National Bank of MomWhen I first started teaching J about money, we used cash and envelopes. After a few years, we switched to FamZoo’s prepaid cards and last year when he turned 13, we opened regular checking and savings accounts at our credit union.
J has also been using YNAB for two years now, but I wanted to give an update on the entire process and how easy it can be for your teenager to manage their money.
I don’t know about you, but the past few months have been really hectic. We’ve been busy with work, school, activities and holidays.
Sometimes when you’re so frazzled, it seems like it will never end. But January is upon us — a chance to start fresh, scale back and go into the new year feeling more calm.
I’ve been circling around the idea of a no-spend month for a few weeks. A no-spend month is a month (or any amount of time) where you don’t spend any money outside of necessities. You still pay your rent or mortgage, car payments, debt payments, utilities, etc. but you cut out the discretionary spending.
When I first mentioned this to J, he was a little confused — a no-spend month where you actually DID spend money didn’t make a lot of sense. (Kids can be very literal.)
I explained that there’s almost no way to not spend ANY money for a month (aside of pre-paying everything I guess, which may be difficult to do), but that the sentiment was really to cut back on all the extra STUFF, which in my mind leads to more stress.
Last year my dad passed away.
He was a great guy, an amazing dad and the reason I became so interested in personal finance. (One of my first posts was about important lessons I learned from my parents.)
In honor of him, I’d like to recount some of his philosophies on money and life and how he walked the walk every day.
My dad was BIG on saving. One of my earliest memories was a coffee can in his roll-top desk where I’d deposit half dollars that his Uncle Walt would give me at church every Sunday.
In college, he had me open a Roth IRA (they had just come out!) and told me to put money in every month. Even if it wasn’t a lot, that was okay as long as I contributed regularly. In time, when I had more money, I could (and should) contribute more.
You don’t have to spend it all. You’re allowed to keep some of it.
My Dad
Kids ask great questions, if you’re paying attention. Here are three questions that my 11-year-old asked recently about credit and loans.
One of the earliest conversations to have with kids is the difference between a debit card and a credit card. This is a difficult concept for kids because they often look exactly alike.
A debit card is tied to a checking account (an account at a bank that normally doesn’t earn interest). You can use your debit card to make purchases only up to the amount available in the checking account. If you have $500 in your checking account, you’ll be able to spend up to $500. (Prepaid cards like FamZoo work in a very similar fashion.)
A credit card isn’t tied to a bank account; it’s basically a loan. When you’re approved for a credit card, the credit card company will say you can borrow up to a certain amount of money — this is your credit limit. The amount of credit extended to you is based on your credit history and how likely you are to be able to pay it back. If you check your statement or online account, it will show you the amount of available credit you have left (minus any purchases you’ve made).
The other day my son’s karate teacher told a story about a graduation present she received from her grandmother — a photo album filled with $20 bills.
The grandmother had started saving when her granddaughter was born — adding a $20 bill each month until the 200-page photo album was filled. (It would take 17 years and 2 months to fill it and the album would contain $4,000.)
She’s not the only one who has received a gift like this — check out this woman’s story.
There’s no denying that a photo album filled with cash is an extremely thoughtful gift. There’s also a big WOW factor — who wouldn’t want to receive $4,000 in cash?
I think this gift misses the mark in three important ways, though.
