Part of the Whole Package

Teaching kids about money is only one element of parenting.  But it’s part of a whole package.  Everyone – including parents and including kids – is going to have strengths and weaknesses.  We all grow as individuals if we can build on our strengths and do our best to mitigate our weaknesses.  Child need parenting that helps them do this. 


So if your child is doing well with managing the budget you give her for auto fuel, but she’s flunking algebra, make sure all the parenting pieces are fitting together well.  Do you need an algebra tutor or just the motivation for studying is in place?  Financial lessons needs to make logical sense.  For instance, parents need to be careful about “paying” for grades.  It might send the message that academic achievement will automatically bring financial rewards.  As any public school teacher who had a brilliant academic career can tell you, that’s not necessarily the case.  And yet a teenager’s primary job is generally agreed to be to get an education and find out enough about what her passion in life is to build a career.  So if working hard enough on grades is worthy of some financial support from parents, that’s worthwhile. 


As a parent of three teenagers, every once in a while I have to take a couple of steps back and ask myself, “Is it realistic that this child of mine who’s making me crazy right now should get a clothing allowance?”  If all the pieces aren’t fitting together for comprehensive responsible parenting, reassess.  And when you do reassess, remember that parenting isn’t about making your kids into clones of you.  It’s about helping them find who they are and maximize their sense of responsibility. 


Freddie, Fannie, and Indy

There continues to be quite a bit of hubbub about the condition of the mortgage industry.  Just how concerned should the average person be?  Let’s use the analogy of a car wreck on a major road. 


Assuming you weren’t in the accident, the traffic that has slowed down on both sides of the road will slow down everyone.  The vehicles going the same direction as the folks in the accident will get really slowed down.  The ones going the other direction will also probably get delayed, because traffic needs to go a bit slower to avoid hitting the accident.  But also, people on both sides of the street slow down to look at the carnage.  Where I grew up, we called that rubber necking.  The rubber neckers weren’t in danger, but if they didn’t pay attention to their own path, they might end up in a wreck, too.


So if you’ve been going on the same path as the wreck – if you’re in an interest only loan that might have a floating rate now or in the future – you’re on the same path and want to look at how to avoid the wreck.  Get out of your mortgage when you can.  Don’t expect the same terms your got now.  Be willing to get the right loan or, if necessary, move to a house that’s more suited to your situation.  If you’re a rubber necker going a different direction – good fixed rate loan that you’re paying as agreed, saving regularly, diversified investments – don’t get too caught up in what went wrong.  Stay on your path and pay attention.  Even people who are doing the right things financially and have clean credit will probably experience delays in getting loans approved.  That’s so we can all be safer.  And, if you’re like me, say a little prayer for the people in the wreck.  Some of them may be scarred for life, or worse.


What caused the wreck?  It might have been a combination of poor road conditions and bad driving.  What if you’re in the wreck?  First of all, be willing to claim your part in it.  If you were tailgating, speeding, not paying attention, own up to it.  So if you got in a loan that you never should have agreed to, you might have to sell your home or even have it foreclosed.  Look for programs that can help you minimize the mess, but you may have to make some tough changes, some of which you don’t have much control over.


And going forward, let’s all try to drive safely.

When to Start Allowance

Parents want to know when the right time is to pay allowance.  It’s sort of like knowing when the right time is to get married or have kids.  It depends on the family and on the individual kids. 


For most kids, when they are aware that things cost money, they’re ready to have some money of their own.  And the right amount is usually about a dollar per week per year of age.  So a five year old could have as much as $5 per week.  The next step is crucial!  Don’t buy the child all of the discretionary purchases you have in the past.  It’s up to her to buy those things.  And define what it’s ok and not ok to buy.  So if she can buy candy, small toys, and stickers, tell her so.  If she’s not allowed to buy a puppy or a pocket knife, tell her that.  Leave the lines of communication open so she can ask if something is an approved purchase.  Don’t bail her out and don’t reimburse her for inappropriate purchases.  So if she buys a cheap little toy and it breaks within the week, don’t give her back the money.  If it’s truly faulty, you can take her to the store and help her get a refund, but you shouldn’t be “the store”.  If she buys a switchblade (not an approved purchase), her choices are to see if the store will take the item back and give her a refund, or you take the item and she doesn’t get a refund. 


For families that are struggling to make ends meet, giving money to the kids should be a rare or nonexistent occasion.  But the kids can still be learning about financial responsibility.  One way is to discuss some of the family finances.  For instance, if the grocery budget is on the agenda, have the kids help plan meals around coupons or sales in neighborhood grocery stores.  One way to let kids have a little money of their own in a sight family budget is to tell them they can have a portion of money they “find” for the family.  So if your teenager finds a way to save on the electric or water bill, he gets a quarter of that money back the first month the savings hit.  Your family still comes out ahead, he’s more financially aware, and he gets some money to spend as he wants – within what you allow.


Keep dialog open.  Let them talk about their money with you.  Be willing to talk with them about some of your financial situation.  It’s important to remember that there’s a difference between talking about money and lecturing or criticizing. 


Kids will make some mistakes with their money.  But it’s easier for them to learn from those mistakes now – while you’re feeding, clothing, and housing them – than when they’re on their own. 


There’s lots more on this issue and others to teach kids finance in The Ultimate Parenting Map to Money Smart Kids available at .