Color of Money Live With Michelle Singletary
Senior Editor, Kiplinger's Personal Finance Magazine Monday, November 22, 1999 at 1 p.m.
Already we have an epidemic of overspending among adults. Perhaps it starts with the wagon-load of gifts kids often get at their birthday parties.
Have you been at parties where the birthday boy or girl tear open gifts as though they were bags of chips? They sit in the honored position as gift after gift is handed to them with barely a moment in between to really cherish each one.
But this isn't child's play. Kids are getting so much stuff it's hard for them to appreciate what they get. Many of us are overindulging the kids in our lives and we aren't stopping to think what kind of consumers we're creating.
Join me Monday at 1 p.m. for a discussion about kids and money. My guest will be Janet Bodnar, a senior editor at Kiplinger's Personal Finance Magazine. She is the author of a book released this month called "Dollars & Sense For Kids: What they need to know about money-and how to tell them." Bodnar is also a syndicated columnist of Dr. Tightwad. She has appeared on countless national television and radio programs offering advice about kids and money. She will answer questions about the best way to teach your kids about money.
Michelle Singletary: I've received a flood of e-mail from readers relieved that somebody else is a little overwhelmed by buying for birthday parties. How do we as parents communicate to our little ones that the parties aren't about the gifts, especially when it's what they look forward to the most?
Janet Bodnar: For wee little ones, parties aren't about gifts; parties are about having fun. It's only when parents and other adults get carried away with giving presents that kids get carried away, too, especially as they get old enough to figure out what's going on. Parents have to remember that they set the tone here, for better or worse.
Welcome to another discussion about money. Today I'm exploring the issue of money and kids. Already, I've been having long talks about money with my 4-year-old. She thinks mommie and daddy has lots of money and all of it ready to be spent on her. But as I always point out, she doesn't have a job yet so she better start now learning about the value of a dollar. So, what are you teaching your kids when it comes to money? Janet and I are ready to hear from you or answer your questions.
Michelle Singletary: I got a message a couple who recently spent about $2,200 on there 4-year-olds birthday party. They wanted to know what they could do to stop the money-spending maddness at such parties. What other strategies can you suggest for a cheaper birthday party?
Janet Bodnar: Frankly, I would like to turn the question around and ask them whatever made them think they had to spend $2,200 on a 4-year-old's birthday party. $2,200!!! The mind boggles. The easiest way to stop the spending madness is simply not to spend. I'm certain the 4-year-old would have been just as happy if the parents had bought a cake and let him/her spread the frosting all over his/her face. Even taking a few friends to the park and then letting them ALL spread frosting over their faces would have been just as much fun and a lot cheaper. Parents need to ask themselves who they're having the party for--their kids or themselves.
Washington, D.C.: When is the best time to start talking to children about money?
Janet Bodnar: You can start talking to your kids about money when they're old enough to start asking questions about it. Usually that's when they're pre-schoolers. They'll start asking you to buy them things when you go to the store, or to take them to lunch, and if you tell them you don't have the money right then, they'll tell you to go to the bank machine and get some! That's a good time to explain to them that an ATM isn't just a little money-printing machine (which is what most kids probably figure). Always answer their questions forthrightly and in an age-appropriate way--and let them hear you say "NO" often, coupled with an explanation of why they can't have whatever it is they're asking for.
Alexandria, Va.: What should you do when your kids just tears though gifts? Should you apologize for them? Give the gifts back?
Janet Bodnar: If this happens with a very young child, it's obviously birthday party overload. I would calmly put the rest of the gifts aside to be opened later, and divert the children's attention to some other activity.
Bowie, Md.: Should a parent pay for chores? I've heard some people make their kids earn their allowance. Is this a good idea?
Janet Bodnar: Don't tie the basic allowance to chores. After years of talking to parents about this issue, I have come to the conclusion that many parents have trouble keeping track of the chores kids down. So an allowance-for-chores system often breaks down, unless the parents are very well organized. Also, many parents don't like to pay kids for things they should be doing around the house anyway.
Richmond, Va: My kid has a job? Should I require him to put away some of the money he earns?
Janet Bodnar: Yes, I think you require your child to save part of the money he earns. You don't say how old your child is, but the closer kids get to their teen years, the more they should be saving for bigger-ticket items, such as their own clothing budget, senior year expenses such class rings and the prom, and, of course, college. Any teenager with a job should be saving at least half of his income. And don't let your kids tell you that it's their money and they can do whatever they want with it. You're still the parent, and you still have input. Let them know what the ground rules are before they start working.
Washingon, DC: I've found a lot of kids getting caught up in this collecting stuff. Is it a good idea to let them spend their own money collecting Pokemon cards or beanie babies? Seems a waste to me but the kids believe they are making a good investment.
Janet Bodnar: I think that kids should be spending ONLY their own money on Pokemon cards, Beanie Babies and other collectibles. That will automatically put a limit on the amount they can spend, spare your from hearing the "gimmies," and make them think about how they want to parcel out their money. If they choose to spend a portion on Pokemon cards, then so be it. Let them know, though, that they should be doing it for the fun and not to make a killing in the market. The Pokemon fad could die in a month--and if it does, they will have learned a life lesson about the fickleness of markets.
Michelle Singletary: My husband and I can't decide whether an allowance is even needed. When I was growing up my grandmother never paid me for anything. I didn't get an allowance and I certainly had better not ask her for money to do any chores around the house. Is an allowance even needed? Are there other ways to teach children about money? Aren't we introducing our kids to the idea that they deserve money sooner than is necessary?
Janet Bodnar: Hands-on experience is the best way to teach kids money-management skills, and an allowance is the best way for kids to get that experience before they're old enough to have jobs. An allowance doesn't have to be big, and there should always be financial strings attached, so the kids know what they're expected to pay for. You turn over some of your financial responsibilities to them, instead of just giving them more money on top of all the other things you already buy for them.
Arlington, Va: With Christmas coming up, what advice would you give parents to cut down on their kid's shopping list. I had a friend whose daughter gave her a two-page list. With so much marketing it's hard not to spend a lot of money. YOu don't want you kid to be left out of any of the must have toys.
Janet Bodnar: If kids ask for something you know they're not going to get, either because it's too expensive or you don't approve of it, tell them that right off the bat so you don't raise their expectations. Otherwise, let them make their wish lists as long as they want--as long as they realize they're not going to get everything on the list. When Christmas gets nearer and it's time to make the final cut, have them go down the list and set priorities. For example, if they could choose only ten things, what would those ten things be. No child should ever expect to get everything on a two-page list. I once heard a shopping-center Santa tell a child that he would take the child's list under consideration, but he could only bring as much as would fit in his sleigh--which couldn't be too much because he had so many visits to make. The child accepted that explanation with no questions asked.
Bethesda, Md: I live in a very upscale neighborhood and the kids all seem to have the latest this or that games, toys and clothes. My kid wants to fit in so there is all this pressure to keep up. How to I put an end to keeping up with the Joneses without making my kid feel left out? And, often they are teased if they don't have the right clothes or latest toys.
Janet Bodnar: Gosh, I can, and have, written a whole book on this one! I would just like to say here briefly that you are under no obligation to buy your kids everything the other kids have, and the sooner that know that the better off you all will be. You may be willing to buy them SOME things the other kids have, but not ALL things. So, for example, you might buy an expensive Abercrombie shirt (better to get it on sale), with jeans from Sears. Your kids will have enough to fit in, but they will also know what your family's standards are, and that trying to keep up with the Joneses is a no-win proposition. There will always be some Jones who has more than you do.
Michelle Singletary: What should you do when your kid keeps asking for stuff while you are shopping or is constantly asking if you can take them to McDonald's?
Janet Bodnar: To some extent, it depends on how old your kids are and where you're shopping. If you're taking a preschooler to the supermarket, for example, you can tell the child ahead of time that he or she can choose one thing, and only one thing, to buy. Making the decision should keep your child occupied for most of your shopping trip (I have three kids, and this has worked like a charm for me).
Michelle Singletary: What should you do if your kid ask how much money you earn? Is it any of their business?
Janet Bodnar: If we're talking about a young child--say, elementary-school age--I wouldn't tell them how much money you earn. It won't mean much to them anyway--whether it's $30,000 or $130,000 it will still sound like a lot--and they'll just blab it to all the neighbors! If they ask this awkward question, you might ask them what prompted them to ask (maybe they're just angling for the new bike they saw in Sears). Or you might reassure them that you make enough to buy the things you need, with some left over to save.
New York, NY: What do you say to a kid who is constantly asking to be paid for every little thing you want them to do. I have a 13-year who is always asking to be paid to do the dishes or clean up the basement or whatever. I'm sick of it. Is there a short answer that will stop the asking?
Janet Bodnar: This is an example of a payment-for-chores system run amok, and a good reason why you shouldn't pay for chores in the first place.
Rockville, Md: What about giving kid's money to spend for Christmas presents? My kids don't have jobs and they don't get a lot in allowance so should I supplement their savings to help them buy presents for relatives and friends. I like the fact that they want to give people things so don't want to seem stingy but not giving them money for presents.
Janet Bodnar: Since workers in real jobs often get holiday bonuses, you could give your kids a holiday "bonus" if they have been good citizens of the household over the last year. But I think most kids know this is a handout, and would prefer to buy gifts with their own money. Consider paying them for doing extra work around the house or, for next year, starting them on an allowance that would give them money of their own to budget for gifts. Also, encourage them to create low-costs gifts for family members, such as gifts of crafts or services.
DC: I thought I'd pass along as idea my parents used with us that really drove home the idea of saving. When we were in elementary school my brother and I desperately wanted a swing set. Our parents puts a big jar in the kitchen and told us that every time we saved money by passing up "something extra", like fastfood instead of leftovers or candy at the grocery store, they'd put the money we saved in the jar. Once we had half the money for the swingset they would match it. We went to the store, picked out the one we wanted, and figured out how much we had to save. It took about six months and I think my folks may have stuffed the pot a little towards the end, but we really did get in the habit of passing up trips to McDonalds or silly toys we saw on television in favor of adding to our swingset fund. I think I'll borrow the idea for my own kids someday.
Janet Bodnar: This just goes to show that parents have the power to make an impression on their children when it comes to teaching them about money--even difficult concepts such as delayed gratification. And matching what kids put aside is a great saving incentive. I'm sure this idea would be just as effective today.
Michelle Singletary: What can parents or relatives do if they want to start teaching thier kids about the stock market. Is there a low-cost way for them to buy shares for the children in their family?
Janet Bodnar: A good way to get kids interested in the stock market is to buy them shares in a company they're interested in. Nowadays, there are lots of low-cost ways to do thise, from buying through on online broker to buying shares of stock directly from the company. Several hundred companies allow you to do this. Check the Web site www.netstockdirect.com for a listing.
Michelle Singletary: I get asked this question all the time so here goes. What age should you start giving an allowance? And, how do you figure out how much do give?
Janet Bodnar: You can start an allowance around first or second grade, when kids start learning about money in school. They also have a better understanding of the abstract idea of money, so if you give them $2 a week, let's say, they know how far that will good. One rule of thumb that parents seem to feel comfortable is 50 cents a week for every year of a child's age. So a 6-year-old, for example, would get $3 a week. But the amount is really up to each family.
Baltimore, MD: Is it really possible to buy a nice present for less than $10 these days? Won't it look cheap?
Janet Bodnar: I think there are lots of neat things in toy stores, accessories shops, and mall kiosks for under $10. And if you have to bump that up to $15 because of the cost of living in the D.C. area, that's okay. Just don't get carried away.
Michelle Singletary: Personally, I'm having the toughest time trying to stop my kid from asking for every thing she sees on tv. As it is now we limit her television watching but it seems the kid's programs have more commercials than content. Have you found a way to limit the "gimmies" when it comes to what they see on commercials and even the big toy advertising flyers that come with the newspaper?
Janet Bodnar: I think the best way to defuse this kind of pressure is to watch TV with her, look at the flyers with her, and talk to her about the things she's seeing. What would she really like, and what turn out to be disappointing? Let her make a wish list, but let her know she'll have to cut it down to size by the time Christmas comes. Since she's still young, she will have forgotten about a lot of things by then, anyway!
As they say in the cartoons "that's all folks." I ish you a happy holiday and happy times teaching your kids about money. I know I'm having a blast and I'm not breaking the bank. Join me again in two weeks for another discussion about money.