Build Good Habits Early - Why to start now!

It's gratifying that more of my friends are asking me about starting their kids on an allowance program at the ages of five or six. I think those are great ages to start (even four for younger siblings as they like to mimic the older ones). More and more of them are getting the message that building good habits early will help them avoid having to break bad habits later.

I thought it prudent to share some of the ideas I've been sharing with my friends. Here are five really practical reasons for parents to start teaching kids about money that I've learned from personal experience as a parent:

1. A Strong Foundation - Building good habits early (which includes making some minor mistakes along the way) will help you avoid having to break bad habits later (or REALLY big mistakes).

2. Have Mall Fun - A good allowance program will make trips to the store or mall so much easier. When your kids ask you for something, you can tell them to save for it. You might get a few tantrums when you first start doing this, but if you stick to your guns your kids will get it.

3. Goals are Good - Setting goals is essential to teaching kids about money (that's how they deal with #2) and is an incredibly valuable life skill for them to learn. Set goals together. Note to self - follow your own advice more often on this one.

4. Confident Kids - Money is subject to so many taboos, not the least of which is discussing the stuff within the family.  Set an allowance, give them cash to handle and discuss making choices, needs and wants and other essential money concepts.  It will help make them more confident consumers when the subject is brought out into the open.

5. Visible Dough - So much of the transactions that kids witness involve invisible money. Make sure there is a physical component (cold, hard cash) to your allowance so that kids can count, transact and get confident with real money. Sure, money is already largely virtual and is only trending more in the total virtual direction, but young kids have tremendous difficulty with abstraction.  Handling actual money is essential to early money learning.

I hope these tips help you.  Let me know if they do or if you have anything else to add.

First Video Podcast - Saving for a Goal!

Around the World

I recently had lunch with a friend just before she was about to take off on an around-the-world journey. I was envious. We had talked previously about goals, something she knew I believed was important. But, more importantly, goals were something her Dad believed in. She put it simply, "It may seem cheezy, but this 'goal' thing works." I found it interesting that she had to include the "cheezy" disclaimer to me, a reader and listener of those same books, as if to say, "you know, I'm not some crazy, self-helf zealot."

That encounter made me realize two things:

First, having goals and putting them out there for the world to hear (I'm thinking of Gary Vaynerchuk's claim that he WILL buy the NY Jets) is a something that I believe can work for anyone and that more of us should embrace (I'm telling myself to be more vocal as I write). None of us should ever feel they need to defend our desires to strive for difficult goals with a line like, "I know it sounds cheezy, but..."

Second, we parents need to model goal-setting for our kids to really make it stick. This is important because modeling is how kids learn. They "do what we do, not what we say" (unless of course we do what we say). As I've noted in this blog many times, goal-setting for kids is a path to learning to save.

So put your goals out there for all to see. Have your kids to the same.

See where that takes you.

Around the world, maybe?

Take Advantage of Opportunities to Teach Your Kids about Money

One of the biggest benefits of beginning money talk with your kids when they are young is that there seem to be endless teaching opportunities or "teaching moments" afforded to us by them. Kids love to ask questions and providing them answers to such things as...

• "Why can't we go out to dinner again tonight?" (discuss the family budget or the cost of doing so)
• "I really want that American Girl doll. Can you buy it for me?" (talk setting goals and saving)
• "Why do I have to put money in my Share jar?" (it's time donate those dollars - make it tangible for them)

...will help them feel more comfortable with money and money choices. Money is a tool with which kids should be comfortable. Talking to them about it will keep it from becoming a "taboo topic."

By not talking to your kids about money, you'll miss the chance to engage with them in these ultra-important teaching moments. It will increase the chance that money will move into the realm of "taboo topic" and that can lead to misunderstandings and, worse, financial illiteracy when they get older. Talking to them about money doesn't guarantee money smarts, but not doing so carries tremendous risk.

Are you worried they might not understand? You'd be amazed what they can understand at a young age. Check this out:

Choose to Save

Thrive by Five

-John

Guest Post - Kerrie Davis of Rogue FCU on financial literacy and families

I am very excited to post our first guest blogger, Kerrie Davis, the Community and Education Outreach Coordinator at Rogue Federal Credit Union. Kerrie is an incredibly talented woman with whom I have worked to develop The Money Mammals Saving Money Is Fun Kids Club. Kerrie has been involved in youth financial literacy for kids of all ages (as well as adults) and she brings a unique perspective to the importance of involving families in the process.

So, here's Kerrie...

Many people don’t equate sharing as a money management concept. However, it is an essential part of money management. In order to share you need to save or give of your time. In light of today’s economic fallout, I can not agree more that we need to teach our youngest kids the concepts of money management. There is a direct connection between those that are financially savvy and their awareness of basic financial concepts. Granted, this economy has thrown many people off track and in many cases certain financial institutions added to the financial burden that they are experiencing. There are so many factors that have created the perfect storm for so many folks. Between the sub-prime loans, cheap and easy credit, the rise and subsequent fall of home values, the declining economy, increased unemployment and questionable lending practices affected many families who were not prepared for what lay ahead. However, I recently received an email from a young adult that has a college degree, his dream job and is trying to save his home in the foreclosure nightmare. He stated that “he did not know that an interest only loan was the worst method to pay his mortgage.” We have gaping holes in our financial knowledge that has had a direct affect on the financial success of individuals especially in this economy.

Kerrie presents @ Building Hope foreclosure seminar

For the past year, we have been helping our middle class and upper middle class families with their financial struggles. Lack of savings combined with the loss of jobs and industry declines have affected the majority of families living in the counties we serve. Many of them looked at their homes as a source of borrowing. I often ask myself if the majority of folks had been taught financial concepts from the time they were 2 or 3 years old would we have as many families in trouble as we do in our nation. Recently a father said to me that his 16 year old did have the competence to understand how to handle money! If we start at the high school level we are too late. They have already formed habits and they have been watching their parents and relatives struggle with their own money issues. How different would it be if everyone at age two were taught the very basic of sound money management concepts? They would grow up to understand needs vs. wants, how to set goals, saving, sharing with others and how to be a smart consumer. Kids need to learn about saving for goals, giving back to others and using common sense in their spending decisions. I think we would have fewer families losing their homes, using all of their savings and retirement money to “stay afloat” and more prepared for rough times that they are experiencing today. The affect on our families, our communities and our nation would be much brighter and we would have a more stable financial future. My question is how long is it going to take for us to understand that financial literacy is a life skill as important as looking both ways before we cross the street?

-Kerrie

Visualize - What Superbowl MVP Drew Brees can teach us about goals

Everyone now knows Drew Brees.

Being inches shorter than your average Joe NFL QB, performing for a once moribund franchise, and playing for a city that was almost completely destroyed, Brees is now on top of the world. And he used one tremendous tool to overcome all of those shortcomings to take himself and his team to the top - visualization. I read and listened to numerous interviews leading up to the Superbowl and I was struck by how many times he attributed New Orleans Saints' success to visualization.

While I've talked a lot about goals in this blog, I haven't really talked about or really focused on the need to "visualize" those goals. We are going to focus on this with our girls and their goals. Kids are incredibly good with imagination so I think this will be easy for them - likely easier than for we adults.

Here's an easy way to get started. If you haven't done so already, create a Save jar, find an achievable goal (start with something that will take 3-4 weeks if you're just starting and a bit longer if it's your kids' second or third goal), paste a picture of that goal that they want on the Save jar and then encourage them to visualize having that goal as much as possible. If you haven't started an allowance program, I highly recommend the book, Allowance Magic, which is available in our store.

Visualization is a tool they'll take with them forever. If Brees in any indication, visualization can help you achieve pretty much anything you or your kids can dream up. Good luck.

-John

Share Jar - Your Kids Can Help Haiti

If you've been following this blog and my advice about having three jars for your kids - Share, Save and Spend Smart - you're likely to have a kid with a sizable amount in his or her Share jar. If your kids have some money saved up and you haven't done so already, the awful events and desperate need in Haiti present you with a teaching moment that will help them make a difference. Have your kids donate the money they've accumulated in those Share jars to Haiti relief. I read today that relief is starting to fade, so now is a great time to help.

The girls and their jars

Most schools are discussing what happened to the tiny island nation and have collection buckets so it's likely very simple for kids to just bring in their money to donate. We even told our girls that we'd match their donations (and include a little more) with our own donation to the Red Cross.

Helping Haiti

Relief dollars for Haiti from a 4-year-old

-John

PS My wife gets the credit not only for coming up with the idea, but also getting it done AND taking pictures.

Back to American Girl

In keeping with my belief that the point of an allowance is to allow kids to make mistakes and learn from them, I said yes to my daughter's request to save for an American Girl doll. She's set her goal and pasted the exact doll she wants on her Save jar. Big bonus - she immediately shifted all of her money from the Spend Smart jar into Save, once again proving that an "owned" goal is just as powerful for 6-year-olds as they are for grown adults.

My hope in this experiment is that she'll earn at least a trickle of appreciation for how expensive the dolls are when she is finally able to purchase one in about two-and-a-half months. It will be interesting. I'll keep you posted.

-John