Calling all Parents! (And even Grandparents)

Is it time to teach the kids in your life about money?

 Do you ever feel like you have “ATM” tattooed across your forehead?

 Do your kids (or Grandkids) think money grows on trees, and that you are the tree?

 Do you even know how much money you actually give to your children?  Even if you give your children an allowance, there’s that extra $20 here and $10 there. And let’s not forget the money for the popcorn at the movie, when your child conveniently “forgets” to give you the change. Our children are with us when we spend our money, but they are not with us when we make it. So they don’t understand the simple fact that before it goes out, it must come in.  (insert following article) JUST CHARGE IT! Your children are quick studies when it comes to spending money.  They see you spending money all the time…just in the course of daily living.  They go to the mall with their friends and learn all about the latest trends because they want to appear “cool” to their friends.n The problem, however, is that your children are not typically with you when you make your money.  They don’t see all the effort that goes into earning a living.  They may see you leave the house in the morning and come home at night, but they probably don’t understand what you are doing all day.  What they see is the stress that you bring home to the family.  They start saying, “I don’t want to work as hard as you do, Mom and Dad. I want a life!”  These are actual statements that my children have made to me and my husband.  They were sobering, to say the least! But what they didn’t fail to experience was the “spending” part of our lives.  The fruits of our labor, you might say.  They enjoyed the spoils (OR: “goodies”), but did not appreciate the efforts that produced those spoils (OR: “goodies”). This fact was brought home to me one day when my children were younger.  I had had a very stressful day at work (can you relate?) and was still somewhat preoccupied. My children and I were out shopping for school supplies and my youngest son saw a new video camera he wanted me to buy for the family (for once it was not just for him).  In my not so wonderful way, I said “No, we don’t have the money for that!” His response was, “Just charge it!  Put it on one of your credit cards!” At that moment, I realized that my son understood the spending part of credit cards, but not the paying part of credit cards.  My kids were with me when I was buying things on my credit cards, but not with me when I paid the bills each month. I happen to love my credit cards. They make buying things easier. However, I pay them off each month so that I am not charged interest.  But I realized my children didn’t know this! They didn’t know this, because I hadn’t told them. In this generation, credit cards have become the payment of choice.  Intentionally or not, our children have learned instant gratification through our actions.  By falling prey to “just charge it” impulses, we are teaching our children the wrong message.  94% of young people surveyed say they learn their financial habits from their parents (that’s us).   ACTION STEP:  When your next credit card bill comes in, review it with your children.  Discuss what it felt like when you bought something.  Are you still enjoying it?  Do you still have it?  How does it feel to pay for it AFTER the fact?  Is it as much fun paying for it as it was buying it?  Sharing the “paying” side of life will educate your children about both sides of the money equation—buying and paying. Knowledge is power. WHY NOT?  Why don’t we teach our children about money?  Could it be because we don’t know much about it?  Chances are you weren’t taught about money in school, either. Everything I learned about money, I learned from my Dad.  His rule was simple. Half of every thing I earned from my part-time jobs went into a savings account.  Every other week, my parents drove me to the bank to deposit that 50% into a passbook savings account. I would never have even thought about withdrawing money from that account. When I started driving, the habit continued, and, yes, my parents would check up on me.  Did I like putting the 50% in the bank at the time?  Of course not, but after tithing 10% to my church, I could spend the other 40% any way I liked.  My parents didn’t “control” how I spent it.  I realize now that my saving, giving, investing and spending habits today became habits when I was still at home under consistent guidance from my parents.  I cannot stress the word consistent strongly enough. Unfortunately, my children didn’t benefit from the same instilled habits.  I used the same lessons my dad had taught me, but with much different results. I didn’t factor in the existence of credit cards. They didn’t exist when I was in high school.  I felt that teaching good habits to my children would make them understand the perils of credit card debt.  It didn’t.  I hear parents say all the time, “I am not going to give my kids credit cards.” and for a long time I felt that way too.  But the harsh reality is, your kids will sign up for credit cards when they go to college—and you probably won’t even know it.  Wouldn’t it be better to let them make the mistakes while they are still at home, while you may still have SOME influence over their decision-making? Phil’s Story: During my later high school years, I worked for my spending money.  I worked for a few different retail stores, and my parents had a rule for me.  That was that 50% of what I earned had to go into a savings account that I could not touch.  I never understood the rule, only that my parents would check up on me to be sure that I made the appropriate deposits.  As I entered my first semester of college, I was given some great opportunities to obtain credit.  I recall the first week that I moved into my dorm at Arizona State University there was a table out front of the dorm room.  All I had to do was write down my name, address, and social security number, and then sign something. Suddenly, I had $500 dollars.  That was awesome! I recall that I had about $2500 in my savings from working.  It took me months to save that kind of money, but mere minutes to have access to $500. I started to use my credit card and it was not long before I had a few more, as I could save 10% at my favorite clothing store.   That 10% savings on a $200 purchase turned into a 22% interest and a delinquency on my credit for $9. {It wasn’t until 6 years later that I looked at my credit and realized that I had a delinquency of $9.  I was able to handle that with the creditor, as well as clean up another issue and my credit score surged by close to 50 points over the next couple months.} By the end of my first year in college, I was close to $2000 in debt, and I had no job.  I had a conversation with my parents—actually I asked them to bail me out and they responded with a resounding ”No!”  They did the best thing for me; they told me I had to get a job and handle it.  What I had not told them at the time was that I had also burned through my savings of $2500, too.  I swung by $5000.  From the summer after my first year of college, I worked.  Still it was tough, though, as I was only working 20 hours a week (weekends and evenings) and after taxes that was just above the minimum payment of my credit cards.  This was when I got the biggest lesson about credit cards—the challenge of paying a minimum payment.  I would pay my minimum payment and then I would get my next statement and even though I had not charged anything new my balance was going up.  ‘Going up?’ I thought. But I made my payment, that was when I went and asked my mom why that was. What an awakening!  Now I understood why she always said that she paid off her credit cards every month…  That my interest per month was more than my minimum payment.  After years of working more hours over the summer and making payments as I could, I finally achieved a zero balance on my credit card.  I remember this day, as I had used the zero balance statement for a “show and tell” during the Dale Carnegie course I took prior to joining the Rich Dad Company.  I was so proud that I was able to pay off my credit card. I also, was not as consistent with my children, as my parents were with me.  A habit is formed as a consistent method of response or activity.  The definition of habit in Webster’s College Dictionary is:   “Habit – an acquired pattern of behavior that has become almost involuntary as a result of frequent repetition.” Consistency is imperative in forming a habit, good or bad.  Repetition creates the pattern of behavior.  For instance,

•  Alcoholics drink consistently
• Smokers smoke consistently
• People in debt spend consistently
• Philanthropists give consistently
• Savers save money consistently
• Investors invest money consistently

In order to change your life, you need to start by changing your habits.  In order to teach our children to be productive and successful adults, we need to help them form habits that produce positive results for them consistently at a young age.  It is easy to look at the list above and know that you would prefer your children to be savers, investors, and philanthropists instead of alcoholics, smokers, or debtors.  It is much more difficult as a parent to find the time to take the action NOW to help instill the habits that will propel your children toward a financial future of successful investing instead of a financial future plagued with drowning in debt. Turn Your Concern into Positive Action! The cost to our children and our society is getting too high not to take action NOW.  The incidence of drug abuse, alcoholism, teenage suicide, and pregnancy is rising and it will most likely hit closer to home than you want to imagine.  It is time for parents, grandparents, and other interested adults to start educating our children today…so they can live a happy and healthy tomorrow. I share my own story because I don’t want parents to “do what I did.”  I want you to learn from my mistakes.  And yes, I am saying “do what I say, not what I did.”  I truly felt I was teaching my children about money, but it wasn’t good enough!  It wasn’t consistent enough. As a result, my children have learned the hard way—by getting into debt and having to work hard to not only get out of it, but also to start to repair their credit history. So these are the two extremes. First, mine, where I learned good habits and have never “experienced” being deeply in debt. There were many times in our lives where money was very tight for my husband and me and we were totally stressed out about money.  Money problems create one of the greatest stresses in a marriage, but working through those stressful times can also create magic in a marriage and family.  Mike and I agreed never to carry balances due on our credit cards. We paid, and continue to pay, them off each and every month.  It wasn’t easy, but it was our way to know we were in control over our financial life. And then there were our children, who have gotten deeply into debt and had to “work” their way out.  My message to you is there is a better way.  Give your children the tools to become independent, the tools to make mistakes—and most importantly, to learn from them.  Give them those tools while you are still around to be their mentor and support system. When I graduated from college, I had $22,000 in the bank because of the habits I learned from my father.  Today many young people graduate from college that much in debt, if not more. They start their adult lives already in the hole financially. Please join my effort in “Calling All Parents, and Grandparents, too”.  You can truly make a difference in your child’s or grandchild’s life. WHAT CAN YOU DO? There is no lack of good financial education content available—and much of it is even free and available on-line.  The problem is execution. Unless we take the time or make the time to teach our children about money, chances are they will never learn it. We are still not teaching money skills in school.  While there are many wonderful organizations dedicated to improving financial literacy, and they are reaching more children every year, can you afford to wait?  Can your children afford for you to wait?  I have also talked to many parents who have the fear of needing to have the right answers and taking the time to teach their children.  At least we can encourage them to learn more and support them.  In today’s day and age, often we are learning together with our children.  Instead of having to be the one with all the answers I have trained myself to become a leader more than an instructor.  It is critical that we as parents draw out of our children and not just try to put in.  Our children have access today to the same information that we do, so let’s learn together.  Let’s achieve together. The other frustration I have is the lack of actual “Action Steps” in all the information available.  There are a lot of lessons, and a lot of  “you should’s”, but not enough “here’s how’s.”  There is little or no practical advice, so I understand when other parents, say “I just don’t know how to get started.”  This program has been developed as a result of that frustration.  Some of the action steps we will provide will make sense and feel good to you while others may not work for you or feel like “too much effort.”  Listen to your own inner voice as to what you want to do, and will do.  If you’re ready to turn your concern into action, you will find definitive action steps that you can take to teach your children the basic financial principles they will need to not only survive—but to thrive—in the world they face. Pay Your Family First is a company dedicated to creating and providing financial education products that teach financial education in a fun and experiential way.  Our goal is to ignite the entrepreneurial spirit as well as the love for learning in young people today.  For more information please visit www.payyourfamilyfirst.com. The credit card regulations which went into effect on February 22, 2010 will prevent credit card companies from soliciting within 1000 feet of college campuses.  While this is a huge step in the right direction it is still critically important for parents and grandparents to teach their children about money.  Let them stub their toes while they are still at home instead of breaking their legs when they leave home! Thank you Sharon Lechter CEO – Pay Your Family First Co-author of Three Feet From Gold and Rich Dad Poor Dad Member of the President’s Advisory Council on Financial Literacy Member of the National CPA’s Commission on Financial Literacy of the AICPA.