Have you ever tripped over a pile of toys in your kid’s room? Toys that seem to multiply but yet never really get appreciated or played with very much. Or perhaps cleaned out the minivan only to find a toy under the seat that seemed so important to your daughter at the time you bought it for her, but was quickly discarded for the next best thing? Both of these scenarios happened to me and I knew there had to be a better way.

A better way to teach my three young children the value of money and the proper value of the “stuff” that money buys. One of my biggest concerns, as a Dad, is sending my three kids out into the real world with no money smarts, which leads to a life of zero savings, and worse yet, a life of battling credit card debt. Here are the five things my wife and I did to turn things around in our home.

1. Teach Them To Value Money – A couple years ago, my son really wanted a Nintendo DS. The sticker price of $150 was shocking to me. But I told him, “Sure you can have one, you earn the money and save up, and I will personally take you to the store to buy one.” I then planted the seed of recycling and turning in our cans and bottles for money. He jumped all over it. Not only did he save and sort our recyclables, he also hit up all his grandparents for theirs.

After he had a sizable haul, we would take them down to the recycle station and he would unload them and even sign the receipt. He finally saved up enough money for the Nintendo DS. It was a great experience for him and taught him that money does not just grow on trees. It has to be earned by hard work and dedication.

2. Give An Allowance – My kids are just now getting to the age where they can start earning an allowance by doing chores around the house. This is also a great way to teach the value of an earned dollar.

The psychology of money is amazing to me. I have noticed in my kids that when they earn money they are less likely to waste it on something trivial. They will want to save it in their dresser drawer for something special that equals the value they have put on the money. Whereas if I give them a couple dollars to spend at the store, they will buy some candy or toy that usually ends up on the floor of the minivan.

3. Savings Account – When each of our kids were born, my wife and I opened a savings account for them. We add birthday money and Christmas money from the grandparent to their accounts every year. When the statements come, I make a point of talking to them individually about how much money they have and how much interest they have earned. They get very excited with the news that they have earned $1.75 last month by doing nothing at all.

The idea of saving money for things like college, or their first car, has to be planted early and often. My hope is that it will help to remove the sense of entitlement that is so prevalent with kids today.

Editor’s Note: ING Direct, one of my favorite online banks, recently added a kids savings account offering that may be of interest to parents looking for a safe place to park accumulated allowance money.

4. In Order To Receive, You Must Give – It happened the other day in the car and it gave me goose bumps. My 6 year old daughter was whining about why she could not have some toy. Tired of her whining and without thought or hesitation I quoted Rich Dad, Poor Dad, “If you want something, you first need to give.” Silence. I let that thought just hang in the air for at least 15 seconds. I could see in her eyes through the rear view mirror that her mind was working overtime trying to understand the concept.

This led to a great conversation about giving, whether it be toys you don’t play with to a charity, or time spent teaching your sister how to ride a bike, and how these things will bring you much more in return than you could ever imagine. I then explained that by being generous, people are going to want to be generous to you. By taking time to help someone else, others are going to want to take the time to help you when you are in need.

5. Personal Responsibility – They are responsible for the money they receive from allowance and otherwise. When it’s gone, it’s gone. So I tell them that it’s their responsibly to save it wisely or spend it wisely if that is what they choose to do. And definitely don’t leave it laying around the house or it may end up back in my wallet!

The idea of personal responsibility carries over into other aspects, like “You say you want dessert tonight? OK, well, let’s look around the house and make sure all of your responsibilities are taken care of. Then we can discuss dessert.” You do this enough times and you stay consistent, they will take care of their personal responsibilities long before they come to you asking for something.

Do you have any tips to add when it comes to raising “money smart” kids? I look forward to our comments. Another aspect of being money smart is using coupons when you do make a purchase. Here are some of the better online coupons on my website right now. Thank you Jason for letting me contribute to the Frugal Dad blog.

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About The Author: Kyle James owns and operate a website called Rather-Be-Shopping.com which specializes in online coupon codes for over 700 stores, organized in 25 shopping categories. He also has a blog, where he writes about frugal living tips, creative ways to save money, and other musings about the adventures and mis-adventures of raising 3 active kids.

Unfortunately, I ignored many of their lessons with regard to money and spent much of my 20s digging out of debt. I certainly don’t want my own children to repeat these mistakes, and I believe it may be harder for them to dig out.

With all the economic turmoil going on, I realize being fiscally responsible will be more important (and more difficult) for my children as they grow into adulthood.

Parents have always had to battle things like unrealistic media portrayals and an overall culture of consumerism. But layer on top of that the ridiculous levels of debt we’ve piled up as a country, and their future looks a little less certain.

Put another way, our kids probably won’t have the backstop we had. It’s doubtful social security will be around. Who knows where health care will wind up. Taxes are likely to be higher, and at least in the near term (meaning the next 5-10 years), things will probably cost more thanks to inflation, currency devaluation or some combination.

But it isn’t all negative. There will still be opportunities for our kids. People will still be needed to teach, to build things, to design building and bridges and roads, to provide health care and nursing and rehabilitation. To work on cars, to serve in the military, etc, etc.

However, to take advantage of those opportunities, our kids must first set themselves up for success. With all that in mind, I offer up:

10 Things I am Trying to Teach My Kids About Money Before They Reach Adulthood

1. No one owes you a thing. Too many people go through their entire lives with the expectation they are owed something. This is not the case, or at least it shouldn’t be. All you should ever expect is to be judged, compensated and respected based on your work ethic and your ability to create, inspire and hustle.

2. Debt is a cancer. Debt is a cancer on our society, on households, and on us as individuals. It saps creativity. It creates pessimism. It robs your future dollars. It limits your freedom. Avoid debt like the plague. Remember the old adage:

“He who understands interest – earns it. He who doesn’t understand interest – pays it.”

3. Save for emergencies…big emergencies. When you are young and many years from considering retirement (and not earning much), it’s tough to save money. But I have discovered no softer pillow than having money in the bank for emergencies. Aim to save about a year of your basic living expenses in a simple savings account (no risky investments here). With a one-year cushion, you’ll be able to weather storms many others will not.

4. Live simply. In 2011, life seems pretty complicated. By the time you are adults, I imagine it will be even more so. There will be new gadgets and toys and cool services and “got to haves.” The problem is, all these things compete for your earnings. I’m not advocating living like a pauper, but limit yourself to only a few of life’s luxuries.

5. Sleep on big financial decisions. When it comes time to buy a car, or a house, or book your first major vacation as a family, sleep on the plans for a couple nights. People selling you these things want you to act immediately to lock in their commission, as I would expect them to, but remember that you are the one who has to pay the bill. Some of my biggest financial regrets came because of a knee-jerk reaction. Be slow. Be methodical. Listen to your gut.

6. Protect your credit. Not because you hope to borrow money, but because you may find people extending a service to you may do so for less cost if they think you aren’t a big risk. And if those people don’t know you well, your credit score may be their only determining factor. It’s not necessarily fair, but it’s a part of life. Credit blemishes can hang around for a decade, so it’s best to avoid them in the first place.

7. Learn to do things yourself, but don’t be afraid to call in the experts. You may remember the time your dad rescued a toy from the toilet trap, saving us an expensive plumbing repair bill. Or the time I climbed up in the attic to unclog the air conditioner drain. But your dad knows his limitations, and calls in the experts when necessary. That’s what emergency savings are for.

8. Shallow people judge your things, real friends judge your character. Some of the saddest, loneliest people I’ve ever known have been surrounded by the nicest things money can buy. They often acquired these things to impress people they thought mattered, and in many cases it did – temporarily. Meaningful relationships are based on things money cannot buy: trust, respect, integrity, compassion, love.

9. Don’t trade the things you care about for a big salary. Remember what mattered to you most when you were a kid: Family, fun, dreams. These things should remain important to you as a grown-up, but often adults sacrifice these things to earn a big salary. Now, everyone has to sacrifice some to earn a living, but by learning to be content, you may be able to earn a comfortable living while still enjoying other things.

10. Start saving early. Remember those money games we used to play when you were a kid? One of them was an attempt to get you to understand one of the great financial wonders of the world: compound interest. You see, when you save money you earn interest on it. The next month you earn interest on the money you first put in, plus the interest you earned the month before. That’s right; you earn interest on interest. Now carry out that example for many years, even decades, and you can understand how some people are able to accumulate wealth. The trick is, you have to start early.

Parents, consider opening a kid’s savings account to get them started early. Our kids deposit a portion of allowance earnings every couple weeks and it has taught them a lot about the mechanics of banking – completing a deposit slip, balancing their savings register, etc.

Finally, keep in mind something your great grandfather taught your dad about finding balance. Be frugal, but remember to occasionally stop and smell the roses. Life is short, and it is meant to be enjoyed. Take an expensive vacation every now and then. Buy something of your “heart’s desire,” even if it doesn’t make sense financially. Be frugal in other areas of your life to make room for things you truly enjoy.

This post was included in the Family Finance Carnival at About.com: Kids and Money

Should You Give Your Teenager a Credit Card?

My short answer is no. I do not think teens should have a credit card, but not because they cannot be trusted, or because it encourages the use of plastic. I don’t think anyone should have a credit card if they do not have the means to pay it back themselves. Now if I could be convinced that my kids earned a steady income of $300 a month at their part time job and their limit would never increase beyond $300, then theoretically they would not accumulate debt. We all know that is not the way it works.

Credit cards companies give thousands of dollars in available credit to college students every day, even those with no income and no ability to repay. I know because I signed up for one my freshman year in school, and the first thing I charged was a Sony PlayStation video game system. After all, I could pay it back over the next couple months thanks to my part time job.

Over those next couple months I had two small emergencies that wiped out my part time earnings, and a third that I had to charge on the new credit card. So began the minimum payment game I would play for years to come.

Proponents of teen credit cards point out that allowing kids to have a credit card will help them learn to use credit responsibly as an adult. Good thing those same people don’t feel the same way about alcohol.

No, there are some things that young teenagers should not have to contend with, and one of those is the pull of available credit. Using cash hurts, and the lack of transactional pain missing when spending with a credit card will warp their spending habits. In fact, it has been shown to warp even adult’s spending habits – you just simply tend to spend more with plastic than with cash.

But It Will Help Their Credit History!

Maybe, but there will be opportunities to prove a history of creditworthiness later when they are finished with school, have their own jobs and are ready to buy a home. I tend to believe credit scores are overrated. Sure, some employers are now using them to screen employees, and other companies are using them to set rates for insurance, etc, but for the most part there is little incentive for a teenager to have an 800 FICO score. What can they do with it besides get into more debt?

As the Readers: What do you think about credit cards for teenagers? Bad idea, or good introduction to credit? Feel free to agree or disagree in the comments below.

My kids occasionally receive a little birthday money themselves, along with gift cards and other small presents from friends and family. Since it is their birthday, we let them take a little bit of money to the store and pick out a toy or game that they’ve been wanting. But we like to encourage them to save the rest of that money in a variety of places.

Local savings account. Savings accounts at a local bank or credit union are practically a financial rite of passage for kids. While they don’t offer particularly good rates, local savings accounts do offer a great way to introduce kids to banking. Take them along and let them fill out the deposit slips and update their balances at home.

Online savings account. As kids get a little older introduce them to online savings account to score a higher rate on their savings, and to take advantage of other features. I like ING Direct (read my ING Direct review) online savings accounts because they update accrued interest daily on their savings dashboard. It’s a powerful lesson on compounding interest for kids to see money being added to their bank account as they sleep. If you aren’t a fan of ING Direct, check out some other top online banks.

529 college savings plan. Most kids are not worried about paying for college until it comes time to pay for college. So I think it is a good idea for them to contribute a little along the way. Invest a little of this “found cash” for your kids in the best 529 savings plan you can find.

Savings bonds. My kids received some savings bonds when they were little to “put up for college.” Later, I convinced the person that gave them to let us convert them to cash and send to the kids’ college savings funds, where I hope the money will get a better return. Sure, they are interesting and colorful and all that, but apart from novelty there isn’t that makes me want to buy and hold them for the kids over the long term.

Individual, kid-friendly stock. I generally dislike the idea of picking individual stocks because I am not good at it, and because I worry over diversification. However, I think it is safe to take a small percentage of your portfolio, say less than 10%, and invest it in a handful of individual stocks you know something about. Same goes for kids. Not long ago we invested a little money in two companies kids are familiar with, McDonalds and Disney. Later, we might add Coca Cola and Mattel to the mix. Be sure to reinvest those dividends, and hold the stock for the long term.  Who knows what a few hundred dollars invested in Microsoft twenty years ago would be worth today.

Where do your kids park their “birthday” money?

I like the idea of breaking up financial lessons by age group, recognizing of course that some kids “get it” before others, despite their age. For instance, my daughter is fairly money-savvy and back when she was just seven or eight could explain in adult terms what a mortgage was, how taxes were collected, etc. She probably got that from hanging out with her frugal dad.

My son, on the other hand, at five years-old, is more interested in a shiny penny than a paper dollar.  He’s yet to recognize the differences in currency (despite our best efforts). Actually, I think he does understand it on some level; he just likes shiny coins.  Who could blame him?

I’ll include the age brackets below, along with the suggested lessons from the Money article, but as usual, I put my frugal spin on the ideas as well.

Ages 5-9: Teach Basic Money Skills and Develop Work Ethic

Assign simple chores. Chores in the frugal household have evolved as the kids grew older. When both kids were small they were responsible for making their beds in the morning, and taking dirty clothes to the laundry room. My oldest, now ten, helps set the table, unload the dishwasher and put away dishes, put away clean laundry, and is still responsible for keeping up her own room.

Start a weekly allowance. The younger kids are the more often they should get paid, because budgeting any longer than a few days is hard to do (even for some adults!). As kids get older, stretch their paydays out a bit so they get used to stretching out those dollars, too. My daughter is paid allowance every other week on the same day I get paid.

Talk about money decisions and values. My blogging colleague at Moolanomy recently shared a great thought on avoiding the phrase, “We can’t afford it.” I like the concept, and have caught myself using that same excuse with my children. Be honest with kids and tell them that if you spend money on a new Wii game, you won’t have money for the grocery store. Life, and money, is about choices and the opportunity costs of making one choice over the other.

Introduce the idea of charity. The best way to make your kids givers is to lead by example. Take them along when volunteering (when possible), and encourage them to allocate some of their allowance to giving to a cause they care about.

Ages 10-13: Kick It Up a Notch With Skills and Responsibilities

Open a savings account. Every kids should have a basic savings account, complete with a ledger for recording transactions. It’s a great introduction to banking, and the idea of compound interest. Help kids complete deposit slips initially, but encourage them to complete deposit slips themselves, keep up the receipt, and record it in their ledger at home.

Offer extra chores as a way to earn money. My kids often bring me a sales flier they’ve found sitting around and say, “I really, really want this new (insert latest Disney movie, lego set, etc.), but I don’t have enough money.” What a perfect opportunity to reinforce the idea of working for money. Find some extra chores around the house and offer to pay kids enough to help them earn the difference. My kids are familiar with the $0.05 per weed plan of helping Dad around the yard.

Raise allowance to cover more of your child’s expenses. One allowance hack my wife and I are introducing this upcoming school year is to include my daughter’s lunch money in her allowance. It’s my opinion that she buys her lunch too often, and I hope to encourage her to “brown bag” it like Dad usually does. It’s fun to eat out, or buy a school lunch once a week or so, but it is almost always cheaper (and healthier) to make something from home.

Ages 14-18: Coach Kids On Using Checking and Credit

Open a checking account; deposit allowance into it. In addition to a savings account for kids, teen years are a good time to introduce checking accounts. Encourage teens to deposit their allowance, and other found money, into checking and make appropriate contributions to their savings account.

Introduce debit or prepaid credit card and monitor (by 16). Along with a checking account, help your teen get set up with a debit card. I don’t advocate introducing teens to credit cards, but that’s a personal decision. Teens can accomplish everything they need to learn about using plastic with a debit card. Later, when they are earning their own money, they can apply and pay for their own credit card if they decide, but I would not let them use plastic and me pay for it. Kids need to understand the transaction behind shopping with a credit card, and using their hard-earned dollars to pay for the items when the bill arrives.

Encourage part-time job (by 16). I have mixed feelings on this suggestion. I’ve worked since the day I turned 16. I worked in high school, and all the way through college. While it was nice to have spending money, it was a necessity in college. Either way, it put a strain on my grades, and my social life (who am I kidding, what social life?).  The only time I didn’t work was during football season when it wasn’t possible to keep a job and practice. I would encourage my own kids to take up things like babysitting, pet sitting, lawn care, or a similar entrepreneurial service–it beats the pay from most retail or fast food outlets and they’ll have more schedule flexibility.

Ages 19-22: Set a Path for Financial Independence

Expand allowance to cover a semester (if in college). I disagree with this suggestion because a semester is a long time. Imagine if we had to budget our income on a quarterly basis, rather than month-to-month. I would extend allowances to no more than a monthly allotment which covers things like rent (if living off campus), some money for utilities and food, and a little for miscellaneous college expenses–you know, like pizza, iTunes downloads, and football tickets.

Provide financial help only if it fuels independence. We have a goal to gift a down payment to our kids when they get married (which may or may not happen outside of this age bracket). My wife and I married young, and could not afford a home for many years. I don’t agree with buying an entire home for kids, but helping them with the down payment seems like a way to help them get on solid ground early on.

Continue to encourage charity. Continue to lead by example, and encourage teens to make time for helping others. I was encouraged to hear about college students spending Spring Break along the Gulf of Mexico in the wake of Hurricane Katrina – not to party, but to help those hurting rebuild their lives. We need more examples like this, and it shouldn’t take a natural disaster to spur a giving spirit.

How often have you shopped with your little one and found the experience nightmarish because your child wants everything he/she sets eyes on?

My niece does this, and it gets pretty embarrassing when she throws herself down on the floor and bawls her heart out when her mom refuses to buy her something. But no matter how hard the tears flow, no matter how long the tantrum continues, it’s not good to give in to the whims of your young one. Besides the fact that you cannot afford to buy them all that they ask, it sets a bad precedent if they learn that they can manipulate you with just a few tears and tantrums. If you face similar problems with your child, here’s how you could try to convince your child to behave better:

• Mean it when you say NO: If you give in when your child begins to act up, the same routine is going to repeat itself every time you go shopping. Your kid is going to get used to the fact that a few tears are enough to make you relent and buy whatever he/she wants.

• Don’t try to make it up to them by buying something else: Besides being a financially foolish move, it does not give you the advantage you need when you go shopping. Children are perceptive, and that’s why they will soon realize that they can get something out of a shopping trip by crying hard enough.

• Forget the incident once you leave the shop: Don’t harp about it or go on about the way your child behaved in the mall or shop. This will only make them more rebellious and determined to do it again.

• Talk to your youngster: If he/she is at an age where they can understand money, tell your child that you cannot afford to buy them all that they want because of your financial situation. If he/she is just a toddler, use the line that the product they want is not good enough, and that you’ll buy something better.

• Remember that kids forget easily: Your child will most likely forget the incident once you get out of the shop and stop for an ice cream or snack or see a clown on your way home. That’s the best part about children – they don’t hold grudges.

Learning to say NO to your child, for their own good, is a great way to instill the value of money in them at a very early age. Once they know that they cannot buy indiscriminately, they will learn the art of saving and spending money more wisely.

This post was contributed by Kimberly Peterson, who writes about the accounting degree online. She welcomes your feedback at KimPeterson2006 at gmail.com.

Helping children while we’re still here is one thing, but what about after we are gone?  If we have managed to build wealth throughout our lifetimes, should we pass that wealth along to our children, or is to do so to discourage them from becoming self-starters?  There is no right or wrong answer here, as much of it has to do with personal situations such as how you were raised, and how you came into wealth.

I do like Warren Buffet’s quote from a couple years ago, repeated in the USA Today article, Should kids be left fortunes, or be left out?  Buffet said about leaving money to kids, “wealthy parents should leave their children with enough money to do anything they want but not so much that they are doomed to do nothing at all.”

We’ve seen plenty examples of “doomed” kids, financially. Paris Hilton comes to mind, although she has managed to market herself as she got older to generate some of her own wealth, rather than relying solely on family fortune.  Of course, it could also be said that the last name Hilton has contributed to her success.

While I doubt I’ll ever have a fortune near that of the Hiltons, I do hope to have something to pass along to future generations.  And why not?  The money my wife and I leave our kids and grandkids could be a downpayment on a new home, or provide the seed capital for them to start a new business.  It likely won’t be enough to retire on, but I would like to think it would be enough for them to chase some dreams.

Often times we think of inheritances as opportunities for our kids to buy new sportscars, or a Harley, or a lavish vacation home.  The truth is that if we have managed to raise kids with many of our same frugal values, they will more than likely put that money to good use.  Imagine leaving enough to pay for a grandchild’s education, or the down payment on a starter home?  Imagine leaving enough for your kids to pay off their mortgage and experience debt freedom for the first time in their lives.  These are the types of things that motivate me to build enough wealth to leave behind, not just to my family, but to people and causes that I care about and want to leave a very small legacy.

What say you?  Should parents leave money to their kids?

One thing that separates me from a lot of personal finance bloggers is that I have never been in massive debt. I never went through that “wake up” period where I looked at my bank account and noticed it was $1,500 overdrawn. And then only to realize my credit cards were maxed out. Sure, I have had my fair share of sticky situations where I had to step back, assess my situation, nervously laugh to myself, and then work on getting back to my yellow brick road. But never massive debt. So what could I possibly share that is worth reading?

My parents, and particularly my father (a daddy’s boy, you could say), taught me some very important financial lessons, if not life lessons. I have combined those lessons with my experiences that I have gathered from high school, college, and the past few years in the workforce since I graduated from college. I have a very analytical frame of mind so I like to breakdown situations into consumable sections. And if I had it my way their would be a lot of numbers.

I find that my posts are probably best for the 16-35 year olds out there who are looking for some useful information. And parents who are looking at ways to connect with their kids. And we have reached a full circle… this all comes back to the three most influential lessons my parents taught me. I hope some of you parents out there can use these lessons to connect with your kids. And if my peers never got these lessons from your parents, I hope some of you can also digest this information for your own betterment!

Lesson #1: Want is not need.

Photo courtesy of babasteve

I was not a particular needy child. My Christmas list usually only consisted of one or two things. My mother tells me stories from when I was a young’n. She used to love buying me gifts. And I loved tearing through them. But once I opened them all up I would take the two things I wanted and go to my room… leaving the rest of the gifts to sit under the tree lonely. I guess I was just quirky like that.

But boys will boys and every now and then I would see something in a store that caught my eye. I would demand it. I NEEDED it. I would go over every reason in the book as to why I needed it and how detrimental it would be if I did not get it. My parents could have easily purchased me these gifts. After all, I did not ask for much, right? However, I am glad they did not enable my behavior no matter how infrequent it was.

My parents always talked to me in a logical manner explaining to me why it was not something that was needed. They did this from a young age and continued it until I was an adult. A typical conversation between a 14 year old me and my pops would go:

Dad: So you need this baseball that clocks your speed for $40?

Me: Yes! How else will I know if I am ready to pitch when I get to high school?!

Dad: Do you and your coach feel comfortable with how you are developing?

Me: Yes.

Dad: Do you think you are a league above your peers when you pitch?

Me: Yes.

Dad: Then what does your speed matter? I’ll take you by a batting cage once a year and clock your speed for $1.

Me: Ugh, fine.

My dad never once said “No!” That would ensue in a fight. Teenagers, and even younger kids, are more logical than we sometimes give them credit for. My dad must have had the patience of a saint because he was always willing to discuss these little issues with me. But in the end, what did I gain?

Now when I look at purchasing an item that I think I need, or maybe just really want, I really break the item down into a bunch of questions I know my dad would ask. Are there any cheaper alternates, like the batting cage once a year instead of a baseball that clocks your speed and will probably break after 20 throws? To you this is a simple discussion. To a kid who is starting to develop his outlook on the world this is a very influential lesson.

Lesson #2: TINSTAFL, There Is No Such Thing As a Free Lunch.

Photo courtesy of D’Arcy Norman

Every now and then the aforementioned lesson would not work on me. But still, my dad never gave me an outright “No!” Every now and then he and I would discuss the merits of a particular purchase and wind up in a stalemate. And that is where we would stay. He never acted as if he had a mystical overpowering veto that would end all discussion. But at the same time he didn’t agree with what I was doing so I knew I needed to work for it.

If I trace my interest in business and entrepreneurship back I think it would all start at age 8. I wanted a new bike because my dad purchased me a Huffy and other people in my neighborhood had Specialized and Diamondback bikes. For those of you who do not know, a Specialized or Diamondback bike is usually leagues above a Huffy. Looking back I can’t blame him. I was a 8 year old who was taking my bike into the woods and building jumps that probably made my spokes shake in their sockets.

But I was determined to get a new bike. As I am sure you are used to hearing from your child, I needed it. I started informing all of the neighbors that I would do any work for them. I would shovel snow, cut grass, rake leaves, pull weeds, take out trash, or help with any other job they wanted assistance on. I once had a neighbor who paid me to lay new bricks along their front garden. It actually wound up being considerably hard work and I am pretty sure they got a bargain. I was getting money steadily. I decided to expand my business and started doing fresh squeezed lemonade and apple stands. I stole the apples from my neighbor’s tree and my dad made the lemonade for me. It was probably a losing proposition but I guess he just liked seeing me put so much effort into a goal. Sales were not good, my street had no road traffic. I went door-to-door selling this lemonade. (Note: This was a neighborhood where everyone knew everyone and my dad stayed outside as I did it)

After a few months I think I lost sight of my end goal. But I kept doing these jobs in order to get money because I liked having my little piggy bank full of money. Between all of the jobs I was doing around the neighborhood and all of the money I collected from the dryer I had enough money for a new bike within about 6 months. My dad reminded me at this point and we went to the bike store in town. I looked around and found the bike I wanted. I was sure it would be better than all of my friend’s bikes.

Let me guess what you are thinking… my dad either bought it for me or I wasted all of my money on it? Nope. I got gun shy and realized I was about to spend 6 months of hard work on a single possession that I would use to skid around (kill the tires), go off jumps (kill the shocks and spokes), crash into curbs (warp the wheels and bend the spokes), and otherwise just ruin it. I decided I wanted to save the money for something more deserving of my money. I kept my Huffy.

My dad did not make me work, he gave me the opportunity to work for something I wanted. By working I realized the value of a dollar and looked at purchases in a different way… even at a young age.

Lesson #3: The best time to plant a tree was 30 years ago, the second best time is now.

Photo courtesy of woodleywonderworks

What did my dad and I do a few days after I rejected the idea of buying a new bicycle? We went to our local bank, Bank of America. My dad opened me up a joint savings and checking account that only I would deposit and withdrawal from. My dad may have planted the idea in my head but I remember it as being my idea. I saw my dad go to the bank all of the time to get money and he had explained the concept to me plenty of times. I liked the idea of having my money locked up for safekeeping while still letting me access it when I needed it. The piggy bank was getting full, anyways.

I opened up my bank account and over the next 8 years I would give my dad money and a deposit slip anytime I earned some. He would take it to the bank when he was going for his own reasons. And that is where my life into personal finance really started… at the ripe age of 8.

My dad always made it clear that I wanted to have a safety cushion in that bank account. He would say things like “What happens when you are 16 and need a car?” Because of the TINSTAFL lesson the idea never crossed my mind that I was guaranteed a free car just for being born to the man. Now, he was not as rough as he may seem and he did wind up helping me out with a car. It was a used Dodge Neon. It also happened to be a hand me down from my sister. I got a great deal as I only had to pay for gas and insurance since the car was already paid off. Now that I look back at it, though, I am pretty sure my dad completely subsidized my car insurance payments. But the idea remained constant, he wanted to make sure I understood that nothing was free.

By the time I was 16 I had a few thousand dollars saved up. This was all earned through hard work and some holiday presents. I was continuously educated by my dad that I was ahead of the game and that everything I did now was worth tenfold down the road.

How well did these lessons carry on?

Once I got my car at 16 I went on to work part-time all throughout high school. I worked at a restaurant as a dish guy, bus boy, and waiter and Best Buy as a salesman after that. I started earning actual money rather than side money for little yard projects. I, just like any kid, made mistakes with my money. I don’t think I really needed that $800 sound system in my Neon (Best Buy employee prices, have you!).

But I continued to work and continued to save.

I wound up choosing a state school, the University of Maryland. Why? It was ranked in the top 20 for my intended major and I wanted to pay my way through school. I found accomplishment in not having to ask my parents for money.

I worked throughout college. The main job that paid for my school was running an exterior painting company. I made enough money in two summers to pay for 3 years of school plus a two month trip across Europe. I also wound up working for some other companies, one of them being UPS. UPS was HARD work but it looked great on my resume.

And what am I driving? A 2004 Hyundai Accent with 86,000 miles on it. Even after being in my career for a few years I have not caved to the pressures of my neighbors with Specialized bikes co-workers with brand new Mustangs.

I would say these lessons were pretty influential, what do you think? Did your parents teach you anything that you would add to the list?

As a parent, we want our kids to have it easier than it was for us – at least I do.  But that doesn’t mean kids shouldn’t be allowed to learn some lessons the hard way. After all, it is only when we face these challenges that we grow.

Still, it is hard to watch kids struggle to keep their head above the surface when drowning in debt, particularly when many of us know exactly what it feels like. The anxiety, the insomnia, and the feelings of shame associated with debt are like few others in the emotional realm.  Before you bail them out, consider the following questions to make sure you are doing the right thing.

One way to lend a hand is to advise your kids to speak to a company like this wealth management Canada service. They’ll help your children to better manage their finances and should prevent them from incurring any major debt again in the future.

A Few Things To Consider Before Providing Debt Relief For Your Kids

1. Can you afford it? If the answer is no, stop here. You simply cannot jeopardize your own financial well-being by paying off credit card debt for your kids.  It would be different if they needed money to eat, or for a medical emergency, but credit card debt alone does not qualify for this level of crisis.  So it requires a rational look at your own finances, and if you can afford to help them without harming yourself, continue with the following questions.

2. Has your child changed the habits that led them into debt? You know the old saying, “Fool me once, shame on you.  Fool me twice, shame on me?”  Well, the same applies to debt.  If your child got in over his head with debt, but seems to have learned his lesson, cut up his credit cards, and has been making an honest effort to repay his debts on his own, it might make sense to help.  However, if he still has three credit cards in his wallet, refuses to sit down and work up a budget, and spends money frivolously, then he probably doesn’t deserve your assistance.  In in the latter case, if you give it anyway, chances are he will be right back in debt in no time.

3. Will this be considered a loan or a gift? Ask yourself this question from two perspectives:  relationally and legally.  From a parent-child relationship perspective, loaning money to kids can change the dynamic between you forever (or at least until the debt is repaid, and it often is never repaid).  If you decide to declare it a gift, be sure you are under the legal gift amount per IRS regulations, or their will be tax consequences.

4. Can you meet them half way? If you decide to help your kids pay off their credit cards, I suggest meeting them half way, literally.  Match the amount they pay each month to help them work off the debt faster, while encouraging them to share the load.  If your kids are able to work and put together $400 a month towards debt payments, pitch in another $400.  No matter how much they owe, $800 a month should bring that total down quickly, saving them hundreds of dollars in interest, and shortening the time before they can get on with their lives.

How do you feel about parents contributing to their children’s debt repayment plan?

Debt Consolidation Alternative for Today’s Consumer – Reduce Credit Card Debt – Debt Free 12-36mo

Her: “Dad, I thought you weren’t supposed to buy stuff with credit cards.”
Me: “That’s true, but that was a debit card I swiped in the store.  Debit cards take money right out of my checking account instead of borrowing money from the bank.”
Her: “Borrowing money? You mean credit cards are like a loan?”
Me: “Well, yes.  They are a loan – one that you have to pay back in a short time or you get charged interest.”

You can see what she was thinking.  Most people think of loans as something you apply for inside the bank, across the table from a neatly dressed banker. You fill out mountains of paperwork and sign your name a dozen places and then you shake hands with the banker across the desk.

Borrowing money on a credit card is much easier, and therein lies the danger. Once approved, you are free to spend right up to your credit limit (and often times beyond) without any additional scrutiny. No one asks if you can afford that item, or asks how you plan to repay the item. No one asks for collateral in case that item cannot be paid for long term. No, we simply swipe the card and go.

Maybe I could have avoided going into debt in the first place if I thought more like my daughter.  She’s right – credit cards are a loan. And in most cases, they would represent loans on very bad terms. Imagine sitting down at a bank to finance new bedroom furniture and agree to paying 24.99% interest!

So to those struggling with credit cards I offer up this bit of advice.  Shift your thinking about credit cards. Imagine every single time you use the card and sign the receipt it is the equivalent of signing a note for that amount. But banks don’t want you to see credit cards this way, which is why they go out of their way to improve the design and “convenience” of credit cards.  You didn’t honestly think they let you pick your own card design, or have it available in key-chain sizes to help you?

Banks recognize that the less their credit products look like a loan the better. So they wrap them in plastic, and cut them down to fit in your wallet (or on a keychain, see picture above), and maybe even pay the NFL to let them put the logo of your favorite team on the background.  Pretty snazzy, huh?  Well don’t be fooled.  Those things are miniature loans riding along in your back pocket, and they have the potential to wreak havoc on your financial life if not used properly.