Teaching kids about money

MissChanandlerBong

I listen to Dave Ramsey, although I don't strictly follow the baby steps.  He does talk a lot about "changing your family tree" and that is something I want to do.  I want my kids to be in a better financial position than I started out in life.  What are some things you are doing with your kids, or something your parents did for you that has helped you?

Growing up, we never talked about money.  I started working in high school and paying for my own stuff, so I think my parents just figured I was in good shape because I was making money and handling it myself.  But once I started working full time after graduating college, I racked up a lot of debt (new car, new clothes, student loans kicking in, etc.).  I just sort of had to figure everything out on my own and didn't have any guidance (granted I never asked for help either), so I made a lot of mistakes.  I was making good money, so I think my parents figured that's all I needed.  I don't really fault them, I just want to educate my kids a little better.  I mentioned in another post that my oldest is 4, and I don't think it's too early to start good habits.  Just looking for some ideas and suggestions. 

lifeonthehill

My mom did was make us earn our money. As a single mom running a daycare 12 hours a day she was tired, overwhelmed and broke. If we wanted money we did extra housework or "worked" at the daycare. By 12 I payed my own way without thinking twice about it. If we wanted something fancy for Christmas that she couldn't afford she offered to pay for half if we could get her the cash by
Thanksgiving. This is how I got my first iPod.

I remember my brother being 10 and asking for a separate check at dinner one night. Hilarious.

I have to say I am pretty great with money compared to other friends my age(23) and I give her 100% credit. I may have gotten the shopping habit from her but now that I am an adult we are curbing it together and it has been a great bonding experience.

AprilZ81

My parents did a good job about teaching us about money and here are somethings I want to do when we have kids.

1) Half of all birthday/Christmas/gift money goes into savings and the other half is the kids to do what they want with after they write their thank you notes.  I hated this as a kid, but that savings account is what allowed me to spend a summer studying in Europe as a college student.

2) Big ticket items (iPads, Playstations, etc.) will not be a "right" but a reward for savings.  My sister and I had to save our allowance for months ($2 each week for each of us) to save up half the cost of our original Nintendo.  It really made us think about if we really wanted it or not and taught us about savings goals.  Once we saved half the cost our parents paid the balance.

3) Once they are old enough to work (baby sitting, retail, whatever) they will at a minimum work part time during the summer.  Half of their take home pay will be put into savings and the other half will be their's to spend.  At that time they will need to start paying for their own gas money, part of their cell phone bill and possibly car insurance so they understand that they are not making a lot of money and bills are inescapable.  

Those are the big things I want to do that they will be involved in.  We will likely do some things behind the scenes (529 plans, additional savings from us, etc.) to help boost the money in their name but they need to chip in.

MommyLiberty5013

My kids are 4 1/2, 3, and 19 months, so we don't talk about money a lot.

The concept that at least our eldest can grasp is that Daddy makes money for our family. He works hard at his job. When we get that money there are 3 things we can do with it.

#1. Give it to God (tithe).

#2. Save it.

#3. Buy things with it and pay the bills to make the house work. And buy food.

The 4 1/2 year old grasps this very well. He also grasps that Mommy's job is to care for the family at home, make food, run errands, and clean/do chores. His job is doing school and being a good older brother.

Right now we're teaching them that everybody has jobs.

maple2

 Probably the biggest thing we do is role model responsible financial behavior in our day to day lives. Our kids know they aren't going to get toys or books or whatever every time we are in a store because we need to use that money in other ways. We talk about how we need money to buy food and pay for our house and to help other people who have less than we do to help them get a sense of the trade-offs. 

We also buy food to donate to a local food pantry when we go to the grocery store every week. It's a way to involve them in thinking about others who are less fortunate. It might be more cost effective for me to just write a check to the food pantry, but I see it as a combination charitable contribution and learning opportunity. The kids love to help pick out items that they think other families would enjoy.

My parents have started sending the kids $10 each per month that we are supposed to deposit in the bank. Every year on their birthday they then get to withdraw a certain amount to use in whatever way they want. I like that the kids go to the bank every month and get in the habit of saving, but I feel like this system doesn't give them as much opportunity to learn since they don't get to make many decisions about it.

We have started giving our oldest an allowance (just $0.50 per week) that she can use in whatever way she wants. This has given her a much better appreciation of thinking about the trade-offs of spending versus saving. She has something in mind that she wants and every time she is tempted to spend on something else, we can talk about how many more weeks it will take to save up for the thing she really wants. Sometimes she decides to save and sometimes she decides to spend, but either way it's a good exercise for her.

We need to come up with a system for other gift money now that our oldest has started thinking about saving and spending money independently. Before, we just automatically put everything they got into their savings accounts, but I think now we will have to come up with a system that forces them to balance spending, saving, and charitable giving.

Our oldest has the idea that she's going to make money this year by selling plants in the spring and flowers and veggies from the garden during the summer. She hasn't decided yet if she wants to keep the money for herself or donate it to charity. We've helped her start seeds indoors and are giving her a garden bed of her own to be in charge of this year. I'm hoping by supporting her in this endeavor, we will have a lot more teaching opportunities.

Erikan73

First thing I think is important for parents to do is to say no when at the store, despite how loud and embarassing the tantrum can get. Also doing family activities with your kids that cost little or no money. It can be to regular walks in the park, family board game night, pick out a movie at the library. Teach your kids that there are lots of great ways to have fun that don't cost much money and they will take that with them as they get older, that you don't have to spend a lot of money to be entertained and have fun. Plus the family memories it will create will be great. As you kids get older you can start to introduce allowances, chores & doing extra stuff for extra money. Take that money with you when you go to the stores and when they want something you can go, mommy doesn't have the extra money for that but you have x.xx in your wallet, so if you want to buy that you can or if you want to save up for that toy you we can put half your allowance away to save up for it. My niece really wanted an American Girl doll when she was probably about 5. My sister thought they were too expensive but told my niece that she could save up money from birthdays and allowance and when she had enough money saved up she could buy it herself. It took my niece 6 months to save up for it. It helped her birthday fell during that time period and because we knew of her goal, we got fewer items & more cash for her birthday to help her with her goal per her request. She took such great care of that doll and still has it to this day, she's 25 now and I think her girls play with it now. Also, when you can, pay cash for items. I know in this day and age, it's easier to use our debt cards, but all the kids see is us putting items on a card, they don't see that there is a limit to the spending, just put it on the card. If they see you paying cash, that may make it easier for them to under handling cash. Like when you go grocery shopping, you say "Mom only has $x.xx to spend on groceries for the next week and we have to get everything on this is. These are coupons, this helps mommy save money

hoffse

My parents did some great things for me.  Some of them might be controversial, but it worked, and I plan to do the same with our kids someday.

1) My parents tracked all the money I "earned" through odd jobs, babysitting, etc.  They matched all the money I earned in a Roth IRA for me - I think they opened the account when I was 8.  I had no idea I had a retirement account until I was in college.  Keep in mind that you can contribute 100% of your earnings or $5500/year, whichever is less.  I definitely wasn't earning $5500/year through babysitting, so they matched 100% of my earnings.  I started college with about $8,000 in my Roth because my parents invested it for me while I was a kid.

2) When I was in middle school I got into clothes and would ask for name brand things.  For my 12th birthday they gave me a VisaBuxx with $100 on it.  This is essentially a prepaid card.  We set up an online account, and they told me they would start to send my allowance on the card.  If I earned money, I could give it to them, and they would add the money to the card.  From then on, if I wanted to buy Abercrombie or whatever, it would come from the VisaBuxx account.  It took one shopping trip, and I never asked for Abercrombie again because I finally understood how expensive it was.  This also had the benefit of switching me over to plastic in a safe way.  My parents were able to manage/fund the account, and I had to learn to track how much money I had online, rather than through cash.  I know that plastic is controversial, but I'm in favor of exposing kids to it and getting them used to good habits before they're old enough to apply for credit on their own.  Banks extend a LOT of credit to college kids with no assets (because parents will often bail them out).  For many, college is their first experience with plastic, and it's also the time they wrack up credit card debt.  By the time I started college, I had been using plastic exclusively for 6 or 7 years, and I knew how to manage it.

3) Once in college I opened an actual credit card.  The billing address was my parents' house.  My parents agreed to pay for my expenses while in college, so they paid the credit card for me.  But every month my dad would call, and we would go through the bill together - to make sure all the charges were legitimate and that I wasn't overspending.  This taught me restraint, because I didn't want to have to explain an excessive charge to my dad.  We also caught an unauthorized purchase once, and it reinforced how important it is to keep a close eye on accounts.

4) Probably the most controversial thing - my parents didn't require me to hold a part-time job in high school or college.  My dad is a college professor, my mom worked for a school system, and to them school/resume building was my only job.  When friends' parents would question this, my dad always said, "If school is her job and she does well, she will earn far more from scholarships than from bagging groceries at the Kroger.  We are going to financially support her so that she has the time to make school and resume building her job."  That means I didn't have to pay for my cell phone.  I didn't have to pay for gas.  I was allowed to borrow my mom's old car to get around.  I only paid for "upgraded" versions of things I needed anyway - Abercrombie jeans vs. Target jeans, for example.  My parents would pay for Target but not Abercrombie.

It paid off.  I got a big scholarship to Vanderbilt and full ride offers elsewhere.  I also got another $20K or so from random scholarship issuers that I was able to use wherever I went.  My free time in high school was spent volunteering, practicing my music and dance, studying for the SAT so that I could kill it (yes, you can study for it), and generally resume building to earn money for college.  This had a side-benefit: I spent so much time studying for school that I wasn't blindsided by college.  I was able to self-motivate by then as well.  I remember taking more than 50 practice tests for the LSAT to get into law school, and nobody had to tell me to do it. My offers for law school were even better than my offers for college.  

My H's parents did the same thing with him, and he had a similar experience: full ride to college, multiple full ride offers to law school.  Neither of us took the full rides to law school for various reasons, but we could have.  It was nice to have the option.  We would both make the same choice if we could do it all over again.

Neither of us held a consistent, paid job until we graduated from college.  They would have taken up too much time, and they wouldn't have been as valuable on our resume as other things.  I know it's controversial, but it worked out very well for us.

maple2

hoffse said:

My parents did some great things for me.  Some of them might be controversial, but it worked, and I plan to do the same with our kids someday.

1) My parents tracked all the money I "earned" through odd jobs, babysitting, etc.  They matched all the money I earned in a Roth IRA for me - I think they opened the account when I was 8.  I had no idea I had a retirement account until I was in college.  Keep in mind that you can contribute 100% of your earnings or $5500/year, whichever is less.  I definitely wasn't earning $5500/year through babysitting, so they matched 100% of my earnings.  I started college with about $8,000 in my Roth because my parents invested it for me while I was a kid.

How did they do this? Do you need something more official than a hand written note that so and so earned $X on such  and such a day by babysitting? I imagine the risk of audit or investigation is low, but I would definitely want to make sure I had my records in order before doing this.

hoffse

A few other things that came to mind:

-My parents did tell me no a lot.  The two exceptions to this were books and sheet music.  They didn't restrict that at all, and they allowed me to read whatever I wanted even if it wasn't age appropriate.  No books were banned in our house, and if I read something challenging I was welcome to talk to them about it.  I remember asking my mom to explain cannibalism when I was in second or third grade after reading about it in a book.  Toys were not a frequent thing though.

-One of my required activities (for resume building and life) was something involving exercise.  I chose dance and really got into it.  They didn't care what I did, as long as one of my activities provided exercise.

-I started receiving an allowance when I was maybe 6 or 7.  Once a year (usually right after my birthday), I was allowed to ask for a raise.  But I had to advocate for it and explain to my dad why I thought it was appropriate that my allowance be increased.  It sounds weird, but I'm super glad he made me do that, especially because research shows that in the workplace women don't advocate for themselves as much as men do.  Having to negotiate my "raise" each year gave me practice. I negotiated a free LLM degree from my employer recently, and I don't think I would have been able to do it without those practice sessions when I was a kid.

I love the idea about picking out food for a food pantry with your kids while grocery shopping each week.  We did that once a year around Christmas, but I like the idea of making it a more regular thing.

EDIT: The older I got, the harder the Q&A session got for my annual raise.  When i was little it was just a matter of getting over my shyness to ask.  By the time I was a senior in high school, I had to submit my request on paper (with letterhead), and my dad made me research and include documentation about things like cost of living increases to justify it.  He also made me submit requests for money for school trips on paper with a budget breakdown of how the money would be used, and I had to submit receipts when I was back from the trip.  Not even joking.  I thought it was horrible that he made me do that, until I had to do it professionally.  Now I finally appreciate it.

And one thing my mom did - every day when I got home from school, she would ask me what I learned that day.  That's a good lesson.

hoffse

maple2 said:

hoffse said:

My parents did some great things for me.  Some of them might be controversial, but it worked, and I plan to do the same with our kids someday.

1) My parents tracked all the money I "earned" through odd jobs, babysitting, etc.  They matched all the money I earned in a Roth IRA for me - I think they opened the account when I was 8.  I had no idea I had a retirement account until I was in college.  Keep in mind that you can contribute 100% of your earnings or $5500/year, whichever is less.  I definitely wasn't earning $5500/year through babysitting, so they matched 100% of my earnings.  I started college with about $8,000 in my Roth because my parents invested it for me while I was a kid.

How did they do this? Do you need something more official than a hand written note that so and so earned $X on such  and such a day by babysitting? I imagine the risk of audit or investigation is low, but I would definitely want to make sure I had my records in order before doing this.

It's whatever your report on your kids' tax return.

My dad keeps meticulous records, and he apparently kept an ongoing spreadsheet whenever I was paid for work (who I was paid by, what the work was, the date, the amount, cash vs. check, deposit date, etc.). It means I was never paid "under the table," but it also allowed them to contribute to retirement for me.  

We were never audited, but he would have absolutely won an audit if we had been.

hoffse

hoffse said:

maple2 said:

hoffse said:

My parents did some great things for me.  Some of them might be controversial, but it worked, and I plan to do the same with our kids someday.

1) My parents tracked all the money I "earned" through odd jobs, babysitting, etc.  They matched all the money I earned in a Roth IRA for me - I think they opened the account when I was 8.  I had no idea I had a retirement account until I was in college.  Keep in mind that you can contribute 100% of your earnings or $5500/year, whichever is less.  I definitely wasn't earning $5500/year through babysitting, so they matched 100% of my earnings.  I started college with about $8,000 in my Roth because my parents invested it for me while I was a kid.

How did they do this? Do you need something more official than a hand written note that so and so earned $X on such  and such a day by babysitting? I imagine the risk of audit or investigation is low, but I would definitely want to make sure I had my records in order before doing this.

It's whatever your report on your kids' tax return.

My dad keeps meticulous records, and he apparently kept an ongoing spreadsheet whenever I was paid for work (who I was paid by, what the work was, the date, the amount, cash vs. check, deposit date, etc.). It means I was never paid "under the table," but it also allowed them to contribute to retirement for me.  

We were never audited, but he would have absolutely won an audit if we had been.

I should add - I think my dad just attached the spreadsheet to my tax return each year as documentation.  I would imagine the IRS viewed it as being overly honest.  I bet that most parents don't report the odd money their kids make, and the IRS knows it.  The few who do report something aren't likely to be audited over it.

maple2

hoffse said:

hoffse said:

maple2 said:

hoffse said:

My parents did some great things for me.  Some of them might be controversial, but it worked, and I plan to do the same with our kids someday.

1) My parents tracked all the money I "earned" through odd jobs, babysitting, etc.  They matched all the money I earned in a Roth IRA for me - I think they opened the account when I was 8.  I had no idea I had a retirement account until I was in college.  Keep in mind that you can contribute 100% of your earnings or $5500/year, whichever is less.  I definitely wasn't earning $5500/year through babysitting, so they matched 100% of my earnings.  I started college with about $8,000 in my Roth because my parents invested it for me while I was a kid.

How did they do this? Do you need something more official than a hand written note that so and so earned $X on such  and such a day by babysitting? I imagine the risk of audit or investigation is low, but I would definitely want to make sure I had my records in order before doing this.

It's whatever your report on your kids' tax return.

My dad keeps meticulous records, and he apparently kept an ongoing spreadsheet whenever I was paid for work (who I was paid by, what the work was, the date, the amount, cash vs. check, deposit date, etc.). It means I was never paid "under the table," but it also allowed them to contribute to retirement for me.  

We were never audited, but he would have absolutely won an audit if we had been.

I should add - I think my dad just attached the spreadsheet to my tax return each year as documentation.  I would imagine the IRS viewed it as being overly honest.  I bet that most parents don't report the odd money their kids make, and the IRS knows it.  The few who do report something aren't likely to be audited over it.

Sorry, last question. Did they only include income you earned outside the home or would your allowance or payment for chores around the house count too?

hoffse

maple2 said:

hoffse said:

hoffse said:

maple2 said:

hoffse said:

My parents did some great things for me.  Some of them might be controversial, but it worked, and I plan to do the same with our kids someday.

1) My parents tracked all the money I "earned" through odd jobs, babysitting, etc.  They matched all the money I earned in a Roth IRA for me - I think they opened the account when I was 8.  I had no idea I had a retirement account until I was in college.  Keep in mind that you can contribute 100% of your earnings or $5500/year, whichever is less.  I definitely wasn't earning $5500/year through babysitting, so they matched 100% of my earnings.  I started college with about $8,000 in my Roth because my parents invested it for me while I was a kid.

How did they do this? Do you need something more official than a hand written note that so and so earned $X on such  and such a day by babysitting? I imagine the risk of audit or investigation is low, but I would definitely want to make sure I had my records in order before doing this.

It's whatever your report on your kids' tax return.

My dad keeps meticulous records, and he apparently kept an ongoing spreadsheet whenever I was paid for work (who I was paid by, what the work was, the date, the amount, cash vs. check, deposit date, etc.). It means I was never paid "under the table," but it also allowed them to contribute to retirement for me.  

We were never audited, but he would have absolutely won an audit if we had been.

I should add - I think my dad just attached the spreadsheet to my tax return each year as documentation.  I would imagine the IRS viewed it as being overly honest.  I bet that most parents don't report the odd money their kids make, and the IRS knows it.  The few who do report something aren't likely to be audited over it.

Sorry, last question. Did they only include income you earned outside the home or would your allowance or payment for chores around the house count too?

maple2 said:

maple2 said:

Funny you should ask.  I think they treated my allowance as a gift (unreportable) when I was little.  At some point the rules changed where I would only "earn" my allowance if my room was clean, and I completed certain chores.  I have a feeling that at that time my dad treated my allowance as paid work so that he could report it on my tax return and match it for retirement.  I've never asked, but that's just a guess.  I remember being all unhappy when I suddenly had to work for my allowance, but I bet that's why they shifted to it.  Roths came out in the late-90's, and that seems to coincide with when I suddenly had to start working to "earn" my allowance.

csuave

My mom and I would clip coupons together when I was young.  She taught me how to go through sale ads to make a grocery list. 

As an adult I consider myself to be very good at getting value out of grocery shopping.

jtmh2012

hoffse said:

4) Probably the most controversial thing - my parents didn't require me to hold a part-time job in high school or college.  My dad is a college professor, my mom worked for a school system, and to them school/resume building was my only job.  When friends' parents would question this, my dad always said, "If school is her job and she does well, she will earn far more from scholarships than from bagging groceries at the Kroger.  We are going to financially support her so that she has the time to make school and resume building her job."

My parents did the same thing for me when I was in school. I volunteered at a local musuem, but my focus was my schooling, not holding down a job while trying to do homework and whatever else. As long as I kept my grades up, my parents covered me and like your parents said, that benefited me way more than some high school job would have.

hoffse

jtmh2012 said:

hoffse said:

4) Probably the most controversial thing - my parents didn't require me to hold a part-time job in high school or college.  My dad is a college professor, my mom worked for a school system, and to them school/resume building was my only job.  When friends' parents would question this, my dad always said, "If school is her job and she does well, she will earn far more from scholarships than from bagging groceries at the Kroger.  We are going to financially support her so that she has the time to make school and resume building her job."

My parents did the same thing for me when I was in school. I volunteered at a local musuem, but my focus was my schooling, not holding down a job while trying to do homework and whatever else. As long as I kept my grades up, my parents covered me and like your parents said, that benefited me way more than some high school job would have.

I agree.  I think it also taught me to play the long game with money. 

Paying for my gas/insurance, supporting my music and dance lessons, etc. cost them money while I was in school, but they viewed it as an investment, and it paid off huge when it came time for college applications.  They were committed to paying for undergraduate, and it enabled them to send me to a private school for the cost of state school.  My parents starting saving aggressively for college when my mom was pregnant, but nobody could have predicted how expensive it would get during the 90's and early 2000's  

blondie42107

AprilZ81 said:

My parents did a good job about teaching us about money and here are somethings I want to do when we have kids.

1) Half of all birthday/Christmas/gift money goes into savings and the other half is the kids to do what they want with after they write their thank you notes.  I hated this as a kid, but that savings account is what allowed me to spend a summer studying in Europe as a college student.

2) Big ticket items (iPads, Playstations, etc.) will not be a "right" but a reward for savings.  My sister and I had to save our allowance for months ($2 each week for each of us) to save up half the cost of our original Nintendo.  It really made us think about if we really wanted it or not and taught us about savings goals.  Once we saved half the cost our parents paid the balance.

3) Once they are old enough to work (baby sitting, retail, whatever) they will at a minimum work part time during the summer.  Half of their take home pay will be put into savings and the other half will be their's to spend.  At that time they will need to start paying for their own gas money, part of their cell phone bill and possibly car insurance so they understand that they are not making a lot of money and bills are inescapable.  

Those are the big things I want to do that they will be involved in.  We will likely do some things behind the scenes (529 plans, additional savings from us, etc.) to help boost the money in their name but they need to chip in.

My kids are young so it hasn't been an issue but all of their gift money goes into savings.

short+sassy

Wow, ladies, lots of great ideas!  But I really need to give a standing applause for your parents, @hoffse.  That was quite a few "advanced" money concepts they taught you from an early age.  And making you ask for a raise every year with documentation as to why you deserved one...love the needing to provide it as a typed letter on letterhead, lol.  I see now what valuable lessons those were.  I hate to admit it, but I got a promotion at work almost a year ago...but it didn't come with a raise.  I didn't even ask for one and I've always been ashamed of myself I didn't...or when annual raises were coming around either .  I'm just a big coward with that stuff.

My parents started a savings account for me when I was two and would deposit my birthday/Christmas money into it.  When I was old enough to understand...probably 4 or 5...they explained what a savings account is and showed me mine.  From a very early age I was fascinated...FASCINATED!!!!...that my money was making money by just sitting there.

It planted a seed in me to learn how to master making money with money.  In fact, I opened my first set of mutual funds when I was barely 20, using the money I'd saved for college but wasn't going to need by the time I graduated in another year.

Though a caveat with that is...not to date myself...but back then I earned more interest on my simple little kid's savings account than the interest rate I am currently paying on my mortgage, lol. 

Like a lot of others have mentioned, my parents were always disciplined in not buying my sister and me stuff just because we wanted it.  I loved crab as a child (still do), but understood this was an expensive food item and only for a special treat...like my birthday.  We were brought up to be very cognizant of the cost of things...especially "wants".

I knew my parents could help me with college, but wouldn't be able to pay for all of it.  So I worked a part-time job in both high school and college to save for it myself.  Not only escaped with money to spare (see my previous paragraph about mutual funds), but also never needed any student loans. 

hoffse

@short+sassy, thanks - that letterhead was something else.  I didn't have any (obviously - I was an 18-year-old kid), so I had to make it up.  I still remember my dad sending back my "proposal" with edits all over it in red ink and a copy of the APA handbook.  He's a psychologist, so that final year he insisted that my citations comply with APA style.  I tried to tell him that I had never used the APA style before, and he basically told me I had to figure it out if I wanted a raise.  It took three tries before he finally accepted my proposal during my senior year, and he ended up negotiating me down from $5/week to $3/week for my raise.  He was tough!

In retrospect, I do think that my dad was more aware of the challenges professional women face than many men are.  He did his best to prepare me for what he could.  Asking for a raise or a promotion is NOT easy, no matter how many times you practice.  But the research shows that men are better at it than women - they're more willing to put themselves out there.  I'm very glad my dad made me practice advocating for myself, because I now work for a bunch of men and they expect me to ask for the things I want.  They won't read my mind, and they won't go out of their way to offer.  

Being a professional woman is challenging - and it's especially true living in a part of the country where the "female role" (socially) is still strongly tied to the household.  When I go to work events with my H, nobody ever bothers to ask what I do, because they assume I stay at home.  There's nothing wrong with staying at home, but I know they are making that assumption based purely on the fact that I am a woman, and I am married to a lawyer.  The biases in that assumption are so fundamentally sexist, that it drives me crazy. I was not raised to view my professional and academic abilities as being different than a man's.  When I was in preschool and we had career day, the girls were given a nurse's cap and the boys were given doctor's bags.  My dad made me go in and ask for a doctor's bag.  

MissChanandlerBong

Erikan73 said:

First thing I think is important for parents to do is to say no when at the store, despite how loud and embarassing the tantrum can get. Also doing family activities with your kids that cost little or no money. It can be to regular walks in the park, family board game night, pick out a movie at the library. Teach your kids that there are lots of great ways to have fun that don't cost much money and they will take that with them as they get older, that you don't have to spend a lot of money to be entertained and have fun. Plus the family memories it will create will be great. As you kids get older you can start to introduce allowances, chores & doing extra stuff for extra money. Take that money with you when you go to the stores and when they want something you can go, mommy doesn't have the extra money for that but you have x.xx in your wallet, so if you want to buy that you can or if you want to save up for that toy you we can put half your allowance away to save up for it. My niece really wanted an American Girl doll when she was probably about 5. My sister thought they were too expensive but told my niece that she could save up money from birthdays and allowance and when she had enough money saved up she could buy it herself. It took my niece 6 months to save up for it. It helped her birthday fell during that time period and because we knew of her goal, we got fewer items & more cash for her birthday to help her with her goal per her request. She took such great care of that doll and still has it to this day, she's 25 now and I think her girls play with it now. Also, when you can, pay cash for items. I know in this day and age, it's easier to use our debt cards, but all the kids see is us putting items on a card, they don't see that there is a limit to the spending, just put it on the card. If they see you paying cash, that may make it easier for them to under handling cash. Like when you go grocery shopping, you say "Mom only has $x.xx to spend on groceries for the next week and we have to get everything on this is. These are coupons, this helps mommy save money

I love this idea!  I hardly ever use cash but this is a great reason to.

MissChanandlerBong

I love all these replies - thanks everyone!

One question - would you suggest having a regular savings account for your kid(s), an education account (ESA/529), or both?  We have put all of the girls' money into a 529 so far but I'm wondering whether we should have regular savings accounts too.

hoffse

MissChanandlerBong said:

I love all these replies - thanks everyone!

One question - would you suggest having a regular savings account for your kid(s), an education account (ESA/529), or both?  We have put all of the girls' money into a 529 so far but I'm wondering whether we should have regular savings accounts too.

Do you have every expectation that they will go to college and are they aware of that expectation?  If so, then they're very likely to go to college and the money that you save for them will go further in a 529 than a savings account.

That said, it's not a bad idea to have a savings account that your kids can learn to manage on their own.  While they're really little I personally wouldn't bother with a savings account, but when they're old enough to have an allowance, it's a good way to teach them about delayed gratification.  

hoffse

Something to keep in mind - states started rolling out 529's in the late 90's/early 2000's.  Most of us were probably in middle school or high school when that happened.  Our parents kept money in savings accounts because there weren't really other options.  Besides, it always takes a few years for new savings options to catch on.

It's great that 529's are something we will be able to use for our kids from birth.

MissChanandlerBong

hoffse said:

MissChanandlerBong said:

I love all these replies - thanks everyone!

One question - would you suggest having a regular savings account for your kid(s), an education account (ESA/529), or both?  We have put all of the girls' money into a 529 so far but I'm wondering whether we should have regular savings accounts too.

Do you have every expectation that they will go to college and are they aware of that expectation?  If so, then they're very likely to go to college and the money that you save for them will go further in a 529 than a savings account.

That said, it's not a bad idea to have a savings account that your kids can learn to manage on their own.  While they're really little I personally wouldn't bother with a savings account, but when they're old enough to have an allowance, it's a good way to teach them about delayed gratification.  

Honestly, yes, I expect them to go to college. Right now the 4 year old is just excited about kindergarten, we haven't talked about college yet   But I plan to raise them so that college is pretty much a given.  I know that may not be the approach that everyone takes, but in personal experience I have seen the people in my family have much greater success going to college right after high school and getting a "marketable" degree.  I know this might be controversial and it's just anecdotal evidence, and I apologize if I offend anyone.  But I did consider the expectation of college when setting up the 529s.

That is a great point about setting up the savings account when they are a little older.  For now, we'll continue with putting everything into the 529s and work on the savings accounts down the road. 

Wulfgar

This Christmas I made my son buy a Christmas present for his sister out of his allowance.  I also let him buy a toy that he could afford.  I also drove him crazy when we went to Target before Christmas and he wanted to buy a ton of toys.  I have no problems saying no.  At the local zoo he wants to ride the train and Merry-Go-Round but we limit the times he can.

As he gets older, I am going to get him a wallet to carry some cash around when we go places that he will want to buy things.

I want to do a better job than my parents did.  All they did was say no to almost everything and never really explained what was going with their finances until after I had to file for bankruptcy (partially due to my ex-wife).

als1982

My parents led by example. I knew growing up that they were in a good financial situation, but I always understood it was because of the choices they had made, some not easy.

My mom always bought on sale, and didn't spend unnecessarily. My parents also never bought each other gifts, for birthdays, holidays or anniversaries, but instead took regular four day weekend trips without my brother and me.

In 6th grade they gave me $500 to start investing in the stock market, which spurned my interest in investing. I ended up loosing half when TWA went bankrupt, but my Merck quadrupled by the time I sold it in college.

They also let me make my own financial mistakes, which where I learned the most. I learned early on the hurt of credit card debt and the pain of a collection call.

And while I understand parents wanting their kids to focus on school, I can absolutely say that I would not have the great paying job and career I have today without the work on my resume from high school summers and throughout my college and grad school years.

jtmh2012

I love all these replies - thanks everyone!

One question - would you suggest having a regular savings account for your kid(s), an education account (ESA/529), or both?  We have put all of the girls' money into a 529 so far but I'm wondering whether we should have regular savings accounts too.

We opened a savings account for our little one as soon as we had a SSN. Our a credit union regularly runs 3%,4%,5% 1-yr CD specials. However, it is 1 per member. So now we get one in each of our three names.



We're debating the 529. While we intend to raise him with the idea of going to college, I look at my brother who never went.

vlagrl29

jtmh2012 said:

MissChanandlerBong said:

I love all these replies - thanks everyone!

One question - would you suggest having a regular savings account for your kid(s), an education account (ESA/529), or both?  We have put all of the girls' money into a 529 so far but I'm wondering whether we should have regular savings accounts too.

We opened a savings account for our little one as soon as we had a SSN. Our a credit union regularly runs 3%,4%,5% 1-yr CD specials. However, it is 1 per member. So now we get one in each of our three names.



We're debating the 529. While we intend to raise him with the idea of going to college, I look at my brother who never went.

This is us.  We won't ever do a 529 because who knows if she will go or not (preferable we hope so).  MIL has a CD set up at their bank and we have a savings account for her at our bank.  Eventually we will move it into a money market account.

maple2

vlagrl29 said:

jtmh2012 said:

MissChanandlerBong said:

I love all these replies - thanks everyone!

One question - would you suggest having a regular savings account for your kid(s), an education account (ESA/529), or both?  We have put all of the girls' money into a 529 so far but I'm wondering whether we should have regular savings accounts too.

We opened a savings account for our little one as soon as we had a SSN. Our a credit union regularly runs 3%,4%,5% 1-yr CD specials. However, it is 1 per member. So now we get one in each of our three names.



We're debating the 529. While we intend to raise him with the idea of going to college, I look at my brother who never went.

This is us.  We won't ever do a 529 because who knows if she will go or not (preferable we hope so).  MIL has a CD set up at their bank and we have a savings account for her at ourbank.  Eventually we will move it into a money market account.

Everyone has to weigh the pros and cons of 529s for themselves, but it worth remembering that the penalty for not using the 529 for education is being taxed on all the interest you earned during that period plus a 10% penalty on the interest. You don't lose any of your principle (at least to taxes or penalties). Depending on interest rates, market performance and the amount you invest, you may come out with about the same amount of money after paying taxes and penalties on a 529 as if you had just kept the money in a savings account the whole time.

I just did a quick check of this recently for my own research. I assumed a steady 7% rate of return for money invested in the market, a constant 1% interest rate on savings, and an income tax rate of 25%. I only calculated the interest growth once per year rather than compounding it within years because I was just trying to get a sense of how things might work rather than be super accurate. I also assumed a single investment when the child was around 3. If you invested $1000 in a 529 for 15 years then paid the 10% penalty and 25% taxes on the interest, you would end up with $2,026.05. If you had just put that $1000 in a savings account you would have $1,149.47. If you did use the 529 for school, you would have $2,578.53.

If you started with $10,000, you would end up with $20,260.47 going the 529 route and $11,494.74 with savings. If you used it for school, though, you would have $25,785.34. A lot of things about my scenario are unrealistic, but it helped me get over some anxiety about investing in a 529 then not needing it all for school for the kids. In then end, we may not be that much worse off than if we took a very conservative investment approach with that money. If they do in fact use it to go to school we will be much better off. Yes, it would suck to lose almost >$5,000 to penalties and taxes, but we would still come out ahead of a savings account.

It still may not make sense to use a 529 if you are sure your child won't attend college (or higher education of any sort), are worried about losing principle due to market performance, or for any number of other reasons, but it's worth thinking about some actual numbers. Taxes and penalties sound a bit scary in the abstract, but they may not be so bad in reality. At least compared to alternatives. Again, my numbers are not super realistic or accurate, so you would want to run scenarios with numbers that feel comfortable to you.

vlagrl29

maple2 said:

vlagrl29 said:

jtmh2012 said:

MissChanandlerBong said:

I love all these replies - thanks everyone!

One question - would you suggest having a regular savings account for your kid(s), an education account (ESA/529), or both?  We have put all of the girls' money into a 529 so far but I'm wondering whether we should have regular savings accounts too.

We opened a savings account for our little one as soon as we had a SSN. Our a credit union regularly runs 3%,4%,5% 1-yr CD specials. However, it is 1 per member. So now we get one in each of our three names.



We're debating the 529. While we intend to raise him with the idea of going to college, I look at my brother who never went.

This is us.  We won't ever do a 529 because who knows if she will go or not (preferable we hope so).  MIL has a CD set up at their bank and we have a savings account for her at ourbank.  Eventually we will move it into a money market account.

Everyone has to weigh the pros and cons of 529s for themselves, but it worth remembering that the penalty for not using the 529 for education is being taxed on all the interest you earned during that period plus a 10% penalty on the interest. You don't lose any of your principle (at least to taxes or penalties). Depending on interest rates, market performance and the amount you invest, you may come out with about the same amount of money after paying taxes and penalties on a 529 as if you had just kept the money in a savings account the whole time.

I just did a quick check of this recently for my own research. I assumed a steady 7% rate of return for money invested in the market, a constant 1% interest rate on savings, and an income tax rate of 25%. I only calculated the interest growth once per year rather than compounding it within years because I was just trying to get a sense of how things might work rather than be super accurate. I also assumed a single investment when the child was around 3. If you invested $1000 in a 529 for 15 years then paid the 10% penalty and 25% taxes on the interest, you would end up with $2,026.05. If you had just put that $1000 in a savings account you would have $1,149.47. If you did use the 529 for school, you would have $2,578.53.

If you started with $10,000, you would end up with $20,260.47 going the 529 route and $11,494.74 with savings. If you used it for school, though, you would have $25,785.34. A lot of things about my scenario are unrealistic, but it helped me get over some anxiety about investing in a 529 then not needing it all for school for the kids. In then end, we may not be that much worse off than if we took a very conservative investment approach with that money. If they do in fact use it to go to school we will be much better off. Yes, it would suck to lose almost >$5,000 to penalties and taxes, but we would still come out ahead of a savings account.

It still may not make sense to use a 529 if you are sure your child won't attend college (or higher education of any sort), are worried about losing principle due to market performance, or for any number of other reasons, but it's worth thinking about some actual numbers. Taxes and penalties sound a bit scary in the abstract, but they may not be so bad in reality. At least compared to alternatives. Again, my numbers are not super realistic or accurate, so you would want to run scenarios with numbers that feel comfortable to you.

I get what you are saying, but I would rather not get taxed and then it be as income and probably get us into the next tax bracket.  With a money market we can still invest it and get better gains than a normal savings.

hoffse

maple2 said:

vlagrl29 said:

jtmh2012 said:

MissChanandlerBong said:

I love all these replies - thanks everyone!

One question - would you suggest having a regular savings account for your kid(s), an education account (ESA/529), or both?  We have put all of the girls' money into a 529 so far but I'm wondering whether we should have regular savings accounts too.

We opened a savings account for our little one as soon as we had a SSN. Our a credit union regularly runs 3%,4%,5% 1-yr CD specials. However, it is 1 per member. So now we get one in each of our three names.



We're debating the 529. While we intend to raise him with the idea of going to college, I look at my brother who never went.

This is us.  We won't ever do a 529 because who knows if she will go or not (preferable we hope so).  MIL has a CD set up at their bank and we have a savings account for her at ourbank.  Eventually we will move it into a money market account.

Everyone has to weigh the pros and cons of 529s for themselves, but it worth remembering that the penalty for not using the 529 for education is being taxed on all the interest you earned during that period plus a 10% penalty on the interest. You don't lose any of your principle (at least to taxes or penalties). Depending on interest rates, market performance and the amount you invest, you may come out with about the same amount of money after paying taxes and penalties on a 529 as if you had just kept the money in a savings account the whole time.

I just did a quick check of this recently for my own research. I assumed a steady 7% rate of return for money invested in the market, a constant 1% interest rate on savings, and an income tax rate of 25%. I only calculated the interest growth once per year rather than compounding it within years because I was just trying to get a sense of how things might work rather than be super accurate. I also assumed a single investment when the child was around 3. If you invested $1000 in a 529 for 15 years then paid the 10% penalty and 25% taxes on the interest, you would end up with $2,026.05. If you had just put that $1000 in a savings account you would have $1,149.47. If you did use the 529 for school, you would have $2,578.53.

If you started with $10,000, you would end up with $20,260.47 going the 529 route and $11,494.74 with savings. If you used it for school, though, you would have $25,785.34. A lot of things about my scenario are unrealistic, but it helped me get over some anxiety about investing in a 529 then not needing it all for school for the kids. In then end, we may not be that much worse off than if we took a very conservative investment approach with that money. If they do in fact use it to go to school we will be much better off. Yes, it would suck to lose almost >$5,000 to penalties and taxes, but we would still come out ahead of a savings account.

It still may not make sense to use a 529 if you are sure your child won't attend college (or higher education of any sort), are worried about losing principle due to market performance, or for any number of other reasons, but it's worth thinking about some actual numbers. Taxes and penalties sound a bit scary in the abstract, but they may not be so bad in reality. At least compared to alternatives. Again, my numbers are not super realistic or accurate, so you would want to run scenarios with numbers that feel comfortable to you.

Agreed with this.

529s are actually being used as an estate planning tool for similar reasons.  The 529 penalties are cheaper than the estate tax rate.

You have to do what you're comfortable with, but 529's are more flexible than people give them credit for.  Example: say you have two kids and the first doesn't go to college, but the second does.  You can transfer that account to the second child as beneficiary.  Or you can even hang onto it and transfer it to grandkids, etc. if you really don't want to pay the penalty.  Or you can use it for yourself to continue your own education in the future.

If you're pretty sure your kid won't go to college, then it's  probably best to just invest in the market and take the 15% capital gains rate on investments you sell in the future.  But if you think there's a decent chance your kid would go to college, I think 529s bear strong consideration.  They are very likely to beat savings accounts regardless of what happens, and if your kid does go to college as planned, then you're also coming out ahead from the capital gains taxes you would otherwise incur.