Giving A 6-Year-Old A Debit Card to Teach Wise Spending…Really!!

Kids are no longer using a piggy bank to obtain financial responsibility. Instead, digital tools, such as debit cards and apps, are the basis for learning smart spending and wise money management.  Many of these products are prepaid cards that help kids track their spending, and also include customizable oversight features for parents.  Some available products include:

  • FamZoo (famzoo.com) makes use of parent-paid interest to encourage saving. Common users of the app are preteen and young teenagers, but may also be used for kids from preschool to college.
  • Greenlight (greenlightcard.com) allows parents to control the stores at which the debit card can be used. Greenlight plans to introduce an investing feature to move users to a higher level of financial literacy.
  • gohenry (gohenry.com) is an app for kids (ages 8 to 18), but may be used by younger children. The emphasis is on building money management confidence in a safe setting while learning to spend and save.
  • Current (current.com) is a custodial bank account aimed at teenagers. Parents may also open accounts for younger children.

These products allow parents to channel digital funds to their children to pay weekly allowances. Also, kids may divide their money into accounts for saving, spending, and donating to charity.  Most apps have a monthly fee, ranging from $3 to $5.

When using prepaid debit cards with children, consider the following:

  • Spend time talking about why the kids want to buy various items, and why certain household tasks earn money and others do not. Expand the Connect the discussion to talk about total family finances as well as money attitudes and values.
  • Allow freedom to make spending decisions to give kids experience at managing money, and to make mistakes from which they will learn.
  • Ask older kids to buy household items, even though they might be reimbursed. Buying shampoo, toothpaste, and snacks will prepare them for when they are on their own. Also consider billing them for monthly expenses, such as the cost of their cell phone.

For additional information on prepaid debit cards for kids, click here.

Teaching Suggestions

  • Have students conduct online research to evaluate apps that might be used by parents to teach their children smart spending and wise money management.
  • Have students talk to parents to obtain suggestions that might be used to teach wise money management to children.

Discussion Questions 

  1. What are the financial, social, and relational benefits of children learning smart spending and wise money management early in life?
  2. Describe some possible money management learning activities for children that do not involve the use of technology.

Meet the “Henrys” (high earners not rich yet)

Many young people making high salaries still say they feel broke. A “Henry,” short for “high earners not rich yet,” is someone who lives an extravagant lifestyle combined with their student loans has very little money left over.  These “working rich” place a strong emphasis on travel, and often limit their spending on food and clothing in order to afford luxury trips.  While many have a desire to get their finances in order, very few take appropriate actions to do so.

Henrys are characterized by a higher-than-average income, little or no savings, and a feeling of low material wealth. Most of their earnings go toward current living expenses rather than building wealth with investments.

For additional information on high earners not rich yet, click here.

Teaching Suggestions

  • Have students conduct online research to determine various financial attitudes and behaviors of people in different age categories and life situations.
  • Have students prepare a video that recommending actions to the people described in the article.

Discussion Questions 

  1. What factors might be influencing the financial activities of the people described in the article?
  2. Describe possible financial concerns associated with these financial attitudes and behaviors, and recommend corrective actions that might be taken.

Kakeibo: The Japanese art of saving money

Kakeibo, pronounced “kah-keh-boh” and translates as “household financial ledger,” is a method used in Japan for managing personal finances. For over 100 years, this system has helped people make smarter money decisions.

Similar to other budgeting systems, kakeibo is designed to help you understand your relationship with money by recording all financial inflows and outflows. As proven by research, this recordkeeping method emphasizes physically writing your financial activities making you more aware of bad money habits. Kakeibo can help you become completely honest about your spending with the use of four categories: (1) needs, (2) wants, (3) culture, such as books and museum visits, and (4) unexpected – medical expenses or car repairs.

Kakeibo encourages you to ask yourself these questions before buying any non-essential items, or things you buy on impulse:

  • Can I live without this item?
  • Based on my financial situation, can I afford it?
  • Will I actually use it? Do I have the space for it?
  • How did I come across it in the first place? (Did I see it in a magazine? Did I come across it after wandering into a gift shop out of boredom?)
  • What is my emotional state in general today? (Calm? Stressed? Celebratory? Feeling bad?)
  • How do I feel about buying it? (Happy? Excited? Indifferent? And how long will this feeling last?)

In addition, to spend more mindfully, Kakeibo recommends that you:

  1. Leave the item for 24 hours.
  2. Don’t let major “sales” tempt you.
  3. Check your bank balance regularly.
  4. Spend in cash.
  5. Put reminders in your wallet – use a sticker: “Do you REALLY need this?!”
  6. Change the environments that cause you to spend.

For additional information on kakeibo, go to:

Link #1

Link #2

Link #3

Teaching Suggestions

  • Have students conduct a survey to determine reactions to this budgeting system among people in different age categories and life situations.
  • Have students prepare a visual summary of some of the characteristics of the budgeting system.

 Discussion Questions 

  1. What elements of this budgeting system might people find beneficial? What are possible drawbacks?
  2. If you were to implement this system for your life, which actions would you select to do first?

Avoiding Personal Finance Nonsense

Many personal finance reports are published with advice that may not provide the best guidance. In an effort to avoid buzzwords and troubling phrases, consider these suggestions:

  • determine who conducted the research; a company may sponsor a study that lacks the rigor of academic or government researchers.
  • be wary of research that reports feelings or predictions rather than actual behaviors and actions of respondents.
  • consider the number of people in the study and how the respondents were selected.
  • avoid generalizations that about a certain age group, such as Millennials, Baby Boomers, or Generation X.

Don’t revise your money management activities based on some survey or research report. If your current actions are working, then you are on the correct path.

For additional information on avoiding personal finance nonsense, click here.

Teaching Suggestions

  • Have students conduct online research to locate a recent personal finance study to evaluate the validity of the advice offered in the report.
  • Have students create a video presentation reporting both valid and nonsense personal finance advice.

Discussion Questions 

  1. What problems could occur if a person uses inappropriate financial advice?
  2. In addition to the suggestions in the article, what actions might a person take to determine the validity of personal finance advice?

Where to Keep Your Emergency Fund

While having an emergency fund is vital, putting this money in a low-yield checking account is not recommended. A certificate of deposit (CD) also may not be appropriate since your funds may be locked-up when the money is needed. For safe storage of your funds along with quick access and a better return, consider these alternatives:

  • High-yield savings account. These financial products are offered by banks to attract new savers. These accounts have high liquidity and are covered by federal deposit insurance; although, interest earned is taxable. Most high-yield savings accounts are available through online banks. Also be aware of fees, minimum balances, or a required minimum length of investment.
  • Money market fund. Usually offered by investment companies, these financial products are similar to high-yield savings accounts but do not have federal deposit insurance. However, they are protected by Securities Investor Protection Corporation (SIPC) insurance, usually covering amounts up to $1 million for investors.
  • Treasury bills and bonds. These debt instruments of the U.S. Treasury have a maturity ranging from 90 days to 30 years. While considered very safe, an investor may lose money if sold before it matures.
  • Ultra-short term bonds. For a higher yield with a bit more risk, consider ultra-short term bond exchange-traded funds (bond ETFs).  These funds invest in corporate bonds, which are not guaranteed.  However, it is possible to find funds that invest only in highly-rated bonds.

In each situation, be sure to consider the tax implications of earnings from these savings and investment products.

For additional information on emergency funds, click here.

Teaching Suggestions

  • Have students create a list of unexpected situations that might require accessing money from a person’s emergency fund.
  • Have students talk to others to determine where they keep money for emergencies.

Discussion Questions 

  1. What factors might a person consider when selecting a savings instrument for storing money for emergencies?
  2. Describe actions a person might take to have more funds available for an emergency fund?

 

Bank Accounts Everyone Should Have

While a savings account and a checking account provide the foundation for managing finances, several other accounts should be considered.  Since all most people don’t put all their financial documents in one drawer, all your money shouldn’t be in one account. The various recommended accounts include:

  • Emergency savings for funds when you face financial difficulties that cannot be resolved in others ways. An amount equal to 6 to 12 months of living expenses is often recommended.  Consider storing these funds in an “out of sight, out of mind” location, such as with an online bank account.
  • Regular savings for short-term needs, such as home repairs, vacation, auto maintenance, or new furniture. Be sure to have a goal and plan for these funds.
  • Household checking account for paying current bills. All income is deposited in this account with automatic transfers for regular bills and amounts to various savings accounts. Extra funds in this account can go to the regular savings fund.
  • Spouse checking accounts to pay expenses for which each person has responsibility as well as work-related costs.
  • Health savings account (HSA) for tax-free payments of medical-related expenses. HSAs are especially of value with high-deductible insurance plans.
  • The extra fund involves the “fun money” leftover after all bills are paid, savings is under control, and all accounts have a balance at an appropriate level. This money is the reward for spending wisely.

If all your accounts are at the same financial institution, using the online dashboard will allow you monitor your balances.  Or, if you use different banks, websites or apps such as Mint.com can be used to view your overall financial situation.

For additional information on needed bank accounts, click here.

Teaching Suggestions

  • Have students design a personal plan for the various bank accounts they will use to to monitor their spending and saving.
  • Have students talk to others about methods used to monitor spending and to maintain an appropriate level of saving.

Discussion Questions 

  1. What are the benefits and drawbacks of the system discussed in this article?
  2. Describe actions to monitor spending and saving using online banking and apps.

 

Personal Finance Hacks

Hacks – skills and shortcuts – are used in many life settings.  For personal finance, here are some tips that can help stop money leakages:

  • Only use credit cards with financial advantages, such as cashback; always pay off credit card balances on time.
  • Making weekly payments, instead of monthly, helps to save interest and reduces the amount owed faster.
  • Pay off loans/debts with the highest interest rates first.
  • You might consider paying off a debt with another loan if the new loan has a much lower interest rate.
  • When shopping online, leave the item in the cart for several days or weeks; the price may be lower or you may decide you don’t really need the item.
  • Consider bulk purchases with friends to qualify for free shipping.
  • Take advantage of seasonal sales.
  • Unsubscribe from email offers.
  • Avoid household clutter to save time and money.
  • Cook your own meals; online videos and recipes offer fast, easy meals.
  • Talk to others for investment advice.

For additional information on personal finance hacks, click here.

Teaching Suggestions

  • Have students tell their personal experience with tech, travel, or personal finance hacks.
  • Have students create a video to dramatize various personal finance hacks.

Discussion Questions 

  1. How would you decide if a personal hack will be of value to you?
  2. Describe actions that might be used to communicate personal finance hacks to others.

Smart Financial Planning Actions

While every person and every generation has something to learn, we all also have ideas and information that can benefit others.  Those skillful in asking questions have an advantage for planning and implementing financial activities.  Asking questions usually results in useful knowledge before taking action and being less intimidated about unknown topics.

Other actions with strong benefits for better money decisions include:

  1. Joining groups through social media and online communities resulting in connections and information to support financial concerns and decisions.
  2. Not being overly confident, but researching a topic carefully before making a financial decision to take action.
  3. Maintaining a minimal competitive nature; instead identify actions and investments that best meet your financial goals.
  4. Manage spending and saving with the use of debit cards, instead of credit cards, and automating your savings with online deposits or an app.

For additional information on successful financial planning actions, click here.

Teaching Suggestions

  • Have students survey friends to determine which of the actions in this article are commonly used.
  • Have students create role playing situations or a video to communicate the benefits of the actions discussed in this article.

 Discussion Questions 

  1. What do you believe are the benefits and drawbacks of these suggested actions?
  2. Describe other actions that might be taken for successful financial planning.

Millennial Money Habits

According to a recent study, the financial activities of today’s young adults (ages 23-37) include the following:

  • One in four millennials are concerned about not having enough money saved.
  • Over 70 percent of these young people believe their generation overspends, and 64 percent believe that their generation is bad at managing money.
  • Over 60 percent of millennials are saving, and 67 percent are consistent in working toward a savings goal.

These money attitudes and behaviors are reported in the fifth edition of our Better Money Habits Millennial Report, with these additional findings:

  • A reported 73 of millennials who have a budget, stay within their budget every month or most months.
  • Nearly half (47 percent) of millennials have $15,000 or more in savings.
  • While 16 percent millennials have $100,000 or more in savings.

Millennial parents are sensitive to child-raising costs. While older generations report that finances weren’t a main factor in the decision to have children, millennial parents believe the opposite. While many are paying off their own student loans, nearly a quarter of older millennials are saving for their children’s education.

For additional information on money habits of millennials, click here.

Teaching Suggestions

  • Have students talk to friends to obtain information about their budgeting and saving habits.
  • Have students locate and report on an app that would help guide their spending and saving activities.

Discussion Questions 

  1. What attitudes and behaviors did you learn when you were young that influence your spending and saving habits today?
  2. Based on these research results, what money management suggestions would you offer to others?

Lifestyle Inflation

Quite often, when a person receives a raise or promotion with an increased salary, overspending is the result. In those situations, financial experts recommend maintaining frugal spending patterns. This path will allow a person to avoid becoming a victim of “lifestyle inflation.”  Many households earning hundreds of thousands of dollars have trouble avoiding debt and saving for the future.   To prevent this situation, the following actions are recommended:

  • Maintain your lifestyle and spending habits as you receive raises. Instead of a bigger house or new car, the increased income can be used to stabilize your financial situation and increase saving for future needs.
  • Keep your average daily spending low.To avoid lifestyle creep, simply keep your typical day spending at a frugal level.
  • Increase your automatic savings amounts. Consider saving an amount from each paycheck equal to the amount of your raise.  This will allow you to put aside money for major financial goals and long-term financial security.
  • Keep housing costs low. Instead of upgrading, maintain and improve your current home. Housing is a major cause of lifestyle creep when a more expensive home results in higher property taxes, maintenance costs, insurance, association fees and other expenses.
  • Remember and review often your financial goals.Do not take your focus off long-term money goals.  Short-term desires and impulsive spending can easily undermine your financial future. Create a way to remind yourself of those goals each day.

For additional information on lifestyle inflation, go to:

Article #1

Article #2

Teaching Suggestions

  • Have students ask another person of what actions might be taken when a salary increase is received.
  • Have students create a video contrasting wise and unwise actions when receiving a salary increase.

 Discussion Questions 

  1. What factors influence “lifestyle inflation” in our society?
  2. In addition to the suggestions in the article, what actions might be taken to avoid lifestyle creep?