How do I raise a financially responsible child?
As a loan officer I talk to people almost every day who have no idea what it means to be financially responsible.
I see credit scores in the low 400's and multiple insufficient funds on bank statements. I get calls from people that don't understand why the fact that they haven't paid their bills on time, ever, means they can't qualify for a loan. I had a woman with 13 credit cards that her husband didn't know about. She didn't understand what the problem was since there was money left over at the end of the month after all the bills were paid. There was $30,000 on those cards, but since she paid the minimum payment, on time, each month, she thought she was fine. She didn't realize that the interest rate on most of those cards was over 25%!
We live in a world where the microwave isn't fast enough. I want it NOW is the cry from the masses. Credit is king. Save 10% on your TODAY if you apply for credit. Don't bother reading the fine print that says the interest rate is 28.6%!
I wonder if anyone has ever spoken to these folks about saving for what they want, about the importance of paying bills on time. Our country is in a financial mess. To some extent it is because everyone is trying to keep up with the Joneses. Parents put themselves in the poor house trying buy Little Jimmy's happiness. What they don't understand is that Jimmy just wants their time. He doesn't need another Lego, another video game, another trip to Disney.
I was one of the lucky ones. My dad helped me to understand the value of a dollar. He came from poor, his dad died when he was young. His mom was a waitress who counted her pennies after the 5 cent all you can eat fish fry nights. He joined the Army right out of high school and sent money home to help raise his younger brothers.
Dad was thrifty. He ordered his pants by mail order and my brother's got the "free gift with purchase" for Christmas presents. He was famous for saying "It only costs a little more to go first class", but he clipped coupons and shopped at the military commissary. He spent the first part of his career in the army, retired and then became a military contractor, working long and hard to provide for his family. He put himself through school at night, recording his reading material in a tape recorder so he could listen to it on the long commute to DC.
We didn't have a lot, but I don't remember ever going without. I do remember family fishing and camping trips and playing board games. I remember long car rides singing Dad's old army songs or mom reading stories from the front seat. I remember Dad coming home from Thailand with 6 pairs of shoes he bought for $8. I remember helping my mom deliver food to those less fortunate at the holidays.
I can remember when we were young, we started getting an allowance. I think it was something like $8 per month. The goal was to save at least $5. Whatever amount we saved and put in the bank, my dad would double. We had our own passbooks and went to the bank every month. Some months there wasn't much to put in. When there was a deposit, it was celebrated. It was fun to watch our money grow.
My credit life wasn't always perfect. I made mistakes. I applied for credit cards on my college campus because they gave me a 2 liter bottle of soda or a t-shirt. Luckily I didn't run up those cards like so many of my friends did.
Fast forward to present day. I have a daughter, she is now 6. She watched Noggin as a toddler. No commercials, what a blessing. As she got a little older, there were shows with commercials. When she was four, during every commercial I began to hear "MAMA!!! I want one of those!" She was quickly told "If I hear that again, I will turn off the TV. If you find something you think someone would like, you can tell me that, but no more I WANT." I had to laugh when there was a commecial for a toilet brush that she just knew I would LOVE and a car that would be perfect for Daddy.
We didn't buy her a "prize" on every shopping trip. Now, don't get me wrong. She was allowed a treat at check out occasionally, but she never expected it, and she still doesn't. We don't talk about not being able to afford something, but about how to save for it if we really want it.
Last Christmas I asked her what she would like Santa to bring her. She couldn't think of one thing that she "HAD" to have. When she sat on Santa's lap she told him "You can bring me whatever you think I will like." As a parent, that was a proud moment.
She already had several piggy banks that were gifted to her over the years and she is quite good at finding change around the house to fill them with and earning money for extra chores. We had also gotten her a three slot bank, with one slot for the store, one for savings and one for charity. She also would put her birthday, Christmas and lemonade stand money in her piggy banks. She loves to share her own charity savings when we go to church or when we hear about someone in need. I am often amazed when extra comes from her "store" money too.
When I thought about what I wanted to do to help my daughter take the next step toward financial responsibilty, I thought about my early savings account. It would be an easy way to help her to have a deeper understanding of saving for future purchases.
As a resident of Westview Park in Catonsville, MD I am eligible for membership at Tower Federal Credit Union. I liked that they have a coin counter that account holders don't have to pay a percentage to use. I knew that was something that Sydney would really like, and a great way for us to gather all the change around the house. Our first deposit was almost $600 in change. We had been collecting it for years! It really is amazing how it adds up!
We opened a Looney Toons Account for Sydney. For every $5 she deposits she earns 2 stickers (max 2 per visit). When she fills up a row, she gets to pick out a prize from the prize chest. She hasn't earned a prize yet, but she loves to make her deposits and get a sticker or two.
Last week we visited the Tower Federal on Snowden River Parkway in Columbia, MD. She emptied almost $50 worth of change into the money machine. She filled out her own deposit slip and helped me to add up her deposit. She presented her deposit slip and book to the teller, and was quick to remind her that she would earn two more stickers. She is excited about saving and about being a big girl since "this isn't something a baby could do!"
I know that she is only 6, but I am hopeful that with a good start she will continue to grow in her financial responsibility, understand the value of a dollar, and always feel good about charitable giving.
How do I raise a financially responsible child? Start them young and remember that waiting for something you want is not going to kill them (or you) and will make them (and you) better off in the long run.
If you are considering purchasing a home in Maryland and want to be sure you are mortgage ready, my brother Tony and I will be happy to help! We help to make the mortgage process a pleasure!
If you already own your home, we are happy to provide a no-cost mortgage review to help you to determine if refinancing may be in your best interest. Please contact me at 410-960-2061.