UPDATE: The winner of this book, chosen at random using random.org, is Leanne! Congrats!
Today we’re chatting with Mary Hunt, author of Raising Financially Confident Kids. She and her publisher have graciously offered to send a free copy of her new book to one lucky winner. So to enter, just leave a comment at the end of this post, and I’ll select a winner using random.org next Friday, Sept. 7. The winner will have three days to respond to my email with a mailing address before I select a runner up.
Now, without further ado, let’s hear what Mary has to share with us!
At what age should you begin to talk to your children about money? Is it ever too early to start the conversation?
MARY HUNT: It’s never too early. Children learn through imitation. They learn what they see and what they hear. Your babies will learn the language you speak to them starting long before they can mimic it back to you. Your babies are learning from what you say and the things you do, beginning on the trip home from the hospital!
From a very young age let them see you treat money with respect, always saving some. Talk about how you don’t spend money you have not yet earned, that you give some away out of gratitude and charity for others, and you take good care of it by keeping it in a safe place. Model and speak openly of the difference between wants and needs. Let them see you dealing day to day with cash. Show them how saving money a little at a time, all the time, accumulates. When you make a decision to spend, that money is gone.
As they mature, teach more advanced concepts such as “opportunity cost,” (when I spend my money, I lose the opportunity to spend that same money on something else later) and “compounding interest” (when earning interest or growth, money begins to earn interest and on and on).
What are some specific activities you can do with your kids to show them the true value of money?
Talk to your kids! Explain what money is, how there are “stand-ins” like a checkbook, a debit card and a credit card (for older children), and the ways these stand ins can be abused and get people into financial trouble.
Sit with them as they watch TV, making sure they know where the show ends and the commercial begins. Your days are filled with teachable moments on money. Ask them what they think the commercial is trying to sell. Prestige? Power? Talk about brand loyalty, impulsive decisions and the consequences of making a dumb choice. Make family rules that require your children to save and give as part of their money management.
Give them money to manage on their own so they can make their own independent financial decisions … then keep your hands off and mouth shut as they learn they must also live with the consequences.
Teach toddlers to count using coins. Show them how we keep money safe in a bank, not laying on the floor, carelessly dropped into a drawer or even into the trash. Talk about how people earn money, how they trade their time, energy and talents for a paycheck. Get into the concept of banking as children mature and can understand that.
What are the three steps to debt-proof kids? How can parents customize each step for their family?
1. Tear down attitudes of entitlement
2. Develop financial intelligence
3. Neutralize the glamour of easy spending
Attitudes of entitlement come when kids are overexposed to commercialization, over-gifted by adults and allowed to have things they have not worked for. The way to nip these attitudes in the bud is to stop exposing kids to so many commercials, catalogs, and stores. Be careful not to over-gift. It’s good for kids to yearn for things. Make them wait, show them how to save first and spend later.
Financial intelligence comes with knowledge. Even little ones can learn to count coins and to keep them safe in a bank. As kids get older they can learn concepts of banking, interest, opportunity costs, the difference between saving and investing and so on. Make it part of everyday life to talk about money, where it comes from and how we must be very careful with how we use and spend it.
Easy spending is an attitude kids get from their parents. Neutralize this by making spending a big deal, rather than a casual thing that has no meaning. Make saving for the family vacation a family affair. Let the kids know how much those tickets will cost and then let them assist with budgeting the vacation cash. Easy spending comes via consumer credit. Teach the kids the dangers of amassing debt and how difficult it is to pay it back.
My husband is deployed and for the first time I’m in charge of our finances. What are the basics of creating a budget?
A budget is simply a method by which you tell your money where to go. So before you even cash that next paycheck, sit down with paper and pencil. The amount of that paycheck is the amount of money you have to manage. Think of each dollar as an “employee” who needs a job to do.
Now look at your financial needs for the period between now and your next paycheck. You need to buy food. So how many of those dollars are you to going to assign to pay for food? Deduct that amount from the total to see how much you have remaining. Good. Now what are your other bills or needs? Do the same by assigning a certain number of dollars to each of those financial needs. If your needs exceed your income, you have a budgeting problem. You must now prioritize. Determine what is most critical, and which of those bills/needs/wants can wait. It’s good you are using a pencil because you may need to do this over and over until your payments/bills/needs/wants do not exceed the amount of your paycheck. Once you have this “balanced,” now deposit that paycheck and start doling out the money according to your written Spending Plan.
Next, you need to supervise your “employees” to make sure they go where you directed and do the jobs you have assigned. The best way to do this is to write it down as the money is spent. At the end of the period, compare your Spending Plan with your Spending Record. In a perfect world, they will match. Realistically, it takes a while to get that good at budgeting. But keep at it. Every month or pay period you’ll get better and better at it.
Mary was not always a personal finance expert, but lived through financial crisis and her family emerged with a healthier view on the value of money and the danger of debt. It took them 13 years to pay off over $100,000 in unsecured debt, and Hunt is on a mission to help other families learn from her mistakes.
Hunt is an award-winning and bestselling author, syndicated columnist and sought-after motivational speaker, who created a global platform that is making strides to help men and women battle the epidemic impact of consumer debt. She is founder and publisher of the interactive website Debt-Proof Living, which features financial tools, resources and information for her online members. Her books have sold more than a million copies and her daily newspaper column is nationally syndicated through Creators Syndicate, where it is enjoyed by hundreds of thousands of Everyday Cheapskate readers. Hunt speaks widely on personal finance and has appeared on shows such as Good Morning America, Oprah, Dr. Phil and Focus on the Family. She and her husband live in California.
For more information visit www.debtproofliving.com and follow her on Twitter @debtproofliving.