MONEY Kids and Money

What Smart Parents Teach Their Kids About Debt

hands holding IOU magnet letters
Getty Image—Getty Images

Steer your kids in the right direction by teaching them these debt "secrets" and backing them up with practical experience.

Debt is a four-letter word, and your kids need to know it. The current public mood on debt ranges between loathing and fear. Nearly 20% of American adults expect to die with debts unpaid and a third of teens — perhaps because they’ve seen their elders saddled with lifelong debts — say taking on debt for college is “not worth it.”

Too much debt is a disaster, no doubt. But a carefully handled loan can help a young person get a degree, and a healthy credit score is crucial to finding a place to live and even getting a job. Steer your kids in the right direction by teaching them these debt “secrets” and backing them up with practical experience.

Credit costs money

You and I know that credit isn’t free, but kids need to understand that borrowing money is not like borrowing a classmate’s pen — unless that classmate charges a fee for lending out pens.

For younger kids and tweens, Northwestern Mutual’s financial literacy site, TheMint, has a simple debt calculator to make this point. Kids can purchase fictional concert tickets, a vacation, a car, or textbooks on credit and see how much they’ll really pay compared to the cash price.

Teenagers need a different spin on this lesson. They may know intellectually that credit costs money, but the allure of a shiny card is strong. I’ve found a quick way to cool off a credit-dazzled teen: Have him or her read a card application’s fine print out loud to you — especially the sections about interest rates, late fees, and rate hikes. Now it’s not just you saying that credit costs money. They’re getting it straight from the credit card issuer and hearing it in their own voice.

Debt can hang on after the thrill is gone

Brooklyn-based educational hip-hop video producer Flocabulary shares the sad tale of Melvin, who racks up credit card debt and wrecks his credit rating over Super Bowl tickets. Lana, meanwhile, does her credit card homework and spends carefully to avoid regret.

The clip shows kids they could be paying for a game, concert, or toy on credit long after they’re over it. For teens, the takeaway is that badly managed credit card debt can hinder their independence by keeping them from getting their own place or car.

Borrow what you need, not what you can get

Make sure your kids understand that if they have good credit, lenders may be willing to offer them a bigger loan than they need, because the more they borrow, the more the lender makes on interest. For young kids, a good analogy is birthday cake. One slice is great, but eating the whole thing will make them sick. As Warren Buffett tells the readers of the Secret Millionaires Club, “Credit cards can seem like an easy way to buy things, but it’s not a good idea to make a habit of using them. The chains of habit are too light to be felt until they’re too heavy to be broken.”

Teenagers can usually grasp the idea of keeping something back. For example, maybe you could get a loan to buy a high-end sports car. But if you take out a smaller loan for a compact car, you’ve got borrowing power in reserve for college loans or unforeseen emergencies down the road.

Real-life practice: Give your kid a loan

Whenever you hear, “Please! I swear I’ll pay you back!” you have an opening for a learning experience. It’s one thing to talk about debt. It’s another to experience the feelings that come with paying month after month on a purchase. If you feel your kids are ready and their request is worthwhile, offer to spot them a loan — with an interest rate, payment terms, and a penalty clause if they miss a payment.

Show them how much the loan will cost compared to the cash price. Put the payment schedule on your calendar so you don’t accidentally teach your kids that repayment is optional. And lend only as much as they need.

Lending your kids money is not without risks. They may decide to go on a chore strike or be stricken with borrower’s remorse. You may even have to temporarily repossess a computer, video game, or other item. But they’ll be smarter consumers and better money managers because of the experience, and they’ll see debt as a tool to be used carefully and not just as a four-letter word.

 

MONEY Kids and Money

All I Want for Christmas: Frugal Kids

Aesop Fables' The ant and the grasshopper.
Aesop Fables' The ant and the grasshopper. Designed and drawn on the wood by Charles H. Bennett, etc. Originally published/produced in W. Kent & Co.: London, 1857. British Library Board—Robana/Art Resource, NY

How to use the season's gift-giving frenzy to teach the difference between what we want and what we need.

A fable that’s frequently invoked when it comes to personal finance is Aesop’s “The Ant and the Grasshopper,” in which the ant busily spends his summer storing up supplies for the winter while the grasshopper frolics the warm days away, blissfully ignoring that times of need are around the corner. When the cold days arrive, the ant is warm and well-supplied while the grasshopper is ill-prepared and starving.

The analogy to retirement saving is clear. At a recent conference sponsored by Defined Contribution Institutional Investment Association (DCIIA,) Michael Finke of Texas Tech University pointed out that retirees with the highest wealth spend the lowest percentage of their income in retirement, suggesting that it was their innate ant-like frugality that in part helped them create such a large nest egg — not just their good fortune or career success. “The ants build up a habit of thrift, and when they reach retirement, they maintain their lifestyle of thrift,” Finke said. “It’s hard to turn an ant into a grasshopper, but you can turn a grasshopper into an ant.”

I was reminded of this recently when my six-year old daughter presented me a three-page-long Christmas list. The items on the list showed the habits of a budding grasshopper: giant teddy bears that had momentarily caught her eye on a recent shopping trip, “newer” versions of some toy that she already had and had long since abandoned. Very few of them were things that she really wanted—she was merely responding to the power of suggestion and, given a blank slate, had dutifully filled it and then some.

Not wanting to send her and her brother down the path of endless grasshopper-like consumption, I offered to instead get them both just one really big thing for Christmas—a trampoline—and nothing else. Even though this purchase would wind up costing me more, I thought it would teach them about trade-offs and spending on something that would hold its value for years. My daughter agreed in theory, but then found herself still wanting a few things from her list—a Christmas dress, the giant teddy bear. And I found myself caught between wanting to fulfill those desires while instilling in them a sense of ant-like restraint. Going through each and every item and debating whether they were really worth it seemed liked a giant buzz-kill on the holiday season.

That’s when a colleague gave me a brilliant suggestion to tell the kids that they can have four things: something they want, something they need, something to wear, and something to read. I was afraid that they might hate the idea, but they both embraced it, in part because it turned list-making into a categorical challenge, a game almost, and it also preserved their freedom to choose. I in turn was pleased because the framework forced them to prioritize desires, forego some things for others, and yes, distinguish wants from needs. (And also accept the fact that clothing and books are legitimate presents.) It wasn’t a completely ant-like solution, but it wasn’t all grasshopper either. I figure I can float the trampoline deal again next year.

Konigsberg is the author of The Truth About Grief, a contributor to the anthology Money Changes Everything, and a director at Arden Asset Management. The views expressed are solely her own.

MONEY College

How To Get Your (Or Your Kid’s) College Application to the Top of the Pile

Hand putting piece of paper on top of pile
PM Images—Getty Images

Fix this essay, don't answer that question, and don't think the college application process is over when you hit "submit."

Time is running out: As you no doubt know if you’re a college senior (or related to one), college application deadlines are fast approaching. And what you do in the next several weeks could still tip the scales in your favor.

Right now, you’re probably worried that your dream school won’t want you. So maybe it’ll make you feel better to know that schools will soon start worrying about whether you really want them. To tip this balance of power in your favor, you need to think carefully about how to present yourself to each school.

Happily, that’s not as hard as it sounds. Read on for seven application strategies that will make your applications rise to the top of the pile.

1) Find out what your favorite schools care about most.

You’ve heard the debates: The college essay is more important than ever before. No, it really doesn’t matter; it’s all about numbers. A low SAT score isn’t a deal-breaker. Except when it can be. The college admissions process is a total crapshoot. Actually, strategy does matter and isn’t that hard to execute.

The truth is, none of this conventional wisdom is true or false across the board because various institutions use a wide range of criteria and weigh them in different ways.

The good news: You can just look up how your favorite schools do it.

Lynn O’Shaughnessy, nationally-recognized college expert of The College Solution, recommends checking each school’s “common data set.” There, schools assemble a wealth of information about demographics, academic offerings, student life, tuition—and how they weigh different admissions criteria.

The answers may surprise you. For example, at the University of California Berkeley, the essay is “very important,” while class rank isn’t even considered.

Many schools post their common data set on their websites; search for it and then check section C7, “Relative Importance of Common Academic and Non-Academic Admission Criteria.” Or check collegedata.com to compare different schools, O’Shaughnessy says.

2) Narrow your personal essay topic.

“A lot of students do a miserable job of writing their college essay,” O’Shaughnessy says. “This is one of the ways to let a school know more about you, and students often do a very generic or very boring essay.”

The most common mistake? Trying to jam the essay with too much information. “The best essays are highly focused,” O’Shaughnessy says. For example, instead of writing about your love of music, O’Shaughnessy suggests focusing on just one event, like how you overcame stage fright at your senior recital.

Peter Van Buskirk, former dean of admission at Franklin and Marshall College and current president of Best College Fit, an advocacy group in support of students and parents in the college application process, agrees that it’s a mistake to just repeat what’s already in your resume.

“Take me to some part of your life experience I cannot find anywhere else in the application,” Van Buskirk says. “Get people to see the invisible you.”

3) Write shorter paragraphs—with more dashes.

You’ve got your winning topic. Now make sure the admissions officer will actually read your essay.

“The mistake that kids make is they don’t think creatively about their presentation,” Van Buskirk says. “This is a creative process. It’s not an academic process. If they have any level of creativity within them, they need to let it show.”

Start by forgetting what your English teacher may have taught you about writing. A lot of applicants submit personal essays with an ploddingly academic, five-paragraph format, Van Buskirk says. “It won’t hurt, but it doesn’t help,” he adds.

Instead, break up your paragraphs. Try using dashes, italics… even ellipses. Experiment with tone and style.

“What kids need to remember is their applications will be read by tired eyes,” Van Buskirk says. “When a set of tired eyes comes across an essay with three or four paragraphs, 150 words each, that’s dense stuff. Tired eyes wander away from it. It’s important to establish a flow.”

4) Rewrite your response to this question.

Many schools ask some version of the question, “Why do you want to go to this school?” If you could sub in the name of any other school and it would still make sense, throw out the essay and start over. Really.

“Kids tend to just do a boilerplate answer to all of them, like, ‘The academics are great, you’re located in a city, you have great faculty,'” O’Shaughnessy says. “That could describe any number of schools. [Admissions officers] will pick that up immediately.”

Van Buskirk says what the school is really asking with this question is “If we admit you to this institution, what do we get? What do you, the student, have to offer us that is different than the next guy?”

Be very specific and do some research. For example, don’t just say you want to major in neuroscience. Talk about how your volunteer work with disabled children has inspired you to pursue that field and how a particular academic program at the university could help you develop your expertise, Van Buskirk says.

The key is to demonstrate that you have thought about how this particular institution is uniquely able to help you achieve your goals.

5) Either skip this question, or double down.

Some schools, and some financial aid forms, will ask you to list other schools that you’re applying to. This question poses some risk, so tread carefully.

Most schools aim to maximize their “yield,” i.e. the percentage of students admitted who actually attend. So you could gain an edge if a school believes it’s one of your top choices. But if admissions officers have reason to think you’ll go elsewhere—if you reveal a preference for other comparably competitive schools, for example—they may turn you down even if you otherwise meet their criteria.

If your heart is absolutely set on a particular school, you may want to rank it at the top of these lists even at the risk of alienating other institutions. It also can help when it comes to aid because your second or third choices may try to lure you with money. Scott Bierman, president of Beloit College, recently told MONEY’s Kim Clark that his school’s best merit aid offers go to top students who have also ranked Beloit in their top three picks. (That’s why it’s helpful to check that “common data set” and see how much a school considers the “level of applicant’s interest.”)

On the other hand, some experts think ranking a school high on these lists can hurt you even when it comes to merit aid. “The No. 1 choice school will say, ‘They really want to go here, so we don’t have to give them money,'” O’Shaughnessy says.

The upshot? “There is no good that can come to the student in providing that information,” argues Van Buskirk. “My advice to the student, when the school asks, is to leave it blank.”

Sometimes, of course, you have no choice. The Free Application for Federal Student Aid (FAFSA) asks for a list of schools. In that case, you just have to realize that you might be showing your hand. You can try to maintain your poker face by putting the schools in alphabetical order. Just know that admissions officers may still draw inferences about your list.

6) Explain any weaknesses.

Maybe your grades dipped one semester. Maybe you didn’t do as well on the SAT as you had expected. Maybe you got into some trouble at school. Providing an explanation can make a big difference.

“Students need to understand admissions officers are cynics by nature,” Van Buskirk says. “In many applications, the student has an opportunity to complete an optional essay. I strongly recommend the students do that. They don’t want to put the reader in the position of having to piece it together themselves.”

The optional essay is an opportunity to disclose a learning disability, explain other medical or family issues that have impacted your performance, or talk about what you’ve done to make amends after a disciplinary issue, O’Shaughnessy says. Make the essay about “how you’ve overcome the challenges other kids don’t have,” O’Shaughnessy says. “Those are things that can help you get in.”

7) Don’t think you’re done when you hit “submit.”

At competitive schools, your make-or-break moment might not be the day you submit your application, or the day an admissions officer first reads your application, or the day you get moved to the admit list. It might be a moment during the last two weeks of March, called the “move down weeks,” Van Buskirk says.

That’s the moment when enrollment managers often realize they have too many applicants on their admit lists, and they risk overspending their financial aid budgets. Representatives for each geographical region might be instructed to move a certain number of students in their area from the admit list to the waitlist, and the college might reduce the amount of aid it had planned to offer certain students.

“It is at this point when the little things can make a difference,” Van Buskirk says.

Here’s how Van Buskirk says you can stay off the waitlist: First, keep your grades up. Second, keep in touch. If you receive email surveys and other communications that prompt a response, respond. If you have the option of interviewing with an alum, sign up. If you can visit, pack your bag. If you have a question about the school that you can’t answer with some Googling, send your regional recruiter an email.

“A big mistake is the students assume that once the application is submitted, they don’t have to manage it anymore,” Van Buskirk says. “The whole business of predicting who will enroll has become really big business. Kids need to make sure they continue to be alert.”

 

For more:

MONEY Kids and Money

Teach Your Kids Financial Values…Via Cellphone

boy on smartphone in kitchen
Catherine Ledner—Getty Images

A child's first smartphone can be a tool for teaching about budgeting, the value of work, and other important concepts.

After I have helped clients prioritize their financial goals, they commonly ask me a followup question: How do we teach these values to the next generation?

Start early, I tell them. And use a smartphone.

Let me explain. For many children nowadays, a smartphone will be their first valuable possession. They start asking begging for one when they’re around 8 or 10 years old, depending upon how many of their friends already have one.

We don’t know what impact early adoption of technology will have on our children once they become adults. As a financial coach, I see that parents are overwhelmed. New technologies are available every year, making parents feel like Maggie Smith’s Dowager Countess character on Downton Abbey: “First electricity, now telephones. Sometimes I feel as if I were living in an H.G. Wells novel.”

The purchase of a child’s first smartphone is an ideal opportunity for parents to pass on their values to children. I encourage active discussions between parents and children about the family’s intent for the phone, many of which may be reflected in the values below.

Open communication: From the beginning, outline the consequences if a child dodges her parents’ calls or ignores their texts. Talk about how this cellphone is meant to keep the family connected, not just to fuel her social life.

Hierarchy: Parents can exercise their authority through a variety of smartphone parental controls.

  • Check-in at tuck-in: Parents enforce this by keeping the charger in their room or in the kitchen. The cellphone needs to be in that spot when the child goes to bed, thereby preventing distractions from the phone and friends during sleeping hours. One client who uses this system was surprised when her daughter handed her the phone before she left for a sleepover: “I guess I need to check this in,” she said. Success!
  • Geolocation: If a parent would like the security of knowing a child arrived at a destination safely, or technological proof that a kid is being truthful, they can track the phone’s location with an app such as Life360.
  • Setting limits on texting/minutes/data: Some carriers offer this feature with unlimited family plans. Or parents can take the more rudimentary route below.

Wise resource management: What messages do we communicate when we give a kid this unlimited resource without requiring any payment from them? How do we engender a strong work ethic? One way is to subscribe to a plan that charges by the minute or unit. You won’t save money, but your child will learn to budget her resources. You can buy a TracFone, give her a monthly allotment of minutes, and explain she has to buy her own if she surpasses the allowance.

Work orientation: Taking this line of thinking a bit farther, if a child uses up her monthly allotment on a pay-as-you-go plan, she now has a choice. Either she stops talking — which could backfire if she can’t check in with parents — or she finds a way to get more minutes. TracFone minutes can be purchased anywhere at increments as small as $10, so it’s easy for a child to get more minutes if she’s willing to earn the money. Or alternatively, she can ask for minutes as gifts for holidays and birthdays. Either way, the child will need to become resourceful, and it’s never too early to exercise that muscle.

Predictability: Americans love to control our environment. In the financial realm, that often takes the form predictable expenses. In the past, roaming charges could exponentially increase your bill if you weren’t careful. These days, data usage (used for streaming video, sharing photos, or downloading apps when a phone isn’t on a wi-fi connection) is the variable that can quickly escalate the monthly total. Take these variances into account to select a plan that works best for your family, and make sure everyone understands the plan’s overage policies to avoid nasty surprises when the bill arrives.

In sum, a smartphone is an opportunity to teach a child about what really matters. Technology is just like money: It is simply a tool to make us more effective in the important stuff. But children are especially likely to subvert that understanding, mistaking technology or money as the end goal in life. So it is worth the time to guide their consumer choices, and their values, while they are still at home.

———-

Candice McGarvey, CFP, is the Chief Story Changer of Her Dollars Financial Coaching. By working with women to increase their financial wellness, she brings clients through financial transitions. Via conversations that feel more like a coffee date than a meeting, her process improves a client’s financial strength and peace.

MONEY Kids and Money

Forget College, This Is the Expense New Parents Should Be Freaking Out About

childcare costs are as expensive as college
Eric Meola—Getty Images

Daycare can be just as expensive as higher ed—if not more so, a new Child Care Aware America report finds.

New parents may live in fear of what they’ll pay for their child to attend college—but a nearer-term expense may have an even bigger impact on their wallets, a new survey finds.

Child Care Aware of America’s 2014 report on child care costs found that, in 30 states plus Washington, D.C., the average annual cost of enrolling an infant in a center-based daycare program is more than a year’s worth of tuition and fees at a public college in that state.

If that’s not daunting enough, the report released Thursday also notes that infant center-based child care costs twice as much as the average amount families across the country spend on food, and exceeds transportation costs in almost every region in the United States. And for those with two kids, child care costs in 23 states and D.C. exceed the average housing costs for homeowners with a mortgage.

The report notes that the average cost for child care varies widely according to state. But if you live in the Northeast ($22,513), Midwest ($17,258) or South ($15,409), expect childcare to be the highest single household expense on your budget. Though still expensive in the West ($17,941), childcare there comes in second behind housing.

When the costs were compared to median income for a married couple, New York topped the list for least affordable center-based care across three different age groups: infant care (16% of income), four year olds (13%) and before/after school care for school-aged kids (12%).

Most parents aren’t prepared for these costs, a separate study from Care.com released this April found. Three quarters of families surveyed in that poll were surprised or overwhelmed by the costs of childcare, and 42% don’t budget for it.

So what can a parent or parent-to-be do to get ready for this overwhelming expense? We reached out to Donna Levin, co-founder of Care.com, and Carmen Rita Wong, financial contributor for Babycenter.com, for tips.

Start Budgeting Early

The moment you know you’re expecting is the time to start saving and budgeting, Levin said.

But before you can do that, you’ll need to determine the type of care that best suits your family’s needs and resources. Options range from family-based daycare in someone’s home on the cheapest end ($127 a week on average, according to Care.com) to nannies ($472 a week). Online resources can help you navigate the pros and cons.

Another option that parents-to-be often consider is having one person cut back his or her work hours or take time off. That may save on childcare expenses in the short term, but you need to consider the ramifications in the long-term, warns Wong. Working parents have to weigh the opportunity cost of leaving the workforce—e.g. how much knowledge will you lose? How much potential income growth will you lose? How tough will it be to break back in?

Take Advantage of Tax Breaks

Depending on your circumstances, you might qualify for the Child and Dependent Care Tax Credit. The total credit can be up to 35% of up to $3,000 in qualifying expenses paid to care for a child under 13 while you’re working (or $6,000 for two children), but the exact amount is based on adjusted gross income.

“Many folks land on the cusp of qualifying year after year,” Wong says. “It’s important to realize just how close you are as you may be able to find deductions that can get you under the limit and save you more.”

Also check in with your HR department to see if your company offers a dependent-care flexible spending account. This allows you to set aside up to $5,000 pretax toward qualifying expenses like daycare, preschool and some summer day camps.

(While you’re at it, see if they offer any other child care help, says Levin. “A lot of great employers are providing child care subsidies or discounts to childcare centers.”)

Share in Care

They say it takes a village to raise a child—and as a mom, Wong can attest to the money-saving benefits of establishing a strong social network in your local area. “Though you may save $1,000 a year with all the tax credits, you can save another $1,000 by utilizing neighborhood networks,” she says.

You might be able to find a parenting group in your area on platforms like The Big Tent Network and Meetup. Such sites allow moms and dads to find play dates or learning opportunities, and also let parents establish relationships that can become helpful when looking for child care resources.

Nanny shares are one good example. With this kind of arrangement, multiple families pay for one nanny, therefore reducing the cost of care. Often, nannies will watch the kids at the same time, but families can also establish schedules that are based around each family’s individual need.

Additionally, establishing a connection with parent group is a great resource if the nanny gets sick or is unavailable.

When parents can say, “If you watch my kids while I do errands, I’ll watch yours after school,” it can be really beneficial for all parties involved, Levin says. Kids also love it, because in the long run “they’re just one big play date.”

Read next: 4 Costly Money Mistakes You’re Making With Your Kids

MONEY Kids and Money

3 Ways To Help Your Kids Become Good Gift Givers

Cashew-caramel brownie in baking pan, elevated view
James Baigrie—Getty Images

Children spend a lot of time thinking about what they'll get for the holidays. Use these tips to turn them into givers too.

Ah, the holidays. The season for time-honored traditions like decorating the tree, lighting the menorah, wrapping gifts … and wondering whether you have raised the most selfish kid in the world.

Almost every parent has felt this at one time or another, as toddlers and teens obsess over accumulating more and more holiday stuff. Robin Gorman Newman is no different.

“Like any kid, my son loves to receive,” says Newman, mom to an 11-year-old in Long Island, N.Y, and founder of the organization Motherhood Later for moms over 35.

“They’re all obsessed with getting, especially when they’re younger,” Gorman says. “If you saw my basement, you would know what I’m talking about.”

Which is why Newman embarked on a campaign to shift her son’s mindset from getting to giving. First on the agenda: Baking brownies to bring to the local firehouse, and to families of sick kids staying at the local Ronald McDonald House.

For parents who are trying to encourage giving instead of getting, it can often feel like shouting into the wind, especially at this time of year. American adults are planning to splurge an average of $861 on gifts this holiday season, according to a new survey by American Research Group.

That’s up 8% in a single year, surpassing 2007 numbers for the first time since the recession hit. As a result, little Johnny and Janie can expect to rip the wrapping paper off more boxes over Christmas or Hanukkah.

But don’t despair. There may be hope for turning kids into givers.

According to data from Allowance Manager, a service that helps parents automate allowance payments and track their kids’ spending, many children are setting aside a surprisingly healthy amount for gift-giving.

Roughly 9% of allowances are allocated for gift purchases, a figure that spikes in November and December. And that does not even include charitable donations, which account for an additional 6% of allowance use.

The key question: How do you trigger that mental shift, to get kids thinking of others rather than just themselves?

Have Them Use Some of Their Own Money

Obviously, young children are not going to have a lot of financial resources to tap. But even if it involves very small amounts, have them use some of those resources for gifting.

It drills in the critical personal-finance habit of setting up different buckets for different purposes, one of which should be devoted to others.

“Handling money is best learned through first-hand experience,” says Dan Meader, CEO and co-founder of Rancho Santa Fe, Calif.-based Allowance Manager, which has over 200,000 users. “So we think it’s important that kids get the chance to use some of their own money for gifts, instead of just using their parents’ money.”

Enforce Artificial Limits

Since we’re dealing with modest sums like allowances, you don’t want kids spending everything they have on holidays gifts, or feeling inadequate for not being able to purchase very much.

One elegant solution: Set a hard cap on how much can be spent, advises Ron Lieber, the “Your Money” columnist at the New York Times and author of the upcoming book The Opposite of Spoiled.

“See how may things you can buy for under $20, or figure out the most fun you can create for under $20,” he says. “If you put a cap on it that way, kids can be generous in spirit, without spending every cent they have.”

Set Up a Matching Program

To maximize your kids’ giving, consider what many charities do to supercharge donations: Create a matching program.

If your child saves $5 for family gifts, match it dollar-for-dollar, suggests Lieber. Then take it up a notch: If they save $10, contribute $1.50 for every dollar. If they reach $20, match each dollar with $2 of your own.

“That way it ratchets up, so the more generous they’re willing to be with their own funds, they will have exponentially more impact,” Lieber says.

Encourage Non-Monetary Gifting

There’s no rule that says more spending equals more thoughtfulness, despite what all those TV commercials might suggest. As every parent knows, some of the best gifts don’t come with any price tag at all.

But it may require some creativity. One idea from Lieber: A ‘coupon book’ of handwritten gift certificates that family members can give each other. “A dad might give a coupon to drop whatever he’s doing and play a game, or to ditch work once in the next 12 months and do whatever the kid wants to do,” he says.

“Things like that don’t cost anything, and are often incredibly memorable.”

Indeed, when Robin Gorman Newman looks around her house, her most cherished gift from her son wasn’t bought in a store at all. It’s an acrostic of the word ‘Mommy,’ with each letter standing for its own phrase such as “M is for Making Me Smile.”

“It doesn’t get any better than that,” Newman says. “That’s worth a million bucks right there.”

MONEY Kids and Money

Trouble Talking to Kids About Money? Try This Book Instead

parents trying to talk to teenage daughter
Getty Images/Altrendo

A new book hopes to impart important money lessons in just a few words and pictures

Talking to your kids about money is never easy. We have so many financial taboos and insecurities that many parents would rather skip it—just like their parents likely did with them. If that sounds like you, maybe a new easy-to-digest money guide written for teens can be part of your answer.

As a parent, you have to do something. Kids today will come of age and ultimately retire in a vastly less secure financial world. Their keys to long-term success will have little to do with the traditional pensions and Social Security benefits that may be a big part of your own retirement calculus. For them, saving early and building their own safety net is the only sure solution.

Most parents get that. After all, adults have seen first-hand the long-running switch from defined benefit to defined contribution plans that took flight in the 1980s. Yet only in the last 15 years have we really begun to grasp how much this change has undermined retirement security. Now, more parents are having the money talk with their kids. Still, many say they find it easier to talk about sex or drugs than finances.

The big challenge of our day, as it relates to the financial security of young people, is getting them thinking about their financial future now while they have 40 or 50 years to let their savings compound. But saving is only one piece of the puzzle. Young people need to protect their identity and their credit score—two relatively recent considerations. Many of them are also committed to making a difference through giving, which is an uplifting trait of younger generations. Yet they are prone to scams and don’t know how to vet a charity.

In OMG: The Official Money Guide for Teenagers, authors Susan and Michael Beacham tackle these and other basics in a breezy, colorful, cleverly illustrated booklet meant to hold a teen’s attention. The whole thing can be read in an hour. I’m not convinced the YouTube generation will latch on to any written material on this subject. And while the authors do a nice job of keeping things simple, they just can’t avoid eye-glazing terms like “liquidity” and “principal.”

But they make a solid effort to hold a teen’s interest through a handful of “awkward money moments,” which illustrate how poor money management can lead to embarrassing outcomes like their debit card being declined in front of friends or having to wear last year’s team uniform because they spent all their money at the mall. “Kids are very social and money is a big part of that social experience,” says Susan Beacham. “No teen wants to feel awkward, which is why we chose this word. If they read nothing else but these segments they will be ahead of the game.”

The Beachams are co-founders of Money Savvy Generation, a youth financial education website. They have a long history in personal finance and created the Money Savvy Pig, a bank with separate compartments for saving, spending, donating, and investing. In OMG, they tackle budgets, saving, investing, plastic, identity theft, giving, and insurance.

A new money guide for young people seems to pop up every few years. So it’s not like this hasn’t been tried before. Earlier titles include Money Sense for Kids from Barron’s and The Everything Kids Money Book by Brette McWhorter Sember. But most often this subject is geared at parents, offering ways to teach their kids about money. Dave Ramsey’s Smart Money Smart Kids came out last spring and due out early next year is The Opposite of Spoiled: Raising Kids Who are Grounded, Generous and Smart About Money from New York Times personal finance columnist Ron Lieber.

In a nod to how tough it can be to get teens to read a book about money, Beacham suggests a parent or grandparent ask them to read OMG, and offer them an incentive like a gift card after completing the chapter on “ways to pay” or a cash bonus after reading the chapter on budgets and setting one up. “Make reading the book a bit like a treasure hunt,” she says. That just might make having the money talk easier too.

 

 

 

MONEY First-Time Dad

The One Book All New Parents Really Need to Read

Luke and The Giving Tree

Fifty years from its first publication date, The Giving Tree remains a relevant allegory for modern parenting, says first-time dad and MONEY reporter Taylor Tepper.

I try to read one book a day to my son, Luke—which works slightly better in theory than practice.

Luke’s a restless infant, who is as eager to sit still in my lap for 10 minutes as he is to fall asleep. So I spend as much time reading as I do extending the pages beyond his grasp. Often he simply bores of the exercise, and I’m left talking out loud to no one in particular.

One of my favorite stories to read on these occasions is The Giving Tree.

The tiny book—which turned 50 this year—is perhaps the most important book in my life. I’ve loved it ever since I was a boy.

I recently discovered, though, that my adoration of Shel Silverstein’s classic is not universally shared.

What the Book Is About

For those unfamiliar, The Giving Tree is the story of a relationship between a tree and a boy the tree loves. At first, the boy and the tree engage in what everyone would consider to be a healthy relationship. He plays on her limbs, eats her apples, and sleeps in her shade—all of which makes the tree happy.

Nothing stays perfect forever, though, and as “time went by,” their encounters changed. The boy started to grow up and wanted new things.

Rather than playing in her branches, he wanted money and a house and a boat to escape his life. The tree gives up her apples and branches and trunk for the boy’s sake, rendering herself nothing but a stump.

Through it all, the tree is forever happy when the boy returns for his next request and willing to give anything she has. In the end, the boy uses her stump to sit on “and the tree was happy.”

Why It’s So Hated

When I told friends of my affection for the book, they were incredulous: How could I find meaning in a story where one character repeatedly and unrepentantly takes and takes from the other? Was I some kind of martyr?

My friends were not alone in their hatred for the book. In doing a bit of research for this column, I found that many academics and authors, liberals and conservatives alike, find its supposed commentary on parenting distasteful, amoral and depressing.

Dr. Lisa Rowe Fraustino of Eastern Connecticut State University is among the haters. In an essay titled “The Rights and Wrongs of Anthropomorphism in Picture Books,” she writes:

“Representing the symbolic mother as a literal tree may be what makes so many readers blind to the conceptual metaphor staring us in the face: GIVING TREE IS WOMAN. Even if it’s true that patriarchal culture has traditionally cut woman down and used her up, assigning her to the role of mother with her only happiness being with her son, is that an underlying moral we want to keep imparting to young children? Is it ethical?”

A post in The American Conservative says:

“Human love simply doesn’t leave its subjects ‘spent’ in this way; there is death, to be sure, but that’s not a consequence of love in the way that the tree’s destruction follows upon the boy’s exploitation of it.”

An entry in the New York Times’s Motherlode blog writes,

“Parenting should not strip and denude, but rather jointly fulfill. The parasitic part is supposed to end with pregnancy. After that the point is to teach a child to make his own way in the world.”

In The New York Times Sunday Book Review, Anna Holmes, founder of Jezebel.com, wrote,

“Of course, maybe we’re just projecting, but to those who would say that Silverstein’s book is a moving, sentimental depiction of the unyielding love of a parent for a child, I’d say, learn better parenting skills.

Others claim that the book teaches kids to become narcissists—that the world is built for their taking, that they’ll never have to grow up.

Shel himself simplified the book to its essence, but warned readers from thinking the book has a happy ending.

“It’s just a relationship between two people; one gives and the other takes,” he’s quoted as having said.

In any case, apparently you’re a naive sentimentalist if you enjoy the thing.

Why It Should be Loved

Like most times in life, I think I’m right and those that disagree with me are wrong. Those critics that see a dark tale are misunderstanding something fundamental to the nature of parenting.

The infantilization of “emerging adults” is a hot topic these days, as more Millennials decide to return home after college due to a difficult job market, historic levels of student loans and soaring housing prices.

MONEY recently published a long feature on the stress parents face supporting their kids into their mid-20’s and on: Nearly three quarters of parents aged 40 to 59 said they’d helped support an adult son or daughter in the prior year. Half said they provided their child’s primary means of support.

No parent wants to be a stump.

But with all due respect to the critics who say this is a book about kids taking advantage, I think they are missing the point. At the same time, those who say The Giving Tree exemplifies unconditional love undersell its depth.

When Luke was first born, my wife and I were scared. We weren’t scared because we were now charged with caring for a human life (an alien experience to both of us), nor were we terrified that our lives would change forever (though they have.)

The scary thing was that we, of our own will, introduced something into the world that we loved so much. And that newborn would soon be an infant, then a boy, then a teenager and on and on.

Just as we’ve struggled to find ourselves, to carve out our own little piece of happiness in our nearly 30 years, so he would too.

When you consider the weight of that decision, when you realize that you’ve suddenly foisted the world’s beauty and ugliness onto this tiny thing, that he’ll have to reconcile it just as you did, you become scared. (And then he has a dirty diaper, and you move on.)

To me, the Tree does not represent mom or dad, so much as it symbolizes an aspect of parenthood. Parents are obviously more than stumps for their children: We have lives, hopes, dreams, disappointments completely separate and apart from the goings-on of our progeny.

But when it comes to them, when they must grow up and face the world head on as adults, we want to be there to give them apples and branches and anything else we have to make their struggle a little easier.

“The Giving Tree” is beautiful because it lets kids know they’re never alone. I think that’s why I loved it so much as a child.

And that’s why I think all new parents should read the book. It will help you put the task before you in perspective.

Taylor Tepper is a reporter at Money. His column on being a new dad, a millennial, and (pretty) broke appears weekly. More First-Time Dad:

 

MONEY Kids and Money

4 Costly Money Mistakes You’re Making With Your Kids

parents cheering softball players
Yellow Dog Productions—Getty Images

Help your kids become financially literate.

When you’re a parent, it’s easy to get caught up in day-to-day money issues: Which brand of milk is a better value? Is Old Navy having a school uniform sale? How much lunch money is left in the kids’ accounts? But parenting is ultimately about the long view, with the goal of raising capable, self-sufficient adults. Dealing with daily details, we sometimes neglect important money issues that can have a huge impact on our kids — and on our finances — as they prepare for college and adult life.

The mistake: Not talking enough about money

Too many parents don’t talk about money with their kids at all. Others skirt topics they don’t know much about, like investing and debt. Parents are the main source of money information for children, but 74% of parents are reluctant to discuss family finances with their kids, according to the 2014 T. Rowe Price Parents, Kids, and Money Survey. That’s too bad, because ignorance about money can set your kids up to make bad decisions — and eventually pass those bad habits on to your grandkids.

The solution: Make financial literacy a family value

In her book, Do I Look Like an ATM?: A Parent’s Guide to Raising Financially Responsible African American Children, Sabrina Lamb details “the business of your family household.” Lamb, founder and CEO of WorldofMoney.org, says all families should work together on five financial topics: learning, earning, saving, investing, and donating time or funds to causes you value. She recommends a daily diet of business news, occasional meetings between the kids, your banker, and other financial advisors, and support of your older kids’ entrepreneurial goals.

The mistake: Believing in the “Scholarship Fairy”

A lot of parents pin their hopes on pixie dust when it comes to funding their kids’ college educations. Eight in 10 parents think their kids will get scholarships. In the real world, less than one in 10 U.S. students receive private-sector scholarship money — an average of $2,000 apiece, according to FinAid.org.

Even more unrealistic is the myth that great grades and high test scores will lead to a full scholarship. The truth, per scholarship portal ScholarshipExperts.com, is there are many more 4.0-GPA students than there are full-tuition awards, and only one-third of one percent (0.3%) of all U.S. college students earn a full-ride scholarship each year. The time to learn this hard truth is now, not when college acceptance letters start arriving.

The solution: Save something now (or accept that you can’t)

Accurate, real-time salaries for thousands of careers.

There’s a considerable body of literature out there on the merits of 529s, trusts, and other college savings options. Don’t let the details distract you from the real issue, which is that if you want to help finance your child’s higher education, you must save regularly, starting now.

If there’s no money to save, be honest with your kids about it. You can start educating them about ways to finance college through loans and cut costs with community college transfer credit and placement tests. It’s perfectly acceptable to expect your kids to take responsibility for their own higher learning as long as you prepare them properly to face that reality.

The mistake: “Investing” in extracurricular activities

Everyone’s heard about overscheduled kids with too many after-school activities. Not as much is said about the huge dent extracurriculars can put in your budget — hundreds or thousands of dollars each year for lessons, league fees, uniforms, and more. If you’re sacrificing because you think these activities will pay off when your child gets an athletic scholarship, remember that the Scholarship Fairy is rarely seen. The odds of any particular student getting even a small athletic scholarship at a Division 1 school aren’t significantly better than the odds of a student getting a full-ride academic scholarship.

The solution: Treat extracurricular activities as extras

If your child loves soccer, piano, or hip-hop and you have the time and money to spare, that’s ideal. But if it’s a choice between paying for extras and saving for college, save for college. Find cheaper after-school options for now, and don’t apologize for making that decision.

The mistake: Not teaching your kids to negotiate

There’s a big distinction between a child who’s been taught how to speak up when appropriate and one who’s been trained to be passive in the face of authority. The kids who know how to negotiate tend to earn more money as adults, even when they’re doing the same jobs as those who keep quiet. Salary.com found last year that workers who negotiated a raise every three years earned a million more dollars over the course of their careers than workers who simply accepted whatever they were offered.

The solution: Teach your kids how to deal

Show your kids the ins and outs of deal making through trading games, doing some haggling at garage sales, and expecting them to keep their word. You can find specific age-appropriate suggestions here.

By talking about money and business a little each day, being realistic about college planning, and giving your kids the skills to advocate for themselves, you’ll give them long-term advantages when it comes to understanding and earning money. That’s a valuable legacy to pass from one generation to the next.

MONEY

How to Cook a Real Dinner for Your Family…and Finish Before 9 p.m.

Luke Tepper

First-time dad Taylor Tepper asks parents and cooking experts for advice on feeding a family while maintaining your sanity. What he learns: Focus on formats.

Last week, I stood in the first aisle of my local grocery store for a few minutes blinking at a bin of scallions.

I had a cart in one hand, a shopping list in the other, and a podcast playing in my ear. I needed to grab a bunch of groceries, get home and make dinner.

But at some point in the produce section, I fell victim to a momentary lapse of cognitive function, as if I was a computer that had overheated. For a moment, I wished I had simply ordered in Chinese.

A parent’s day is long. Ours starts at 5:30 a.m. with a groggy baby and two sleep-deprived parents, and I don’t return home with dinner’s ingredients in tow until 7 p.m.

To be clear, I genuinely relish the responsibility of providing my family with sustenance. Plus I know there are real benefits to eating real food prepared at home: We can eat more healthfully and save a few bucks in the process.

But my problem is that I’m terrible at planning. I’ll look up a recipe before I head home from work, buy everything on the ingredient list (often forgetting that I have a quarter of the stuff at home), walk home and make the meal. On that day last week when I paused in front of the scallions, for instance, I ended up preparing a baked chicken dish with Kalamata olives, dates, tomatoes with an herb jus and mashed potatoes.

Delicious. Only, my wife and I finished eating close to 9 p.m.—at which point I devolved into a coma.

I know I’m wasting time and money. I need help. I need a plan.

So I turned to a few experts: KJ Dell’Antonia, who as the lead writer at the New York Times Motherlode blog has written on her successes and failures of cooking for a family, my friend Cara Eisenpress whose cookbook and blog BigGirlsSmallKitchen.com document dinner prep in a diminutive Brooklyn apartment, and Phyllis Grant, a former pastry chef whose blog DashandBella.com chronicles meals made with her kids.

The Game Plan

“Obviously I’m a big fan of planning,” says Dell’Antonia. “There’s nothing like realizing that it’s 4 pm and you’ll have to make dinner again tonight—but not only do you know what it is already, but you’ve got all the ingredients and maybe some prep work done. Saves my life every time.”

But what type of plan is best for a busy working parent like me?

Cara told me to forget about specific recipes and think more broadly.

“When planning, think in terms of formats,” she says. “Pasta, hearty soups, stir fries, roasted cut-up chicken, and eggs are all classes of weeknight dinner that are so simple to vary.”

In other words, rather than shopping for a pasta dish on Monday (like Lemon Fettuccine with Bacon and Chives) and then returning to the store on Tuesday in search of ingredients for for another (say Orecchiette Carbonara with Scallions and Sun-dried Tomatoes), plan on whipping up two pasta dishes and a chicken entrée over the next few days and then map out recipes from there. That way you’ll buy overlapping ingredients.

At the same time, though, be mindful of planning too far ahead, says Cara.

“Don’t shop for the seven nights’ worth of formats—you’ll waste food and money if something comes up,” she advised. “Better to plan out fewer and then grab a few miscellaneous staples that could turn into dinner as needed, like extra onions (caramelized onion grilled cheese), a box of spinach (lentil soup with spinach), or some bacon (breakfast for dinner).”

Grant even suggests preparing more than one night’s worth of a neutral protein like chicken, which she notes “can be a life saver, You won’t get sick of it because you can dress it up with some many different flavors and techniques.”

Most importantly, Cara said, make sure you have a stocked pantry—including olive oil, vinegar, mustard, salt, rice, pasta and cheddar, among others—to augment whatever recipes you’ve chosen.

The Defense Formation

After you’ve figured out the formats and recipes you’re interested in for the next couple of days, it’s time to actually buy the food.

But the grocery store is like a casino: The thing is designed to have you spend more time shuffling along the aisles so that you look at more food. They even mess with the music (see #19 here).

If you’re not careful, you’ll arrive home with a beautiful jar of jam that will sit in your fridge for the next six months. (Guilty!)

That’s why Dell’Antonia recommends shopping with a list, “and not buying anything that’s not on it,” says. “Ridiculously, I save money by sending my babysitter to the grocery store when I can. Her time costs me less than I’d spend in ‘Oh, look! Halloween Oreos!'”

Also, look for items that will make your cooking life easier, says Cara. “Don’t shy away from shortcut ingredients. Find brands of tomato sauce, salsa, stock, pre-washed spinach, ravioli, etc. that you like: each of those gets you a third of the way to dinner. There are some vegetables I think of as shortcuts too because they require so little prep: a potato you can rinse and then bake, and my go-to, fennel, where you just remove the outer skin, quarter what’s left, and roast to get a super simple serving of vegetables.”

Kickoff!

Time to practice my new strategy.

I replenished up my pantry—I was a little low on olive oil and pepper—and decided to prepare Chicken with Figs and Grapes from Grant’s blog. I even bought a little extra chicken and stock for some soup later in the week (guess I was in a chicken format mood.)

Her recipe calls for about a dozen different ingredients, but since my pantry is already full, I only need to pick up the chicken, anchovies, figs and grapes.

I’m in and out of my local grocery store in five minutes (without jam!) and before long my kitchen is humming right along.

The dish is relatively easy to prepare and after a little less than 30 minutes in the oven, my wife and I have a meal for tonight and tomorrow. I arrived home by 7:15pm and we finished eating around an hour later, about 45 minutes quicker than normal and nearly a Tepper weekday record.

Our stomachs were full, the kitchen relatively clean and my brain didn’t wither like a raisin during the process.

A sense of peace had been restored in my life.

Adulthood can be difficult—after a long day of work, it often just feels easier to order a delicious Korean BBQ kimchi burrito than expending the time and effort to put together a meal. So sometimes the Teppers do just that.

But as Cara says, “Cooking at home is one of the best parts of being a grown-up. You get to eat exactly what you want when you want it. So, if you like to eat, you like not spending all your money, and you like putting relatively healthful food in your body, you should probably learn to cook.”

And if you’re going to do it, plan ahead.

Taylor Tepper is a reporter at Money. His column on being a new dad, a millennial, and (pretty) broke appears weekly. More First-Time Dad:

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