What is the best way to help your child become financially successful?

A. Make sure they attend an Ivy League school B. Pay a head hunter to find them a higherpaying job C. Teach them about money early and often

How to Raise Money-Smart Children
Rule #1 - Make sure you talk about money as a priority. But how?
Today’s session will… • Show you the challenge you’re up against • Offer some suggestions to get you started • And ultimately, make you really start to think about getting you and your family’s financial future in place

The Other Dreaded Subject
Does talking about money to your children make you uncomfortable?
• You’re NOT alone – money may even be more difficult to talk to your children about than sex and drugs. – In a survey, parents said they felt more comfortable discussing sex than savings with their kids.*

* 2008 Parents & Money Survey Findings, Charles Schwab, March 2008

Why It’s Hard to Talk Money
• These are some of the reasons parents delay or avoid talking to their children about money: 1. I don’t have good money habits. 2. My parents never talked to me about money. 3. Isn’t money the root of all evil? 4. Money is just to complicated a subject for me to discuss.

They’re Counting On You
• Nine states require financial literacy testing.1 • Only seven states require students to take a personal finance course to graduate.1

1

National Council on Economic Education, 2007

The Price of Financial Illiteracy
• One out of three teens know how to read a bank statement or balance a checkbook.  Only one in five know how to invest. 1 • 56% of students carry four or more credit cards, with an average balance of $2,864. • U.S. foreclosures were up 75% in 2007 compared to 2006.

Charles Schwab Teens and Money, 2007 Survey Washington Post, 2007 citing student loan lender Nellie Mae. 3 RealtyTrac.com. 2008
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The Price of Financial Illiteracy
• JumpStart Coalition For Personal Financial Literacy • High school seniors still lack fundamental knowledge about money • Scores are dropping

– Average score was 48.3%, down from 52.4% in the 2005-06 survey – Only 17 percent felt that stocks are likely to have higher average returns than savings bonds, savings accounts and checking accounts over the next 18 years – Only 40 percent realize that they could lose their health insurance if their parents become unemployed.
• Never happened over 18 year period in history

Source: JumpStart Coalition for Financial Literacy Survey, April 2008

Show Them the Money
• Money is an important part of life – use it to teach life’s lessons. – Adding and subtracting – Independence and making good choices – Setting goals; delaying gratification – Empathy and sharing – Interacting with others; social skills • Determine your values about money; make sure your actions are consistent.

Show Them the Money
• Create an open dialogue to help instill positive financial attitudes and behaviors. • Turn everyday experiences into teachable money moments.

Money Doesn’t Grow on Trees
• Start teaching before spending. • Make it a family affair – Include all members in money discussions and activities, as appropriate for their age. • They’ll fall…but help them up, and teach – Allow children to make decisions. – Mistakes now with small amounts of money will help avoid more costly missteps later.

Learning Good Cents
• Each stage in your child’s life presents new challenges and opportunities for helping them learn to make good financial decisions. • Like measuring growth in inches, start setting goals for your child and track their financial progress.

The Valu e of Mone y…
Age-Appropriate Lessons

Infants & Toddlers
(Birth-2)
• Time is on your side – take advantage! • Looking to Uncle Sam • Think long-term – College funding – Investigate long term saving options – Set up an automatic savings plan • Help protect their future

Infants & Toddlers
(Birth-2) Activities:
• Lead by example • As you talk with your child to develop their language skills, incorporate “money talk.”

Preschool Years +
(Ages 2-6)
• Making Sure Your First Steps are in Place • Practice putting coins in a Piggy Bank • Open a general savings account • Set up a 529 plan • Allowance Ready? – All depends on you – How much? • Teach good habits by example

Preschool Years +
(Ages 2-6) Activities:
• Turn reading practice into ‘reading and money practice’ • Play grocery store/bank with play money. • Talk about how family members work to pay for food and clothes – bring your child to work. • Talk about products on TV and their costs

Tweens

(Ages 7-13) The real lessons begin… what you can do:
• Start with goals; focus on the long term. • Educate about the concepts of earning, saving, spending, donating and investing. • Foster your child’s social responsibility. • Allowances • 401 K(ids) – matching programs.

Allowances: The Issues
When to begin?
• It depends on you and your child – the idea is to start good habits early.

How much?
• Some parents match the child’s age or year in school (50¢ or $1) • Cover their costs • Chores?

Allowances: The Issues
How often?
• Younger children – weekly • Teens – bi-monthly

How long?
• When your teen starts to earn money at a part-time job, begin reducing your financial support.

Allowances: The Issues
Allowances Tied to Chores – controversial Advantage – Kids learn the connection between money and earning it. An allowance is earned, not entitled Disadvantage – If chores aren’t done, there’s no money management lesson. Where do you draw the line for chores?

Additional Allowance Tips
• Don’t cave – giving advances will undercut the idea of a budget. • Pay on time – it teaches your child that commitments have to be kept. • Be flexible – give an allowance bonus or raise to reward your child for being responsible with their allowance.

401 Kids
• Match your child’s contribution up to a set-level • Kids can’t access it until agreed upon age (ex: 18, 21) • Invest money in savings, CDs, other investment options

Younger Tweens
Activities:
• Explain how a bank works; track savings interest. • If you give an allowance, teach your child how to use it. • Compare prices/quality while shopping. • Discuss wants vs. needs.

Tweens

(Ages 7-13) Earning Your Pay
• Assign unpaid tasks to all family members. • Pay for extra household jobs and talk about expectations for those earnings. • Help them find pay for outside work. • Show how to keep track of earnings and expenses for jobs. • Pay Yourself First

Tweens

(Ages 7-13) Learning to Spend
• Allow your child to buy something you know they won’t like; talk about making a better choice next time. • Have them help balance the checkbook. • Usage of cash vs. credit – The Magic Money Machine Myth

Is that Credit or Debit?
• Kids know ATMs give out money, that’s about it – they’re vulnerable. • Don’t make the leap from savings to credit. • Cash is the best learning tool. If you do want to give them plastic, start with a pre-paid debit card.

Tweens

(Ages 7-13) Saving and Investing
• Talk about the amount to be saved and what it will be used for. • The power of compound interest. • Exploring investments – what are they, how they work

Tweens

(Ages 7-13) Borrowing activities:
• Don’t lend more than your child can realistically repay and forgive the loan. • Draw up a contract for any loan with your child; set up rules for interest. • Talk about how to save for something instead of borrowing money.

Tweens

(Ages 7-13)
Help Others Through Donating • Explain that sharing can include time and resources or skills, not just money. • Volunteer together or initiate a community project. • During special occasions or tragedies, remind about donating to help those who are less fortunate.

High School Years
(Ages 14-18) What you can do:
• Open a checking account; compare options. • Encourage their entrepreneurial spirit. • Set up a financial plan to meet short- and long term goals. • Continue saving for college; match savings

High School Years
(Ages 14-18) Activities:
• If they have a job, determine what they will pay for vs. what you will contribute. • Increase financial responsibilities (e.g. grocery shopping, planning/budgeting for a family vacation). • Help them fill out income tax forms. • Teach how to set and stay within a budget.

High School Years
(Ages 14-18) Activities:
• Explain protecting against risk – life and auto insurance, etc. • Encourage researching major purchases. • Talk about safe debt levels. – Calculate how long paying off a large debt at the minimum payment would take – Discuss college financing options

The College Years
(Ages 19-22) What you can do:
• Address dangers of credit cards • Caution about preserving savings • Encourage to “pay yourself first” • Explain good and bad debt • Help with asset allocation

Financial Yardstick
• Have you started talking about money? • Are you setting a good example? • Have you helped your child set up a plan for saving, spending and sharing? • Is your child involved in discussions about money? • Do you give praise for good decisions?

Financial Yardstick
• Are you letting them make mistakes? • Have you started a college fund? • Do you have short- and long-term goals for teaching your child about money? • In need easy to follow-suggestions? • www.free-retirement-plan.com

Ou r F utur e Our Children Our Responsibility

Q A

Caution: Moms & Daughters
• Women are achieving significant success and wealth but still face a number of financial hurdles.

Did you know…?
• Based on demographic information alone, it’s likely women need to be more financially prepared than men. But why?

Reality Check
• Women: – Live longer than men1 – Earn about 25% less than men2 – Leave the work force for longer periods and are more likely to work part time3

National Center for Health Statistics, 2008 U.S. Census Bureau, 2007 3 Maternity Leave and Employment Patterns of First-Time Mothers:, 1961– 2003, Feb. 2008
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Mistakes Smart Women Make
• Not getting involved in family finances • Not preparing for life’s changes • Not setting financial goals • Not making investments • Procrastinating savings • Getting into debt

Break the Cycle
• Get involved in family finances and understand your own financial picture. • Help your daughter understand that she will need to plan for her own financial future. • Start a saving sooner, rather than later, is the best way to prepare for life’s changes and longer life spans.

Slotted-Piggy Bank Approach
• A four-slotted piggy bank can be a helpful tool to teach the basics of asset allocation. – Penny the Pig • Helps teach that money has four uses – saving, spending, investing and donating. • Tape a picture of “a want” to the pig to make the connection with setting a goal and saving for it.

Answering Tough Questions
Q: Why can’t I…?
Rather than say “we can’t afford it,” or “because I’m the parent,” be specific and explain your reason.

Q: Are we poor or rich?
Find out why your child is asking. Use the question to explain how you’re managing your money.

Answering Tough Questions
Q: Can I have more money?
Rather than just saying, “no” (which should be part of your answer), discuss what went wrong with their budgeting.

Q: Why does my friend get a bigger allowance?
Rather than giving a raise, talk about your family’s financial goals and overall budget.