A Christmas Gift

So what was my daughter's favorite present this Christmas? Her own.

Quick back story - As mentioned in a previous post, we recently tried the saving-for-a-goal approach to dealing with allowance. My daughter taped a picture of something she wanted to buy - a neat, kid-sized pottery wheel that came with wood, clay and paint. Over the course of a few months, she saved enough to purchase the wheel. Having the picture taped directly to her save bank helped serve as a reminder at allowance time. Sure enough, most of her money went to saving. When she saved enough for the item, she gave me her money and I purchased it online for her. I would have preferred to purchase this item at a store so she could physically pay for the item, but then this wouldn't have happened...

Back to Christmas - She had already opened most of her gifts as I picked up the brown box that had arrived with her name on it (one of several). It had been a busy holiday season and I had forgotten about the order we had placed for her. I thought this was another gift from one of her long distance relatives. We opened the box together and when I realized what was inside, I almost jumped with excitement. My daughter, though, went bananas. She was so excited and proud that she had received the toy for which she had so diligently saved. It was a an exciting moment for both my wife and me. Of all the presents she had received, none had elicited such a powerful reaction. We had stumbled into an incredible teaching moment for our child. She had learned the power and pride of saving for something on your own. She had received an incredible Christmas gift...from herself.

I wish you all a Happy New Year!

A Smart Way to Spoil Grandkids

Kudos to Janet Bodnar for this article in her "Money Smart Kids" column.

Holiday Cries for Help - Got Sanity?

Help! That seems to be the call this season. I am seeing so many articles about kids, money and the holidays that I honestly can't keep up. There is one thing that I've been talking about that I think is probably the most important consideration parents should have this holiday season - be aware of your own actions. Stacy Tisdale's new book, "The True Cost of Happiness," addresses this same issue - she says that if kids grow up in a credit card debt home, that's the kind of home they'll have. She even talked on the Today Show about this. True, true, true. I completely concur with Stacy's assessment. We all know kids do what we do, not what we say. So, this holiday season, be aware of the following:

- Make it a point to create and talk about a budget - even if you have very young kids, talk about it. They may not yet get, but you're setting the foundation...and you'll help yourselves curb "crazy spending in the process."

- Be very aware of the use of the words "need" and "want." Correct yourself and your children when you use these words incorrectly and/or interchangeability. Seriously, make it a point to pay strict attention to your words and actions regarding money for a day or two and you may be surprised at what you might discover about yourself - and your kids.

-Emphasize traditions. Don't have any traditions, create some. Every kids wants gifts during the holidays and I certainly don't want to advocate being a scrooge here, but emphasize your traditions - whatever they may be - because that's what kids will value in the long run. Granted, a Christmas without presents would not be fun at all, but neither would a Christmas without a decorated tree.

Make time for family and enjoy yourselves.

-John

Starting An Allowance

At one of our recent super-fun live "Money Mammals" shows, a parent approached me about starting an allowance for her 5-year-old. I figured it was a good time to share the approach our family is taking as it might be helpful for others. We've just started allowance for our 4-and-a-half year old and I've begun by using David McCurrach's book, Kids' Allowances, as a guide. I like this book because it's simple, includes a survey of what parents of various age kids do r.e. allowance, cites various experts on youth financial literacy, and provides you with a structure to provide allowance for your children. The author is also experienced - he has honed his method on both his kids and grandkids. And he's not "preachy" or condescending, refreshing when you consider the approach of some financial self-help gurus today.

So what are we doing? We are using a three bank system (Share, Save, Spend Smart) and she's getting three dollars per week - two dollars and four quarters. Providing the money in different denominations provides us with a teaching opportunity each week (e.g. four quarters equals one dollar - and you can change up the coins each week). She is required to put two quarters into the "Share" jar (for donations) and two into the "Save" jar. At her age, we're making saving tangible by putting a picture of a savings goal on the bank so she knows that she's saving for something. She can do what she pleases with the other two dollars - put them in the "Spend Smart" jar or either of the other two (Save or Share). We are not tying our allowance to chores and we will revisit our approach at least every six months. At some point, we may consider some type of savings matching to encourage savings and I envision giving her complete control of her allowance (no mandates) in a few years.

I hope this is helpful and good luck to all parents out there. Remember, it's most important to just do something. You can't afford not to teach your kids about money.

Who Will Own Our Children?

Ok, I'll admit it. I stole this headline for the National Association of State Boards of Education's report on financial and investor literacy. The title says it all. If you decide not to teach your kids about money when they are young, you may be ceding their financial educational literacy to credit card companies or financial institutions who may not have your child's best interests in mind. This is certainly not to say that credit card companies and financial institutions are bad - only that I don't believe they should be the primary source of financial literacy education for our kids. Parents need to teach their kids about money. Why? Let me give you a few snippets from the report:

"In 2005, the average personal savings rate for the year dipped into negative territory [where it's remained] ...in the United States for the first time since the Great Depression as consumers relied on credit and/or tapped into personal savings and other assets to allow them to spend more than they took in. As a comparison, savings rates for countries in Western Europe hover around 14 percent." In short, we need a country-wide change in attitude towards saving money. We must teach kids the basics of financial literacy as early as possible, just as we do with teaching them their ABCs, personal hygiene and eating right (though I suppose we still need work on the latter of these). I believe that this may take a generation to do - though hopefully sooner - and that we need to start now.

"Changes in employment and public policy have only recently put substantial financial responsibility on the shoulders of individuals, a condition for which they have not been adequately prepared. Financial literacy is as much a societal concern as it is an issue for individuals..." The NASBE narturally argues that the state boards of education need to be involved directly in K-12 financial literacy. I do agree that classes in personal finance are arguably as important - if not not more important - than those in the three R's and I'm glad financial literacy requirements are in place in some states. I believe, however, that it's of paramount importance that parents take significant responsibility in the process as they will set the stage with their own behaviors as to how children will view and use money. I created a DVD, "The Money Mammals: Saving Money Is Fun," to help parents start this dialogue. If you are interested in finding out more, click on the link to the right.

Most importantly, youth financial literacy makes a difference. The NASBE report notes that "the evidence shows that youth financial education can make a difference. Individuals graduating from high schools in states the mandate personal finance education courses have higher savings rates and net worth as a percentage of earnings than those who graduate from schools in states without such a mandate. "

So before you decide to wait to talk to your kids about money, be sure to ask yourself, "Who will own YOUR children?"

John

Somewhat Shocking Short

Just in case you're wondering how important it is to teach your kids about the value of money, please watch this New York Times Magazine short, "Kids + Money," by Lauren Greenfield. It's so important that we as parents demystify money and help our children to understand that it in no way should define them (or us). Doing so is obviously not an easy task (we're in the process ourselves and have not hit the truly difficult life stages with our kids yet), but I am so glad that my wife and I have made money education a cornerstone of our childrens' lives.

-John

A Dollar a Day from the Money Mammal's Mommy

I have a very special special guest blogger today, my wife and "Money Mammal" executive producer, Eileen Lanza. Eileen inspired me to really get my money act together after being something less than money-savvy in my 20's. Her advice is simple and effective. Listen to her. I do.

A dollar a day?

So, I am a Money Mammal, right? And a Money Mammal Mommy, too! Because I sell Real Estate (in Los Angeles), I have decided to put $1 a day away for each of my children starting at birth to go towards a down payment for their first home. Since I just thought of this, I have some catching up to do; my girls are 2 & 4. I decided to buy in to a mutual fund and keep it in my name until they are old enough & wise enough to purchase their own homes. I looked for a no-load mutual fund with a low minimum and purchased shares of American Century LiveStrong 2035 online.

I have always funded my 401ks, IRAs and the girls 529 plans and I have never missed a single dollar. It is very satisfying getting the statements in the mail and seeing how much money I have socked away. Can you imagine how much money they will have in 20 years? All because I saved $2 a day!? C’mon & join me! Your kids will thank you in 20 years...and they won’t live with you until they are 35!

Eileen

Put It In Writing?

Memorialize your child's commitment to learn the value of money by putting it in writing - or at least make it visual in some way. Just as you should write your own goals down to "train" your brain to follow your direction, writing or memorializing your child's commitment is something to strongly consider if you want to begin their lifelong commitment to money smarts. If you want some help (and an easy way to start), you can print a free copy of a Money Mammals certificate for your kids to help them to commit to share, save and spend smart (Click Here to download certificate). Or have your child make his own certificate. Or simply write something on a piece of paper that you refer to on a continuous basis. I personally like the idea of a certificate because it carries more weight - and it goes on a wall for easy reference. Another idea (or a complimentary idea) might be a wristband so that you can refer to it when you are out the house and out of range of the certificate. As always, good luck and always remember to Share & Save & Spend Smart Too.

A Little Victory

I talk a lot about needs and wants to other parents and kids and it's a core part of the mission my company and I are on. Recently, though, I've been wondering about the effectiveness of this communication because my 4-year-old, Quinn, has been overwhelming my wife and me with whining about "wants, wants, wants." I kept thinking to myself, "Is she getting it?"

And just about when I was at my breaking point, she stunned me. We were cruising down Gower St. here in Los Angeles when Kellyn, our 2-year-old, blurted from the back seat, "I need my Dora" (pronounced "Doe-wah" in two-speak). I had just watched her toss it on the floor and since I was, well, driving, I wasn't in a rush to satisfy this demand. She quickly followed her request with a whine when suddenly Quinn chimed in, "Kellyn, you don't NEED your Dora, you WANT it." I looked at Quinn in the rearview mirror and smiled. A little victory.

Say Yes to No

Minnesota has launched a new campaign, "Say Yes To No," that encourages parents to be more active in setting limits on their children, particularly when it comes to consuming media - which are filled with "yes" messages. Why? The site link above notes that "The constant barrage of “yes” messages undermines crucial character traits for success, including self-reliance, respect, integrity and the ability to delay gratification." The campaign promotes Dr. David Walsh's new book, "No. Why Kids – of All Ages – Need to Hear it and Ways Parents Can Say It," as a way of addressing the "yes" syndrome in our culture.

I haven't yet read the book, but I love the concept. It immediately reminded me of a recent conversation. My friend - a company president and someone with tremendous means - told me that he was having diffculty getting across the concept of saving with his 5-year-old. I probed a bit and found that his real problem was that he was having a difficult time saying no to "small requests." These requests (toys, games, etc.) were adding up and he was feeling that his child was beginning to become one of those "entitled" types. The irony of this was staggering - the wealth he had amassed by embodying the traits above was enabling him to potentially deprive his son of those very important traits. I told him that he really needed to learn how to say "no." Sure, he can afford most anything his son would like, but perhaps it was time to use the phrase, "it's not in our budget." It's just one way to "say yes to no."

Road to 10%

How long will it take us to get from a sub zero savings rate to 10%. Likely a generation. But steps like the bill being considered in the California legislature can help. AB 150 is a "first step" bill that will establish the California Literacy Council and create a state clearinghouse of financial literacy information for California schools. As I've said before, understanding personal finance is as crucial to a kid's well being as learning multiplication tables and your ABC's. The California Jump$tart Coalition (of which Snigglezoo Entertainment, our company, is a member) is focused on bringing financial literacy education to every child in California. This bill is a good first step. Currently, only seven states require that high school students take a personal finance course to graduate. This number should be 50. In time it will be.

"The Fourth R" - The Real World

I recently took part in a conference call hosted by Robert Duvall and the National Council on Economic Education (NCEE) announcing their "Report Card – Survey of the States: Economic, Personal Finance, and Entrepreneurship Education in Our Nation's Schools in 2007." The upshot? Kids are not learning what Mr. Duvall referred to as the "The Fourth R - 'The Real World'" The report notes that "the majority of students aren't receiving the essential real-life economic skills they need to become knowledgeable consumers, prudent savers and investors, and productive members of the workforce." It's this fourth R that is arguably as important as the other three (you remember, Reading, 'Riting, and 'Rithmetic). It's so exciting to be a part of those on the vanguard of getting this most important message out - particularly to very young children - so that we can help cement behaviors that will serve them well throughout their lives.

Give Kids Credit (Not that kind of credit)

This morning, I was perusing an article about teaching kids about money and the author suggested that you should start giving an allowance when kids begin to understand the concepts of saving and spending. I agree. Then the author said this should happend around first grade. First grade? Hmmm...my kids certainly have learned about the concept of spending money much earlier than that and saving money is something they can understand by the time they reach kindergarten (if not before). We need to give kids more credit (not that kind of credit) for their ability to grasp concepts earlier and, therefore, I think you should start them on an allowance earlier than first grade. Earlier is better, because the forces teaching kids to be irreponsible with money are certainly not waiting and an allowance is one of the best tools to start teaching your kids about the value of money. Let them make mistakes with the money young, seek out the teachable moments when they make them, and hopefully they will learn and we can raise a generation of kids much smarter than us when it comes to money.

Young Kids and Money - Rich or Poor

My family is always sending me articles relevant to our business and today's mail proved to be no exception. My Dad, a retired banker, sent me a piece from the June 2007 issue of the Parsippany monthly. Though the article addresses four topics for "Teaching Children the Financial Facts of Life" (article by Steven Brisgel), two items resonate for me. At the beginning of the article, Steven mentions that many young people may receive "sizable inheritances." Kids of wealth have difficulty with "value of money" issues just as poor or middle-class children do. It likely stems from the same problem, though, and that is the emphasis society or parents put on material things. Which brings me to the Steven's first (and arguably most important) topic, "Be a Role Model." This is one of the most difficult areas for any of us to address, particularly if we have developed any bad habits (which would be about 100% of us) over our lifetimes. We all know that kids do what you do, not what you say, and it is IMPERATIVE that we are mindful of this axiom. One thing that we try to do in our household is be mindful of our use of the terms "need" and "want." Put your attention on this during the day and you'll see what I mean. Adjust what you say accordingly - making sure that you are using the terms properly. And gently correct your children when they identify a want as a need. Nobody really needs a nightgown emblazoned with their favorite character. Do they?