Finance for Kids

From time to time I help people set up a financial plan for themselves.  I love doing it because it is the second most impactful thing you can do for yourself.  Besides your faith, nothing else touches all aspects of your life so directly and completely as money.

Over the weekend the question of how to teach kids about money came up.  Obviously they won’t sit still for lengthy lectures.  If they are young enough they won’t even really comprehend the ideas of delayed gratification, debt or the value of money.  There are lessons they can be learning though.

Give your kids an allowance. This is an easy and immersive way to start their relationship with money.  They will be able to touch it.  They will watch it accumulate week after week.  They live in your house, eat your food and wear clothes you gave them, but this is something that they will own.

Allowance Guidelines (Sorry about the screwy numbered list format.  I can’t seem to get it to work right.)

  1. 1. Give it weekly
  2. 2. Make it easily divide into thirds (three nickels or quarters, for example)
  3. 3. Have your kids place it in three clear plastic containers. Label them “spend,” “save” and “God.”  Put a money slot in each top.  Consider drilling a hole in the top and body of the save and God jars so that they can be secured with a zip-tie if your kids are very young.  Zip-ties can be removed once you know your kids understand the purpose of the jars and that funds will not be mysteriously “reallocated.”
    1. a. 1/3 into the spend jar
    2. b. 1/3 into the save jar
    3. c. 1/3 into the God jar (give jar if not religious)
    4. 4. Make a big deal out of it
    5. a. Talk about why it is good to save
    6. b. Talk about why we give money to God (or to charity)
    7. c. Talk about what a big responsibility it is to have money
    8. d. Talk about how proud you are when they avoid an impulse purchase on a piece of junk, etc.
    9. Talk about how much work they did to get that money
    10. 5. Make it fun
      1. a. Count the money with your child
      2. b. Stack it to see how many dollars it equals
      3. c. Talk about what they could buy or do with it

Allow your kids to use their spend money whenever and however they want to. The obvious exceptions apply (no chainsaws or Playboys).  Be sure to talk through the consequences of these purchases.  “Because you spent all your fun money on gum, you don’t have enough for the movie.”  Remind them to weigh out their decisions.  “If you buy the Hot Wheels car now, you won’t have the money you need to get the football you talked about yesterday.”

Allow your kids to use the save money only for bigger longer-term purchases and only after they have talked it through with you and you agree on it. Use this money as a tool to teach your children about goal setting. There should never be an urgent/knee-jerk purchase with this money.  Sleeping on a decision to use the save money is a good rule of thumb.  “The next time we come to Target, if you still want it, you can get it” can also work.

Have your kids put the God money in the collection plate on a regular basis. If not religious, talk through a charitable way to use the money.  Have the children directly involved in giving this money on a regular basis.  Money is only good for fun, saving and giving away.  Of these three, giving it away makes the only life-long lasting impact on the child.  Be sure to include this aspect of money in your financial training.

Stop buying stuff for your kids. This does not include special gifts or necessities.  For things that are their wants (not needs), have them pay for the items or pay for a percentage of them.  It is amazing how quickly things kids “need” aren’t so important when they have to spend even a little bit of their own money on them.

Give them weekly chores. Explain that everyone in the family has jobs.  Let them know that they will get their money if their work is done cheerfully and on time.  Let them know that they will not get their money but will still have to do the work if they are late or have to be reminded or are grump butts.  The tricky part is not tying the allowance too closely to the work.  If you do, kids sometimes try to pull the ol’ “It isn’t worth emptying the trash every week just to get $0.75.  You can keep your money.”

Give them entrepreneurial opportunities. Let them know that there are other opportunities to earn money that are completely job-based.  “You don’t have to do it at all, but if you do X, you will get X.”  Maybe it is yard work, helping a neighbor, etc.  Let them know that they are welcome to suggest ideas too.  I can remember sharpening all of my mom’s knives for some amount of money.  I vividly recall it because it was my idea and I had to redo all of them a second time to get paid because my first attempt wasn’t good enough (I kinda thought I’d be rewarded just for coming up with the idea).

As they get older, increase the allowance but also increase the responsibilities. I started out emptying trash cans around the house.  By the time I was in second or third grade, I was cleaning a bathroom, vacuuming my bedroom and changing the sheets on my bed every week.  This was done by or on Saturday before I could go out and play.  My room had to be kept neat and my bed made on a daily basis.

If you would like additional or more detailed help for young children (3-12yr olds), consider Financial Peace Jr. by Dave Ramsey.  Once they get a little older, you might like Dave’s age 10+ money management game Act Your Wage or his 13-18 yr old financial “home school” program.  Please note I have not reviewed any of these three items but have only heard good things about them and I can tell you that his plan for adults is excellent.


Rich Dad, Poor Dad by Robert Kiyosaki

I just finished reading Rich Dad, Poor Dad by Robert Kiyosaki.  It isn’t a new book on finance but one that I’ve heard referenced many times by finance gurus.  Some people really like it and others can’t stand it.  Even though Mr. Kiyosaki’s thoughts are not particularly radical, they are more risky than many people would care to stomach.  He pushes concepts and wants you the reader to pick up on why he does something but I know that some people get hung up on his examples of how he did it.

He might be discussing how he used real estate to make a lot of money in a short amount of time.  His point is to make sure that you make your money on the front end of the deal.  Maybe it is with a guaranteed buyer after you buy or paying less than market value.  Some people will take this message to heart and apply it to various forms of investing.  Others will just be mad that he used real estate for his example claiming that money can’t be made in real estate any more.

I found the quote from the book below to ring particularly true.  I have worked with folks that were less talented, less intelligent or less experienced before.  If they managed to get the better end of the deal it was usually because they were good negotiators.  I’m not talking about salaries as much as negotiating choice projects and work load.  It usually boils down to how you defend your position and workload in the big meetings that determines what your to-do list is going to look like.

The most important specialized skills are sales and understanding marketing.  It is the ability to sell – therefore, to communicate to another human being, be it a customer, employee, boss, spouse or child – that is the base skill of personal success.  It is communication skills such as writing, speaking and negotiating that are crucial to a life of success.

Reading through section three of chapter eight, which is entitled “Laziness”, is worth your time.  I can’t quote the entire thing here but know that there is a part (or parts in my case) that will almost certainly apply to you.

Overall the principles are sound and good to know.  The particular way he invests is too risky for my taste.  His writing style is inspiring and I’m sure stirs many people to action.  Overall, it is a good and worthwhile read, but it does not make my list of top recommended reading (on the right side of this website).

Is Costco Worth It?

I like warehouse clubs.  I especially like Costco.  To me, Costco is to Sam’s what Target is to Wal-Mart.  They have a really wide variety of quality merchandise at good prices.  Or are they so good?  It can be hard to tell when you are required to buy in such huge quantities.  What about the annual membership cost?

Rather than being an extreme penny pincher who tracks the cost of multiple commodity items at multiple stores all the time,  I try to find one or a few staples that I think are going to be a huge savings and compare them.  If I can save enough on them to make back my membership cost, I’ll join.  For years, this was simple.  Melanie’s job was the litter box but, rather than scoop, she replaced the litter once a week.  The savings in cat litter paid for the membership in no time.  Now that we don’t have a cat anymore and our membership is up for renewal, it was time to do a little directed comparison shopping.

After we run, we drink a smoothie for breakfast and a snack.  It almost always has pomegranate juice, strawberries, blueberries and broccoli in it.  While tasty, these things are fairly expensive.  I knew the pomegranate juice was a big savings over any place else I’d checked but I wasn’t so sure about the other frozen stuff.

We also decided to check facial tissue, toilet paper and paper towels.  This was more to make sure we weren’t getting ripped off.  I actually prefer to buy these items in bulk.  Really, who wants to have to think about these things more than a couple times a year?  As long as you don’t live in a small apartment, you have the space to stuff some paper products that will never spoil.

Attached you will find a chart of our results.  The short answer is yes, Costco is a great deal for us.  Once you take out the $50 membership, we still save at least $130 per year.  Keep in mind, that the list is limited to items we buy fairly regularly.  We also only compared it to Publix.  Why not Sam’s or Wal-Mart or <insert name>?  Because this is a practical comparison.  We don’t shop at those other places enough or at all to make the comparison worthwhile.

I did not compare identical products only.  This is a real world comparison.  If Publix-brand paper towels are cheaper and acceptable, they go up against Costco’s Bounty.  I’m comparing what I’d actually buy from each establishment.

Two items do get gypped a little bit.  Costco only sells frozen broccoli florets (the top part) but since they get blended, we just get the cheaper broccoli cuts from Publix.  At the time we checked, Publix didn’t carry milled flax seed.  So it is a comparison of milled vs unsmashed.  Since you only get the benefits of flax seed if it is broken open, this was more of check to make sure we weren’t getting reamed by Costco on this item.

You’ll also notice that there are a few items that are incomplete.  Those are basically reminders to me for future checking.  I think printer ink could be a great deal here.

So this is good news for me.  I get to keep my Costco membership and, as I mentioned, I like shopping at Costco.  Here are some other reasons why:

1.  Lots of free samples – Christmas fudge and Valentine’s Bavarian chocolate are two favorites

2. Free 2yr Warranty on Electronics (Thanks for the tip, Clark Howard)

3.  Cheap and easy contact lenses

4. Cheap and tasty take n’ bake Costco pizza

5.  Cheap and decent fast food lunch

What are some other reasons to shop at Costco?  What else should we look at buying there (besides the two-seat go-cart)?

Item Publix Costco Costco Savings ~ Saving Per Year
Swiffers Mop 48 pack $  12.79
Swiffers Dusters 64 pack $  11.79
Printer Ink
Boursin Cheese $    5.99 $    2.66 $             3.33 $                    6.66
100% Pomagranate Juice (per oz) $    0.21 $    0.10 $             0.11 $                  84.48
Strawberries (per lb) $    2.00 $    1.47 $             0.53 $                  25.44
Blueberries 3lbs $    9.89 $    7.79 $             2.10 $                  25.20
Kleenex (per box) $    2.19 $    1.98 $             0.21 $                    1.68
Bounty Select-a-Size (per roll) $    1.74 $    1.42 $             0.32 $                    3.84
Charmin Jumbo Ultra Soft (per roll) $    0.75 $    0.63 $             0.12 $                    7.20
Frozen Broccoli (per lb) (Cuts vs. Florets) $    1.49 $    1.47 $             0.02 $                    0.48
Cheerios (per oz) $    0.28 $    0.14 $             0.14 $                  30.24
Almond Butter (per oz) $    0.30 $    0.22 $             0.08 $                  19.20
Flax Seed (per oz) (Whole vs. Milled) $    0.12 $    0.23 $           (0.11) $                (26.40)
HE Scented Laundry Detergent (per load) $    0.16 $    0.12 $             0.04 $                    4.40
Total $                182.42

Geeeve us a Goooaal

When I was in middle school, my brother and father got to see two international soccer teams compete locally.  The teams were traveling around the US promoting pro soccer.  Apparently we had some international fans that either lived in town or traveled with the team.  These fans were really into the game and chanted over and over “Geeve us a goooaal.”  I don’t remember if my dad or brother enjoyed the game but I can still vividly remember the post-game chanting that could be heard throughout our house.  They loved that chant and I’m reminded of it now as I set my goals for the new year.

Those of you that know me well know that I’ve not been a fan of self-help or self-improvement books nor a big goal setter.  To-do lists have always been my friends (many times to my detriment) and I’ve never shied away from reading a how-to book or dreaming dreams, but goals are different.

Things began to change for me about two years ago.  I was given Dave Ramsey’s The Total Money Makeover which could be the subject of its own post or entire section on this site.  It was the first self-help book that delivered for me.  Since then I have really begun to see the power of setting specific goals for yourself.  You get more done, you stay more focused, you are less easily overwhelmed and your accomplishments are usually more meaningful.  I have seen big changes in my finances and physical health and this year I am expecting improvement in other areas as well.

I could go on but many people have written on this subject already and I think Dave sums it up extremely well in this four-minute podcast.

Goals Must:
1.  Be Written
2.  Be Specific
3.  Be Measurable
4.  Have a Time Limit

Areas (From Inside to Out):
1. Spiritual
2. Intellectual
3. Physical
4. Family
5. Financial
6. Career

So take some time before 1/12th of your year is gone to act on this.  The days are lined up and ready to come out the chute.  They stand at attention chanting “Geeve us a goooaal.”