Posts for May 2011

Buying Your Teen’s First Car

By Rebekah Johnson

Everyone remembers their first car. Loving the freedom of the open road, getting your driver’s license, feeling in control, being behind the wheel by yourself for the first time. It’s an exciting feeling for the teen in your life, but how much should you spend on a car for your inexperienced driver? Here are some reasons to think twice before going out and buying your 16-year-old a new car:

1. New cars depreciate quickly. Buying a used car could be a better option. According to Dave Ramsey, most vehicles lose about 60% of their value in the first four years. Buying a used car is easier on your budget and will help save for more important things (i.e. college) for the future. Also, the type of car you purchase will have a direct impact on the cost of insurance. That cool red Trans-Am may not net the best rates from the insurance company. Consider that blue Civic. May not be the hippest car around, but will save a bundle in insurance and serves the purpose of getting from point A to point B.

2. Teach responsibility and work ethic by having the teen pay for or help pay for the car, the insurance, or the gas. Or a combination of all three. Because the cost of insuring teens is so high, it is a big motivator for your teens to understand the costs along with ways to help reduce the cost. Maintaining a high GPA is an example of a way to reduce their insurance costs. When your teen has personally invested in their own vehicle, they will be more likely to take better care of it. This also teaches teens about the importance of budgeting for high-ticket items like an automobile.

3. Teens are at a much higher rate for car crashes. In 2008, about 3,500 teens in the United States aged 15–19 were killed and more than 350,000 were treated in emergency departments for injuries suffered in motor-vehicle crashes. Young people ages 15-24 represent only 14% of the U.S. population, but they account for 30% ($19 billion) of the total costs of motor vehicle injuries among males and 28% ($7 billion) of the total costs of motor vehicle injuries among females (Centers for Disease Control and Prevention). Even minor accidents can cause insurance rates to skyrocket, so make sure your teen practices safe driving.

Whichever car you purchase, make sure it’s a safe one. A properly inspected used car can still be very safe, just make sure that the airbags and seatbelts still work. Have a used car inspected by a reputable dealer or mechanic to make sure it is in proper working order.

Once you’ve found “the” car, look for discounts on car insurance and teach your teen ways to save fuel costs. And above all, remind your teens to keep their eyes on the road and safe travels!

5 Ways to Cut Teen Summer Travel Costs

By Mike Morland

According to the National Consumers League, 70-80% of teens will have some type of job during their high school years. Of those, 50% will work more than 15 hours a week during the school year. After months of saving, many teens anticipate spending part of their summer traveling with friends. However, it’s important for teens to plan trips as wisely as they save for them. Whether it’s an overnight camping trip or a week on a coastal beach, smart planning is equally important to financial success.

1. Travel When Others Don’t. Many teens like the idea of a weekend flight, but according to Rick Seaney of the travel website FareCompare.com, one of the best day to fly is Wednesday. If your teen can avoid traveling on a Sunday, it could save them some major cash. Sunday fliers are often hit with a “peak air traveling surcharge,” which can be up to an additional $30 each way.

2. Split the Cost. If your teen is planning on staying in a hotel, encourage them to room with friends. According to a recent Travelocity.com search of the popular Myrtle Beach destination, many hotels can accommodate from one to four occupants without major price fluctuations. If your teen doesn’t mind bunking up, it could save them several hundred dollars.

3. Take the Bus. If you’re concerned about your teen driving long hours, you’re in luck. One of the newest and best kept traveling secrets is the MegaBus. Since 2006, MegaBus has offered lost cost travel with free Wi-Fi to all its passengers. According to megabus.com, a ticket from Ann Arbor to Chicago is $15 one way or $30 round trip.

4. Second Choice isn’t Second Rate. If there’s a place your teen would love to visit, but it’s just too expensive, try a nearby alternative that’s less expensive (because it’s not a tourist trap). Some of the best vacation destinations are the ones less traveled. Advise your teen to use the internet as a tool and do some homework with them on alternative destinations. Plus, any word of mouth recommendations from a reliable source could save you some money over a travel agent.

5. Set a Budget. As a parent who’s traveled before, express the importance to your teen about setting a budget and sticking closely to it. Help them manage several expense categories including things such as supplies, food, accommodations and even souvenirs. Helping your teen set up an itinerary of what they are doing on what days can help budget planning go more smoothly.

Helping your teen plan their trip can be a challenge. However, with a little advice and guidance now, you are preparing them for a lifetime of smart financial traveling.

The Crisis of Credit Visualized – A Great Way to Explain the Mortgage Fiasco to Your Kids

By Bob Masterson

I was watching the news the other night and the topic was the continuing slide of the housing market with foreclosures expected to continue to rise into 2012. I know…more upbeat economic news. One of my children asked what foreclosures were and as I was trying to explain it to him I could see I was creating more questions than answers. But as we say so often in the FamilyMint blog, you have to take advantage of every teaching opportunity that comes along.

I remembered a video I saw at a recent conference entitled “The Crisis of Credit Visualized” by Jonathan Jarvis. Interesting enough, Jonathan created this video as part of his thesis work in exploring the use of new media to make sense of complex topics. He did an excellent job here, as this eleven minute video lays out the cause of the financial meltdown in simple animated terms that even my child could understand. So if you or your own inquisitive children have ever wondered how we got into this financial mess in the first place, pile up the family in front of the computer and watch this informative video.

Top 10 Money Tips for Parents

By Jeff Eusebio

“But why do I have to wait two weeks?” said my 12 year old son. “O, come on, please! I really want it and I won’t want anything else for a long time!” This was almost a weekly ritual in my house as my son would look through the Sunday ads for good “deals.” We had tried many things, including a mandatory two week waiting period, but nothing seemed to really help.

This is why we created FamilyMint, and within it we built a system of goals and delayed gratification that changed my kids’ habits once and for all. In the process, through our own families and users of FamilyMint, we have learned what works. Here are my top 10 tips:

“What we need to learn we learn by doing.” – Aristotle. Experts say there are three learning styles—listening, seeing, and experiencing—but all of them are reinforced by doing what we learned over time. Children learn by doing, so don’t do for your kids what they can do for themselves.
Personal responsibility is key. Give kids responsibility to manage a particular expense category with their allowance (such as entertainment). Through this they will experience what it means to have a budget, plan ahead, and take ownership for decisions.
Start early. Most financial literacy education is provided in high school, if provided at all. This is too late. A 5 or 6 year old can pick up the basics of money and we’ve seen them thrive first hand when given the opportunity to manage their own money.
Set goals. This is fundamental to getting a child comfortable with delayed gratification. Whining for things is replaced by a new conversation: “You want that iPod? Sure… just create a goal for it and you can buy it once that goal is reached.”
Don’t spend it until you have it. This was the societal norm prior to the advent of easy credit and ties in well with tip #4. Money gets more people into trouble because it’s not looked at as a limited resource. “If I have credit, I can get it.” Waiting until you can pay for a purchase outright is a good habit to start forming early, because the credit habit can be very hard to break.
Pay yourself first. This popular saying is easy to remember but can be hard to put into practice. Make it a natural instinct for kids by having them save a portion of every dollar they receive for long term goals. Elizabeth Warren, selected by President Obama for the new Consumer Financial Protection Bureau, wrote a book called All Your Worth in which she suggested a 50/30/20 distribution. 50% of your money should go to needs, 30% to wants, and 20% to long term savings. This can be done manually by kids using envelopes or 3-walled piggybanks, or automatically with the FamilyMint Savings Plan.
Motivate to save. Incentives are a great means of motivation and driving behavior. Interest rates, although not very motivating today at < 1%, provide incentive to keep your money in an account. Companies match their employees 401K contributions to encourage saving for their retirement. Parents can do both of these with their own children by providing motivating interest payments so kids can learn about the time value of money and by matching their kids deposits towards long term savings goals like college. FamilyMint is designed to allow parents do both of these easily and conveniently.
Create teachable moments. Kids learn many of their money habits from their parents. Parents just need to know the basics to set the right foundation for their kids, including the importance of savings and setting goals. Parents can help create teachable moments by pulling their kids into their own money-related conversations or perhaps letting them help pay the bills. Even if it’s just opening the envelopes at first, kids can actually enjoy this! The key is letting kids know there are obligations that must be met on a monthly basis as well as unplanned events that need to be budgeted for. Open a youth savings account and walk through the statements together when they arrive. A few weeks after your kids make a purchase, ask them how they feel about the purchase now. This will help them reflect on their own behaviors and alter course down the road.
Let mistakes happen. Mistakes are teaching and learning opportunities. Let them happen. Your child may learn a much better lesson from spending their own money on something unnecessary than you telling them it would be a waste of money. It’s also much better to let mistakes happen when they are young and the impact is smaller.
Don’t be a money tree. End the Age of Entitlement at your house. Find ways for kids to work for money. It’s good for them! I’ve told my kids to find something around the house that needs to be done and then make me an offer. When they have worked for their own money they will think much longer before handing over their cash for a purchase.

Motivate and encourage kids to build financial skills and habits. These skills and habits will serve kids the rest of their lives. Soon you’ll have confident, money-smart kids!

A Really Really Simple Way to Explain Supply & Demand to Kids

By Jayne Berkaw,

One of my blog posts last month was about seizing teachable moments in your child’s early money-making ventures (lemonade stands, etc.) to drive home important business concepts like planning, marketing, pricing, etc. An integral part of your child’s business education is an introduction to the power of Supply and Demand.

Why does your child need to know about supply and demand? Because unless you live on a deserted island, it affects practically everything in your life! From the price of lemonade to how many Beanie Babies you can collect, to how many summer helpers the pizza store needs. The forces of supply and demand are everywhere – so kids need to understand the concept early in order to live a reality-based existence.

Start out with supply. If the toy store has 10 Johnny Racer Glow-in-the-Dark Water Slides, that is their supply. Then there’s demand. If 15 people want Johnny Racer Glow-in-the-Dark Water Slides right now, then that is demand. Now ask your child how they would feel if they really, really wanted one of those water slides and they couldn’t get one because the store ran out of its supply. Would they maybe pay more for one at a store that had some left?

Since the store knows that this summer’s hot toy is Johnny Racer Glow-in-the-Dark Water Slides, and people really, really want them, they will also pay more for it. And they will have to keep paying the higher price until something cooler comes along and demand comes down along with prices, OR until the store orders enough slides to meet the demand. Of course if they order too many, they will be in the uncomfortable position of owning too many slides and having to lower the price just to get rid of them! Here’s where you can actually talk about the job of buyers for stores and the skill it takes to match supply with demand in order to make money and stay in business. Is this a job they might want someday?

You can also note the role of the Dollar Store in reselling goods that other stores have lost sales on by misjudging demand.

To get your kids thinking about supply and demand, play “what if” games with them. If they love peaches, ask what they think would happen if there was a frost in Georgia and it wiped out the early peach crop. What would happen to the peach supply at your grocery store? Would the price go up? Why?

If your family takes a summer vacation, bring the kids into the discussion of your own financial planning by talking about the cost of vacation homes or resorts, and how the finite supply of lake houses and hotel rooms and the increased demand during peak seasons leads to…What?

Daily life presents us with innumerable examples of the power of supply and demand. Out of this come lessons on the importance of saving for things you really, really want, the distinction between want and need, being a smart consumer, etc. Kids get lessons in basic economics in most grade levels, but there is no replacing the lessons that you can provide with a quick, “Hey did you know…” or “What do you think about…” The goal is to help kids navigate this complex world, so be their mentors just by living it with them!

Extra Bucks for Your Kids This Summer

By Bob Masterson

Are your kids looking to make few extra bucks this summer for a new bike, camp, vacation or just to sock away the savings? There is no better time than summer to encourage your kids to be creative and earn some extra money around the house or around the neighborhood. I’m going through this process now with my own kids. Besides keeping them out of trouble, running a business no matter how simple can help build skills that will carry with them for the rest of their lives.

Recently Jayne wrote a blog on the ABCs of starting a business, which provides some great planning tips for getting a business up and running. To build on this, I wanted to share a fun video that talks about the importance of location. Sometimes this means taking your business to the people instead of waiting for the people to come to your business.

There are a number of other great episodes produced by The Secret Millionaires Club that kids will enjoy watching that talk about the different hurdles of running a business, even a ‘kids business’. Who better to give the kids some tips and advice on earning extra cash than Warren Buffet. AOL Kids working with Warren Buffet developed The Secret Millionaires Club to teach kids about business and investing. Besides videos, there are also a number of fun money games and the ability for your kids to get some virtual experience investing in the stock market using Buffet Bucks.

So have your kids set up a savings goal in FamilyMint and apply some creativity, ingenuity and elbow grease to make it happen on their own.

Motivation Through Appreciation

By Jeff Eusebio

“I consider my ability to arouse enthusiasm among my people the greatest I possess, and the way to develop the best that is in a person is by appreciation and encouragement. There is nothing else that so kills the ambitions of a person as criticism from superiors. I never criticize anyone. I believe in giving a person incentive to work. So I am anxious to praise but loath to find fault. If I like anything, I am hearty in my approbation and lavish in my praise.

In my wide association in life, meeting with many and great people in various parts of the world, I have yet to find the person, however great or exalted his station, who did not do better work and put forth greater effort under a spirit of approval than he would ever do under a spirit of criticism.”

– Charles Schwab

Charles Schwab was renowned for his ability to motivate others to do their best work, and he attributed this skill to his ability to find things to praise and appreciate even when most others would find fault. This works in the family too, and I have a sincere desire to get better at it myself. I think I’m never a better father than when I remember to do this with my own children. How much better off would we be if we remembered to do it all the time! Principle #3 in FamilyMint Fundamentals is Motivate. Motivate and encourage to build new skills. Build skills to create confidence. Soon you’ll have confident, money smart kids!

Laura S.

You won’t have to worry about remembering to give the kids their allowance, PLUS you keep track of how they spend their money so you can use it as a teaching tool. Finally, it completely eliminates the “Mama & Papa are an endless source of money.” Either the money they want to spend is in FamilyMint or not. If they don’t have it, they must save.

Lori F.

This is a very family friendly, no hassle way of keeping up with our children’s money. The kids have a deep interest in keeping up with where there money will be spent and how much more they can “earn.” There are no more loose bills belonging to “who knows who” lying around because they immediately want to deposit their money into their accounts.

Giving Back, Putting Money into Perspective

By Mike Morland

Teaching a child the importance of giving back to those less fortunate may be one of the most valuable lessons they can learn.

Any parent can attest to their child going through the “mine” stage. It’s human nature from its earliest stages to want comfort and security in their possessions and surroundings. However, as a parent, it’s important to teach your child the significance of giving back.

It’s not always easy to explain to a child how “need” and “want” are two very difference necessities to life. Even though your child may beg and plead that they need that new toy, it’s important they know that even though they want it, they don’t really need it. One of the best ways to encourage giving behavior is by putting it into perspective.

Perhaps your child wants a new, expensive toy. Explain to them that as much as they want the toy, there are children in the world that can’t afford any toys. Offering to buy them a different (and less expensive toy) shows them the importance of not being selfish. Also, propose to your child that together you can buy an inexpensive toy with the difference and donate it to someone less fortune.

This lesson curves selfish behavior into a selfless act and building a charitable heart. By including your child in the decision to take less in order to give more, it allows them to understand more clearly why they don’t need everything they want.

As your child grows older, lessons such as these can be a springboard into smart financial decisions. Donating old toys, clothing and other household items show the value of items to different people. By teaching your child to be efficient with their belongings, they may be more inspired to make the most of the money they have.

There are many ways a child can get involved and give back as they grow older. Organizations such as St. Jude Children’s Research, and Habitat for Humanity to name a couple offer opportunities for your child to get involved, give back and put the world into a better perspective. Talk to your child and find out what’s important to them, then set up a charity goal within FamilyMint so the idea of giving is always in front of them.

Giving back teaches your child the skills of being able to do more with less. This lesson will roll over into many aspects of their lives, including a true understanding of financial needs and wants. The better they understand this difference, the more likely they will make smart financial decisions as they get older.

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