Gail Vaz-Oxlade's Blog, page 76
July 29, 2011
Grow and Change
People think that getting smarter on a topic is all it takes to make things better. I can't tell you the number of folks I've met that have shelves full of personal finance books but are deeply in debt. Or the number of really "smart" people who have the knowledge to make their lives better but can't come up with the actions to change what isn't working for them.
Hey, if doesn't matter how smart you are, if you don't change what you're doing, you aren't growing at all and you shouldn't expect your outcome – your life – to be any different.
Thinking AND doing… that's what it takes to grow. Read a book, learn something new and incorporate it into your life, and you've grown. Read and learn but don't incorporate and you're just One Duck Stuck in the Muck.
If you know you should stop spending on credit, but you keep whipping out that credit card every time the impulse monkey whispers in your ear, all that knowing isn't getting you any closer to debt-free forever. But if you act – you take those credit cards and freeze them in a bucket of water or throw them behind the refrigerator – you're one step close to getting out unstuck.
Know you should save but take no action and you'll have no money left at the end of the month to move to your RRSP, TFSA or RESP. Take action by setting up an auto-debit to your high-interest savings account and you're changing what you do, so you're growing (as is the asset side of your net worth statement).
Maybe you believe lip-service is all it takes to convince others how smart you are. You can say the right things, make the right sounds, but when it comes to the short-stokes you're a fake. I once knew a girl who could talk all the talk about sailing, but had never been on a boat! Hey, if you're happy faking it, to each his own. But if you're serious about growing and changing, you've got to stop pretending and BE.
It's easy and quite exhilarating to come up with a new idea to do something differently. And the planning can be fabulous. Eventually, however, unless you plunge in, you'll experience no growth. You have to be willing to assume the risks of change to grow.
Actually doing can be quite messy. So you also have to be willing to forgive yourself for all the messy missteps along the way. And you have to be committed to continuous motion and incremental growth. Getting from here to there doesn't happen quickly. But it will happen if you keep moving. Reward yourself. Pat yourself on the back. And keep moving.
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July 28, 2011
This & That: Student Edition
S Wrote: First of all, I am not sure how I would have made it through college without your help!! Now that I've graduated and I'm out in the work force, things aren't as rosy as I thought they would be. I have a full bachelor's degree, but because my kind of work is not in demand right now, I am making quite a bit less than I had predicted I would with my full education. I had only a little debt left over from my education that I hoped would be paid off quickly. However, I couldn't seem to get ahead, even after re-working my budget. So, besides my full time job, I decided to take on another part time job. Just when I thought I was getting a handle on things, my rent went up and an emergency expense brought me right back to where I had started. I feel like I have hit bottom since my little savings and emergency fund money have disappeared. My question(s) for you is: Is it appropriate to ask for a raise if I feel my work is worth more than I am currently being paid? Is it an option for me to go more into debt and spend the money on moving somewhere with less rent for the long run benefits? How can I get back on my feet? Thanks so much for your help Gail!! I hope I'm not a Princess!
Gail Says: I'm sorry you're having a tough go of it right now. Life sometimes conspires to undo all the good we've done. But remember, where you are now is not where you are going to be next. So breathe. And then come up with a plan.
If you feel you are deserving of a raise, you should sit down with your boss and talk about his/her expectations and how you should proceed to prove your value is above your pay-grade. Talk about what he/she wants to see and what the company policy is on raises. Explain that you're prepared to work hard, achieve what needs to be achieved, and that you want to be sure you'll be fairly compensated.
As far as moving goes, if the move is going to ease your cash flow crunch, then it will be a good thing in the long run. Make sure if you are financing this that you're doing so at the lowest possible interest rate. Have a plan for having the debt paid off as quickly as possibly. And make sure the total cost still leaves you saving money when all is said and done. It's a math problem. Do the math.
You don't sound like a princess to me. Just a chick trying to make it all work. As long as you're not shopping your brains out, living too high for your income, or making everyone else pay for your self-indulgences, you're in the clear. From your message to me, you don't sound like you're doing any of that.
Congrats on two things: getting through college and having the emergency fund so you had options when the caca hit the fan. See, it worked. Now you have to get busy rebuilding. Chin up!
Z Wrote: My name is Zach I'm fixing to graduate high school. My parents are divorced and have never set up a college fund. Also they have a horrible credit score. I've been approved for FAFSA but it does not begin to cover my college. I work as a Nurse's Aide. What's your advice on getting a loan and not going bankrupt after college?
Gail Says: M'love, you are going to have to use loans, but how much will depend on how hard you're also prepared to work while in school. I've met many people who manage to get through school with no debt by busting their butts working while in school. You're going to have to take this route, and live a very frugal life, if you want to come out the other end not buried in debt. I know you can do it. You can be creative about where and how you live (sharing to reduce costs or staying at home), about your entertainment (get friends who like cheap fun and don't waste money on booze), and be smart about where you shop (second hand). Live like a starving student so you don't end up starving because your debt is so high you have no money for anything else once you go to work.
S Wrote: I will be graduating from university this June. After 9 years of post-secondary education, I have only accumulated $10,000 in student loans (thanks in part to bursaries). When I start working I will make a salary of at least $80,000/year. My partner and I really want to buy a house by June 2012. We have no credit card debt or other consumer debt. The only investments we have are TFSA's that we are planning to use towards the down payment for a house. My TFSA contains the extra money that I didn't need from my government student loans. When I was in school it served as my emergency fund, but I was planning to use it to pay down 100% of my student debt the day I graduate. I recently mentioned this to a friend who said that I should instead make minimal payments on my student loan as long as possible, because 1) the debt will not be considered by the bank when we ask for a mortgage pre-approval 2) there is a tax credit issued on the amount of interest paid and 3) when I do have extra money I should first invest in an RRSP, then pay down the mortgage and finally put anything left over toward the student debt. What should my priorities be? Should I stick with my original plan or should I take my friend's advice?
Gail Says: Contrary to what a lot of people think, student loan debt is just like any other debt. Just because there is a small tax credit associated, that does not mean you should keep paying interest for as long as the system will allow you. The interest rate on student loans is actually quite high, relative to what you could finance for at the bank, but people stay in the system because they want to be able to claim the credit and they want to be able to claim relief if the worst happens.
The non-refundable tax credit varies by province. Non-refundable means it can lower your taxes, but it won't give you a refund. If you are in Ontario, your tax credit would be worth about $105 to you if you pay $500 in interest a year on your student loan. You can use this calculator to get an idea of what your tax credit will be. ( http://www.debt101.ca/taxcredit )
It is important to save for a house, put money aside for retirement, and have a life. But debt is debt. Student loans and mortgage debt is less-terrible debt, but it is still debt.
You should focus on paying off your student loan as soon as you can without compromising the rest of your financial plan. Aim to stick about 6% of your money away for retirement if you're still in your 20s. You can up it to 10% once you've got your student loans paid off.
I would use the money in your TFSA for the downpayment. Do not buy too much house. Your housing costs (everything in, including property taxes, insurance, utilities and maintenance) should not be more than 35% of your total net income. Then make a plan to get the rest of the student debt paid off in three years or less. That'll be fine.
Good job on getting to where you are with so little debt. I'm very impressed.
L wrote: Hi Gail, love your approach and your show. I recently graduated from law school and have a horrendous amount of student debt (to the tune of $38,250 in government loans and $65,000 professional student line of credit). As you probably know, young lawyers make a pathetically low amount of money starting out, at least in the Maritimes. I am living at home for my articling year, but would like to be back out on my own ASAP. My net monthly income is $2070/mo (gross $37,000/year). While my salary will increase with every year of practice under my belt, and ultimately my career choice will be a lucrative one, I feel extremely helpless and stuck right now. Do I have to move to a big city and make more money? What is the best line of attack?
Gail says: Professional degrees that come with a lot of debt have to be looked at more like mortgages than like consumer debt. Yes, it is going to take you a while to get this puppy paid off. But that's okay, as long as you're living within your means and working hard to improve your career position. As you say, every year you'll make more money…but it won't just happen, you have to make it happen.
Do you have to move to the big city? If you do, your costs are likely to go way up. I don't have a sense that young people starting out do that much better in the big city. You might want to consider staying home for an extra year if your folks will have you (you are paying rent, right?) You definitely should NOT move out until you have all your costs of living on your own covered from cash flow, a healthy emergency fund, and you've socked away the money you'll need to buy the stuff to set up a home of your own.
You're going to have to bust your butt too. You don't say what aspect of law you are planning to practice, but you can start setting up your own "on the side" clients by forming relationships with people who can refer people to you. So if you plan to do corporate law, for example, you can set up a side "real estate" law biz where you work with particular realtors who may want to refer their clients to an accommodating and efficient (and cheaper) lawyer for closing fees. You'll have to make sure you have set this up so that a) you're not in conflict with your full-time job and b) you've covered your ass on the biz end with enough insurance and the like. But you know all that… YOU'RE A LAWYER.
You can have everything you want. Set your sights up, look forward and be brave. I know you're feeling a little overwhelmed right now; that's natural. It's a big weight you're carrying. But focus on what is to come and then make it happen.
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July 27, 2011
Who's in Charge Here?
Have you ever looked into your wallet and wondered, "Where did all my money go?" Or looked at your credit card statement and scratched your head, "What the Dicken's did I buy at that store?" Or checked your bank account online and thought, "How come there's so little money left?"
I'm amazed at people who don't know what they're doing with their money. You drag you sorry butt out of bed every day to go earn some money, but you won't spend some time keeping track of it? Really? During book tour for Never Too Late I met a heap of bodies that told me, "I have no idea if I'm on track with my retirement savings." Really? You don't know? So, who would know?
As for all the people who want to blame someone else for their mess: the credit card companies charge too much interest, the bank lent me too much money, I wouldn't use overdraft if I didn't have it… OMG! Quitcherbitchin' and fix the mess you made. No one MADE you shop on credit. And no one is making you stay stuck in the muck you're in… except YOU.
What is it about money exactly that leaves us throwing up our arms in total surrender? Or choose to close our eyes, roll over and play dead? Why would a reasonable human being who knows that they need to make more money sit on their couch and whine about not having enough? And what is it that makes people think that there's an easy way out of a big pile of debt poop?
I've seen people whine about how much debt they have in one breath, and then in the next tell me about the kitchen reno they're planning, the vacation they just took, or the really great deal they just got on whatever it is they just bought. Talk about disconnected.
Until we recognize that WE are in charge of our money, that we decide how to make it, spend it and save it, we are always going to be looking for some kind of magic solution. I'm convinced that's why so many people leap into investments they neither understand nor are prepared to research: they're looking for an easy way to make lotsnlotsa money to solve all the problems they've created for themselves by ignoring the basics of managing their money.
I've you've ever said, "That's just too much work," or "It isn't worth all that effort to keep a budget" or "Debt is just the way life is" then you're exactly the person I'm talking to.
Until you accept that YOU are in charge, and only YOU can take the steps required to make things different, you will always be a mess of can'ts and I-wishes. Yes you can. And you'd be way better off expending some of that energy your wasting on wishing on actually DOING something.
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July 26, 2011
5 Questions to Ask before you Tie the Knot Again
There's no one right way to handle money in a re-marriage. But since you can't escape responsibility for your partner's decisions, you better talk about it. Some couples maintain separate savings and chequing accounts, paying for their own personal and children's expenses and sharing the costs of running the household proportionately using a joint account. While they may still quibble over shopping habits, keeping some money separate leaves each partner free to indulge. That's the easy part. Here are 5 questions to ask each other to make sure your merger goes smoothly:
1. Who gets to decide? Couples have always struggled with how to save and spend their money. For the newly remarried this can be further complicated by their histories, particularly if spousal and child support are issues. To create a realistic picture of your financial state, keep tabs on where your money comes from and where it goes for about six months. Then you can make some decisions about how much each of you will contribute to the household, and how much discussion is appropriate (and who will prevail) when purchases are made.
2. Who we are with money? By the time we get to husband number two or three (or four), most of us have clearly defined money personalities that affect our decisions about education, housing, clothing, vacations, medical and dental services, investments and gift giving. Financial responsibilities are also a big part of this discussion. While many a newly wed may know that her spouse has financial obligations to another family (a previous spouse, a mother, or Great Aunt Lucy), living with the reality is often very different from the intellectual acceptance of that responsibility.
3. How do we use credit? While each of us may have a different money management style, understanding which styles are no longer appropriate in a new family is critical. If you've always chased the blues with a shopping spree, you may have to take up kick-boxing. You'll also have to get a grip on the impact of past decisions on your new family. One that's often overlooked is the fact that divorce financial settlements are not binding on creditors. If you and your former spouse continue to have both of your names on a loan or account, you are at risk for each other's financial behavior. That means the new family is also at risk. So take an inventory of your financial obligations.
4. Where will we live? You'll have to decide whose roof will work best. Or you may decide to both sell and buy a new home together. Keep in mind that if you're staying in the same home, when you put more kids and more stuff under the same roof you'll probably want to take a look at your insurance. From home insurance to car insurance — adding teenagers will be expensive so brace yourself — you need to do a full review. And if your divorce agreement assigns your former spouse as the irrevocable beneficiary on your life insurance to cover support responsibilities, it may be time to start shopping for new life insurance too.
5. Who gets what? You're also going to have to deal with how your property will be distributed after death according to the law, the needs of your new family and prior agreements. Remarriage makes a will more important than ever. Biological or adopted children of first and remarriages are treated the same. While that may appear fair at first glance, when you consider the fact the first group is through college and the second set are only in elementary school, the picture changes. Most children expect money and property to follow a bloodline, not a wedding band. If you have a good relationship with your adult children, make time to talk over their concerns and expectations. And make sure you've clearly identified your position to your new spouse so there's no misunderstanding about promises made.
Over time, the issues relative to merging your loves and your money will evolve. The issues you have to deal with initially will be very different than those that arise if you start having children together. Some of the things you should talk about may take some time to get to. And you may never be joined at the hip financially. But as long as you keep talking, keep sharing information and keep listening, you should be fine.
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July 25, 2011
Poll Results: Good Little Savers
Gail's Rule #3 is save something. Saving is the act of taking money you aren't spending and putting it away for some time in the future. You have to save to build up an emergency fund. You have to save to have a pool of money for retirement.
When I asked the question, "How much do you have in your emergency fund?" 28% of you responded, "What's an emergency fund?" Oy! People, if you don't have an emergency fund then the first time life craps on your head you're going to be pushed to use credit… creating another emergency down the road. Only 17% of the over 500 people who responded have 6 months' of essential expenses covered. Those are the people who know that money in the bank means you have options in terms of coping with whatever curveball life throws at you. But you're working on it, I know. 25% of you have a month's worth of essential expenses set aside, another 20% have 2-3 months' worth, and 10% have 4-5 months' worth. Keep it up. The peace of mind is priceless.
You're working on building up those retirement savings too. When I asked, "What percentage of your salary will you put towards your retirement savings this year?" you said:
13 % of you said 16%
18% of you said 11-15%
24% of you said 6-10%
32% of you said 1-5%
13% of you said nothing.
Loads of you are optimistic about your retirement savings. 27% of you have a cood company pension plan and another 19% of you think you're in great shape. That's almost half of you who aren't worried at all. 17% of you say you've just started saving, but you have lots of time. Well done. 21% say you've just started saving and hope you'll have enough. HOPE! Hey, when you live in that grey zone, it's got to be weighing on you mind. Find out more about how your plan is working so you have time to tweak it if you need to. Sadly, 16% of y'all aren't in a happy place when it comes to retirement.
Many of you seem to like the TFSA. Of the almost 450 people who voted on this poll, 28% had contributed the max. The rest of you did the following:
8% contributed between $4,000-$4,999
4% contributed between $3,000-$3,999
5% contributed between $2,000-$2,999
8% contributed between $1,000-$1,999
12% contributed less than $1000
35% contributed nothing.
Most disturbing in these stats were the 10% of people who responded, "What's a TFSA?"
Have you been living under a rock?
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July 22, 2011
Lose the Obsession with Perfection
Perfectionism is the enemy of the Good. Y'know, this can be a really hard lesson for some people to learn. We set such high standards for ourselves (and for others) and are so determined to always put out best foot forward that we end up thwarting our own best efforts. There's nothing wrong with having a passion for excellence unless that determination to maintain the highest possible standard starts working against our best interests.
Here's a case in point. I got this letter from J:
Gail, I'm so frustrated. Every time I try to make the budget balance, I find something's happened to throw me off track. It might be a school event – those darn bake sales – or something goes wrong with the car. Last month my daughter broke her arm and between time off work to take her to the doctor and the clothes I'm going to have to replace because I had to cut some of her clothes for the cast, I'm falling behind again. I just feel like giving up.
Here's what I wrote back:
Hon, I'm sorry that you're finding the budget frustrating, but it's not really the budget… it's your attitude to the budget. Crap happens in life. Things will always come along to throw off our best-laid plans. You've got to be able to roll with the punches and deal with your reality. So here are a couple of things you should think about:
1. Have you made the budget too tight? If you're running too close to the edge, and you have no wiggle room, that can make your Perfect Budget unworkable. Build in a little extra into some of those categories, or create a curve-ball account to deal with life's surprises.
2. Do you have an emergency fund? See, that time off work to take care of your daughter… that's an emergency. If you have an emergency fund, this is the time to tap it. Some people become so obsessed with keeping their emergency fund intact, they forget that the purpose of the emergency fund is to deal with shortfalls in income you couldn't predict.
If you find you have a hard time starting things, and an even harder time finishing them, because you're afraid of doing it "wrong", you may be suffering from perfectionism. But I have news for you. The world does not reward perfectionists. It rewards people who get things done. If you're so obsessed with having it perfect that you can't act, you're letting your super-high standards get in the way. You might as well be total incompetent for all the progress you're making.
You must act. And if you're only 76% right, hey, you'll get another chance to smooth out the wrinkles. Next time you'll get it 79%. And over time, you'll get better and better and better.
You may never get it perfect. You've got to know when good enough is good enough and take satisfaction from what you've achieved, instead of beating yourself up for what's missing.
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July 21, 2011
The Sneeches
This is one of my all-time favorite Dr. Seuss stories. It's comes from another of his compendium of stories and the moral is fabulous: If you don't know what you want, you're gonna get taken to the cleaners, sucker!
The star-belly Sneetches were a proud lot, walking right by the plain-belly Sneetches without saying a word to them all because they had "stars upon thars." Meanwhile, the plain-belly lot can't think of anything but getting into the star-belly parities and hanging out with the snoots. Sound familiar. It's an age-old problem where the cool folks set the standard and all the Regular Joes look on lustfully. You'd think we'd know better by now. But we don't.
Along comes Sylvester McMonkey McBean with a machine and the desire to take all the money he can off these fools. When the plain-belly Sneetches went into the machine they got stars on their bellies just like the star-belly Sneetches. Of course, they paid dearly for those stars.
When the star-belly Sneetches saw that the plain-belly Sneetches had stars they were so mad they paid McBean to take off their stars just so they wouldn't be confused with the hoy polloi. McBean pockets even more money. Then everyone is running in and out of machines, McBean is cleaning up and no one knows who's who. The money runs out and Sylvester McMonkey McBean leaves town. Everyone learns to get along, but only after they're broke and have no other option!
This is what happens when you're a fool so obsessed with the superficial. I can't help but think of my Princesses and the money they'll spend on brand name stuff even as they rack up debt and limit their life options. And I can't help wonder how we could have come so far in the world in terms of our knowledge, but still think that a handbag, a car emblem, or the name on our clothes means anything of significance.
Hey, you can buy all the stars you want if you've got six months' worth of expenses in the bank, you're saving what you'll need for retirement, your debt is all gone (all of it), and your children don't have to worry about how to pay for their post-secondary education. But if you still have some I's to dot and some Ts to cross, throwing money at McBean to run through his star machine is just a way to imitate those who have more money than you.
If I have to have a star on my belly to be your friend, let's just skip it. Imma takin' my plain belly home to people who don't care about crap like that.
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July 20, 2011
8 Life Insurance Don'ts
Nobody likes to talk about life insurance except life insurance salespeople. Most people feel that the whole thing is yucky: it's expensive, confusing, and mostly about sickness and death. But the single best way to ensure you can get insurance when you need it, is to buy it when you don't. And the earlier you buy your insurance the cheaper it will be.
If you work for a company that offers life insurance as part of your benefits package, don't get complacent. If you change jobs down the road and have become uninsurable in the interim you won't qualify for new insurance. Make sure you have a basic private policy to cover your butt.
Here are 8 other don'ts to avoid:
#1 Don't think of insurance as an investment. It's not. It's risk mitigation and it's a necessary part of a sound financial plan. While certain types of insurance do build up money over time — products like whole or universal life insurance — that's not the first reason for buying insurance. Insurance is about taking care of the "what ifs". So the amount it will pay out to help your family cope should be your primary consideration, not the potential return on investment.
#2 Don't let the premiums make the decision for you. If you start from the premise that you can only afford to pay $x, and let that decide how much insurance you buy, then you're going about it all wrong. You must first figure out how much insurance you need and then choose the type of insurance that will give you the level of coverage you're looking for.
#3 Don't buy term because you think it's the only game in town. The "term vs. permanent insurance" debate has ranged since Moses was a lad. Term insurance, for which you pay only for the death benefit, may be the best fit for some people, particularly those who are older or who need a whopping amount of insurance. However, other types of policies, such as universal life or second-to-die policies, may be a better choice in certain situations. Choose the insurance that's right for you. Don't pick something just because you've heard it's what everyone should buy. Speaking of which…
4. Don't confuse illustrations with reality. Life insurance illustrations are designed to show much a cash-value a policy will build over time. Insurance representatives got their wrists slapped because many of those illustrations implied consumers could count on their policies to be self-funding within a specific — often too short — period of time. But if you haven't yet heard the news, illustrations are only projections of what may happen. They are not guarantees. If the company's rates of return decline, earnings may not be sufficient to cover the premiums in the future. So don't count your chickens.
5. Don't just forgetaboutit. At least every year or two, re-examine your policies to be sure they are still doing the job. If you got married, divorced, had a baby, or had a big jump in income, the amount of coverage may no longer be adequate. Or you might need to add a second, different type of policy, to meet new needs. You don't have to buy from the same insurance company. Shop around.
6. Don't forget to change beneficiaries. If you get a divorce, remarry, have a new baby, or if your partner dies, you need to review your insurance to make sure you're not leaving a stash of cash to nobody — or worse, someone you hate! Imagine seeing the death benefits from a policy on your recently deceased spouse go to that person's former spouse instead of you. Heads up. This is a far more common mistake than it should be when you consider the consequences.
7. Don't needlessly replace a policy. Sometimes it is appropriate to drop one type of life insurance policy and replace it with another, especially if your life circumstances have changed. But be careful about dropping a policy just to get a "better-performing" policy or for a cheaper premium. The flip side of this is people who automatically renew their term coverage, even when the reason for having insurance has grown up and left home.
8. Don't name your estate as beneficiary of your insurance. Insurance benefits are free of income tax when left directly to beneficiaries, but they face probate if the benefits become part of the insured's estate. So make sure you've named a person (or people) as beneficiary — and not your estate — on your policies.
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July 19, 2011
14 Reasons To Be Debt-Free Forever
You can quit your second, third and fourth jobs. Man, won't it be great to sleep in on Saturday morning?
You can breath. Having had the weight of that debt lifted off your chest, you can breath. It feels soooo gooood.
You can live in the present, satisfying today's needs and wants instead of paying for the past. Yah, you can have that latte with feeling like a total dick-wad because the money should be going to pay off your debt.
You can brag to your kids and use your experiences to teach them about money so they don't go into baaad debt. Hey, use your experience for good. And toot your own horn.
You don't have to worry about late fees and interest costs, where interest rates are going, and how the credit scoring system is jerking people around. You're in the clear. They can all go to hell.
You get to earn interest instead of paying interest. It may not be much, but it beats the pants of paying!
You no longer have to dread going to the mailbox or answering your telephone.
You can afford to save for your children's education, your own retirement, and anything you want to buy. The future looks good.
You can become the financial guru of your gang. Go ahead and try it. It feels fabulous to inspire and encourage family and friends to take control of their money and their lives.
You can give. Y'know, there are only three things you can do with money: spend, save and give. You already know how good it feels to spend, that's how you got into debt in the first place. And it's a great feeling watching your money grow. Giving comes with it's own rush.
You can set goals and start working towards them? Want to own a home? Have a family? Go back to school? You can do it with a plan and the money you're no longer spending on debt repayment.
You can blow a raspberry at every credit app that comes through the door and every telemarketer who offers to lower your interest rate.
You can write a success blog for me and tell everyone how you did it, shining a light on the path out of Debt Hell.
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July 18, 2011
Are You Stunting Your Kids' Financial Growth?
A few weeks ago I wrote a blog asking if you're stunting your kids' financial growth? Along with a load of comments on the site a bunch of ya wrote to me directly. This is subject on which people have a lot to say. The new e-book about raising Money-Smart Kids is coming soon but I thought as a run-up I'd talk a little bit more about the things we do to stunt our children's financial growth… most of which we do quite inadvertently.
Do as I Say, Not as I Do: If you tell your kids to save, but you don't save, the mixed message is confusing for children. If you tell your children not to impulse shop, but you never walk into a store with a list that they can see, how do they know you're not impulse shopping? What you DO has way more long-term impact on your kids than what you SAY. So you've got to be walking the talk.
If your money is a mess, then look at your babies and decide today is the day you clean up the confusion so that you can start being for you children what you want them to be for themselves. Being smart about money is more about discipline than it is about book-learnin'. Sure, there are some sophisticated concepts in money management, but the basics are plain ol' common sense.
Practice what you're preaching and you will have way more authority than if you say one thing and then do another. If you're always struggling to get things to come out even, you'll make money management look hard. If you have a system in place and you're disciplined about what you do with your money, you'll make money management look like a skill.
Silence is Golden: This is perhaps the biggest mistake you can make when it comes to kids learning about money. If you don't talk about money in your family, you're sending a message. Maybe you're saying, "I'm embarrassed about what I don't know." Maybe you're saying, "I feel stupid about money, so I'd rather not mention it." Or maybe you're saying, "Money isn't important enough to talk about." Your children are hearing you loud and clear.
People who are uncomfortable talking about money want to unload the yucky job on someone else: teachers should do this; schools should have a curriculum; the bank should teach you what you need to know
Wake up! The bank's in business to make money. Schools have enough to work into the curriculum without picking up your slack. And as for teachers… they're just people. They're no more or less financially savvy than the rest of y'all. (Have you seen how many teachers I've had on TDDUP!)
The only way to teach children about money is to give them some of the stuff to work with. And you're the only person who can give your children money. You're also the best person to see the opportunities to teach money lessons from when your tots are wee to when your teenagers hit the tall and know-it-all stage.
If you have some preconceived notions about teaching kids about money, those notions will influence how you communicate. How's that working for you so far? If those notions are getting in the way of teaching good lessons, it's time to flush away your prejudices and open up your mind to all the opportunities to do thing differently. Not talking about your money is one of those things you have got to get over!
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