Priceless

Today's New York Times article, "Given a Shovel, Americans Dig Deeper Into Debt," inspired this post. Click the title above to read the article. Or you can start with these lines from the article as food for thought:

"For decades, America’s shift from thrift could be summed up in this familiar phrase: When the going gets tough, the tough go shopping. Whether for a car, home, vacation or college degree, the nation’s lenders stood ready to assist."

"As the profits in this indebtedness grew, financial companies [credit card companies, mortgage lenders] moved aggressively to protect them, spending millions of dollars to lobby against any moves lawmakers might take to rein in questionable lending."

"Eliminating negative feelings about indebtedness was the idea behind Mastercard's “Priceless” campaign, the work of McCann-Erickson Worldwide Advertising, which came out in 1997."

All these excerpts made me think, but the last quote truly gave me pause. The "Priceless" campaign has been an incredibly successful campaign (who hasn't made up their own version of the commercials), but it's underlying message is certainly damaging - that we should feel good about indebtedness. Debt is good!? We need to educate ourselves and our kids so that we (and most importantly, them) are not slaves to credit. See my previous post about "The Money Mammals Challenge" or "Goals" and start teaching your kids (and maybe even yourselves) today. Financial literacy education and being debt-free is priceless.

Age Old Goals

I've advocated the idea that saving for a short-term goal is a good way to teach young kids about the value of money. So, for example, during the Money Mammals Challenge, my daughter saved her weekly allowance over a month to buy a new shirt (she's now five and needs some new clothes). My wife and I both saved for tangible things as well so that she could see that we were engaged in the Challenge as a family. As I've noted in this blog, I've used this approach of short-term savings goals numerous times in order to teach the concept of saving. My wife - who is much more financially savvy than me - asked me if it's such a good idea to associate saving so directly with spending, albeit delayed gratification spending. I told her that I thought it was, but I figured another source could more effectively make my case. So I turned to a classic. I read a nice piece in a terrific book I picked up from Amazon from 1969, The Time-Life Book of Family Finance. This 40-year-old tome makes a terrific case for the need to be practical in our approach to teaching kids to save:

"One idea about money that nearly all parent try to inculcate in very young children is the importance of saving. The effort is frequently wasted, perhaps because so many people go about it in the wrong way. Too often saving is not presented in its true light, as a practical method of satisfying needs and desires, but as a vague ideal, a Good Thing symbolized by the ubiquitous piggy bank...Saving can be either a negative action - a self-denial - or a positive action leading to some desired goal. For most of us, saving must be positive: The desire for some future good has to be stronger than that for an immediate satisfaction...the reward must always be attainable and attractive. If it is not, we will not save, and neither will Junior.
Against this backdrop, let's try to imagine what goes in Junior's mind vis-a-vis his piggy bank. [When he receives pennies] he is instructed to "put them in Piggy." This is accompanied by smiles and a general air of "we're doing a good thing." It seems to be a game that adults enjoy playing, possibly because of the interesting noise the pennies make when Piggy is shaken. It is also an interesting kind of magic, because the pennies do a disappearing act. You never see them again. In fact, Junior is admonished that you never take money out of Piggy. That money is being saved.
It is not clear what Junior is learning from all this, unless what the parents have in mind is training him to be a miser. It certainly is not teaching him that a deferred use of money can be more satisfying than a present one..."

The article also makes a great case for using clear or translucent savings jars or banks.

The Challenge Continues

How is your Money Mammals Challenge going? I thought it might be helpful if I posted a completed challenge sheet right here. Take a look and you'll see that our daughter is saving for a new pair of shoes. She's turning five and tells us (oh, about every five minutes) that she's getting bigger and will need some new clothes and shoes that fit her better. This is a bit of an exaggerating (she's doing just fine with most of her clothes), but her choice was pretty practical and she could use some shoes. $3/week (her allowance) will net her $12 by the end of the month. Enough for the pair she'd like.

We used to have a beautiful hibiscus plant that recently died so my wife is saving for a replacement plant - a new palm tree. We're lucky enough to live in Southern California and she's always wanted one of these iconic trees.

I have a good friend who has multiple sclerosis and I missed the MS Walk in which my wife and kids recently took part. So I'm saving to "Share" my money with MS. $80 is only a dent, but it will help.

For the month, my wife and I will be making a point to show our kids the money going into our clear "Save" and "Spend" jars for the month. I want them to physically see that the money is being saved and that's it's accumulating over time (albeit a short time).

Comment here to let me know how your challenge is going.

The Money Mammals Challenge

Fellow Money Mammals,

April is now my favorite month. Why? Well, it's National Financial Literacy Month of course. It's a great opportunity to spread the word about youth financial literacy. I'll be doing a live Money Mammals event in Eureka, California, later this week sponsored by the Consumer Credit Counseling Services up there. Then I'll be heading to DC to for Financial Literacy Day on Capitol Hill with the Jump$tart Coalition for Personal Financial Literacy to help spread the good word.

But I wanted to do more. I thought long and hard about how to make this month more relevant to all of us and our kids and I think I may have come up with a compelling idea...

The Money Mammals Challenge. And we want you to take the challenge with us.

It's simple. You and your children each set financial goals to achieve this April 2008. Download this super-simple worksheet here and put pictures of you, your little savers and, most important, pictures of the goals you will be trying to achieve. They need to see the goals. Also, make sure you're saving money in a jar or something so that they can see your money being saved as well as theirs. As the sheet suggests, break the goal into four parts and enter those incremental amounts into the weekly rows. I've tried the goal-saving approach with some success (see my previous blog posts) and I think it can work for you.

Let us know how you're doing by adding comments to this post. The second step in the challenge will be to spread the word. More on that later.

-John