Wise Bread Picks
I’d like to say that I have taught my kids everything they need to know about personal finance, from the basics of banking to the complexities of investing and portfolio management. I haven’t. When I was ready to inform and guide, they had no interest in learning. The financial education of my children has not been progressive or linear, but rather haphazard and unorganized. Imparting wisdom, then, has been the result of random events and conversations. So, with the understanding that life keeps happening whether you are ready or not, here are 6 things I have managed to teach my children about money.
1) Beware of fees for add-on services.
Both of my sons, newly equipped with cell phones, accessed the Mobile Web during out-of-town trips. When my oldest son went away to football camp, he got bored during his downtime and checked ESPN box scores. My youngest decided to check on updates for his favorite computer game during a family vacation. Neither realized that this service was not included in our flat monthly fee.
Now they know that easily accessible services are not always (hardly ever?) free.
2) Watch your expenses if you want to have a profitable business, but don’t be so cheap that you won’t have satisfied customers.
When my youngest decided he wanted to sell Yu-Gi-Oh! cards on eBay, we worked together to set up an account linked to my credit card and checking account, both of our emails, etc. Though he seemed to understand the revenue side of business, he had to learn about expenses. He carefully considered the cost of posting multiple photos, postage, and mailers. Would an extra photo help sell the cards or just increase the eBay fee? How much is postage? And should he use a rigid mailer, as I suggested, or a flexible bubble envelope, as he preferred, to get the best buyer feedback? (He shipped the cards using the bubble envelope and earned a “well-packaged” comment from his first buyer.)
Not only did my son figure the basics of controlling expenses, he also learned how to weigh business costs vs. benefits to the customer, made easier thanks to the feedback mechanism.
3) Be certain of a purchase before you make a commitment.
For the fourth year in a row, my son decided to attend a month-long summer enrichment program. Before I sent in the $350 fee, I confirmed his interest but never mentioned the amount.
Having spent the week just prior to start of the program at Boy Scout camp, walking several miles each day, he was tired, rather than energized, for the first day of activities. Adding to his troubles were 1) a new program site (he preferred the inner-city school of prior years); 2) more watchfulness and protection on the teachers’ part, limiting his perceived freedom; and 3) no long-time friends in any of his classes.
He wanted to quit after the first day but I felt troubled having paid the non-refundable program fees and more importantly, not having taught him the value of $350. We had a series of discussions in which I managed to explain to him that while I didn’t mind paying for the program, it bothered me tremendously to waste money. Also, I made clear that I had to forgo other opportunities to allow him to participate. Our first solution was for him to repay me (he had a couple of hundred dollars in unspent birthday cash that made a dent in his debt); though he said he didn't miss the money, he decided within a couple of days to go back (thus reclaiming his cash) and found the experience enjoyable.
We both learned to consider the cost of programs and other opportunities before making a big commitment.
4) Bring cash but don’t spend everything you have.
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For many years, my oldest, a saver by nature, seemed to think that he should either spend all the cash I gave him for outings or keep all the change. I would give him money for a movie with a friend, for example, but he would ask his friend’s mom to pay his way and then try to keep my cash. After I clarified that he was to use our family's money, he then proceeded to spend as much as possible. I was surprised when my youngest, the spender, gave me change when he returned from scout camp; during the entire week, he bought just one root beer and a merit-badge handbook. About that time, my oldest also returned currency and coin from a parent-funded activity.
I am not sure how it happened but they managed to learn financial restraint.
5) Just because you can afford any one thing you want doesn’t mean you can afford everything you want.
In the past year or so, my teenage son’s appetite has gone from average to outrageous. During this time, he discovered Jersey Mike's and developed a preference for giant-sized sandwiches (currently Chipotle Cheese Steak) to the extent that he began to think that having a giant every day was a normal request. During the summer break, when I had trouble keeping his hunger abated, he kept asking for Jersey Mike's. When I expressed my frustration and told him that we couldn’t afford to eat out every day, he asked if we were poor.
I did convince him that limiting your appetite doesn’t mean you are poor but thrifty and wise.
6) Having money can save you money.
Now that I’ve realized that I should involve my sons in day-to-day financial decision-making, I took my youngest with me to get his band instrument for the upcoming school year. The local music stores have rental programs, making it easier to afford an instrument, but the one we visited had a combination of offers. We could 1) rent the instrument for a monthly fee, 2) rent the instrument and have the monthly amount go toward the purchase price so that at the end of a few years, we’d own the instrument or 3) buy the instrument at nearly a 50% discount and, if my son changed his mind about band, return the instrument for the purchase price less the monthly rental fee. After some consideration, we opted for the purchase with buy-back guarantee (the rental interest rate seemed about 25%).
He found, as Philip as mentioned in "On the Importance of Having Capital" that having enough to pay now can save money; or if he missed the nuance of the salesperson's presentation, he certainly learned that band instruments are expensive.
Do I hope to be more intentional in my financial education of my children in the future? Yes. But I'll take what I can give (in terms of personal finance) as it comes along.
