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What a Junior Achievement Survey Tells Us About Kids, Parents and Money

Guess which topic most parents say is easier to explain to their kids than the birds and the bees, death or politics?

You guessed it: Money. A whopping 77 percent of parents can talk more easily about finances with their kids than they can other challenging topics.

That’s good news on the financial front. It means money isn’t a taboo topic in most U.S. families, according to a new survey by Wakefield Research for Junior Achievement and the Jackson Charitable Foundation. The Children’s Financial Literacy Survey included 500 children, aged seven to 10, and their parents.

Other key survey findings:

  • 77 percent of parents believe the best place for kids to learn personal finance basics is at home. Good thing, since only five U.S. states (Alabama, Missouri, Tennessee, Utah and Virginia) require high school students to take one personal finance course in order to graduate, says Champlain College’s Center for Financial Literacy. Eleven states plus the District of Columbia have zero personal finance requirements in their high school curricula.
  • Parents think kids should learn about money as young as age five, and by age eight, on average. Many kids begin to start understanding the connection between numbers and money in kindergarten (“Five pennies is the same as a five-cent nickel.”). By age eight, kids may understand that money is exchanged for goods and services (i.e. to buy stuff).
  • 92 percent of parents save money—for emergencies, college tuition, and retirement. Good on you, parents! You’ve got the most important savings goals covered. Of course, we don’t know how much the surveyed parents are saving. But hey, any savings amount is a good thing.
  • 82 percent of kids earn allowances from parents for doing chores, getting good grades, doing homework and doing good deeds. Learn more about the pros and cons of connecting allowance to these accomplishments.

Of course, all is not rosy when it comes to kids and money. Many of the young survey respondents showed they have a lot left to learn about finances. But hey, the oldest kids surveyed were only 10. They’ve got time:

  • 33 percent of the kids surveyed haven’t yet been taught how to get or earn money. Uh oh. Is that a sign that it’s time to talk about extra summer chores for pay, parents?
  • 41 percent of kids don’t know how to spend money. Even kids as young as 10 can begin making some simple spending decisions. How about having your kid help pick a birthday gift (with a maximum dollar amount) for a friend? Or choose how to spend their souvenir money during your summer vacation?
  • 47 percent of kids haven’t learned how to give money to help people. An easy fix: Many parents use the “three-jar system,” (or some version of it.). They require their kids to split their allowances three ways: Spending, saving and donating. This way, giving money to others becomes an automatic habit. Be sure to let your kids help decide where their donations will go.
  • When asked why they think people put money in a bank, only slightly more than half (53 percent) of kids said “saving it so they won’t spend it.” First, banks and credit unions are almost invisible to kids, since parents don’t physically visit branches anymore. You could make a point to drop into your bank or credit union occasionally, or look online for kid-friendly videos like “Roles of a Bank” from CashVille Kidz.Just as important, though, is explaining to your kids how banks, budget categories and savings accounts make it easier for them to separate their spending money from savings.
  • Only 25 percent of kids surveyed know you can earn interest on savings. Interest can seem like a tricky topic to explain to kids, for sure. How about sharing this “Schoolhouse Rock” classic to help make the concept clear?

For more about the survey, along with other kids, work and money topics, visit Junior Achievement’s website.

(photo courtesy © Paul Hamilton cc2.0)

Spring Break Money Lessons for Kids

Teaching your kids about money might not be at the top of your Spring Break to-do list. However, if you think about, a spring break trip—or any vacation—is an ideal time to increase your child’s money IQ. Your family makes a lot of financial choices when you travel—from which daily activities you choose to how much money to spend on souvenirs.

Here are some great ways to use your Spring Break trip to give your kid hands-on lessons about money.

Give Vacation Cash Bonuses For A+ Behavior

You can always let your kid earn extra spending money for your trip by doing some extra chores ahead of time. However, have you considered any of these smart ideas for encouraging kids to earn—and be more pleasant humans—while you’re traveling? Consider giving kids an extra buck or two for:

  • Trying a new food (bonus: it makes kids more enthusiastic about experimenting at a new restaurant instead of a familiar chain)
  • Trying a new activity they might otherwise skip, from snorkeling to rollerblading
  • Not squabbling with siblings on the plane or while you’re driving
  • Being quiet for an hour in the afternoon while you rest (they can draw, read or quietly play on electronics)
  • Doing a good deed, like opening a door for another hotel patron, or letting a younger child in front of them in line at an amusement park

And don’t worry—you’re not bribing your kids. When you bribe someone, you give them money to do something they shouldn’t. These payoffs are rewards: You’re giving your kids money for doing something right.

Establish a Souvenir Budget

Rather than listening to your kids beg for money every 15 minutes, give them a set amount of money upfront. If you have young kids, you may need to release their souvenir money to them every few days, so they don’t spend it all at once.

Give older kids an amount that has to last the entire trip. (If they want to bolster their fun allowance with the extra money they’ve saved, that’s fine.) To prevent teens from carrying a big wad of cash, consider loading their souvenir allowance onto a prepaid debit card, like Greenlight. Don’t refill the card once your teen spends their entire budget. When the money’s gone, it’s gone.

Let Teens Make Family Activity Choices

Some families give their teens an assigned trip day and budget, and let the kids decide the family’s schedule. This can be done ahead of time (if you’ll need to book advance tickets, for instance) or at the very beginning of your trip.

This exercise helps teens see that having a budget means making smart choices. For instance, would they rather spend the family’s entire daily budget on tickets to an indoor wave pool and a movie afterward (with a no-frills dinner back at the condo), or a less expensive activity that leaves money for a fun dinner out? Encourage your teens to look for coupons and other deals online.

Get Creative About Other Money Choices

Every family and kid is different. You may think of some family money rules that work especially well for your Spring Break trip. For instance,

  • If you have a kid who constantly snacks: Try a “one purchase a day” rule—snack or souvenir. They get to choose between the two; they’ll never get both. (And if your kid is truly hungry, they’ll be happy to take the apple and nuts you pack with you!)
  • If the trip is extra spendy: Tell kids well ahead of your next trip that they’ll need to save up birthday and holiday gift money to pay for souvenirs. You’ll pay for everything else.
  • To discourage a spending frenzy: Offer your kids a match on any money they bring home from your trip unspent. This is a great incentive for kids to skip buying tchotchkes that will just end up gathering dust.

What money strategies have you used with your kids on Spring Break or another vacation? We’d love to hear from you.

(photo courtesy © Carissa Rogers cc2.0)

4 Ways to Help Big Spenders See the Value of Saving

Many kids see saving as the most un-fun part of having their own money. Totally understandable. Many adults aren’t wild about saving money, either. However, saving is definitely an important 1/3 of the Key Three Money Skills: spending, saving, and giving.

To be fair, the saving skill may be a bit harder to teach kids who are natural-born spenders. And yes, it is possible for a human to be wired as either a natural spender or a natural saver. Parenting odds being what they are, there’s also a pretty good chance that your kid’s inborn money temperament is the polar opposite of yours. So if you’re a great saver, your kid probably can’t wait to spend his green on anything that floats in front of him.

If your child happens to be a natural saver or even an over-saver—appreciate your good fortune! But if you’re raising a happy-go-lucky spender, these tips are just for you:

1. Create a saving system

Spenders can be impulsive with their money. Nuf said. So make it easier for your child to do the right thing by putting up some financial guardrails. You essentially want to create automatic habits, or systems, to guide your kid to save.

Every time your child gets an allowance, earns money from work, or gets money gifts from relatives, make it a rule that 10% (or whatever ratio you choose) of it always goes into savings. No exceptions.

Next, make sure your child’s savings are in a separate account, jar, bank or digital category from any spending money. The guiding principle here: “Out of sight, out of mind.” Kids aren’t as tempted to spend what they don’t see. And by the way, the system of automatically transferring money from a spending account to a savings account works great for natural-spender grownups, too. Just sayin’.

2. Incentivize Their Savings

This is the reward system at its best, used to teach your kid financial smarts. Whenever your child puts money in savings, consider matching a portion of it. If they put in $1, you add an extra 50 cents. If they save $10, you add another $5 to sweeten the pot. Your kids will quickly come to see the saving habit as a very, very good thing.

Yes, your child will earn some interest on their money, if they put it into a savings account of some type. However, interest rates are low enough right now that your child might not get excited about earning an extra 12 cents a month. Your match makes savings much more exciting.

3. Teach Kids About the “Future Value of Money”

This is a good conversation to have with kids who are in late grade school or middle school. The main lesson: Over a long period of time (years, not just months), the build-up of compound interestand perhaps parental matching fundson your child’s savings means they’ll earn lots of extra “free” future money.

Here’s an example. The average kid gets an average allowance of $68 per month.

If your kid hypothetically could save that entire allowance from age 8 to age 18, they would have a whopping $14,230* by the time they go to college—without even taking on a part-time job.

The “future value” of your kid’s humble $68 monthly allowance becomes more than $14,000 in 10 years. And more than $6,000 of that sum is “free” money from interest and parental matches. That’s a pretty compelling reason for kids to save.

Put another way: If your child spends every penny of their $68 allowance, they’re also erasing more than $6,000 in future money. Yikes!

4. Walk the Talk

You’re your kid’s best teacher. If you want them to understand how to save, let them see you do it. Talk out loud about saving money for that new flat-screen TV or your next family vacation.

Better yet, create a colorful savings graph and post it prominently on your refrigerator. Mark your family’s progress toward that family vacation. Celebrate your savings milestones along the way.

Help your kids (and yourselves!) see that good money things come to those who save.

* Assuming a 10% return, compounded monthly

(photo courtesy © Rich Brooks cc2.0)

Kids’ Allowances: What Rules and How Much to Pay?

Some interesting allowance statistics:

While these general guidelines are helpful, most parents still have lots of questions about allowances. Of course, there’s no single, “right” way to structure your child’s allowance. However, these tips might help you decide what works best for your family:

When should I start giving my kid an allowance?

Most parents start around age 8, according to a T.Rowe Price survey. This is a good rule-of-thumb age. One tip: If your child mixes in cash and coins with her toys or routinely leaves money sitting around the house, she’s not yet ready for an allowance.

How often should I give it?

Weekly for younger kids and allowance beginners. They’ll have trouble making their money last much longer than seven days. Switch to giving your kids a monthly allowance when they’re about 11. This requires them to budget their money over a longer amount of time.

How much should I pay?

Although the current U.S. average is $67.80/month, that’s for kids of all ages. Your mileage may vary. For instance, you may want to pay a dollar or so per year of a child’s age, and give raises at every birthday. By high school, you might prefer to give your teen enough money to cover his own costs for clothing, personal supplies, bus, etc. You can base the amount on how much money you think is reasonable for your child to spend, rather than just his or her age.

Should I tie allowance to chores or grades?

There are different schools of thought on this.

  • Tie to chores, yes: Some parents advocate paying kids “commissions” so money remains connected to working hard.
  • Tie to chores, no: Kids could decide to skip chores if they don’t need money.
  • Pay for grades, yes: This practice can teach kids that good work leads to rewards.
  • Pay for grades, no: It could take away their sense of pride, or be tricky for kids who truly struggle academically.

Should saving and/or donating be part of the allowance picture?

Most experts say definitely yes on this point. Give kids jars, envelope, segmented piggy banks or help them set up digital budget categories for Spend, Donate and Save. Older kids might also need bank accounts or digital categories for saving larger amounts of money—for a car, college, etc. Your goal is simply to help your kids see that money is never just for spending.

(photo courtesy © James Thompson cc2.0)

How to Teach Your Kids Financial Patience

Could you leave your young child alone in a room for a few minutes with a fluffy, sweet marshmallow…and trust him or her not to eat it until you get back? What if you promised a reward of a second marshmallow if your child waited? Could he or she do it?

Not entirely sure? You’re not alone. Self-control is a really tough task for kids—and most grownups, too, when sweets are involved!

The Famous Marshmallow Test

In the 1960s and ‘70s, a Stanford University researcher named Walter Mischel actually conducted a psychological experiment with kids and marshmallows (and some other treats). The Marshmallow Test became legendary. It’s been recreated and filmed many times. Mischel also recently released a book about his experiment and its implications.

The bottom line: Helping your child learn to “delay gratification” may be a key to helping them be financially successful. It may also help your kids in other parts of their lives—working to improve their grades, avoiding drugs, not overeating, etc.

Why the Wait?

Can your child give up something they really want right now in order to wait for something better down the road? For instance, can a young child skip buying candy today and save their money to buy an Xbox game in a month? Can teenagers occasionally skip having lattes with friends in order to save up for a car?

Financial experts like Beth Kobliner and Farnoosh Torabi and say absolutely yes. After all, when your kids are adults, the stakes will be higher. They may need to trade all sorts of day-to-day purchases so they can save for a vacation, house, retirement, etc.

4 Ways to Teach Kids to Wait

You can help teach kids financial patience—starting right now:

  • Offer a modest allowance. Even if you can afford more, pay your child just a little less. Make sure they’ll always have to save up for a few weeks, or even months, for bigger purchases.
  • Require waiting periods. Whenever your kids want to pay for an item or experience over $x (you set the limit)—even if they already have the money—make a rule that they have to wait. Have your child note the item on a family calendar and wait two weeks (or more for bigger buys). Hint: It also helps if you, the grownups, model this same behavior.
  • Have older kids pitch in. Don’t automatically pay in full for your teen’s school trip to Disney Land or that new phone. Let your teen earn some of the money with a job or extra assigned chores at home. You’ll automatically build in some waiting time as your child works and saves.
  • Be cautious about loans. Tempted to advance your child a few extra bucks when they’re short of money? Don’t do it. Let your kid save up or work more and wait. Particularly when kids are new to managing a bit of own money (even a small allowance), it’s good to set a family rule that you won’t loan money or pay allowances ahead of schedule.

Be clear that it’s not OK for your kids to borrow money from friends, either. You want your budding tycoons to realize that they should only buy things when they have enough of their own money in hand. Credit lessons can come later.

(photo courtesy © Ken Bosma cc2.0)

Introducing Greenlight

The Greenlight Prepaid MasterCard® is a debit card paired with an app that allows parents to view, approve, and manage their kids’ spending.

Greenlight was designed for parents

-Give money to your kids from anywhere, instantly. Sending your kids a Greenlight lets them know how much money they can spend at specific stores
-Review real-time spending requests from your kids. You can approve, edit, or decline the requests and communicate with your kids within the app
-Receive instant notifications for all transactions approved or denied with the Greenlight card
-Powerful transaction history view lets you monitor where the money is going. View individual expenses or group by store to see a full analysis of spending
-Each of your kids can have their own card managed within the Greenlight app
-Kids lose things? No problem. Turn the card on or off in the Greenlight app with one touch
-Give your kids an allowance weekly or monthly with automatic transfers to their “Spend Anywhere” Greenlight
-Use the “Return Change” feature to receive any leftover money automatically after a purchase

Here’s why Greenlight is the SAFEST and most SECURE way to give your kids money:

-You can limit where money can be spent
-If your card is lost, the parent or child can instantly turn it off. If turned off by a parent, only that parent can turn it back on
-Spending history shows everywhere your child has used their Greenlight card, including declined transactions
-In-app messaging allows for documentation of requests, reasons, and discussions about money
-Parents can move money on the Greenlight card back into the Parent Wallet at any time
-Push notifications are sent to both the parent and child for each transaction

Kids love Greenlight, too!

-View your Greenlights in the app to see where you can spend money
-Check your allowance and view savings
-Request money at specific stores or locations. Take a picture or chat with your parents so they’ll approve your request!
-Receive real-time notifications each time you make a purchase with your card
-Track all of your spending within the app to see where your money is going
-Lost a card? No worries. Simply turn it off. Find it? Turn it back on right in the Greenlight app

Our team at Greenlight understands the challenges of busy families because we have kids of our own! We wanted to teach them how money works and help them develop good money management skills. Greenlight is the safest way to give your kids money and prepare them for financial independence.

Click ‘Sign Up’ below to get started!

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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)