The last word of Children and cash

This story has been updated to a few years ago, when my son is 25 years old, he told me – sounds a bit cranky. John just read the name Deirdre a young investor, also 25, who has been a pioneer in index funds accumulated more than $ 100,000 a Kipling story. “You write about kids and money,” said John reproach. “How do you never tell me about mutual funds?”

I patiently explained that John Roth IRA – when this my husband and I started him and he in college Regular contribution, because he graduated – in fact a pioneer in investing in index funds. One of the original managed to accumulate all the money (in addition to the bull market in the early 2000s) is regressed tower she lived at home with her parents and grounded well over 60% of her salary.

What, John learned from this incident is that a little more about the stock market and the value of thrift – he should pay closer attention to declare his IRA. For me, it confirmed that some of the corny, I’ve learned to write about children and money from more than 15 years: First of all, no matter how old they are, your child will come to your opinion. Secondly, there is nothing you can tell that they are too basic. Third, some of the information long way to go.

because my parents advice on how to raise money, smart kid, I have always felt the weight of responsibility for my own three children to do the same. People often think that I have a magic formula to calculate the amount of subsidy (I do not, but I have some strong opinions), or that my children are whizzes stock market (apparently, they are not). But two big finish college with no overdraw their checking account or run up credit card bills, the smallest in their footsteps. Frankly, I have learned from them as much as they have learned from me.

Thanks to them, and to thousands of parents I’ve talked to and who wrote me over the years, I came up with to raise funds in every age, smart kids a set of practical rules. They may be read from you any different elsewhere, but they work.

3-5 years old: the big picture in

4-year-old to choose between three or nickel-dime, he would choose the nickel because it is bigger. My preschooler rules: Keep things simple, do not expect too much. If your daughter that “everything costs $ 68,” as anxious parents had complained to me, do not worry. You’ve accomplished a lot, if you can teach a child this age, money can be exchanged for other things.

Encourage them to put coins in vending machines or pay for the ice cream man. They may Savings Bank of fun to play, learn pence, nothing, or the difference between collecting state quarters. The more hands-on activities, the better.

Do not put your children into something they do not understand or can not appreciate. For example, young people in this age group live in the moment; for them, one week may become a lifetime. So ask them to save on college, though a worthy goal, it is unrealistic. However, they can save their booty birthday trip to dollar stores, where they can choose – and pay for – what they want.

Age 6-7: start time allowance

Kids will spend unlimited funds, as long as it is yours. When their money on the line, they’ve got skin in the game, because I often like to say a correspondent. The best way, so that they began to make their own decisions is to give them a sum of money, this is the beginning of a great era.

On the one hand, children are learning about money in school, so that they understand that four quarters equal a dollar. In addition, they have a more mature understanding of capital in the abstract, let them how much the dollar will (or will not) buy some feeling that they can further plan for the future. Think of it as invisible budget.

How much? Start a basic weekly allowance equal to half the age of the child. I know I know. It was suggested to the weekly allowance equal to the child’s age. However, in the real world, I have found that parents often hesitate to give a 6-year-old $ 6 weeks. Therefore, the rules half my age. If you want to hit up, free.

It is now even bigger question: Should allowances be a reward for doing chores? My suggestion is: No, it should not. I think that children should clean their own roomSometimes help unload buy food, because they were asked to, not because they pay camp. In addition, over the years, I have learned that many parents have a difficult time tracking whether their children have actually completed their assigned chores that week.

However, a grant should not be a handout. My rule: tie the basic allowance to “financial chores” – spending responsibilities, the kids take over from you. You can pay for their own collection by having a movie, for example, or snack to start. The advantage of this system is that, as children grow older, you can expand their allowance and their responsibilities.

In order to make the connection between work and reward, let your child have the opportunity to do additional work, such as cleaning the family room, raking leaves, or washing the car, and pay for every task to make money, because it It completed to your satisfaction. It is easier for you than a week’s worth of chores monitoring. Remember Rule number one: Keep things simple.

8-10 years old: Bank this

Help your kids open their own savings account. Of course, you can start saving on their behalf, they are younger, they might have their sock drawers filled with a stack of cash birthday. But now they are mature enough, to show you how a real bank. Even at this age, children may be horrified to discover that their money was gone. It takes them a while to understand (accepted), if they exist, said the bill $ 10, they will receive $ 10 back – but not the same bill.

If you want to save your child? That depends. Believe it or not, some of the young people hoarding every penny, forced to spend. You can always let them divide up spending a lot of money into the benefits, energy saving, charitable donations, even inves ting. However, if you do not want to take the trouble to wrap cash, a simple alternative is for them to save, say, a nice, round 10%, or one-tenth of the amount to charity. And you can always encourage children to save by matching them aside – your own family’s 401 (k).

Another strategy works: your children to save a goal, whether it is a toy or a new baseball glove. When they reach their goalLet them spend their own money, and enjoy the rewards of their efforts. Save spinach and consumption may be dessert, but my youngest child, Peter once told me, “savings can be dessert, too, if you save what you want.”

11-13 years old: parents power

As you head to the difficult “tween years, remember this: parents have the right despite the media hype and peer pressure, children will listen to you, if you have a clear information, and consistently provide it a young woman once told me that when she was a child, her parents had a rule about holiday gifts: what she and her siblings could not ask if they see it and on television commercials. a bit extreme, I think. but not only did the young woman and her brother to accept the rules, and they passed it on to his brother (the same boat, perhaps?).

Now is the time based on when your child is young you laid the foundation to expand their pocket money to include more discretionary purchases: video games, movie tickets, shopping excursions with their friends my rule: children It should be a day when they do not hit you go to the mall for 20 bucks. Do not have to die so that the natural brake spending their own money, so they ask you from the bombardment and expensive brand-name things, and give them a reason to save themselves the iPod

If you are an investor, introduce your children to the stock market they are old enough to understand, means the stock is held by some owners -.. and sharing of profits – their products or their use services. (answering a lot of questions I get from readers, investors can Sharebuilder.com make small purchases of stock, a commission of $ 4 and MyStockDirect.com, can be linked to more than 100 companies selling shares directly face the public)

Age 14-15: stick with the cash

At the latest wrinkle allowance is dEBIT prepaid card, which is aimed at this age group parents are encouraged to face the transfer of money to a child allowance account online, this way you can use his card in the ATM machine to withdraw money or make purchases online or in stores accessible – and mom and dad can make up as much Finish

My principles: insist on cash. Even at this age, any kind of plastic, not real money for the children, they can see and feel. With the cashless society looming in their future, children are learning the hard currency management more important than ever. This is the expansion of their allowances, including Friends of clothing, school concerts and other entertainment, plus a good time to buy gifts.

This is also an opportunity to encourage them to find a job, at least this summer. The teens of age are allowed to work in the office, amusement parks, movie theaters, restaurants and retail shops. For convenience, you can arrange for them to have an ATM card, so that they can deposit and withdraw their savings from their income account.That is how my son Peter managed his money throughout high school. When he was 18 years of age, I am willing to help him open a Visa debit card bank checking account. To my surprise, he refused. “With a debit card,” he said, “It would be too easy to spend money.”

16-18 years of age to enter university: Hold the plastic

Have school of thought, when said young people should get a credit card, they are still at home, so that they can learn when they manage credit responsibly on their own. I disagree – strongly. In fact, I was recorded as saying to the young people’s credit card, make as much sense, because they allow them to use drugs, so that they will not become drug addicts.

I am not against credit cards. I just think in general, young people are not mature enough to manage them. And there is a lot of research to support me. James Roberts, a marketing professor at Baylor University, has found that young people who use credit cards “are not sensitive to price, cost more, and compared to those who write the checks and cash payments to overestimate its existing wealth.” They also more likely than adults to max out their credit, and they are more susceptible to impulse buying.

Children this age need to know about the loan, but remember that the basic knowledge goes a long way to go. Teenagers do not realize that credit card I am not free money. They need to know that when you use a card, you have to borrow money from the issuing bank, the high interest rates it will charge you

My rule: cash is still king. Help your child to open aChecking account (and get a debit card), so they can learn how to balance the books – whether by check or enter the online registration – the account before they enter university (jointly signed, if the banks need it because they have not 18 ). Fund, and use them to earn from their summer or part-time job to help pay college expenses fund account. . Let them know you will pay in advance the cost – books, for example – and this is their responsibility, such as outside meal plan food

The age of 21 and beyond: preparing to launch

ONCË your child’s college seniors, you are very confident, they have learned to make their own money for a whole semester of last year, they are ready to apply for credit cards – himself. My rule: Do not put your account, or, worse, co-sign for their obligations to your children. This gives you on the hook, if they do not pay.

If you and your child to talk about money has always been, you will be seamlessly transferred to adult topics. (See 7 the basics of personal finance graduates.)

Who are they going to ask advice to buy health insurance from a 401 (k) plans – and, yes, make the big bucks in mutual funds? When your money smart kids do not need your help, it is even more gratifying. When our daughter moved 3000 miles away from home to take a new job, my husband Ophelia red funded her apartment. Claire refused. “I’d rather do it myself,” she said.