"What's the best way to teach financial skills to our children" WSJ

Parents Forum
41

What on earth? $40 is LOW for clothes?

Different strokes I guess but I was a rapidly growing middle school kid (grew almost a foot in a year) and we never would’ve considered spending that much.

Like julliet, I vowed to not get a junker after watching my ex go through them like candy. I got a loan and paid it off two years early. Now I have a pretty new car that will last me a good long while. Paying cash is nice and all but not realistic for most people.

A finance course is good for EVERYONE, not just those of us on free lunch.

Honestly, the low income people I knew growing up were way better with money than more well off people. They could make a dollar stretch like no tomorrow… and yet somehow a middle schooler can’t get along with a $500 clothing budget? One of these seems way more fiscally responsible than the other…

42

Agree with those who said that teaching financial management is good for everyone. Just because one family managed their $ without a formal class is no justification for denying its importance. That’s like saying that they know math so they don’t need to take a math class.

My DS#2 used. The app Mint to track his spending. It helped him a lot. Last night we had a family phonecall, a good part of which was discussing tax planning and investments. They have learned.

43

LOL, glad someone else mentioned the $480/year clothing budget before I did…my kids never got anywhere near that and managed quite well to not stick out among their peers. The first lesson my kids got (beyond the “sorry, can’t afford that this week” they heard quite often) was losing their allowance on their 14th birthdays. Allowance was never tied to household chores so I ducked that conversation. I helped them navigate their expenses from that point forward but truthfully it only took about two years for them to get it right (how to budget for and prioritize their spending).

I am very pro-finance course for every high school student. Everyone should know how to balance their accounts, what interest rates are and how they work, what the common costs of housing, food, transportation is in their area, that sort of thing. How is it that we’ve raised all these students with huge college debt? How is that we have all these “adults” who took out mortgages they couldn’t afford. That needs to end. And I believe that starts with education.

44

A message that “debt is bad” across the board, regardless of how it’s managed and for what it’s used for is dumb.

Loans are a tool- like any other. Don’t use a hammer when you need a drill, don’t use debt when there’s a better option. But most people ignore the full costs of things they buy and focus on one particular number and that’s as dumb as taking out a loan you can’t afford to payback.

I live in an area of a small city that has a very diverse housing stock and I hear this all the time- “Oh, condo’s are a rip-off because of the monthly fee. Buying a house is a much better value”. And then people stretch to buy a house- generally more expensive than a similarly sized condo- and discover- guess what- it costs money to maintain a house. Shocker. Snow removal. Lawn care. Cracked asphalt on the driveway. Even the do-it-yourselfers have to buy shovels and lawnmowers in order to have the equipment to properly maintain their grounds.

I pay cash for safe, reliable cars (new Hondas) and then drive them until their first major repair (usually at over 120K miles). Then I start all over again. But for someone who can’t afford cash- I would still make them a spreadsheet showing that borrowing to own a new, safe, reliable car is going to cost less on a per mile basis over time than buying and trading the junkers, leasing, etc.

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@Blossom What are you driving a civic? great car:)

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No, the government shouldn’t interfere in our lives, but what’s wrong with mandatory finance classes in High School? I had them in high school and they didn’t ask us anything about our parent’s finances. I don’t think they even cared! They just taught us stuff like how to balance a checkbook, how to invest, what a 401K and Roth IRA were, we learned about pensions, bank accounts, etc. It was all neutral and basic… I have a family friend who is very anti-government who recently said that he was disappointed that they don’t teach personal finance at his daughter’s public school…I’d like to know how many parents are teaching their kids about finances, probably not that many! It’s amazing how many people live beyond their means and just keep racking up the credit card debt! Maybe teaching personal finance at school wouldn’t be necessary if more adults and parents had their finances in good shape in the first place…

I also think that when you raise kids and try to teach them things, it doesn’t always stick with them. A lot of it has to do with the child’s personality.,.You could teach your kids to be frugal until the cows come home and they could still turn out to be bad with money as adult. And vice-versa. You never know! I think the best thing to do is model good financial behavior, teach your kids the basics, admit to any mistakes you make and try to hope for the best! Personally, I couldn’t imagine never teaching your kids about money and finances, but to each their own! It’s really hard to determine how or why we turn out the way we do sometimes…

47

Civic- not the flashiest ride on the block (especially when you hit that magical 80K mile mark when you figure it’s not worth banging out the dings from the supermarket shopping carts). But boy- cheap to own and operate!

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@blossom Not flashy, But they are great on gas, inexpensive to maintain and insure! Plus you can get 150k miles without a problem:) Your my kinda gal ‘)’)

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@blossom, I do the same thing with my Hondas! And I wish I lived in a Condo. I know that would be a perfect fit for me! But I do live in a Patio Home in a HOA that has steep (for my area) monthly fees, but they do all lawn care.

50

We have owned civics in the past. Great little cars. One got totaled by a babysitter (she was not hurt, fortunately) and one we sold to a friend when we needed to get a bigger car. Younger s drove a relative’s hand-me-down sedan (he paid her way it cost to fix it up and drive it across country) until it finally was not worth repairing (it was 14 years old) - but he was able to sell it for not a lot of money, but better than nothing. And what did he buy… A used… Civic!

51

Another Honda owner here, but Accord Sport. Crosstour was my last vehicle. Love my Hondas !

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Older s’s wife has a Honda – the hybrid. I forget the model. She loves it. We tend to stick with Hondas and toyotas

53

Kids have our hand-me-down Hondas, a 2006 and a 2009. The 2006 with 130K miles made it through the desert all the way from Chicago to California in August in 2015. DH and I got new Hondas in 2014 and 2015. Love our Hondas.

DS is 23 and every phone call is about finances. Taxes, car registration, car insurance, credit cards. He was never one to learn about something before needed, but living below his means was built in to his value system, so we don’t have to teach that now. Also, he values experiences over things now that he has an income. My idea is focus on the values all along, then teach the details when they can apply it.

54

Just an aside, and I have no objection if people want car loans - it’s just something we have purposefully avoided, but the Dave Ramsey program puts you in a two year old car that is paid for. You have to follow the steps, and it takes some time, but it can be done.

We are a Honda family - all paid for (3 vehicles). One is very old, but the other two are a bit newer with low miles.

Older kid drives a Toyota - same concept. Has enough saved to roll that car into a newer (to him, not new) car when the time is right.

55

We gave our kids weekly allowances starting in middle school. $1 per week for each grade level. So $5 in 5th grade, $6 in 6th grade and so on. This was for personal spending but not clothes which we shopped for seasonally. If they wanted something outside of that or were out shopping with friends that was on them. (By the way I am amazed at the number of people who think $480 per year for clothes is plenty. I know I spent more than that between shoes, boots, winter coats,etc even though we were more Target than Nordstrom shoppers for the kids.) DS decided he wanted to make a couple of extra bucks a week so he has been cleaning our master bath for the past 4 or 5 years. Kids had to contribute 1/3 of cost of expensive band/choir trips. WhenDS wanted a new gaming console he saved up for it. We finally got a 3rd car this past year so now DS pays for gas although we still pay for insurance. He happily drives a 12 year old mini van even though most of his friends drive relatively new SUVs. When our kids wanted smart phones in hs they got the actual phone as a gift but contributed to the monthly up charge for data since I didn’t have a data plan yet. My D13 never had a job until the summer after hs graduation. I was worried about that but she got a job and has been working since. In college our kids are expected to pay for books and all personal spending including any travel not with us. I think just a little taste of managing one’s own money does a great job of teaching fiscal responsibility.

56

Finances in our house were not really discussed with my three children when they were growing up, but they did see me talk with their father about them, saw me paying the bills, and knew our limits about buying “fun stuff” (only for Christmas and birthdays) and even knew our “budget” on these gifts when they were older and putting a list together. They all took an econ class in high school, but did not take a personal finance class as they took honors sociology instead (weird trade off but…) Consequently when I heard about a semester honors class that was offered on Personal Financial information at their university, I urged my two who attended to take it to satisfy one of their honors requirements. They said that alot of what they learned was common sense, but going over interest, compound interest, investing, and even sample tax forms was useful. They can use the information they learned however they want, but at least I know that they are more financially aware. One of them just recently graduated, moved to another state, started a new job, and will now be handling all of his finances (from rent, insurance to cell phone payments.) I feel confident that he can handle this, although I am sure there will be a few surprises for him along the way.

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@kjcphmom, funny that you mention “tax forms”. I am amazed at how many parents do their kids’ 1040EZ and simple state tax returns. Well, I’m also amazed how many adult persons pay H&R block, etal, to do their own simple tax returns as well. Before I was aware that there was an “exempt” status available, it was necessary for my S to do a tax return to get his refund. Even D’s first job required it because the owner of the mom/pop restaurant didn’t allow her to file exempt. I did it with each of them ONCE. If you are old enough to work, you are old enough to learn how to fill out a simple tax return.

58

It’s been a little hard teaching my kids about the concept of compound interest when in real life for a good chunk of their existence the interest rates have been close to zero. It seems a more theoretical discussion for their bank accounts although they are accumulating enough to start dabbling a little in the stock market.

59

So we have found ourselves in a very interesting situation:

When our Ds were toddlers, we established an education trust fund for them. We bought a piece of commercial property that DH felt would mature quite well long before they started college. It is an irrevocable trust, and the terms state that anything left over in the trust after they either graduate or turn 30 will be theirs to split 50/50.

Well, this turned out to be the only investment DH has ever made that failed. Not only that, it failed spectacularly. A promised highway in the area didn’t materialize. We have joked about this investment; we call it the “doggy deal.” Fortunately, we were able to pay for the Ds’ educations out of pocket as we went along. Both chose publics, and even the OOS public was easy to manage. D1 has gone on to grad school in a fully funded Ph.D program. D2 is about to graduate.

And NOW the highway has begun construction, right along this property. We have put the piece under contract. If it closes, the after tax profit will be hundreds of thousands of dollars. That now will belong to the Ds.

DH and I just laughed so hard about this the other day. We NEVER would have thought this would happen. But it’s sobering as well. DH wants each girl to have established a strong work ethic and understanding about finances before they ever get their hands on a lot of money. D1 is well on her way; she’s a prolific saver and is VERY very frugal. To a fault sometimes. D2 has a business degree, so understands money much better than I did at that age, but hasn’t had a lot of practice yet working and budgeting.

So what to do? Legally, the property/money is theirs. DH wants to propose that the girls withdraw 20% if they wish. He’d like them to agree to let him invest the balance (he really is very good at this) for them, with their input and cooperation, in order to teach them the art of growing one’s money. We will have to see if the deal pans out (but it’s now a very valuable property due to the highway, so someone will buy it), but this whole thing could very well set them up for life. We need to be very thoughtful and serious about this, educate them, and hopefully keep them from having too much too soon before good financial practices and attitudes have been established.

Good problem to have, I know, but this kind of thing worries DH greatly.

I should also mention that neither girl knows anything about this trust.

60

I take it neither of them are close to marriage? I see a prenup in someone’s future…