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Color of Money Book Club

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Michelle Singletary
Washington Post Columnist
Thursday, April 23, 2009; 12:00 PM

Personal finance columnist Michelle Singletary hosted an online discussion with Susan Beacham author of "The Millionaire Kids Club" series on Thursday, April 23, at Noon ET.

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In her April 5 column, Michelle writes: When you're tucking in your young ones at night and reaching for a bedtime story, add to the nightstand a collection of books that will entertain them yet also protect them from those intent on turning them into lifelong debtors and uncontrolled consumers. Read more in A Book Club Kids Can Really Get Into.

Read Michelle's past Color of Money columns or check out her past Book Club picks.


Michelle Singletary: Welcome everyone. I was really looking forward to today's chat. I love talking about kids and money.

I have a 14-year-old and all I have to say is PRAY FOR ME!

I have been able to stand firm on what I spend but my friends it is getting harder. Not saying I cave but I do have to lock my bedroom door at night cuz not sure the girl won't do some damage to me while I sleep for holding out on getting her a cell phone :)

So let's get started.


Washington, D.C.: As part of my participation in stimulating the econmy, I'm thinking of buying a new TV and gaming system. What's the best way to pay for something that might cost over $1K? Save for it, then buy, or buy using a low-rated credit card and pay it off over a 4-month period?

Michelle Singletary: C.A.S.H.

It's not a bad four-letter word. Save and buy my friend.


Washington, D.C.: I've got two credit cards with interest rates of 28 and 30 percent. What can I do to get those lowered? I've had very good credit until recently, and realized that my only hope of paying off my debt lies in getting those interest rates down.

Michelle Singletary: Call the companies and beg. If you get nowhere ask to speak to a supervisor and tell the person you need to be put on a payment plan because times are tough and you can't afford these rates otherwise you may default like so many others.

And I hope you are no longer using the cards. Cut them up!


Fairfax, Va.: I purchased a townhouse 4 years ago for $400,000. I qualify for the refinance package under the President's plan, but because my house has dropped to $300,000, I would be responsible for paying about $13,000 in financing fees and buying down points. Does this sound normal? I have amazing credit. The ARM adjust is June 2010. Currently have interest rate 5.375%, but the best Countrywide could offer me would be 6.1% after buying down points. The current balance is about $360,000.

It seems like I should take my chances and see what the interest rate will be June 2010.

washingtonpost.com: Special Report: Obama's Foreclosure Prevention Program - Do you Qualify?

Michelle Singletary: I would take my chances, especially if you can afford a jump in your rate. Check your mortgage papers, because there is typically a limit on how much the rate can jump in one year and with rates so low and probably staying low for a while you may actually end up paying less when it adjust.


Silver Spring, MD: These books sound great, though my teenagers are now too old for them. I've tried to model good financial behavior as they were growing up -- I save a lot, I don't carry a credit card balance, my car is older than my kids -- but I worry about them anyway. We don't do allowances, because (1) frankly I would wind up forgetting to give it to them and (2) their father wants to connect an allowance with whether they've made him mad this week. So instead I have a posted a list of chores and what I'm willing to pay the kids to do them. For larger jobs, I encourage them to submit bids. The problem is, one of my two children is money-conscious and is always keen to earn it, whereas the other one could not care less. If there's something he really wants, say prom tickets or a yearbook, he'd rather let it go than bother working for it. When he borrows money from other family members, he takes forever (or never) to repay it. I don't know how to motivate this kid, and I worry that he's going to be a classic debtor as an adult. Any advice?

Susan Beacham: Try allowance - but make it money that is tied to expenses your child has that you are now paying for - that they will now pay for with their allowance money. Allowance done this way takes away the emotion that you talked about with your husband. Allowance is the gateway to budgeting. Allowance will becomes a child's money - not YOUR money - and will therefore be harder to spend.


Property Tax-keep it in mrtg. payment or pay on your own: Hi Michelle, I've been weighing the pros and cons about whether or not to keep my property tax in with my mrtg payments or if I could make those payments on my own twice a year if I made it a point to actually put that money away for the tax? It seems each year my mrtg payment goes up and down a little due to the companies estimates of how much property tax will be each year: this year I owed money last year I had too much money. Besides the convenience are there other pros to having the property tax with the mrtg company? I've owned my place for 5 years and I feel I am responsible enough to make those payments on my own. Are thre any cons to this? Thanks!

Michelle Singletary: I pay mine thu my mortgage company. Just one less thing to worry about. But the key is are you really going to save the money. If there is even the slightest chance you won't, let them maket the payment part of your mortgage. Because when you think about it, whether they take it or you save if the taxes are going up or down you have to pay no matter what.


Washington, D.C.: Hi Michelle. I have a 2 year old. Do you think it is too early to start reading these books to him and having discussions about saving?

Susan Beacham: I remember being told to read to my girls when they were "in utero"! How about that for early! Seriously, 2 is not too old for these books becasue they are full of pictures. I did that on purpose so that children could rad along with you and get it from what they were seeing in the pictures.

Younger children listen to us - they think we are geniuses - and we are molding behavior at young ages - not trying to change it - which is much harder. So, start now and add other children's books from the library that will help you to keep reading about this topic. I have a list under "resources" for you at my website www.msgen.com.

Michelle Singletary: I agree. The books are well illustrated so they will hold the attention of younger people.

Except as I wrote my 8-year-old was a little scared of the big heads...but I think that's because big heads run in her daddy's side of the family and she's scared she may have gotten the big-headed gene.


Gaithersburg, Md.: I know this is a little off topic, but it has to do with my 29-year old son (we did not do a good job teaching him how to handle finances . . .). He just graduated from college and has three loans to repay -- all total probably less than $20,000 but he can't find a job. I co-signed on two of the loans and I'm making the payments. One loan company called me the other night and offered to make a "settlement." We owe them $7,500 and they will take $5,000 to close the loan out. Have you ever heard of this? Any suggestions (aside from asking for this "deal" in writing which I'm going to do)? Thanks.

Michelle Singletary: As long as taking the deal doesn't tank your credit scores, TAKE THE DEAL!

Just get everything in writing before sending any money.


Mt St Joseph High School, Baltimore, Md.: Good Afternoon Michelle!

I believe that the so-called "credit crunch" is a myth. I just got a loan solicitation in the mail from Bank of America, $30,000 at 7.99 percent, UNSECURED!

The credit crisis should be redifined as too much credit available, not a lack thereof!

Thanks and my wife and I love your stuff!

Michelle Singletary: Loving you right back.

And I agree with you. I'm still getting credit offers in the mail too.


Columbia, Missouri: I got a letter from a credit card company yesterday, indicating my credit limit was being cut in half because they had decided my credit line was too big (the credit line they gave me - I never requested a larger credit line). I've had this card for close to 10 years, but haven't used it much in the last 5 or 6 years and when I do, I pay off the balance completely. Will the credit company's action negatively effect my credit score? If so, is there anything I can do about it? Thanks!

Michelle Singletary: Let them cut it. Unless you are carrying outstanding balances on other cards, it should not hurt your credit score or scores.


South Riding, Va: How old is old enough for kids to start to get a concept about money, and what is the best way to start introducing the idea? Our son is only 2 1/2, so I really am looking for "how do we begin from the beginning."

Susan Beacham: Start with a bank - the traditional icon for kids and money - a piggy bank. We have one that is called the Money Savvy Pig. It has 4 see-through tummies and 4 slots at the top and 4 plugs at the bottom - each labeled with a choice a child has for money. Save, Spend, Donate and Invest. You can see it at www.msgen.com

Remember as you work with your child that money is very abstract and that kids do not get abstract concepts very well. So, to teach them about money - you have to make the message concrete. Like using a bank. Or reading a book to them so they can see the "picture" of what you are teaching -because they struggle with visualizing it themselves.

At this point, use a bank and get your son used to the choices he has for money. It will help him stop and think and make a choice - which will begin to help him practice the much-needed skill of delayed gratification.

Grab some additional suggestions for books to read to him at www.msgen.com under "resources" where I list the classics like the Berenstain Bears "Trouble with Money" and other titles that will keep you both thinking about the topic of money choice.

One last thought: Children as young as 4 associate the visable accumulation of coin with the concept of saving. So, make sure that the bank you use for your child to "accumulate" his savings is one where he can see the money add up.


Alexandria, Va.: Mixed Blessing?!

I am irrationally mad this morning, Michelle. My credit card company reduced my available credit by HALF, despite my perfect record of payments. I've even used it before, though not in years, to finance emergency medical bills. I suspect it is because I haven't used the card in months, except for the occassional charge, immediately paid off. I suspect they feel they aren't making enough money on me. I like the idea of a healthy balance in the event something terrible happens and all my emergency funds run out. I'm kinda mad, even though I barely use the thing. Oh well. At least I'm on track to be debt-free by my 30th birthday in September, thanks to you!!!

Michelle Singletary: Count your blessing I would day.

Or poot them they would say in my old neighborhood.

Besides a credit card is never good in an emergency as you laid out. It only puts you further into debt. So if you NEVER view the card that way, kick them to the curb and close the account.


Baltimore, Md.: Hi Michelle,

We will be getting a sizable tax refund ($6k) and would like to take half of it and start some sort of saving plan/college fund for our toddler.

What would you recommend?

Thank you so much.

Michelle Singletary: Do you have a sizable emergency fund and life happens fund?

If not use the tax money for that.

If you have any credit card debt pay that off first.

But if all the above is covered you can use the money to open a 529 plan. Go to www.savingforcollege.com for more info.


Save or pay down debt?: Hi Michelle! I love the columns and chat. My husband and I have about (deep breath) $40,000 in credit card debt. This has been accumulated over the last several years when we've had one major event after another happen - excuses, whatever. My question is: Right now we have $1200 in savings. Should we keep throwing money in savings, or start throwing money to our debt? I want to keep saving b/c last year we both lost our jobs at the end of the fiscal year (June 30), but this debt is weighing us down, so I want it done too. What's the priority for right now?

Michelle Singletary: Aggressive pay off that debt...BUT also keep saving.

So if you have say an extra $100 a month, save $25 and put $75 toward the debt.

Right now you should aim to save at least one month's living expenses. Then keep saving with a goal to at least six months. But you want to really target the debt, while still setting aside some to build up savings in case there is another job loss.


Cell phones use and texting in school.: Our daughter's high school has a lovely remedy for cell phone infractions, i.e., cell phone making ANY SOUND in school during school hours, using cell phone for anything during school hours. The cost is Saturday detention (3 hours sitting and looking at the wall) 9am to 12 noon in school uniform and a $25 cash.

Susan Beacham: Love the concept - might use this at home. BUT, I would ask the high school to have them spend the time in detention writing an essay on what they could have used the $25 for if they did not have to pay it to the school.

Also, might not be a bad idea to have the school keep a running total of the amount they are collecting and asking kids to write another essay on what they would suggest the school do with the money they are collecting!


Laurel, Md.: President Obama today is meeting with the credit card industry to reduce abusive practices like outrageous fees for trivial tardiness and universal default.

What would be the effect of making them move their operations out of Delaware (except for customers in Delaware, of course) and making them lend according to the laws of each customers home state. Delaware is making itself rich by being the home of usury.

washingtonpost.com: Obama to Host Credit-Card CEOs, Pledges New Rules (The Post, April 23)

Michelle Singletary: I'm not sure cuz I'm sure they would find a way to get around any state law and charge what they want.


Lansdale, Pa.: Hi Michelle: I am 50 and my wife is 42. We have no kids. We are very prudent with our money. We have no loans what so ever. Any balances on our credit cards are paid in full. And we put away close to 40 percent of our income every month. Though we currently rent, we plan to buy a townhouse/condo this fall. Given all this, should I subscribe to the Credit Score Tracker service offered by Discover Card at $7.95 a month? Apparently, this gives me access to my credit report and score 24/7. Is this money well spent?

Michelle Singletary: I probably wouldn't spend the money. What will you be tracking? That you are still doing the right thing every month?

Keep the $8 bucks and give it away to charity my friend.


Anonymous: Hi Michelle. We are closing on a house month so we will get the $8,000 tax credit. Do you think it's best to put that toward the house to pay down the principal, pay off the $2,000 credit card debt we have or put it in savings? Buying the house has taken most of our savings so we do need to build it back up. We will build our savings back up, whether we do it monthly or by using the tax credit.

Michelle Singletary: Definitely pay off the credit card and use the rest to build back up your emergency fund.


Annapolis, Md.: hi Michelle, Love your column! Are tax liens a fatal barrier to refinancing a mortgage? where can we go for help? thanks!

Michelle Singletary: With that kind of lien, especially if recent, you will not be getting the best rates if a rate at all.


Arlington, Va.: Hi Michelle, love your chats. I have never owned a house and am considering buying a condo. However, I find this whole home-buying thing overwhelming. Can you recommend some good books or websites where I can start doing my homework and learning what steps I should be taking. Thank you!

Michelle Singletary: If I were you I would go thu some housing counseling.

Go to www.hud.gov and look for a counseling agency near you and see what classes, help they offer to first-time home buyers. Books are good but one-on-one counseling will help too.


Washington D.C.: I have had a MasterCard since 1986. Over the years, without ANY request from me, the credit was increased to $50,000. I am a "zero balance" guy (I pay in full each month). Yesterday, I received a letter from BOA (who acquired the card about a year ago) saying my credit had been "adjusted" down to $25,000. I called and spoke to two reps, who provided no real explanation, other than "the economy, etc." They said I could "apply" to have the credit raised back to $50,000. I am insulted and may cancel the card (recognizing the fact I have not, historically, ever used that much credit). Any thoughts??

Michelle Singletary: And you are insulted because???

Certainly your manhood or womanhood is not tied to having $50,000 in credit you NEVER plan on using. So what do you care, especially since you pay your bills off every month.

Too much in this world to worry about really.


Susan Beacham: Today's economic crisis is a great opportunity for parents to teach kids about money. In the past, when we told our kids to "cut back" or "save" they rolled their eyes as we were not walking our talk. Nowadays, we are. And, as the most impactful teacher in our child's lives when it comes to money, this is good news. Our kids are watching us - and now they are seeing us save, set goals and delay gratification.

So, use this crisis to your advantage. Kids are also hearing from their friends -their #1 source for information - the same thing - that times are tough and money is not flowing as freely - and so, our message as parents sounds so much more authentic to our kids.

So, start talking at dinner about money choices, setting goals for those choices and family goals around cutting back. This discussion will get a lot more attentin these days than it did in the past.


Baltimore, Md.: Hi Michelle, thank you for hosting these chats. I've learned a lot from you and the fellow readers.

I need to buy a car in the next two months. I am in decent financial shape - have an emergency fund and life happens fund, and about $20K in savings. I am looking at cars in the $15K range. How much should I spend on the down payment, and how much should I finance? I am thinking to put $7K down and finance the other $8K. Thoughts?

Michelle Singletary: First let me say thank you.

Next, get on your case for even thinking this way.

So let's see. You have

emergency fund

life happens fund

Which means you have means and you handle your money well.

So then why would you want to get a loan when you have the full $15,000 and then some to pay CASH for your car.

People C.A.S.H is not a four-letter word.

Why give away money in the form of interest if you don't have to and it doesn't appear you have to.

I paid C.A.S.H. for the last two cars I purchased.

Debt is bondage. You don't need to be tied up.

Buy the car outright.


Washington, D.C.: Do the NFCC's repayment plans (especially the hardship plan) include any committment on the part of the debtors to not open any additional credit lines or take on any other debt? Wouldn't that be in the best interests of everyone (creditor and debtor)?

Michelle Singletary: Yes, typically you cannot use credit when you are under such a plan.


Credit Cut in Half: The same thing happened to me - my credit limit was cut in half on a card I never used. Fine - I truly never use it. But you said it wouldn't affect my credit score - what about the ratio of debt to available credit? It would go down, right? Thank you - you're the best!

Michelle Singletary: If you have zero debt owed on other cards, no change in your credit score because there is no change in the ratio.

The cut in credit line only affects people who have outstanding debt.


Re: 1986 Mastercard holder: I agree with Michelle and would add that you also need to consider whether closing the card would hurt your credit score. Longevity is a factor and I'd be reluctant to close a 20+ year old account, unless I had others that were as old or older.

Michelle Singletary: If you close the account the history is not erased. It stays.


Dupont Circle, D.C.: I use a credit card for travel (namely high ticket airline purchases). Do you see any benefit in getting a charge card like AMEX that requires re-payment every month but comes with an annual fee? I do find with open credit I'm not as good as I like with small silly purchases like "emergency" shoe shopping trips. I don't keep high amounts on my check card for reasons of security and the way I have my finances configured so having some sort of credit is helpful for these larger purchases.

Michelle Singletary: You need discipline, not another card.

Work on that. Much better way to handle your finances.


Credit Crunch: Is the "credit crunch" issue a case that individuals can't continue to max out their credit cards, or that corporations are having an incredibly difficult time finding investors for their debt.

I would imagine it is more the latter than the former, but I suppose the borrow-to-lend model of business is a little more difficult to explain, so the media speaks in general terms. Which leads people to think "what credit crunch? I just got a new Capitol One card!"

Sort of like how people say there's no global warming when it is cold in the spring.

Michelle Singletary: I think I see what you mean.

But there is a crunch, just not for people who have money.


Rockville, Md.: Hi, Michelle! I just went through the WP's do-you-qualify-for-refi article (linked above) and am still confused. Maybe you can help?

Bought house for $379K in early 2007. 30-year fixed at 5.75 percent (which we can afford even on one income, yay!). Put 10 percent down, so paying PMI. Loan balance is down to $330K.

I assume we are "underwater" in theory since house values have gone down, but we don't have any trouble with the payments and aren't trying to sell to realize that loss (i.e., the imaginary value will go up eventually and we may never move anyway!). Is there any point in bothering to refinance, and if we DO refinance would they base the loan on the new "lower" value of the house? If they use the new lower value, let's say it's $300K, do we have to put in ANOTHER down payment to get some equity in the mortgage, or do we get any credit for the cash we put down when we bought?

Sorry this is lengthy... if you know of a Web site where it's explained in more detail I would be happy to go there instead! Thanks much!!!

Michelle Singletary: Call your lender. That's where you are going to get your fuller answers. But doesn't appear you would qualify or need to qualify.

But as I said, call your lender.


Rockville, Md.: If we want some regulations on Credit Cards and want the regulations now, we should write or contact our Senators. I will.

My personal solution is to rely on my Credit Union for a card that I use the most. I can count on them to be fair and honest. NFCU.

Susan Beacham: Credit Cards are one of the most abstract concepts for kids to get their heads around. Gift cards are also tough. Let the senators know also about the brain research around how kids do not get abstract concepts until they are in their early 20's.

Until we get that kind of relief, we, as parents, grandparents, concerned aunts and uncles, need to step up the money talk and help make "plastic" a concrete concept. Put masking tape on gift cards and have kids write the total gifted and then any purchase so they can visually and concretely keep track of the total.

I have two teenage girls and they are both working with cash, checking and debit cards now. No credit yet - frankly because they cannot handle credit. Much too abstract. And they still struggle - as most teens do - with the ability to delay gratification.

Eventually, they will have credit, but not before that frontal lobe is developed!

Michelle Singletary: I say keep the kids --teens and college kids -- from the evil of credit as long as you can.


Debt-to-Credit: In my experience, the debt-to-credit ratio is calculated on the balance of your card on whatever day the credit report is pulled (or maybe the last time they checked, not sure). And sometimes there's even a "highest balance" noted. So even though I always pay off my main card every month, sometimes (like during my wedding) there was a huge balance at some point during that month. I assumed that's what they used to calculate the ratio, and I think I remember having it noted as one of the reasons my score wasn't even higher. That's why I was always glad to have a high limit.

Michelle Singletary: Folks this really only matters if you plan on going INTO DEBT.

If you pay off your balance every month, and you pull your score just before, just may be lower. So then don't charge and then borrow.

But really for the folks that this matters to, it doesn't matter.

It's the people carrying balances and heck if you are carrying a balance you shouldn't be getting more credit anyway.


Bloomington, Ill.: Never to early to start teaching 'money/budget' to kids! The B word will solve many questions and if properly followed will save many families from financial disaster. Sad -- but most people do not know the importance of the B(for Budget) but unfortunately they use the bad B word.

Michelle Singletary: Yup, budget is the other bad six-letter word.


Downtown Baltimore: Why pay $15,000.00 for a car? My brother finds cars for me that we call Little Old Lady cars. They are more than 5 years old, so they are fully depreciated, but they are well maintained, and have very low mileage. (Only driven to church and the grocery store once per week!) My brother knows a car dealer in Westminster Md who looks out for cars like this when asked. My last car was traded into the dealer where it was first purchased, and the dealer did the maintenance, so I was able to see the record.

I have yet to pay more than $4,000.00 for a car, and I pay cash.

Michelle Singletary: Good for you. But if he or she wants and can afford a $15,000 car I have no problem with that.

If you work hard, save, invest, out of debt, etc. then buy that car that nobody has driven. But if you like to buy $4,000 used cars, fine too.


stop with the FICO worshipping!: Why do people keep worrying about things (Closing accounts, limits, etc) affecting their credit score? All you need to be is responsible, build up the emergency funds, fund retirement, and then save for a downpayment on the house or other big expense. Let's get back to the days when 20 percent was standard. There is a reason that we've been in this finanical mess, people worrying about their scores and financing things they can't afford.

Michelle Singletary: Amen!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


Philadelphia, Pa.: Michelle, not a question about kids, but about coping with the current economic crisis. My husband and I are losing about one-third of our combined income due to salary cuts, job loss, etc. We currently save about 10 percent into retirement, and about 10 percent into general life savings. We need to cut one of those out in addition to the tightening of our spending we're doing. Should we cut retirement savings (no match), life savings? Some of both? We have 3 months net income plus an emergency fund and are 30.


Michelle Singletary: For now I would cut retirement if the money is going into accounts that penalize you for early withdrawal.

Right now you need to stockpile cash that you can get to until things turn around for you.


Silver Spring, Md.: Back again, the mom with the no-allowance, unmotivated teenager. He's almost 18. Is there any point in starting with an allowance now, for the first time, when the kid could, theoretically, get a job? (Except this is not going to happen until he graduates; he has little free time.) Thanks.

Susan Beacham: Silver Spring - you sound as if he is a lost cause! As long as he is under your roof, you have a chance to get him going in the right direction. Your roof - your rules.

Let him know that as of 18, he will now owe you room and board. That will motivate him to do one of two things - get a job and pay to stay with you - or, leave and pay someone else. Either way - you have made progress. Even if he is going of to college - you can still collect this summer.

I have two teenage girls - they both have jobs. They work with whatever time they have. Kids jobs are great for that - their employers are used to this kind of schedule. Tell your teen he has a bill to pay and it is time to work.

Allowance - as long as you are giving him money to cover expenses you have covered to date - then you are paying out no more money than you already pay - so you have nothing to lose - only to gain - by your teen now being required to manage the money that covers those expenses.

Be tough now - life is much tougher.

Michelle Singletary: I definitely agree.

Tough is good.


Columbia, Md.: My husband and I got a bill for credit card that was closed over a year ago. They actually called us and told us they were closing the account. Now, we have a bill in the mail from them for a charge we have no idea about. The charge is minimal but it's still not ours. What should we do? Risk having our credit score effected while trying to fight them or just pay?

Michelle Singletary: Keep complaining. Is the bill from a merchant or for goods you didn't buy. If so challenge the charge.

If it's a fee the company imposed and the fee is truly low, it may not be worth it to argue.


Arnold, Md.: My spouse and I have done pretty well with our kids so far -- they don't whine for stuff, they understand that if we buy cheap toys we can't go out for dinner, etc. -- but now they've reached an age (11 and 9) where they are starting to ask for opportunities to earn money in exchange for extra chores, and we are kind of torn. Sometimes we think it's a good idea, to give them some responsibility. Sometimes we think it's a bad idea, since we don't want to encourage them to develop the habit of coveting toys and stuff, and since they aren't always good about doing their regular non-paying chores (picking up, setting and clearing the table) we think they need to improve on that front before we offer extra jobs. Can you offer any advice?

Susan Beacham: Allowance is money that should cover expenses in your child's life. This way, you teach your children how to manage money and the expenses in their lives. Believe me- when they get allowance to cover expenses, it will become "their" money and they will handle it much more carefully than "your" money. Pick a few expenses that you now cover, like, lunch at school, clothing, maybe a hobby, and hand over that cash to them to pay for these expenses.

For example, my daughter Amanda was getting tennis lessons. I paid for the first round and then told her that they were too expensive and that if she wanted to continue, she would need to pay half of the next round with her money. She declined. Told me the coach was not so great so the lessons were not worth her money! How about that?!? Never would have had that conversation has her money not been involved.

Go to www.msgen.com under "resources" for an allowance contract and take a look at my blog at www.susanbeacham.com under "allowance" for lots more detail on how to execute allowance.

Done well, this is a very worthy use of both your and your child's time.


Credit scores are important: whether you like it or not. I put down 65 percent on my house and have no other debt but your score is important in getting a good interest rate (I'm now looking at refinancing and my score is over 800). It's also used to determine your payment in other circumstances such as car insurance. I agree that we shouldn't be slaves to our credit scores, like some financial advisors -ahem Suze Orman- preach, but you're crazy if you think it's not important and not something you shouldn't try to keep as high as possible.

Michelle Singletary: Hey slow your roll.

Nobody said scores aren't important. What I said and a few others is it's people like you with high scores who are worrying about little things that is annoying.


Bowie, Md.: Another credit card question. We have an affinity airline card that we've had for 15 years, but because of relocations we don't use that card much anymore. (We're disciplined fans of yours!) Now the airline is going through a merger and they're ending the relationship with this bank, so we are considering what to do before the next annual fee is charged. Which of the following will be least damaging to our credit score (currently 800)?

a. Keep the account open and pay the annual fee.

b. Close the account and get another more useful affinity card, maybe one without a fee.

c. Close the account and just leave it closed.

Michelle Singletary: You don't need the card.


Crystal City: Hi Michelle! Thanks for coming to American U. a few weeks back. I'm a grad student there and really enjoyed your talk. My question is this: I got almost $4k for my tax refund this year (I got the rebate for paying tuiton -- no graduate student loans for me!). Do I apply it to the remaining $6k in loans I have from undergrad (for which I am currently in deferment while in grad school)? Or do I continue to build my 6 months emergency fund? I'm saving for the house, but am a long way away from reaching that goal. I only have about $10k in my emergency fund, but would like $30k. I take home about $50k in annual salary, after all taxes/deductions. I also have a discretionary mutual fund and a retirement account. I'm 24.

Thanks for your help!!

Michelle Singletary: So if you have savings, why do you still have $6,000 in loans.

Take the $4,000, plus $2,000 from your savings and pay off the loan.


Washington, D.C.: Ms. Singletary,

I am finally coming clean with myself. Despite me trying to deny it, I am just not good with credit cards. I declared bankrupcy a few years ago, yet I was offered( and accepted ) a credit card, thinking I learned my lession and could better handle it. I wasn't. I ran this one up (1.5K) and have gotten to this point.

Having confessed my shortcomings, My question is simple: When I cut up my card and send it back to them, does that stop the clock on the fees and overage charges that they have been charging me? I have not spoken to them since maxing out the card. I have beaten my self up enough with this, but if you have anything to add, I can take it.

Michelle Singletary: As long as you stay over your limit you may be charged. And you will continue to pay interest of course.

But yes, if you can't control this, stop using credit.


Falls Church, Va.: re: I would ask the high school to have them spend the time in detention writing an essay

I disagree with the idea of assigning a writing project as "punishment." It reinforces the notion that writing is a bad thing to be avoided. Young people should be encouraged to write, not be given writing as a punishment for doing something wrong. It only encourages them to avoid writing...

Michelle Singletary: Interesting point. I know what Susan meant but I can see where that may send the wrong message.


"evil" credit cards: I agree with you on most things, but this idea that credit cards are evil is ridiculous. Many people use them responsibly - do not charge what you don't have the cash for, pay balances in full every month, etc. This helps build credit and you can find fee-free cards that offer rewards. It's better to TEACH kids how to use credit responsibly than to make them afraid of it.

I know you'll respond by saying debt is slavery, but you could not be more wrong on this issue.

Susan Beacham: When you teach kids about credit, remember that credit is an abstract concept that they will struggle with until their early 20's. You have to make the lesson concrete if you want them to learn.

So, start money education with concrete tools like coin and currency and then move to checking, then debit, then credit. Kids should not "graduate" to the next level until and unless they get it - and handle each level with responsibility.

When they were first dealing with coin and currency, I told both girls - this was early elementary - not to take cash to school. Well, Amadna took a $20 birthday gift to school and lost it. She never did that again. Losing a $20 bill killed. Gift cards, however, don't seem to have the same impact. I see gift cards left behind at our house by teens all the time.

Michelle Singletary: You, me, them, they, Peaches, CAN NOT win at this credi card game. You think you can but you can't. Study after study after study shows that when you use that evil plastic you spend more than if you use cash.

It's not ridiculous for me to shake people up with using the word "evil."

It is.

I want my kids to be afraid of credit.


Jessup, Md.: Is there life after bankruptcy? I'm currently in Chapter 13 bankruptcy (for the next five years.) What advice do you have for re-establishing myself?

Thanks I know better now!

Michelle Singletary: There is life. I've seen it!


Michelle Singletary: Well, it's that time. So sorry if I didn't get to your question. Thanks for joining me today.

Most importantly take care. Things are tough but every day is a new day to get your money straight. And if you already know how to manage money well, teach somebody else.


Editor's Note: washingtonpost.com moderators retain editorial control over Discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions. washingtonpost.com is not responsible for any content posted by third parties.

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