’ve all heard about a house or other project that’s a major “money pit”.  While not as widely recognized, there are also “money pets”.  If you’re a Pet Person, you’ve probably had at least one in your life.  It’s the stray that never leaves and becomes a part of the family, developing health problems that are quite expensive to treat.  Or is perfectly healthy, but a picky eater who’ll only eat the pet equivalent of filet mignon.  Let’s put things in perspective.

As a Pet Person, I’m not suggesting that you have Fido put to sleep the minute he gets injured.  But we need to be realistic about the finances of pet ownership just like we are the rest of the family financial commitments and this often gets very emotional input from the kids.  Here are some ideas to exhibit sanity without being on the SPCA watch list.

         Everyone can be picky about what they eat, but we all need to eat a diet that fits our pocketbook.  It’s fine to get a few pricey treats for your pet, but if your expensive food treats are only occasional, the pets should eat a reasonably priced stable diet. 

         If every cute pet toy ends up in your shopping cart when the kids are along, tell them they can buy those items with their money if they wish, but otherwise the pet gets basic needs met.

         Don’t get a pet unless you can afford one.  Even if you’re trying to save the life of a stray, taking it in while you put an ad in the paper to find the animal a good home can be less expensive than keeping it long term.  Also, many local animal shelters have “foster pet” programs where the shelter will provide food to families who keep animals until they can be placed.

Depleting your financial resources for a choice you can’t afford is never good for you or your family.  Only bring a pet to your home after considering all the costs, including vet bills, food, and potential damage to your home.

Being a Single Mom and Financially Sound in 2008

If you are a newly single parent, this time of year is a good one to get a grip on your financial situation.  Here are a few tips to get you started.

 

First, know that you can be in charge of your own situation.  Feel free to get help from professionals, but don’t assume that you can’t be financially sound if your co-parent used to handle all the money or even if he made all the money.

 

Next, figure out what you spend.  Do some detailed listings of what you’ve spent in the past year.  See what you must spend and what you could do without.  Don’t hold on to lots of financial ideas for the wrong reason.  If an expensive coffee every day is how you show your status to your co-workers, be willing to let go of it.  Also, be sure you are saving every month.  Ideally, save 10% of what you make.  If you can’t save that now, start with as much as you can save and build it up over time.

 

Don’t burden your kids with financial worries, but don’t hesitate to let them have a voice in family finances.  If you need to eat at home more, let them help you plan menus, clip coupons,  and get meals prepared – or at least set the table.  Whatever you do, don’t badmouth their dad about money or any thing else. 

 

In addition to seeing what you need to spend.  Don’t hesitate to look for a better paying job.  There are two ways to approach a budget crunch – spend less or make more.  If you do both, you can really better your situation! 

Reader Question – Divorce, Disability, and Quilts

A Reader Writes

 Linda,  I recently retired and went through a divorce after 38 years of marriage. During my pre-retirement years, I was out on SSI for ten years. My ex and I had a small business-I made handmade quilts. The business was in his name as I could only make a certain amount of money or lose my disability. When we divorced, the business was dissolved and the assets were split. As the inventory -quilts-have been essentially written off, would I be better off trying to sell my share of the quilts, piece by piece on Ebay-my research tells me that handmade quilts don’t bring much as the competition with the overseas market is cheap labor.  Would I be better off donating my quilts to a charity ?  If so how much could I reasonable write off as a donation without raising a red flag?  Another alternative would be to try  and sell the whole lot to a third party broker?  Obviously the broker takes a healthy chunk. What impact does my tax bracket have on this decision?Thanks 

You’re to be praised for the fact that you’ve obviously taken control of your life and responsibility for your future after the end of a long-term marriage!  That isn’t always easy, especially when you haven’t been able to work for a while. 

In regard to the disability, Social Security disability payments and most privately paid disability policies only look at earned income as potentially disqualifying someone for payments.  So investment income or money from sale of assets should be a problem for whether you can still get payments. 

If you are getting your regular Social Security retirement benefit now, that’s not going to be impacted income other that earned income either.  If you are at full Social Security Retirement Age, which currently ranges from 65 to 67 depending on the year you were born, you can also have earned income without losing any Social Security benefits.

In regard to the quilts, your next step depends on what you want or need to get from them.  You’re right that certain items do well in online sales and others don’t.  So if you have to get a certain amount from the quilts, only list them with minimum sale prices.  You may or may not have actually written them off, depending on how the business was last reflected on a tax return, so that probably needs to be reviewed with your tax professional.  In terms of charity, you need a receipt from the charity and a listing of what you gave and the value.  The value is the sticky piece.  You can support that with copies of what comparable items sell for online or in a thrift shop.  Or you could actually have them appraised.  The appraisal might give you the biggest number, but will also cost you a fee for the appraiser.  If you just want to get rid of the quilts, thrift shops, homeless shelters, and domestic violence safehouses will probably be most likely to want them.  Since they are so nice and personally made, it’s probably a painful thought to give them away, but some of these charities could probably really use them. 

It’s always a good idea if alimony (a/k/a spousal maintenance) is part of your divorce decree to look at whether or not it’s effected by other sources of income.  If you don’t feel comfortable reviewing the document without professional help, your financial planner or tax professional might be able to help.  If they aren’t comfortable with it, it’s worth hiring an attorney to look it over.