Prepping Kids (Part 3)
Posted by John Draper | Filed under Kids & Money
Essential Money Skill #4: How to manage bills and other paperwork.
I can’t believe the number of people who just throw their crap in a drawer, never open their bills, or leave everything until the last minute. It’s no wonder financial institutions are making a fortune off NSF fees and overdraft protection. If you want your child to be one of the fools who ends up paying too much in bank fees, then let this lesson just slip on by, like those unpaid bills.
Having a system for money management isn’t hard, but it does take some discipline. But Gail… I hear it now… I can’t get him to put his dirty dishes in the dishwasher… I can’t get her to pick her clothes up off the floor… I can’t get them to (fill in the blank with this week’s tick-off). I know, I know, they are messy thinkers and messy livers. But that doesn’t negate the need for you to teach this lesson.
If you’ve already taught the budget lesson from EMS#1, then your child already knows how important it is to keep track of every penny. What she may not know is the consequence of missing a payment on a credit card, being late with a bill payment, or not keeping track of her paperwork.
TO DO:
Give your kid a small office in a box so he has everything he needs in one place. Review the process for getting financially organized. You can use this as a guide.
Explain what a credit history is, and how missing payments can mess it up.
Create an employment file. This is where Molly will put her paystubs and tax forms. Talk about taxes, the fact that certain expenses can be a write-off and save money, and how to keep track of those expenses.
Have Junior make a Personal Property Inventory including photographs and serial numbers for everything of value that will be leaving home with him.
Create a Student Loan File which includes all student loan information, a projection of how much student loan debt she will have when she’s finished her degree, how much her payments will be when she begins her loan repayments, and when those repayments start. If Susie has already finished school and is now striking out on her own with student debt in tow, this is still a very useful exercise.
Whether your son or daughter is living in residence or living in an apartment, (s)he should know what it’s costing. Create a file that contains all the pertinent paperwork for the lease/rental/residence. Make sure your kid knows this is being paid with “NET” income. Go through the exercise of figuring out how many hours of work it will take THEM to keep this roof over his head and food in her tummy.
Essential Money Skill #5: How to save for a goal.
Everybody needs to learn to set aside some money for the future. Most young adults have NO interest in retirement planning. They’re coping with making it to the end of the week, never mind the end of their working careers. But without a sense of how important “saving” is, they could end up never figuring out this very important lesson.
Even when they are small, kids need a reason not to spend. Whether it’s saving up to buy yet another pack of Pokemon cards, a new bike or an iPod, learning to set money aside for the future is an important skill. NOT SPENDING is a tough lesson, but one that can be nurtured.
As kids get older, the idea of having to delay gratification comes more naturally to them. It’s amazing just what teenagers will do to get what they want. Of course, “want” is an important part of the equation.
I know a young man who never wanted much. With little desire came a small amount of ambition. Despite being very bright, he never excelled at school. He never much cared what kind of job he had or how much he made. He sort of just coasted, eking out just enough. He had been taught this lesson by a stern mother who made it clear from he was a tot that he shouldn’t want anything because he wasn’t going to get it. The lesson stuck.
There’s nothing wrong with wanting. It’s what drives us to get a good education, to save for a home, to achieve some level of success. Whether you want to earn buckets of money, want to make a difference in people’s lives, or want to live peacefully in the world, ambition is a good thing. And since money gives us choices, teaching the lesson that having some makes achieving what we want easier is important.
TO DO:
Whether your child is eight or 18, show her how to set a goal, break that goal down into small, measurable steps (go read the blog on milestones) and prioritize to achieve those steps.
Talk about establishing an emergency fund. How have you had to use your emergency fund? How might an emergency fund save your goose? How might it save his? Help him set the parameters for building his emergency fund.
Explain the difference between long-term saving and planned spending. Read Piles of Money.
Find an on-line calculator and show her how long-term compounding makes saving easier. Using a retirement calculator, demonstrate the growth of $100 a month starting at 22 compared to starting at 32 and 42. This not only demonstrates how to put time on your side, it also shows how even a little saved for a long time can make a big difference.
Next: Essential Money Skills #6 & #7.
January 7, 2009 at 9:21 am
This is a thorough lesson on a very important topic. It’s so great to think that your show and your blog are having a cyclical effect by helping parents make sure that their kids are better equipped to manage money and make these tools work for them, instead of having to learn everything the hard way.
January 7, 2009 at 9:40 am
Wow…I have become an addict..lol…what great posts this week. My kids always thought the magic card would work when you get to the bank machine, after getting there own and being able to look online at how much money they have in their account…they start to realize.
I just received my planner and am excited about. What a fabulous job!!! Looking forward to reading your posts and watching your show..its become a regular tv show that Hubby and I both watch together….we are learning lots too.
January 7, 2009 at 10:30 am
I really like EMS #5. It’s one that I’m starting to work on (albeit in very small ways) with my preschooler. The idea that if you want something you need to plan for it. I think this is the one where so many adults fall down – that you can have what you want, but you might need to plan and save to get it.
January 7, 2009 at 10:52 am
“I know a young man who never wanted much. With little desire came a small amount of ambition. Despite being very bright, he never excelled at school. He never much cared what kind of job he had or how much he made. He sort of just coasted, eking out just enough. He had been taught this lesson by a stern mother who made it clear from he was a tot that he shouldn’t want anything because he wasn’t going to get it. The lesson stuck.”
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Thanks Gail…this may explain a few things for me sadly…
January 7, 2009 at 12:01 pm
Great information. My oldest will also (hopefully) be going to college or university soon and I am going to do much of what you’ve suggested.
I would like to know, though, what you suggest for younger children besides the jars idea. My daughter is fantastic at saving her money. Infact she asked me to bank all her money she got for christmas. Othertimes though she’s a little spender. She’s only 7 so I’m trying to determine how to get her more aware of what things cost besides taking her shopping with me and explaining how much she has to spend (or I have to spend) and how I have to make choices based on what the final bill will be.
January 7, 2009 at 1:15 pm
Thanks for the great info!
January 7, 2009 at 1:44 pm
A lesson that I will be instilling on my kids are the joys of internet banking! After I check my mail, I take five minutes to sort and delegate every piece. If it’s a bill, I st down at my computer and DEAL with it right then and there! I set the transaction for 3 days before the due date and write that on my calender and make a note including the tracking number on the bill. And bravo! No fear of losing the bill, no fear of late fees!
Procrastination is my nemesis, but not with the bills since internet banking.
January 7, 2009 at 1:54 pm
These are all such great tips for teaching money and life lessons. My daughter is only 9 months old but Gail’s show and blog had me pondering already how to teach her valuable money and life skills. I never really had any formal teaching from my parents. But I’ve managed to turn out okay — I’m debt free, I have savings, insurance, a will, and a good life.
I think I’ll share these money and life lessons to my sister and brother-in-law! I won’t even bother kidding myself that I’ll be “teaching” them. It’s that old saying about leading a horse to water…
Looking forward to the next blog!
January 8, 2009 at 10:55 am
I am loving this series!
Am saving all the advice on my palm for future reference.
Am also linking to this to spread the word about what people should do with their kids to start them off right. Wish my parents had done this. I may not have learned the hard way…
Fabulously Broke in the City
Just a girl trying to find a balance between being a Shopaholic and a Saver…
January 8, 2009 at 11:57 am
wow im so excited about the planner i haven’t had a chance to keep up with the blogs the last few days, crazyness.