allowances

6 Ways to Boost Your Partner's Bad Credit Without Risking Your Own

Mikey Rox — Tue, 08 May 2018 09:00:13 +0000

You can't help with whom you fall in love — and that's never more annoying than when the object of your affection has royally effed up their credit. Nobody's calling it quits over a few past financial mistakes, but the situation will need to improve if you two are planning a future together that includes buying a home, starting a business, or other major money-based life decisions.

Since you're now in this together, you have a responsibility to do what you can to make sure you start your joint life on the right foot credit-wise. Here's how.

1. Help your partner review their credit report to flag and report errors

If your partner has terrible credit, it's likely that they don't know how to pull their credit report, flag errors, and report them to the appropriate authority to have them removed or updated. That's where your expertise (or even elementary knowledge) of how credit reports work comes in. Flagging and reporting credit errors is the first step in getting their situation back on track and under control. Once that's squared away, you can move on to the bigger issues. (See also: How to Read a Credit Report)

2. Provide positive reinforcement instead of bailing them out

It's easy to throw money at a problem to make it go away — especially if you have extra cash to spare and the person you love will benefit immensely from your generosity (at least in the short term). But I urge you to avoid opening your wallet to deal with your partner's bad credit. Instead, provide encouragement that they can manage their debt on their own.

They created this situation, after all, and the only acceptable solution is that they work it out without your financial assistance. Help them in other areas, like navigating their credit report, but don't shill out dough to dig them out. The only thing they'll take away from that scenario is that you'll always be the sucker who pays for their poor judgment.

3. Establish a cash allowance that you'll both adhere to

You can't take your adult partner's credit cards from them (even though you might like to), so an easier-to-swallow solution is to jointly stop using credit and instead switch over to an all-cash budget. If they feel like you're both in this together, they'll be more willing to comply. You might have to make a few sacrifices along the way with your cards not available, sure. But if it helps condition your partner to spend and save smarter, forgoing the treat-yo'-self impulse buys you're used to will be worth it. (See also: How to Put Your Spouse on a Budget Without Ruining Your Marriage)

4. Brainstorm actionable ways they can start chipping away at their debt

Sit down together and come up with ideas about how your partner can start paying down their debt faster. That may involve asking for a raise at work; picking up a part-time job; working a few side gigs, like driving for a ride-sharing service and pet sitting; selling off unwanted or unused valuables; downsizing their lifestyle (maybe it's time to move in together so both of you can save?); and canceling all frivolous monthly expenses, like subscription services and memberships. (See also: 5-Day Debt Reduction Plan: Pay It Off)

5. Schedule autopays on pay days

Help your partner set up auto-payments that coincide with their paydays so the money goes straight from their checking account to their debt accounts, leaving them little time to start a spending spree before handling their financial responsibilities. (See also: 5 Ways to Automate Your Finances)

If your partner doesn't like the idea of auto-paying bills, maybe they could get on board with a regular money meeting where you both sit down each week or month to discuss your budget and bills and make payments in each other's presence. It's a way to keep each other accountable, build trust, and establish good money behaviors. Either of these options will make sure the bills are getting paid on time.

6. Discuss secured credit card options

If your partner's credit score is weak, you can help improve it by encouraging them to open a secured credit card. Secured cards are fairly easy for anyone to get because the risk to the bank is low. That's because the cardholder puts down a deposit that's typically the same size as the credit limit (which will be low to begin with). If the cardholder defaults on the payments, the bank keeps their deposit.

Secured cards are great for building credit because your payment activity is reported to the credit bureaus, just like any other credit card. "After demonstrating consistent payment history, your credit score will steadily improve," says certified financial adviser Lou Haverty. "You could consider applying for a regular credit card when your score is in the high 600 to low 700 range."

I took my boyfriend to the bank to get a secured card after he moved in with me because I wanted him to start rebuilding his weak (but not necessarily bad) credit. This was an important step for us to take early on because I want him to have decent credit if we decide to buy a house together a few years down the road. Sometimes that's how long it takes, so there's no time like the present to start working the system. (See also: The Best Secured Cards)

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Questions to Answer Before Giving Your Kid a Credit Card

Dan Rafter — Mon, 23 Oct 2017 08:30:10 +0000

Would you give your 10-year-old a credit card? Many parents would; in fact, a recent study by T. Rowe Price found that nearly one out of every five parents with children between the ages of eight and 14 have given their child a credit card.

Are you considering joining this group of parents? If so, you need to make sure that you ask your young children these questions first. And make sure you get the answers you need to hear to inspire confidence that your youngster is ready for that piece of plastic. (See also: 13 Things to Teach Your Kids About Credit Cards)

What is the credit card for?

If you're giving a kid as young as 13 or 14 a credit card, it's safe to assume that this card is to be used only for a specific purpose. Maybe you want your child to use the card to buy a train pass each month to get back and forth from school. If that's all the card is to be used for, spell it out clearly so your child understands and isn't tempted to use it to buy a new shirt or video game. (See also: 4 Reasons to Add Your Teen as an Authorized User on Your Credit Card)

What is the spending limit per week or per month?

You'll need to set clear spending limits before handing over a credit card to your kids. Maybe your kids can only charge up to $150 a month. Or maybe their spending limit is $300. Whatever it is, make sure your kids know this limit and understand what it means. Ask them about it early and often. You want your kids to understand that the spending limit is a rule and not a suggestion.

Make it clear, too, that if their monthly limit is $200 and they charge $150 in the first week, they can now only spend $50 for the rest of the month. Don't let them break that spending limit. If you do, that limit become meaningless. (See also: Should You Cosign on Your Child's Credit Card Application?)

Who pays, and how much?

Before giving your children a credit card, you'll need to establish the payment rules with them. Explain how credit cards work, and that if the bill isn't paid on time, the account will be hit with late fees. Make sure that they understand the consequences of not paying their balances off in full each month and that high interest rates can make credit card debt grow quickly.

Once you've asked your kids these credit card basics, establish ground rules for how the card is to be paid. Maybe you've agreed to pay the card in full each month, as long as your children don't spend past a certain limit. Maybe you and your children have agreed to split the monthly bill, with your children covering their half with allowance money or withdrawals from their savings accounts.

Whatever arrangement you agree to, don't change the rules at the end of a month. Your children might complain that they have to pay half the credit card bill. Don't let their complaints convince you to cover the whole bill. This won't teach your children about financial responsibility.

Do they understand the consequences of misusing their cards?

Have consequences in place if your child overspends with a credit card or purchases items they're not supposed to be buying.

Maybe you agree that your child can charge $150 a month maximum. If your child spends $200 in a month, they should know that there will be consequences. Perhaps they will be responsible for repaying what they overspent, whether that repayment comes in the form of extra chores, a withdrawal from their savings account, or a reduction in next month's spending limit.

If your children use their cards to purchase something they aren't allowed to buy — say an in-app purchase or a fast food meal — there should be consequences, too. Maybe your child will lose their card for a month or on a permanent basis if they don't follow your buying rules. Spell these rules out before you give them their own credit card. (See also: 7 Important Lessons Frugal Parents Teach Their Children)

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This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Help Your Kid Build Their First Budget

Emily Guy Birken — Thu, 16 Feb 2017 11:00:09 +0000

Teenagers need guidance to build their first budget. But with sporting events, extracurriculars, and homework to worry about, it can be easy for parents to let budgeting skills fall through the cracks. And if you were never taught how to budget by your own parents, you might not know how to teach your children this skill.

Helping your teenage child create a budget does not have to be overwhelming or time consuming. The important thing is to be proactive and consistent as you teach your teen how to handle money in the real world.

Offer a Monthly Allowance

Providing a monthly allowance will help your child recognize the importance of long-term money planning. If they blow the entire month's worth of allowance in the first weekend, they'll learn an important lesson in delaying gratification. The most important thing you can do is be consistent about paying the allowance each month, and refuse to bail your child out of a problem if they use up their money before the month is over.

If your teenager also decides to take a job, consider that a supplement to their allowance, rather than a substitute. Just as you would hate to see your initiative at work penalized by a reduction in pay, your child would hate to see their allowance docked just because they're showing initiative in getting a job.

Require Them to Take Over Some Necessary Spending

Many parents allow their teens to use their allowance and salary as pocket money. While there's nothing wrong with letting your kid have fun money, a big part of budgeting is making sure you have enough money to cover fixed bills. You can help your teenager learn to do this by asking them to take over a necessary bill.

For example, you could ask them to cover a portion of the family cell phone plan, or their portion of the automobile insurance. Learning to pay these bills on time will give your teen an important first taste of what it will be like to pay their own way as an adult.

Create Targeted Savings Accounts

It's likely that your child has some big goals for the future, whether that's going to a private college or buying a car. You can show them that they can achieve these financial goals through targeted savings accounts.

Many banks allow you to create several targeted accounts, each with its own nickname. You can help your teen set up a few of these targeted savings accounts and encourage them to transfer some of their allowance or salary into the accounts when they get paid. They'll learn the importance of paying themselves first, and that consistent savings adds up. (See also: Build Savings Faster With a Multiple Account Strategy)

Help Them Track Their Spending

Financial tracking is a necessary part of creating a healthy budget. They should know where their money is going each month, and whether those expenses were worthwhile. If they discover they're spending a good portion of their allowance on going to the movies, introduce options to them, like discounted movie passes or skipping the popcorn, soda, and snacks while there. Remind them to spend their money consciously.

Have Regular Budget Meetings

Plan on checking in at least once every two or three months to see how their finances are faring. They should get into the habit of reviewing how they've spent their money and whether those expenditures align with their goals. This will set your teen up to regularly review their budget on their own, and one day have regular budget meetings with their spouse.

Teach Your Children Well

Budgeting is the cornerstone of financial health, but knowing how to budget is hardly intuitive. Spending can easily become automatic and savings be pushed to the back burner. By getting your teen used to reviewing their finances and planning for their future, you're creating a powerful habit that will guide them wisely for the rest of their lives.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Best Sites to Help Your Kids Learn About Money

Ashley Eneriz — Mon, 19 Sep 2016 10:00:07 +0000

Teaching your children about money is an important, yet often overlooked area of education. Most kids will not want to sit through a lecture about credit card usage and budgeting practices, but they might be more willing to listen to interactive videos and games. These sites make learning about money and money management fun and enjoyable.

1. Biz Kids

Biz Kids offers short and interesting videos aimed toward middle schoolers. These videos cover a wide range of topics from young entrepreneurs to starting a business to different money personalities. For teachers and home-schoolers, there are coordinating lessons that go with the videos. The site also has three different games — Break the Bank, Bring Home the Bacon, and Dollar a Glass — which allow kids to try their hands at running a virtual lemonade stand.

2. Rich Kid, Smart Kid

The Rich Kid, Smart Kid site was created by The Rich Dad Company, the brand behind the popular book, Rich Dad, Poor Dad. The site comes with four interactive games: Jesse's Ice Cream Stand, Reno's Debt Dilemma, Ima's Pay Yourself 1st, and Jesse's Big Change. The site has fun graphics and is kid-friendly to use. For parents and teachers, there are teaching resources for every age level.

3. Lemonade Tycoon

While not technically a site, Lemonade Tycoon is an addicting game that shows kids the way to build a business from the bare minimum to franchise status. This game can help show children that in order to grow a business, you need to strike a balance between profits and investments. Kids will also learn that there is a fine balance between product cost, product quality, and product success. For example, adding more water to the lemonade will bring down costs, but it can also drive away customers. On the other hand, using a lot of sugar in the lemonade will cost more and gain more sales, but the profit margin is smaller.

4. H.I.P. Pocket Change

H.I.P. Pocket Change focuses less on money management and more on the history of coins worldwide. The site has several games and cartoons that teach how a coin is made and other important dates in coin history. There are also a lot of great resources for kids interested in coin collecting.

5. Sense & Dollars

The Sense & Dollars site has several interactive calculators. The site calls them games, but they are simply calculators that require little input. The Saving Money section of the site is most helpful, especially the Show Me the Money calculator, which shows how much an investment will grow in different saving accounts. The Charge game is also useful since it can show your child how much something costs when you charge it and then make minimum payments. On the other hand, The Makin' the Bacon calculator is extremely outdated and does not factor in taxes or SSI taken out of each paycheck.

6. It's My Life

It's My Life from PBS Kids offers advice, shows, and games for all areas of life. The money section is small, but there is a game called Mad Money. There is also a lot of helpful advice for older kids that want to get started in babysitting.

7. Credit Card Simulator Game

This Credit Card Simulator game from Channel One allows kids to get a virtual platform card and virtually shop in the game's mall. The game will then teach about the downside of interest and debt.

8. Three Jars

Three Jars is a great site for kids and parents alike, since it can help streamline allowance time. With this site, kids keep track of how much money is owed to them through either chores, odd jobs, or both. The money then gets split into three jars entitled Spend, Save, and Share. The goal of the site is to make managing allowances easier, while minimizing nagging and entitlement in your home. For example, when a child asks for something at the store, you can buy it for them if the money is in their spend jar. If the item costs $20, and they only have $5 in their spend jar, then the responsibility is on them. They either need to do more chores or spend less money.

While your kids might not want to trade in their video games for these interactive money games and websites, they are a great starting point to talk about money in your home.

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This article is from Ashley Eneriz of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

This Simple Mistake on a Credit Application May Cost You

Ashley Eneriz — Thu, 01 Sep 2016 10:30:07 +0000

Besides your credit score, your income may play an important factor in whether you get approved for a credit card, and the amount of credit you will be approved for. But for those with freelance jobs or other variable sources of cash, determining an exact income to report can be difficult.

Obviously, you want to be as accurate as possible, but you also want to report the highest amount of income applicable so that you can qualify for your card. Your income is how credit card companies can determine if you are able to pay back your debt. Even if you do not plan on accumulating credit card debt, credit card companies still look at you as a debt risk. If you only say that you make $20,000 a year, then why would a credit card company want to take a chance on you with a $12,000 credit line?

Types of Income You Can Report on a Credit Card Application

Applicants over the age of 21 can list a wide range of types of income that they have reasonable expectation of access to. Here are some of the following types of income considered:

Personal Income

Put simply, this is your gross income figure. If you are a freelancer or self-employed, base this number off your total income the year before or your average monthly income multiplied by 12. For example, if you regularly make $2,500 to 3,000 per month, then reporting an income of $33,000 should be fairly accurate.

Spousal Income

As of 2013, you can count income from your spouse or partner on your application.

Allowances and Gifts

Do you regularly get a few hundred dollars for your birthday from family members and friends? You can add it to your income list.

Scholarships and Grants

This is a benefit for college students who have received scholarships and grants for the school year. If you are not accepted for a credit card, call the reconsideration line and talk about your scholarships and other redeeming qualities (i.e. leadership programs you run at school, GPA, and other accomplishments that can boost your credit worthiness).

Trust Fund Distributions

If you're fortunate enough to have a trust fund, report the average amount you expect to receive in a typical year.

Retirement Fund Distributions

Retired? Great! Don't forget to list distributions from 401Ks, IRAs, or other retirement funds.

Social Security Income

Ditto for Social Security income. List your yearly benefit amount as income.

For borrowers between 18 and 21, only independent income can be reported. This includes personal income (including any regular allowances from relatives) and scholarships and grants. Borrowers between 18 and 21 might have better luck being added as an authorized user on a parent's account. This can help build up credit history without having to turn to high interest fee cards.

Types of Income You Should Not Report

Note that student loans do not count as income. Once you graduate, student loans become debt you must repay, and it is best not to pile on credit card debt on top of that.

Your mortgage or equity in your home should also not be considered income.

Consequences of Lying About Income on Credit Card Applications

While you might want to gain access to a credit card, it is never a good idea to lie about your actual income. Stretching the truth on your application and getting approved can mean that you are more likely to get into debt without the income to get you out.

On a more serious note, lying on credit card applications is considered credit card fraud, which is punishable by up to $1 million in fines and up to 30 years of prison. While these punishments are on the extreme side, individuals caught falsifying income to gain loans or credit cards have been hit with hefty fines.

In 2012, 52-year-old New York resident David P. Gaylord faced charges for reporting an inflated income of $90,000 to $122,000 on three credit card applications in 2006. However, the IRS reported his income as $12,488 that year. Gaylord was sentenced to five years of supervised release and ordered to pay $46,914.73 in restitution.

If you are still unsure about how to fill out your application, consider calling the credit card company to talk with a person who can guide you through the application process.

Do you have multiple sources of non-wage income? How do you report it on credit apps or elsewhere?

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This article is from Ashley Eneriz of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Bad Money Habits You're Teaching Your Kids

Emily Guy Birken — Wed, 11 May 2016 10:00:11 +0000

Money is a taboo subject in our culture, which means it can be tough for parents to know how to talk to their kids about it. But children are little sponges, and the lessons they learn about money may not be the ones you intend to teach them.

Here are four bad money habits you might be passing along to Junior and Sis, without even realizing — and how to start teaching them positive money lessons. (See also: 6 Fun Games That Teach Your Kids About Money)

The Bad Habit: Entitlement

Every single parent has had this moment. You have made it clear to your kid that they may not have the candy bar or Thomas the Tank Engine figurine or other coveted object du jour — but the fit they throw in the store is worthy of a gold medal at the temper tantrum Olympics, and it's easier to give in than fight your sobbing child all the way back to the car.

How You Teach It: Caving in to the Tantrum

We all know this is the wrong move, but some days your nerves are stretched to the breaking point and it's just easier to buy the candy bar. However, making a habit of caving to a tantrum can lead to a child who rivals Veruca Salt in feeling entitled to anything and everything money can buy.

The Better Move: Acknowledge Your Child's Wants

The best way to head off an incipient I want it NOW temper tantrum — and thereby teach the difference between needs and wants — is to recognize that to your child, this is a big deal.

For instance, with my own kids, I will often respond that the candy bar does look delicious, but that it's going stay at the store and not come home with us. Similarly, I encourage my kids to say "bye-bye" to toys or books they want me to buy, giving them the opportunity to make the transition from coveting the item to letting it go. It's not a foolproof method, but it does help them to at least have a framework for letting go of wants that they can't have.

The Bad Habit: A Scarcity Mindset

Knowing how much to tell your kids about big topics is something that all parents grapple with, and money is no different. That's why many parents end up simply falling back on stock answers like "We can't afford it" when their kids ask for something.

How You Teach It: Saying "We Can't Afford That."

The problem with doing this is twofold. On the one hand, it can make kids feel resentful about how money is spent in the family if they do not understand why you make the financial decisions you do. They might notice that their sibling got new shoes but you couldn't afford the video game they wanted that cost the same amount.

In addition, hearing that something is unaffordable can make kids worry about money and start focusing on instant gratification. Kids who hear that their parents can't afford something are learning that money is a scarce commodity, and that it should be used up quickly when it is available.

The Better Move: Invite Your Children to Plan Their Purchases

The big problem with the scarcity mindset is that it leads to zero-sum thinking and takes control out of your child's hands. If your teen wants to go on a ski trip with her friends, saying "We can't afford that" simply shuts down the entire discussion and makes her think that things might be more affordable if it weren't for that bratty little brother of hers.

Instead, you could ask your teen "How can you afford this?" and put the control right back in her hands. That will allow her to start thinking of money as something she can earn and control, rather than something that controls her life.

The Bad Habit: Relying on the Bank of Mom and Dad

Your son has spent all of his allowance for the week when he is invited to go to the fair with his friends. Even though you swore you wouldn't give him an advance on next week's allowance again, you hand over some cash so he doesn't miss out on fun with his friends.

How You Teach It: Solving Your Kids' Problems for Them

This is such an easy habit to fall into, but it's a terrible lesson for your child. Watching your kid miss out on something — even if the problem is their own making — is tough for parents. You want to give them a fun childhood.

But it is so important for children to learn that financial decisions have consequences, and spending all of their allowance money as soon as they have it means there's no money for other opportunities.

The Better Move: Let Your Kids Be Disappointed

It is far better to learn the lessons about financial planning when the stakes are low than when your child is an adult and has to ask you for rent money. Feeling the disappointment of missing out on the fair and understanding that you are not there to bail them out of financial woes is a lesson that will stay with your child — and keep you from having to maintain the bank of Mom and Dad into their adulthood.

The Bad Habit: Seeing Work as a Chore

Unloading about your terrible day at work is a natural reaction to stress. It's not a big deal to let your spouse and family know that you've had a tough day and that no one is to say the word "spreadsheet" within your hearing for the evening.

How You Teach It: Complaining About Your Job

The problem is when the only way you talk about work is through complaints. This teaches your children that work is a chore that must be gotten through in order to collect a paycheck. And while work can sometimes be that, it can also be a satisfying career, or even a higher calling that energizes you. Even if you do not have that kind of relationship with your job, you do want your kids to know that it's possible.

The Better Move: Express Whatever Gratitude You Can for Your Job

One of my favorite parts of the truly terrible final episode of How I Met Your Mother was the running gag about how much the character Marshall hated his corporate law job, but refused to say anything negative about it. Instead of complaining, he would say that his chair was reasonably comfortable and that he didn't cry at work more than twice that week.

Though this is clearly an exaggeration, it is a good method to adopt when your job is stressful. Not only will you remember the good things in your job — even if it's just the fact that you're grateful to have a paycheck — but it will also help you remember that your kids are learning about the world from you. You don't want them to think growing up is the worst thing in the world.

Teach Your Children Well

Money habits are often picked up unconsciously, rather than taught. Instead of letting your children unknowingly learn negative financial habits, make sure you are intentional with your money lessons. It will pay off in the long run, even if it does cause more temper tantrums in the short run.

Are you teaching your kids these — or other — bad money habits? What are you doing instead?

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Chore Time: Allowances for Adults

Kelly Kehoe — Wed, 27 Jun 2012 09:48:19 +0000

The concept of an allowance has been around for decades, usually as a means to motivate kids to do their chores without complaining or forgetting altogether. Although allowances are commonly used for children, they can also be applied to adults. (See also: Five "Jobs" for Children)

“Pay Yourself First”

As the old adage goes, you need to pay yourself first. And this doesn’t just mean allocating your biweekly or monthly income in a budget spreadsheet to account for expenses; you need some cash for non-necessities too. This is what your “allowance” is for. It can either be a fixed amount (say, 10% of your income for a given pay period) or it can fluctuate based on how much of an income surplus you have beyond your budget for necessities.

What you choose to do with your allowance is entirely up to you. Just like how some kids prefer to save up their allowance for an expensive toy or gaming system, you can choose to sock your own allowance away in a savings account for something such as a new car or down payment on a house. Or, like the kids who blow their entire allowance on movies, candy, games, etc. every week, you can put this money towards drinking nights with friends or a day at the spa (basically anything you haven’t accounted for in a short-term fixed budget).

There’s no right way to go about managing your allowance, but it is a crucial remedy to the monotony of living on a strict budget.

A Rewards System for Housework

So, how do you go about setting up an allowance system for the adults in your family?

First off, this goes both ways for spouses — each one receives a monetary reward for work completed around the house (for single-income families with a stay-at-home spouse/parent, this method might need some modifying). With kids’ allowances, they receive money based on work they do around the house. Likewise, you can build a system of monetary rewards using housework (vacuuming, washing the dishes, etc.) and yard work (mowing the lawn, cleaning the pool, etc.) as the means for increasing your own allowance.

There are also consequences in this set-up. For example, if hubby forgets to do the dishes a few nights, then he receives a reduction in his "allowance" that would’ve been used for going drinking with the buddies that weekend. The rewards/penalties will vary from family to family, but the concept of allowances themselves ensures that everyone does their share of work and receives a fair stipend of "fun money" in return.

The allowance system won’t work for everyone, but it is a simple way to set aside funds for non-budgetary needs. It is also helpful in tracking just how much you (and your partner or spouse) are spending on entertainment each month.

What about you? Any fresh ideas on keeping your non-necessity expenses in check? Tell us in the comments below.

This article is from Kelly Kehoe of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: