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Financial Literacy

Gift$ From Grandparents: How Should Your Kid Use Them?

Savvy grandparents know the #1 secret to holiday giving: Money is the gift everyone loves.

Tucking a few fresh bills or a generous check into that holiday card is a surefire way to make grandkids light up. However, if this year’s grandparent gift was extremely generous, you may want to talk this month with your kids about how best to use their windfalls.

 Help kids plan their purchases. Guiding your kids toward smart spending choices can help stretch their gift money. For instance, if Grandma and Grandpa gave your child enough green to buy a spendy gaming system, show your kids how to watch for sales or discounts before they shop. They might end up having enough money to buy an extra game, too.

You could also require your child to write down things they want to buy, then take a two-week “cooling off” period. If your kid still wants the item when their waiting time is up — and the purchase fits in with your family’s values and rules — you can greenlight the purchase.

Use money gifts to grow more green.
Talk to your child about saving and investing that holiday money so it increases over time. The Consumer Financial Protection Bureau offers a few suggestions for teaching middle-school-aged kids about the power of compound interest. The Charles Schwab Foundation also suggests opening a custodial investment account if you’d like to help your child learn more about investing.

Make savings a habit. Some parents require their kids to put a small portion (say, 10%) of money gifts into a savings account. This routine is good practice for later, when your child has an earned income. By then, they’ll be well in the habit of tucking away a set percentage of their money for emergencies or planned, bigger purchases.

Chat with grandparents about future gifts. Do your child’s grandparents regularly dole out extremely generous financial gifts? If so, it’s perfectly OK to share your thoughts (respectfully) on how that money could be used.

For instance, could Grandma give a bit less in holiday cash and invest the rest in a 529 college savings plan for your child’s benefit? A study by Upromise (the savings arm of college loan provider Sallie Mae) found that 68% of all parents prefer that grandparents add cash to their kids’ college funds instead of giving other holiday gifts. Just be sure to talk with grandparents well before next year’s holiday season about how their gift funds can best help your family.

 

(photo courtesy © Ben Smith cc2.0)

5 Rules for Kids Who Buy Things Online

Spending habits have shifted significantly over the last decade. High adoption of smartphones, social networking, tablets, and more are several reasons why people make less purchases in physical stores than ever. While you may have participated in this transition, your kids are growing up with online spending as the norm. Amazon, Hulu, Netflix, Ebay, and other services have made it as simple (and affordable) as possible for their customers to make online purchases rather than going to the store. With kids spending more than 1.6 hours a day online according to online safety provider Norton, it is critical that you set ground rules for your children to follow.

  1. No Purchases without Parental Approval

            Regardless of how old your kids are, they should be comfortable talking with you about their online purchases. Setting a rule that they must check with you first for approval gives you an opportunity to verify that the website or app they are using is safe, and the purchase is appropriate. As your kids get older, you can relax this rule to teach your children about trust. For example, you could allow your kids to spend their allowance when they want online, provided they use websites you have pre-authorized.

  1. Approved Websites & Services

            Sit down with your kids and walk them through which websites and services they are allowed to access, and which sites they should not be using. This can be supplemented by parental controls, but not every mobile device or PC has these capabilities or makes it simple to use. A spending card and app like Greenlight can simplify this process through its simple interface while teaching children about good money habits.

  1. Purchasing Amount Limits

            Sit down with your kids and set strict limits on how much money they are allowed to spend online at any given time. Limiting how much your child can spend at one time or each month will significantly reduce the possibility of an unwanted purchase. Link this amount to your child’s allowance because you can review their spending monthly and teach them better money management skills.

  1. Category Limits

            Much like a dollar restriction, select specific categories your kids are allowed to purchase from. For example, you may allow purchases related to gaming, clothes, and music, but restrict purchases to junk food, R-rated movies, and more. Several allowance systems allow you to set up categories for spending which could be used to enforce the restriction further.

  1. Time Limits

            Whether your kids are using cell phones, tablets, or a computer, set specific time limits for how long they can spend on any of the devices. In addition to limiting access, set specific hours that they are allowed to have screen time. Your kids should learn when it is appropriate to use online devices, and occasions when it is not appropriate such as family time. A general rule of thumb is allowing a maximum of one to two hours per day with an online device after they have completed their homework. Establishing a cut off time is also important so your kids don’t impact their sleep schedule.

(photo courtesy © Lucélia Ribeiro cc2.0)

Have an Incoming College Freshman? Here are Six Must-Read Smart Money Tips

College is full of unanticipated costs. As a freshman, I learned this the hard way (i.e. never having enough money). When you live at home, you don’t quite realize just how many expenses your parents cover. Need to eat dinner? You simply head into the kitchen for some of your dad’s spaghetti. Running out of clean clothes? You start a load in the washing machine down the hall. In college, life isn’t so accessible. Eating dinner can mean choosing between plopping down $7 for a burrito or cutting costs by zapping some Easy Mac. Washing your clothes requires a literal handful of quarters (who even carries around change anymore?). And these are just the little costs. There are also textbooks to acquire, household items to buy, that midnight pizza party you just have to throw…

But fret not! We’ve put together some tips for managing your money and minimizing your college spending woes.

(Note to parents: Check out Greenlight to help your kids handle finances during their college transition.)

  1. Create a budget. This is the first, crucial step. Start by listing monthly sources of income, including allowances from your parents, income from any jobs, and savings. Next, list your anticipated living expenses for the month. Will you be living in a dorm or an off-campus apartment? Will you be on-meal plan or off-meal plan? Do you have a car or will you walk/bike to classes? What sort of regular expenses will you have (i.e. laundry, personal care items, household items, etc.)? Compare your expected expenses to your expected income (here’s hoping the former’s lesser than the latter).
  2. Look into loans and financial aid. It can be difficult to balance student loan payments against the cost of living and declining wages. If you will be financing your education through loans, calculate the exact size of your expected student loan debt upon graduation and make a plan for how you will pay it back. Apart from loans, be sure to look into financial aid. The Free Application for Federal Student Aid (FAFSA) is not your only possibility. Look into local scholarships, national scholarships, university-specific programs, and on-campus or work-study employment. 
  1. Cut costs where you can. While college is undeniably expensive, there are plenty of opportunities to cut spending.
    • Instead of buying brand-new textbooks from the bookstore, consider buying used books online, checking out books from the library, and reselling your old books.
    • Compare the costs of eating on-meal plan to eating without one. Many meal plans can cost upwards of $10 per meal. Look at the different plans offered by your college’s dining service and determine which, if any, offer a good value.
    • Finally, plan ahead. Instead of running to the on-campus market to buy toothpaste in the middle of the night, purchase necessities ahead of time and in bulk. I have yet to run through the eight tubes of discount toothpaste I bought on Amazon sophomore year.
  2. Find student discounts. Your college student status can actually save you money! Stores, local venues, restaurants, museums, and other services near college campus frequently offer student discounts, and these discounts can add up to big savings.
  3. Exercise caution with credit cards. I remember when I got my first credit card. Life was beautiful. With one small piece of plastic I could buy whatever my little heart desired. And then I got a call from my mom inquiring about the $150 I had spent at Urban Outfitters (#whoopsies). Morale of the story: these pieces of plastic are tied to real bank accounts. If you are not careful with your spending, you could rack up serious late fees and interest payments. So spend wisely and check out Greenlight, where we’re committed to helping you do just that.
  4. Finally, reevaluate your spending regularly. You might be surprised to find that you are spending much less money in one area or much more money in another than you initially thought you would. Knowing about any excessive spending is the first step to addressing it, and identifying savings in one area could allow you to spend more in another. Being familiar with your budget is the first step toward mastering it!

 

What Dave Ramsey Says You Should Teach Your Kids about Money

Dave Ramsey is an American financial author, radio host, television personality, and motivational speaker focused on encouraging good money management skills for all ages. But, he didn’t start out this way.

Dave made plenty of money when he was young, but poor money management decisions resulted in significant debt. As a result, he lost everything he saved and was embarrassed to ask for help. Dave was determined to figure out how money works and to better manage his situation. He read every book available, interviewed older wealthy individuals, and more. Ultimately, he realized that the world wasn’t out to get him. As it turns out, it was his own decisions that ruined him financially.

After moving back into real estate and bailing himself out of financial distress, Dave realized he wanted to help others with all the knowledge he had gained. He began Ramsey Solutions in 1992 to “counsel folks hurting from the results of financial stress.” Dave wrote several books on the subject and eventually started a radio call-in show that airs nationally.

As you can imagine, Dave has several tips for your kids to learn early. Check out just a few of these below!

See “9 Ways to Teach Your Kids About Money” here

Elementary School Age

  1. Use a clear jar for saving. There are a lot of piggy banks that are pretty cool looking! Try to find one that is also clear so your child can see their money growing. This should be a fun thing for you and your child to sit down and discuss. Watching three quarters turn into 8 quarters is a big deal! This will also encourage saving.
  1. Show them that stuff costs money. It’s one thing to have money and another to understand what it actually means. The next time you take your child to the store, have them bring some physical money with them from their piggy bank. When they find something they want to purchase, have them hand their money to the cashier. This will be far more meaningful than a simple lecture about money because they will visually witness the result.

Tweens

  1. Teach them opportunity cost. Your kids need to learn that when they decide to purchase something, it generally means they can’t purchase something else. So, if they want to purchase a video game, show them that they won’t have enough money to pay for the new pair of shoes they want as well. Tradeoffs are critical, and can easily be taught in this manner.
  1. The importance of giving. Once your kids start making or saving money, take time to discuss the importance of giving to others in need. If they are passionate about animals for example, help them pick a shelter they can either give money or time to help out. Your kids will see that giving helps others, but that they will also feel good about it as well.

Teenagers

  1. Work for money. Your children will have a lot of free time during breaks, summers, and more. Helping them find a summer job at their local ice cream shop for example is a great way to show how working will provide them the additional money they seek.
  1. Teach them the danger of credit cards. As soon as your teen turns 18, they are going to want a credit card and will receive mail from banks trying to provide it to them with “attractive” promotions. Teach them why debt is dangerous and how to protect themselves.

These are just a few of the tips you can use to teach your kids how to manage their money. Its best to start as early as possible promoting positive money management skills because it will be a critical asset for your kids as they grow up.

See “Money-Smart Kids: The Top Tips Every Parent Should Know” here

Financial Literacy - Greenlight Debit Card for Teens

Imaginary Dogs: A Clever Way to Raise Financially Responsible Children

Do you want your kids to be financially stable when they’re adults? Want to avoid having to take-in your wayward son after he’s run out of money, forcing you to shelter him in your basement until he gets back on his feet? Want to make sure your daughter doesn’t waste her entire paycheck on a frivolous, impulse purchase?

If your answer to any of the above questions is “yes,” consider this technique: Have your child look after an imaginary dog for a month.

Why an Imaginary Dog?

When I was in high school, I had a friend named Scott who desperately wanted a dog. His parents were hesitant, worrying about things like, “What if we end up taking care of the dog all the time?” and “Can we afford all the expenses that come with a dog?” But, in a moment of parenting brilliance, Scott’s mom and dad came up with the Imaginary Dog Plan. This plan required Scott to wake up every morning at 6am, walk a leash around his neighborhood, put down an empty food bowl, and then open and close an empty dog crate. Immediately after school, Scott came home and walked that empty leash again, put down the empty food bowl, and spent 30 minutes either vacuuming, dusting, or completing some other household chore as a stand-in for the time he’d have to spend cleaning up after a dog. Additionally, his parents struck a deal requiring him to pay for half of all the expenses that come with having a dog. To prove that he could do this, Scott did extra chores around the house and got a part-time job. By the end of the month, Scott had walked his empty leash 60+ times and had saved $300. By the end of the month, Scott had a real dog.

How an Imaginary Dog Can Help Your Family:

So, how does my friend’s dog apply to you and your family? Simple: the principles Scott’s parents taught him through this exercise are the same principles any kid needs as a foundation for a successful financial life. If your son or daughter wants something, whether it’s seemingly insignificant, like a crazy new pair of socks, or something bigger like a pet or laptop, consider using this technique to help them get what they want while also teaching them the importance of being responsible with their money. Some of the lessons they’ll learn from an exercise like this are:

  • If you want something, you need to work for it
  • You need to consider all the responsibilities attached to making a purchase
  • You need to be fully prepared, financially and physically (with your time, etc.) before making a purchase
  • You should give yourself time before making a big purchase to make sure you really want that particular thing
  • Often, making purchases (especially big ones) requires some sort of sacrifice, so you need to ask yourself, “Is it worth it?”

Obviously, if you decide to try this with your kids, the situations will be different, and you’ll need to adapt strategies. It wouldn’t make any sense for your daughter to walk a leash every day to prove that she’s responsible enough to buy a laptop. Instead, you may start by asking her to save a certain amount of money each week. Then, have her to carry around a fragile place-holder (picture frames, perhaps), proving that she’ll be careful with something as breakable as a laptop. You could even have her do research on how to fix common laptop problems, making sure she’ll know what to do if it won’t turn on one day, or if it gets a virus.

Whatever way you apply this to you and your child’s life, just be sure to remember the main point: If you prepare your kids now to be responsible, both financially and personally, they are much more likely to continue these practices as adults. Try it today, and hopefully you’ll still have your basement to yourself once your kids grow up!

Allowances: The Good, The Bad, The Ugly

The way I see it, there are three main options for giving your kids an allowance.

Option One: Give them an automatic allowance. With automatic allowances, parents will usually set a standard amount of money for their kids to receive, weekly, bi-monthly, or monthly, and their child will receive that money no matter what (for the most part, of course).

Option Two: Don’t give your kids any allowance at all: self-explanatory.

Option Three: Have your kids earn an allowance. Many parents use this option and assign certain tasks or chores to their child, which upon completion, will result in a rewarded allowance. Of course, you’ll find pros and cons of any decision you make as a parent, including the decision about allowances. However, out of these three main options, I think there is a clear, front-runner that is beneficial for both parents and children.

Through the course of my life, and my more recent research and inquiries into this topic, I have been exposed to numerous variations of the allowance situation. Two stories stuck with me, though, as extreme, yet surprisingly realistic examples of the negative consequences of giving your kids an automated allowance or not giving them an allowance at all.

Extreme Scenario #1: The Jean-Ralphio and Mona-Lisa Saperstein Story

Parks and Recreation is a sit-com that recently went off the air in 2015. It follows the quirky and endearing Parks and Rec. department of Pawnee, Indiana through the trials, tribulations, and triumphs of life.  While most of the characters are lovable and good-hearted people at their core, there are two characters, Mona-Lisa and Jean-Ralphio Saperstein, who should serve as a warning to any parent considering the automatic allowance option. Mona-Lisa and Jean-Ralphio come from a rich family, headed by a father who clearly does not regulate the money they receive.  It is quite evident that, in their fictional lives, they’ve probably never heard the word “no” before as a response to any request, thus resulting in their annoying and outrageous request of “Money please!” This demand is made often, without remorse, and almost rarely without an affirmative answer from their father. They are so used to receiving money whenever they want, automatically and without any effort, that they perfectly illustrate an extreme consequence of giving your kids an automatic, no-strings-attached allowance.

While this is obviously an extreme example, taken from a fictional TV show, there is some real truth that lies at the core of Mona-Lisa and Jean-Ralphio’s roles. If you don’t require any effort from your children in order for them to receive their allowance, then what’s to stop them from taking it for granted? What lesson will they learn about how to get money? Will they turn out like Mon- Lisa and Jean-Ralphio, assuming that all they need to do in order to get money is sit around and wait for it, and then if it’s not enough, just whine until they get more? Do you, as a parent, really want to hear “Money please!” all the time, even after you’ve already given your child money? I don’t think so.

Extreme Scenario #2: No Allowance: The Story of Put-Back Pancakes

My aunt and uncle adhere to a much different philosophy than that of fictional father, Dr. Saperstein, from Parks and Rec.  They didn’t believe in giving their kids an allowance at all. So, my cousin, let’s call him Jim, had to figure out another way to get money. As many teenagers do, Jim turned to the job force and got a part-time job as a carhop at Sonic. He worked at Sonic all 4 years of high school, and in this time, he learned to budget and save his money since he knew his parents weren’t going to be his main source of income. So far, so good, right?

In almost every way, my cousin is a perfect example of how not giving your kids an allowance is a good option. He learned the value of hard work. He didn’t bother his parents for money all the time. He had a good head on his shoulders and was able to understand the basic principle of saving money, which is advanced for a teenager. However, there are two things wrong with this story. Number one, my cousin is an anomaly. He represents a small population of teenagers who are stable and level-headed enough to make these responsible decisions, like finding and maintaining a job and saving the money he made at this job. Other teens may not be as dedicated as he was to earning and saving money during those carefree, teenage years.

The second thing wrong with my cousin’s story is the end. Jim managed to save more money during his high school years than I think most high schoolers could even comprehend. But, this resulted in him being extremely stingy with his money, to a fault. Perfect example: his honeymoon. After my cousin got married, he and his wife vacationed in Mexico for their honeymoon. One morning, at breakfast, Jim piled his plate high with food from the buffet, taking full advantage of an “all you can eat” meal. However, before he went to sit down to his feast, he was stopped by the cashier at the end of the line who told him that breakfast was not actually included in his room rate and that he’d need to shell out a rather hefty sum for his overloaded plate. My cousin, the too-money conscious man that he’d become, looked at the cashier, turned around, and dumped his food back in each, individual serving pan from which he’d taken it just minutes before.

The moral of Jim’s story is this: not giving your kids an allowance might be a good idea. They might find a job, work hard for their money, and learn valuable lessons about managing their own finances. Or, they might end up like my cousin, dumping pancakes and scrambled eggs back into hot plates in Mexico, effectively embarrassing himself and his new wife on what should’ve been a lovely honeymoon.

Solution:

So, what do you do as a parent then? Ultimately, the decision is up to you and what you think is best for your family. However, considering the pros and cons of each side, setting up a system for your kids to earn their allowance seems like the best, least painful, and most beneficial way to go. By having to earn their allowance, kids will hopefully learn the lesson of working for what they get. Ideally, they’d value their money more because they had to work for it, thereby making them more conscious about spending and saving. And finally, the system of working for their money at home will mirror their future, independent lives when they have to work for their paychecks and balance their adult finances. Exposing your kids now to the realities of money management and working to earn their money is an invaluable experience, and you can easily start by implementing an earned allowance policy in your house today!

(photo courtesy © Carissa Rogers cc2.0)

These are the Most Parent-Friendly Brands that Teens Love

“Teen tested. Mom and dad approved.”

Buying clothing for your teenager, or approving their purchases, is all about compromise. It is important to strike a balance between how you want your teen to dress and how your teen wants to dress. We’ve rounded up a list of clothing brands that accomplish just that. They offer clothes that are stylish, age appropriate, and affordable.

  1. H&M: A massive Swedish fast fashion brand, H&M is a step above Forever 21 (a highly similar brand). It offers runway-inspired clothing at affordable prices. It also has regular high fashion collaborations, most recently with Balmain.
  2. Forever 21: Perhaps a slight cut-below H&M in terms of quality, Forever 21 is beloved by many a mother and teen alike because it offers trendy fashions at highly affordable prices. Visit twice in the same week, and you’re still likely to find something new on the second go-around.
  3. American Eagle: This brand has been a go-to for teens for quite some time. It has a nice selection of highly wearable looks and quality-made basics.
  4. Madewell: One of my personal favorites, Madewell is well-suited to the teen who likes to dress like she’s “13 going on 30.” It can be a bit on the pricier side, but regularly has sales. They also have an amazing selection of fun-yet-mature clothes.
  5. Urban Outfitters: Long synonymous with “hipster,” Urban Outfitters offers trendy apparel of a different vintage (quite literally) than H&M or Forever 21. In addition to a wide assortment of clothes, Urban also sells décor, accessories, and footwear.
  6. Free People: Much like Urban Outfitters, Free People appeals to the teenager who wants to rock more of a bohemian, free-flowing look. While its prices do tend to run rather high, a savvy shopper can typically find items that have been substantially marked down at stores like Neiman Marcus Last Call and Nordstrom Rack.
  7. J.Crew: Much like Madewell, J.Crew appeals to the teen who likes to rock a more sophisticated and mature style. J.Crew has a wide variety of staples that you will want to keep in your wardrobe for years to come.
  8. Nike: Athletic wear is no longer only for the gym. On any given day, at least half of the students in my classes are decked out in some sort of athletic wear (and something tells me they didn’t all just come from the gym). Nike is the largest apparel retailer in the United States, constantly producing new, brightly-colored fashions.
  9. Topshop: Topshop is all about quantity (and it does so without sacrificing quality). It has a wide selection of hip, of-the-moment clothes. Like H&M, it also frequently does collaborations with famous figures, such as Kate Moss, and other stores, such as Nordstrom.
  10. Brandy Melville: I first learned of Brandy Melville when my younger sister diverted a family vacation to visit one of its stores (yes, apparently their clothes are that cool). Brandy Melville is known for offering “one size fits all” fashions that cater to a simple and carefree look. Its staples include crop tops, cut-off denim shorts, and loose-fitting tops. It is an Italian company, so their retail locations are a bit hard to come by in the United States, but ordering online is always an option. And with only one size to choose from, why not?

Five Top Ways High Schoolers Are Wasting Money!

Think back to when you were in high school. How did you spend the money you either earned or received from your parents? Chances are you spent it on some silly things. Like that shirt you wore just once, or the colossal burger you couldn’t possibly finish today. I’ve got news for you. Your kids are wasting money in the same ways we used to! But there is hope. You should help your children identify how they are wasting money and teach them how to make good choices. Here are the top five ways your kids are wasting money today.

New Clothes

Do you have a son or a daughter? This spending area will affect both. Clothing trends are going to vary each year and your kids will be exposed to them. Male or female, they are going to go through fads with clothing. Remember when Abercrombie & Fitch was all the rage? Not so much today as trends have changed. When your teenager says they don’t have anything to wear, this would be a great opportunity to break out the photo album and show them your “clothing purchase mistakes” of the past. That double popped polo collar probably wasn’t popular to begin with, but it will certainly give you and your teenager something to laugh about. If they insist on a particular style, encourage them to find a cheaper brand. Kids are highly affected by advertising, but can generally find the same type of clothing in a lesser known brand. By the way, your kids grow really fast. Unless you want to be in the business of hand-me-downs, this is another topic you can bring up with them.

Impulse Purchases

Your kids are going to find themselves in a number of situations where they want to make an impulse purchase. Part of this can be attributed to peer pressure when they are out with friends and classmates. But, it’s also an important part about being a kid. Your kids need to learn when it is appropriate to make such a purchase. Teach your kids to communicate with you in these situations. Apps like Greenlight can help by providing a simple interface to not only communicate but authorize or decline those impulse purchases.

Gaming & Entertainment

When you grew up, there were board games, card games, and video game consoles like Nintendo. Kids these days have the same games, and a whole lot more. Your kids have smartphones, tablets, and computers to provide them even more entertainment. While video games have always been expensive, they have gone up in price with the expansion of online gaming and additional purchases that enhance the experience. Now that games can be played online, your kids are going to want the next new game and console to play with their friends. Of course these games and consoles are coming out faster than ever before.

One-Click Purchases

Speaking of big changes, your kids have a lot of opportunities to make purchases faster and easier than ever before. Amazon, mobile apps, iTunes, and other services have simplified the process to make purchases. While this adds convenience, it is also one of the areas kids waste a lot of money. While some purchases are mistakes, most are legitimate, whether it was a good idea or not. This can be scary because your kids may not be thinking about how much money they are spending when purchases are so simple. Restricting your kids from these types of purchases or reviewing them ahead of time will go a long way to ensure they don’t waste their money.

Fast Food & More

Your kids are going to eat…a lot. Unfortunately, they won’t just eat healthy food either. They will spend a lot of money on fast food like McDonalds, coffee from Starbucks, and chips from vending machines. These purchases add up quickly and can be one of the largest hidden expenses to your kids. While your kids may not see a problem with spending money in this category, they should be aware of how much they are spending. Make a plan with your kids regarding how often they can eat out and how much they should be spending.