I’ve learned another reason why there is no emphasis in our society to teach personal finance to teens or anyone, for that matter – there’s no money in it! Well, I guess this isn’t true for Suze Orman or Robert Kiyosaki – I need to get that best selling book finished! But generally teaching the basics of personal finance does not a lucrative career make.
You’ll find people out there willing to teach all about insurance and annuities so that you will, in turn, buy some insurance or put money in an annuity. You can even find banks encouraging people to learn about checking accounts. But, as I’m sure some people in the banking industry have figured out, the less people understand about all the fees involved from not managing your checking account properly, the more the bank benefits. $$$
Now who in the credit card industry really wants us to understand – really understand – all the terms and conditions of a credit card agreement? This has become a much bigger issue over the last few years as there has been more and more emphasis on encouraging people to understand what happens if you go into too much debt. However, there’s so much more to know about credit cards than “don’t get into too much debt” –
· What’s the difference between credit cards, charge cards, debit cards, pre-paids?
· Where do you look to find out about all the fees BEFORE you sign up?
· What are all the fees that may take place if I do something wrong?
· What are some of the things that may go wrong?
· What does “No Payments, No Interest” really mean?
· How can I REALLY get my credit report for free?
I have not found anyone who teaches people how to stay organized so bills get paid. I think as a culture we haven’t come to the realization that this is something we don’t know. We still believe that paying bills is a money issue instead of an organizational issue. But that’s a whole other blog topic.
What about explaining what comes out of your paycheck when you get a job? Who would benefit from this knowledge? Obviously the employee, but who else? Pre-tax deductions, how taxes work, 401(k) accounts. Why would anyone take out the time to teach this to your kids? Teachers are already busy teaching stuff that kids need to know to go to college (which unfortunately does not include these topics). People who really understand these topics usually already have a job doing something else. Are they going to quit to do this? I did. But I think I’m the only crazy one out there.
As I lay in bed at 5AM thinking about all the stuff on my schedule – several workshops, networking events, even an appearance on a local cable show – very few of these activities actually pay me anything. So I can see why others who may have considered this path, would quickly scurry over to an alternative route.
But I’m on my mission. My path has been clearly defined and all obstacles have been removed to encourage me to stay on it. And even though the money is slow in coming, I’m sure it’ll be there in time. I tell my friends all the time, “I have the perfect life! Everything is going really, really well, except that we have no money.”
Thursday, March 13, 2008
Tuesday, October 30, 2007
Include your kids!
When I talk to parents about including their kids in what’s going on financially with the household, I get one of three responses:
1) I’m the parent, they’re the child. Money matters is a grown up issue and kids shouldn’t be involved.
2) Why would I want to burden my child with that kind of stress?
3) If I told my kids about the bills we have, they would say it wasn’t their problem as they weren’t the ones to make the decisions about what to buy!
Kids can handle more than you think. People tend to believe that managing money is something you’ll just figure out how to do when you become an adult. But we do nothing to prepare kids for this responsibility as they grow. Don’t let your belief that kids are too immature to handle this kind of information keep them in the dark. They must be prepared for managing money, and the best way to learn that is through their parents.
Stress is a choice. We work so hard to protect and shelter our kids from the trials of life, that we think this is benefiting them some how. Managing money can be a stressful experience, but it’s a necessary life skill. Show your kids how you handle a stressful money situation so they can be prepared to do the same as they get older.
Bring in the mail. The best way to get your kids involved with understanding household finances is to have them bring in the mail. That’s it. Choose the most irresponsible child you have, and make it their new chore to bring in the mail everyday. It’s their job to sort through it and identify the junk. Create a list of expected bills and give that to your child. Have your child check off each bill as it’s received, and keep them all together in a file. When all are received, have him or her bring the file to you so you can pay the bills.
Kids need to see what actually goes on financially to run a household. Let them see that maxed out Visa bill. Show them what bills didn’t get paid because you had to repair the water-heater. Give them an understanding of managing all the paperwork involved with paying bills. This is invaluable life skills that they’ll need in the next few years.
And for the parent that says, “my child would never be responsible enough to manage this task.” I say to you, if they can’t handle this task at the age of 16, how do you expect them to handle it at 23?
1) I’m the parent, they’re the child. Money matters is a grown up issue and kids shouldn’t be involved.
2) Why would I want to burden my child with that kind of stress?
3) If I told my kids about the bills we have, they would say it wasn’t their problem as they weren’t the ones to make the decisions about what to buy!
Kids can handle more than you think. People tend to believe that managing money is something you’ll just figure out how to do when you become an adult. But we do nothing to prepare kids for this responsibility as they grow. Don’t let your belief that kids are too immature to handle this kind of information keep them in the dark. They must be prepared for managing money, and the best way to learn that is through their parents.
Stress is a choice. We work so hard to protect and shelter our kids from the trials of life, that we think this is benefiting them some how. Managing money can be a stressful experience, but it’s a necessary life skill. Show your kids how you handle a stressful money situation so they can be prepared to do the same as they get older.
Bring in the mail. The best way to get your kids involved with understanding household finances is to have them bring in the mail. That’s it. Choose the most irresponsible child you have, and make it their new chore to bring in the mail everyday. It’s their job to sort through it and identify the junk. Create a list of expected bills and give that to your child. Have your child check off each bill as it’s received, and keep them all together in a file. When all are received, have him or her bring the file to you so you can pay the bills.
Kids need to see what actually goes on financially to run a household. Let them see that maxed out Visa bill. Show them what bills didn’t get paid because you had to repair the water-heater. Give them an understanding of managing all the paperwork involved with paying bills. This is invaluable life skills that they’ll need in the next few years.
And for the parent that says, “my child would never be responsible enough to manage this task.” I say to you, if they can’t handle this task at the age of 16, how do you expect them to handle it at 23?
Wednesday, September 26, 2007
Paying Bills is not a Money Issue
Paying bills is a task that most people will have to handle sometime in their life. However, the assumption has become that the task is simple, and requires no preparation, training, or even discussion.
In today’s society, the belief is that paying or not paying bills is a money issue. “People who don’t pay their bills, must not have any money, right?” Don’t fall into believing this myth. You’d be surprised how many people with money can’t get their bills paid on time.
Paying bills can be complicated – paying bills has become a more complex task than it was for our parents. With on-line banking, automatic deduction, and debit cards there are many ways to pay bills. Do you understand the rules involved with all these methods?
More bills at a younger age – Years ago, people didn’t have bills until they got married and moved into a house. Nowadays young adults can have a mailbox full of bills before they move out of their parent’s home. Phone bills, car payments, auto insurance, credit cards, student loans, and more. There’s a lot more to manage, and young minds aren’t always prepared for that responsibility.
Banks and credit card companies – yes, these institutions can be a big part of the problem. Companies have caught on that big money can be made from loans - especially the high-risk kind. Banks are more willing to give credit cards and make loans than ever before. The interest rates and fees involved ensure that anyone who doesn’t stay on top of paying their bills can really pay a price.
Paying bills is not a money issue, it's an organizational issue. Staying organized so your bills get paid is a skill that actually needs to be taught.
In today’s society, the belief is that paying or not paying bills is a money issue. “People who don’t pay their bills, must not have any money, right?” Don’t fall into believing this myth. You’d be surprised how many people with money can’t get their bills paid on time.
Paying bills can be complicated – paying bills has become a more complex task than it was for our parents. With on-line banking, automatic deduction, and debit cards there are many ways to pay bills. Do you understand the rules involved with all these methods?
More bills at a younger age – Years ago, people didn’t have bills until they got married and moved into a house. Nowadays young adults can have a mailbox full of bills before they move out of their parent’s home. Phone bills, car payments, auto insurance, credit cards, student loans, and more. There’s a lot more to manage, and young minds aren’t always prepared for that responsibility.
Banks and credit card companies – yes, these institutions can be a big part of the problem. Companies have caught on that big money can be made from loans - especially the high-risk kind. Banks are more willing to give credit cards and make loans than ever before. The interest rates and fees involved ensure that anyone who doesn’t stay on top of paying their bills can really pay a price.
Paying bills is not a money issue, it's an organizational issue. Staying organized so your bills get paid is a skill that actually needs to be taught.
Friday, August 24, 2007
What should I teach my kids?
This question is what most parents should be asking themselves about personal finance, because the truth is, their kids most likely are not going to learn it in school.
Many parents feel that if they teach their kids to save and they make sure their kids don’t spend too much money, they’ll be okay. Don’t assume that if your kids get a good education, and then a good job and a good salary, they’ll understand how to manage their money. Financial literacy is more than the accumulation of money.
So what are some ways parents can teach kids financial literacy?
HOW TO BUDGET
Keep your kids on an allowance! Every time I talk to a group of kids I ask how many of them are on an allowance, and very few raise their hands. We’ve moved away from this very informing practice! Kids need to be kept on an allowance, because it teaches them how to budget their money.
If your child is over the age of 12 (and in many cases, even younger), you’re probably giving them money for various activities daily. Figure out how much they spend on a weekly basis, and come up with a flat amount to give them as a weekly or monthly allowance. Let them be responsible for paying for their lunches and snacks, having money for mall trips, and paying for school related activities, like dances.
If they spend all their allowance on some new video game, and don’t have enough left to buy lunch at school, let them learn that they’ll have to pack a lunch or they won’t eat! Giving an allowance forces kids to think about their future (even a weekly future). They’ll have to plan for upcoming expenses and resist temptation to buy things they don’t need. They’ll also learn the benefit of not spending and saving for a big purchase in the future.
Do your kids spend a lot on the internet, downloading music, games, and screensavers? Do they run up phone bills text messaging friends? That should be part of their allowance as well. Don’t give them your credit card number. Pre-paid debit cards are a great tool to help your kids learn to control their spending in today’s cashless society.
Giving your child a certain amount every week on a pre-paid debit card is a great way to implement an allowance. You can buy pre-paid debit cards and phone cards in local drug stores like CVS. There are several pre-paid debit card programs designed just for teens. Many have great tools for parents to allow them to monitor their child’s spending and continually load money on the card. However, many charge fees for these services so read the fine print carefully.
Many parents feel that if they teach their kids to save and they make sure their kids don’t spend too much money, they’ll be okay. Don’t assume that if your kids get a good education, and then a good job and a good salary, they’ll understand how to manage their money. Financial literacy is more than the accumulation of money.
So what are some ways parents can teach kids financial literacy?
HOW TO BUDGET
Keep your kids on an allowance! Every time I talk to a group of kids I ask how many of them are on an allowance, and very few raise their hands. We’ve moved away from this very informing practice! Kids need to be kept on an allowance, because it teaches them how to budget their money.
If your child is over the age of 12 (and in many cases, even younger), you’re probably giving them money for various activities daily. Figure out how much they spend on a weekly basis, and come up with a flat amount to give them as a weekly or monthly allowance. Let them be responsible for paying for their lunches and snacks, having money for mall trips, and paying for school related activities, like dances.
If they spend all their allowance on some new video game, and don’t have enough left to buy lunch at school, let them learn that they’ll have to pack a lunch or they won’t eat! Giving an allowance forces kids to think about their future (even a weekly future). They’ll have to plan for upcoming expenses and resist temptation to buy things they don’t need. They’ll also learn the benefit of not spending and saving for a big purchase in the future.
Do your kids spend a lot on the internet, downloading music, games, and screensavers? Do they run up phone bills text messaging friends? That should be part of their allowance as well. Don’t give them your credit card number. Pre-paid debit cards are a great tool to help your kids learn to control their spending in today’s cashless society.
Giving your child a certain amount every week on a pre-paid debit card is a great way to implement an allowance. You can buy pre-paid debit cards and phone cards in local drug stores like CVS. There are several pre-paid debit card programs designed just for teens. Many have great tools for parents to allow them to monitor their child’s spending and continually load money on the card. However, many charge fees for these services so read the fine print carefully.
Thursday, July 26, 2007
Teach this stuff in schools!
Why isn't Financial Literacy taught in today's school? This question has been plaguing me since I decided to create Start Money Smart. And many others are asking this same question. There are financial literacy web pages that generate great discussion on the topic. Many people really believe it should be a priority when educating our young people. So why hasn’t it happened? Why isn’t personal finance added to standard curriculums in American schools systems?
Well, I’ve done some research, and here’s what I’ve found…
1. Teens don’t need to know personal finance to go to college! Standard curriculums in schools are already filled with what kids are required to learn. Many schools will tell you there is no room for additional topics. Schools are under great pressure to generate students who are considered “educated”, which really means “prepared for college”. It doesn’t mean “prepared for life”. If it’s not on the MCAS test or an SAT exam, there’s not a lot of justification for teaching the topic in today’s public school system. And the truth is kids don’t need to know personal finance to go to college. However, they’re inundated with credit card applications when they arrive, and given no education on how to deal with them.
2. Our “money” world is changing too fast. If you’re old enough think back and remember what money was like thirty years ago. Credit cards and charge cards were only for the rich. A 25% interest rate on a credit card was considered loan-sharking. Did anyone ever hear of automatic deduction? What about twenty years ago? There were ATM cards, but no debit cards and no one did on-line banking. Okay, so ten years ago? Well, there were very few pre-paid debit cards, and kids were not running up their parent’s phone bill by texting their friends.
Our money world is changing too fast, and we haven’t been able to keep up with educating ourselves on how to handle it. So for those people who still think, it’s up to the parents to educate their kids on personal finance – I’ll argue that most parents don’t know what to teach their children. They haven’t learned the rules themselves yet.
3. We still believe more money will provide the knowledge. I believe our biggest problem with making a change to our educational system is getting over the idea that “If we just make more money, it’ll be okay.” Some of us are working so hard to educate our youth, and to what end? So they can go to good colleges, and get good jobs, and make good salaries. We still believe that if our kids make enough money, they’ll be okay. They’ll some how learn how to balance that checking account. They won’t buy things they can’t afford, because they’ll magically know how to create a budget for themselves. They’ll figure out taxes and what they need to do to pay their bills on time every month.
If we really want to make a difference in increasing financial literacy in America, we have to let go of the idea that being rich solves problems. In many cases it just creates the need for more education.
Well, I’ve done some research, and here’s what I’ve found…
1. Teens don’t need to know personal finance to go to college! Standard curriculums in schools are already filled with what kids are required to learn. Many schools will tell you there is no room for additional topics. Schools are under great pressure to generate students who are considered “educated”, which really means “prepared for college”. It doesn’t mean “prepared for life”. If it’s not on the MCAS test or an SAT exam, there’s not a lot of justification for teaching the topic in today’s public school system. And the truth is kids don’t need to know personal finance to go to college. However, they’re inundated with credit card applications when they arrive, and given no education on how to deal with them.
2. Our “money” world is changing too fast. If you’re old enough think back and remember what money was like thirty years ago. Credit cards and charge cards were only for the rich. A 25% interest rate on a credit card was considered loan-sharking. Did anyone ever hear of automatic deduction? What about twenty years ago? There were ATM cards, but no debit cards and no one did on-line banking. Okay, so ten years ago? Well, there were very few pre-paid debit cards, and kids were not running up their parent’s phone bill by texting their friends.
Our money world is changing too fast, and we haven’t been able to keep up with educating ourselves on how to handle it. So for those people who still think, it’s up to the parents to educate their kids on personal finance – I’ll argue that most parents don’t know what to teach their children. They haven’t learned the rules themselves yet.
3. We still believe more money will provide the knowledge. I believe our biggest problem with making a change to our educational system is getting over the idea that “If we just make more money, it’ll be okay.” Some of us are working so hard to educate our youth, and to what end? So they can go to good colleges, and get good jobs, and make good salaries. We still believe that if our kids make enough money, they’ll be okay. They’ll some how learn how to balance that checking account. They won’t buy things they can’t afford, because they’ll magically know how to create a budget for themselves. They’ll figure out taxes and what they need to do to pay their bills on time every month.
If we really want to make a difference in increasing financial literacy in America, we have to let go of the idea that being rich solves problems. In many cases it just creates the need for more education.
Monday, June 18, 2007
"Buy now, make no payments for…"
I was reading comments posted on a message board about whether financial literacy needed to be taught in our schools. One of the comments regarding debt was, “Just teach people that they shouldn’t spend what they don’t have.” That person went on to say, “It’s not brain surgery, is it?”
In today’s society there’s an underlying belief that people who get themselves into debt are either too lazy, too dumb, or too spoiled to understand how to stay out of debt. I believe many people are under the impression managing debt is really as simple as “don’t spend what you don’t have.”
Do you know what you have? Many of my clients have no idea how much money they have. There’s more to it than just looking at your annual salary. In fact, your income really tells you nothing about what you have. You have to look at your expenses. And many people don’t take out the time to calculate their expenses. We should all realize, it’s not what you make, it’s what you owe. Two people that both make $60K a year can have very different lifestyles based on their expenses.
Our whole culture is designed to encourage people to spend money you don’t have. Do you think the average American is going to wait until they have the money to buy a new washer and dryer when the old one breaks down? How many people can be convinced to wash their clothes in the sink until they’ve saved up enough to buy a new washer? “Buy now, and make no payments, pay no interest for 12 months!”
Debt doesn’t ruin lives, not managing debt does. This point may be arguable, but I firmly believe it. Being in debt is not causing all the problems with debt in our society. It’s the inability to manage debt that ruins many people. Now, I can believe that this statement can’t be applied across the board. There are many people out there, that don’t have sufficient income to pay their bills. But I’ll argue that even more go shopping when the stack of bills arrive because they can’t deal with the stress. Or people who can’t resist a new pair of shoes or paying the tab on Guy’s Night Out, even though they know they can’t afford it. Just one month of ignoring bills can rack up a huge amount in late fees and interest that could have helped people get out of debt. I’ve learned that stress, denial, and vanity keep people from managing their debt much more than lack of money.
In today’s society there’s an underlying belief that people who get themselves into debt are either too lazy, too dumb, or too spoiled to understand how to stay out of debt. I believe many people are under the impression managing debt is really as simple as “don’t spend what you don’t have.”
Do you know what you have? Many of my clients have no idea how much money they have. There’s more to it than just looking at your annual salary. In fact, your income really tells you nothing about what you have. You have to look at your expenses. And many people don’t take out the time to calculate their expenses. We should all realize, it’s not what you make, it’s what you owe. Two people that both make $60K a year can have very different lifestyles based on their expenses.
Our whole culture is designed to encourage people to spend money you don’t have. Do you think the average American is going to wait until they have the money to buy a new washer and dryer when the old one breaks down? How many people can be convinced to wash their clothes in the sink until they’ve saved up enough to buy a new washer? “Buy now, and make no payments, pay no interest for 12 months!”
Debt doesn’t ruin lives, not managing debt does. This point may be arguable, but I firmly believe it. Being in debt is not causing all the problems with debt in our society. It’s the inability to manage debt that ruins many people. Now, I can believe that this statement can’t be applied across the board. There are many people out there, that don’t have sufficient income to pay their bills. But I’ll argue that even more go shopping when the stack of bills arrive because they can’t deal with the stress. Or people who can’t resist a new pair of shoes or paying the tab on Guy’s Night Out, even though they know they can’t afford it. Just one month of ignoring bills can rack up a huge amount in late fees and interest that could have helped people get out of debt. I’ve learned that stress, denial, and vanity keep people from managing their debt much more than lack of money.
Wednesday, May 16, 2007
Big salary = Big success ??
It's not what you make, it's what you owe! I realized this when I was in my early twenties. I was making about $8.50 an hour working for an insurance company as a Licensing Specialist. Among my crowd, this was considered a very good job and a pretty good salary. However, I couldn't make ends meet. So I went out and got a second job.
When a friend asked me about my salary at the insurance company, her comment was, "Why do you need to work the second job when you make such good money at the insurance company?" My response was, "Well, it's not what you make, it's what you owe?" My friend didn't ask about the amount of debt I was in, and how much money it took to pay my bills each month.
It's amazing how, in our society, we only focus on salaries when we think about financial success. If someone makes $100,000 a year, they must be very successful, right? However, what if that same person has two mortgages, makes payments on two cars, pays credit card bills, auto insurance, electricity, water, gas, cable, internet, telephone, commuting, food, supplies... How much extra do you think they have in their pocket on a Friday night? Don't be surprised if it's not much.
Conversely, someone making $10 an hour that has no debt, lives with their parents, and takes the T to work could have much more extra money to play with.
So what's the point? A big salary doesn't equal financial success. And someone who makes plenty of money is not necessarily going to have more to spend.
When a friend asked me about my salary at the insurance company, her comment was, "Why do you need to work the second job when you make such good money at the insurance company?" My response was, "Well, it's not what you make, it's what you owe?" My friend didn't ask about the amount of debt I was in, and how much money it took to pay my bills each month.
It's amazing how, in our society, we only focus on salaries when we think about financial success. If someone makes $100,000 a year, they must be very successful, right? However, what if that same person has two mortgages, makes payments on two cars, pays credit card bills, auto insurance, electricity, water, gas, cable, internet, telephone, commuting, food, supplies... How much extra do you think they have in their pocket on a Friday night? Don't be surprised if it's not much.
Conversely, someone making $10 an hour that has no debt, lives with their parents, and takes the T to work could have much more extra money to play with.
So what's the point? A big salary doesn't equal financial success. And someone who makes plenty of money is not necessarily going to have more to spend.
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