Category: Talking to Kids About Money

It’s never too early to start talking to your kids about money! Here are some resources to get the conversation started.

Banks vs. Credit Unions: Which One Should You Trust with Your Money?

Woman smiling

Banks vs. Credit Unions: Which One Should You Trust with Your Money?

Banks and credit unions are financial institutions that provide similar services, such as savings accounts, checking accounts, loans, and credit cards. However, there are significant differences between the two. This post will discuss the differences between banks and credit unions, their advantages, and the risk associated with depositing your money in them.

What is a Bank?

 

A bank is a financial institution that accepts deposits, makes loans, and offers various financial services to individuals and businesses. Shareholders usually own banks, and they operate for-profit companies. In other words, banks are owned by people companies who invest their money in them, and they try to make a profit.

bank buildings

Advantages of Using a Bank:

 
  1. Convenience: Banks usually have a more extensive branch network, more ATMs, and offer online banking services, making it easier for customers to access their accounts and manage their finances.
  2. Availability of Products and Services: Banks offer a wide range of products and services, such as debt in the form of credit cards, mortgages, lines of credit and other loans, wealth management services, and investment options.
  3. Technology: Because banks operate on a for-profit model, banks are more likely to have the latest technological advancements and innovations to entice more clients and drive down costs. Technology, such as mobile banking apps and digital wallets, can make banking more accessible and convenient.

What is a Credit Union?

 

A credit union is owned by the people who use it. To use a credit union, you must be a member of the credit union. This is different from buying a bank share since you do not need to use the bank to become a shareholder. And if you are not a member, you can not be a credit union shareholder.

Credit unions are non-profit financial institutions that focus on helping their members by offering financial services. Members of credit unions are also shareholders and have a say in how the credit union is run.

Advantages of Using a Credit Union:

  1. Lower Fees: Since credit unions are non-profit organizations, they tend to have lower fees and better interest rates on loans and savings accounts. 
  2. Better Customer Service: Since credit unions are often smaller than banks, focus on bettering their members, and are not focused on profit maximization, they tend to offer more personalized service and are more likely to work with their members to find solutions to financial problems.
  3. Community-focused: Credit unions are often community-focused and are more likely to support local initiatives and charities.

Risk to Deposits:

 

Both banks and credit unions are insured, meaning depositors’ funds are insured. For example, in the US, accounts are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) for banks and the National Credit Union Administration (NCUA) for credit unions. Deposits up to $100,000 are insured in Canada by the CDIC. Canadian credit Unions are insured by provincial deposit insurance corporations, which provide coverage to their member credit unions. The maximum amount of money insured by each regional deposit insurance corporation varies. Most provinces/territories insure more than the $100,000 guaranteed by banks, and in some regions, 100% of your deposits with no maximum amount!

ATM machine

Conclusion

 

In conclusion, both banks and credit unions have advantages, and the choice between them depends on your needs and preferences. Therefore, it is essential to research each institution’s products, fees, and services and weigh the benefits and risks before making a decision. Ultimately, the most crucial factor in choosing a financial institution is finding one that is insured, stable and meets your financial needs.

Further Reading

My parents didn’t talk to me about money [2022 Update]

In a previous post, I touched on the idea that you do not need to be an expert to talk to your children about personal finance.  In this post, I want to focus on some common refrains you may have heard in your childhood- “We don’t talk about money.” or “Don’t worry about it” or “My parents didn’t talk to me about money, and I turned out fine.”

I consider myself very fortunate growing up because I did not hear any of those phrases in my house.   My parents were very open about the topic of finances. However, I recognize that this was not typically the case in many homes.  For many of you, the topic of money, especially with your parents, may have been a forbidden topic. Money is not something you could talk about. It would have been just as inappropriate to talk to your parents about money as it would have been to ask them how many times they had sex.

If this resonates with you, I can understand why you may be hesitant to talk to your child about money. Our environments shape how we relate to our world, and thus, you may feel paralyzed around this topic. Many parents have admitted that this resonates with them, and they are regretful that they never broached the topic with their children.

What Are You Passing On?

Why is it that money can be so taboo? Is it related to feelings of shame or embarrassment about the finances, what our parents had, or didn’t have? Or perhaps it was their lack of knowledge on the topic?

How might this affect a child, the lack of transparency? If your parents didn’t talk to you about money did it result in feelings of shame or embarrassment? Some report that it made them feel as if they were not a trusted confidant to whom their parents could share that personal information.

We often inherit our parents’ values around subjects as personal as these. So how have your experiences shaped the way you feel about money now? Does the thought of talking to your child about money, raise those same feelings?  Do you still feel embarrassed or shame? More importantly, do you want to pass those values and feelings on to your kids?

I have a feeling the answer is no.

Be Conscious and Deliberate

A lot of feelings we have towards money, and even actions we take with our money, are irrational. I love the study of behavioural economics because it confronts the fact that people are not rational beings. We may know that we should save, but instead, we spend. We know that retail therapy will leave us feeling worse in the long run, yet we continue to do it anyway. Yet, if we want to have a strong grasp on personal finance, we do need to act rationally and be aware of our feelings and actions regarding money. To truly be reflective and self-aware, we need to go back and revisit some of our early experiences with money.

If the subject of money was “off-limits” with your parents, this likely created some confusion, anxiety or both for you.  If you are willing to reflect honestly, take some time to think about how those early experiences shaped your beliefs about money and how you spend, save and give now. We will likely want to be much more conscious and deliberate with what we teach our children.

We want our children to be comfortable coming to us when they have questions about the world, whether that be about relationships, academics, money or otherwise. To forge that trusted relationship with them, we need to reciprocate and show them that we trust them as well.

You don’t need to whip out a pay stub on day one, but start the dialogue and stay open to answering their questions honestly. A stronger relationship with your child will be your reward.

Keep Learning, Together

I would also want to encourage all of us to brush up on our knowledge of personal finance. Also, as we know, our children will do what we do, and not what we say. So if your finances are messy (as can happen to all of us, myself included), take the time to get them in order. If your child is old enough to understand what you are doing, add them in some of those discussions. If you commit to paying down some debt, include your child in those discussions. Let them see that you are not perfect, but model how to set goals and work towards them.   They will act as your accountability partner. And it is powerful for them to see their role models (you) working towards your goals.

Money In A Digital World? Helping Your Kids Manage

I received a great question from a parent yesterday about something that has been extra challenging since the start of the pandemic. How do we teach our children about money in a digital world?  When so many of our transactions are online, should our kids need to be online to learn about money? This parent brought up the excellent point that during the COVID pandemic, many of us shifted to online purchases. But even before, and definitely after the pandemic, more and more of our buying is going to be online. With so many of our financial transitions being digital, how do we give our children a chance to experience handling money?

If you have read my post on allowances, you will know that I’m a big proponent of avoiding digital options until your child has a firm grasp of saving and spending using cash.Child on phone So, when the pandemic hit, I decided it was an opportunity to test out some of the options to practice using money in a digital world available to me.

We tried using Rooster Money for my nine-year-old son, who has demonstrated an excellent grasp of money management. I did not and would not make this transition with my seven-year-old daughter since she is still getting a handle on saving, but my son has had three years of practice and is doing well.

I won’t lie; the advantages of using apps to manage an is hard to argue. It automatically credits my son’s account with his allowance every week. It allows him to move money from his accounts as quickly as an online banking account.

The drawback to going digital

But, even with all those convinces, it does raise a few problems.

  1.  I require that my son have access to a device. This is not too challenging for me, but it may be for some parents and add to that, I have been battling with the increased screen time due to online learning, so adding another reason for him to be on a device isn’t my favorite.
  2. We have fewer discussions about money. My son can use the app to shift money from his different accounts (spend, save, give), but since it is happening virtually, we have fewer interactions and less dialogue about what he plans to do with his money. This challenge would be a show-stopper for me if my son’s interest in money and money matters were not as deep as they are. So, instead, we find other opportunities to have these discussions. But if he was less interested, I think I would switch back to cash for this reason alone.
  3. When we manage his money via an app and make online purchases, it can feel like I am buying things for him since he does not have his online accounts or credit cards to make purchases. So instead of buying what he wants, he has to use my accounts and credit card and pay me back. This experience is a far cry from when he would go to the store and buy his own stuff. To help overcome this last hurdle, companies are releasing debit cards for kids, and I will dive more into those options in a future article.
So, what is the solution?

I still firmly believe that for younger children to get their first opportunities to interact with money, they should do it at a physical store. There is more to money management than moving money from one account to another. Interacting with service people as they cash you out. The anticipation of a purchase. The feeling of the exchange when you hand over your money to receive your item or service, to name a few.

The sooner we can give our little ones those opportunities to practice those skills, the better. I acknowledge that we are moving to manage more of our money in a digital world. As our kids grow up, they will likely do most of their transactions online, but that doesn’t mean all of their transactions will be online. There is a reason why online stores call it a shopping cart. And have a check-out button. They are a proxy for the real thing. So, let’s give our children a chance to experience the real thing before they move to the virtual.

How does that work in practice?

I know it is not feasible for most people to take their child to a store all the time, but that doesn’t mean you can’t do it once in a while. A solution that worked for my kids was taking them to a physical brick-and-mortar store once a month. That cadence worked for us. They usually needed a few weeks to save up enough money to buy something, and I usually could find time in my schedule to take them to a store once a month. But that may be different for you. I also make sure to switch them back to cash and let them take complete control of the interaction once we are in the store.

In the end, I hope you will do what works best for you. If monthly doesn’t work, maybe you shoot for every two months. The important thing is that you try to give them the opportunity to manage their own money in whatever form works best for you and your family.

 

How To Protect Your Kids Financial Mental Health

Financial literacy is starting to become a focal point in schools. For that, I’m very thankful.  While I believe introducing financial concepts to students earlier would be more beneficial, I’m grateful for the progress we have seen.  But before you think that we can leave your child’s financial education solely to our schools, think again.  Doing so could leave your child’s money mental health in jeopardy.

Financial Mental Health

I’m confident schools will do well discussing the hard facts about personal finance. What is an asset, what is credit, and what is debt? But financial literacy is more than just definitions.  There are a lot of emotions wrapped up in how we use our money.  That is why you need to be involved in teaching financial literacy.

You know your child better than anyone, and I believe you are a better advisor when it comes to your child’s emotional well-being. So while in the classroom your child will get to understand some of the nitty-gritty of finance, you can be there to discuss:

*     How you feel when you buy something
*     How you feel when your savings account is at zero
*     How you feel when you give to charity
*     How you feel when you get paid for work well done

Feelings Drive Actions

I am a big basketball fan, and I live in Toronto.  So when Toronto was in the NBA finals, it was a big deal for me. Over two weeks, I gained ten pounds. Why? I was stress eating. All the tension of the series had me overeating. I’ve known I stress-eat for a while. When I’m down, I reach for sugar and crave comfort foods. There are feelings tied to the way I eat. The same is true for the way I spend and save.

Think back to the last purchase you made for yourself. How did that make you feel? Did you get a little high off of the transaction?  That euphoric feeling can become addictive, and drive our behaviour, just like my stress drove me to overeat.

Whether retail therapy is good or bad depends on you.  But the only way to answer that question is to understand how you feel since your feelings drive actions. I  know what my triggers are for stress eating—knowing that, I can choose how to manage it.  The same is true for the emotions that drive our financial behaviours, like saving, spending or giving.

Talk About Their Feelings

There is a lot of feelings that go into what we do with our money. When we have something in our lives that is not right, we may seek out a councillor to help us deal with our feelings. The hope is that by identifying our emotions and our triggers, we can change how we react. I want parents and guardians to be our children’s first financial councillors. Parents can help children work out the complicated feelings they may have around managing money. As much as I know teachers are there for our kids to talk to, they change year over year. And with counselling, sometimes what you need is consistency.

So don’t be afraid to talk to your children about how they felt when they had to pay back a loan or when they finally were able to save up and buy that big-ticket item. Getting them to acknowledge their emotions will better enable them to have healthy financial mental health habits and give them the tools to deal with those complex emotions on their own.

What Should Say When Your Kids Ask “Are We Rich?”

Hey Mom, are we rich?  Has your child asked you this question, or it’s opposite, “Are we poor?”. We have and it is a doozy.  Here is how you can deal with this question when you get it.

Let me start by repeating something I’ve said a few times. I’m very fortunate. I grew up with all my needs met, and I currently do the same for my children. I acknowledge that much of that privilege came from the luck of the timing and place of my birth. Had I been born somewhere else, or at some other time, I would not have had all the opportunities that I did. I also acknowledge that I have worked for what I have.  But just the fact that I was able to be educated, to be in a position to work, makes me one of the lucky ones in this world. So with all that said, yes we are rich.

Us vs The World

If we compare our situation to the vast majority of the people in the world, we would have to acknowledge that we are rich. Are We Rich Vs the WorldThe majority of the world makes much less per person than that of my family and me. And that is true for most of the people in my community. I have to believe that would also be true for most of the people reading this. According to where most of my readers are based, and those countries average income per/capital. Which means by those standards, we are very well off.

Us vs The Neighbourhood

But let’s be honest, when our children ask are we rich or poor questions they are not comparing us to households around the world.  They are Are We Rich vs neighbourhoodcomparing themselves to their friends down the street. They want to know how their family stacks up compared to the friend with a new pair of Jordans on, or a Nintendo Switch. Are we rich compared to those families?

I think this comparison starts early.  Our kids are not much different than us. I won’t pretend that I don’t look at clothing, cars, and other items and try to estimate where I fit economically compared to my peers. I like to believe that I don’t, but I would be lying if I said I didn’t. But with age and a bit of wisdom, I think that whatever mental calculus I do when I see those items I still treat the people I meet the same way regardless. It may be hard for me to stop doing mental math, but it has always been easy for me to treat people as people, I thank my parents for that.

What’s the  Answer?

If this question comes up, and I am positive it will come at some point, I would suggest you avoid diving deep into your pay stubs and tax returns. Start by asking a simple, “Why do you ask?”.  In addition to buying yourself some time to formulate an answer, it will also give you a chance to address what is at the root of your child’s question. Maybe they are comparing what they have versus what other’s don’t or perhaps it is something altogether different.  First, try to get to the cause of the question before you dive in.

Regardless of where your child is coming from with the question, I would suggest you work on defining the terms “Rich” vs “Poor.”  In our family being rich is as having enough money to cover all the needs of your family.  When talking about being rich or poor is a great time to identify needs vs wants if you haven’t already done so. If you have all your needs covered and you have money left over to buy your wants I consider that rich. Poor, on the contrary, is when you do not have enough money to cover all of your needs.

Definitions Matter

With that simple definition, it is easy to understand why we can feel poor while we are some of the wealthiest people in the world.  If we start to believe that having the newest smart-phone is a need, but we can not afford it, then we will feel inferior.   Similarly, people with very little can feel wealthy if they want for little.  I don’t want to stray into the ills of consumerism, but if you get into this discussion, you can easily segway into how wanting more can make you feel bad.

It is easy to grasp the “keeping up with the Jone’s” effect.  The more we see others have, the more we want, the more we want, the less we feel like we have.    To counteract this effect, we practice gratitude.  I think it is essential to fight against the endless want so that we can appreciate what we have.   

Be Honest

If this question arises for you.  Be honest about your situation.  Provide your children with both comfort and clarity. Let them know that you, as their parent, will do everything in your power to supply them with all the needs that they have.

If this question arises out of wanting for more stuff let them know that not getting all of their wants met, right when they want them is a good thing too.  Remind them how much more valuable items feel when they have to save.  Remind them how fortunate they are.

“Are we rich/poor?” is not an easy question to answer, but answer honestly for your situation, and you will be fine.  Let me know what you have said to your little ones when this question has come up.

 

 

If I’m not financially literate – How Can I Teach It?

Let me address the elephant in the room. I advocate teaching our kids about money, but it is based on a few key assumptions. The first is that we are financially literate ourselves.

I’m Not Financially Literate

With regards to our financial literacy, we can always learn more without a doubt. Investing, debt management strategies, retirement planning, and the list goes on. There are endless methods and tactics for how we should be dealing with money as adults. You have probably heard some of them:

The list is endless. I’ve read something recently that says, “We can not give what we do not possess.”

So how, then, can we be expected to teach what we do not feel we know?

Yes, You Are Financially Literate!

To that, I say, don’t sell yourself short. We all have had experience with money. Our journeys are all different, and our level of knowledge varies vastly.  However, when you compare that to your child’s knowledge base in this realm, you are a wise financial sage. The important takeaway is that if we are not talking about money with our kids, they will be forced to interpret what they can from the media and other social influences in their lives. Therefore, it is best to provide a basic shared foundation of finance to help our kids start their relationship with money in a positive way.

Simply earning an income, paying bills,  and spending your money have given you a solid grasp of the basics. You likely know how to prioritize your spending to cover your needs, and you understand the difference between a need and a want.  You have learned the ramifications of spending more on wants versus needs one way or another. From the outset, your child does not know these things. Here is where you start.  Teach your child that money is a limited resource, and our wants are unlimited.  Discuss the need to decide how these limited resources will be used. Talk through how you make your decisions and what you value.  The more complicated money management strategies can come later.  

Rather than saying I’m not financially literate, if you want, you can learn those strategies with your child when the time is right, but don’t let a lack of complete knowledge of the subject stop you from covering the basics. We owe this to our children.

 

Are you Wealthy? [2022 Update]

What does it mean to be wealthy? Easy right? Being wealthy means you are rich, you have lots of cash, you go on vacations, and you can buy what you want when you want. Or is it?

I had a fascinating conversation with Felicia Robinson Joly. She is the co-author of The ABCs of Wealth: Big Ideas for Little Children. A book I mentioned in a previous post on when is the right time to start talking about money with kids. Her book takes a different approach to start the conversation about financial literacy by discussing financial literacy vocabulary.

The book

I’ll admit when I read “The ABC’s of Wealth.” I thought it was a bit simple. Felicia, to my surprise, echoed that observation and then doubled down on it. She told me it is simple by design. We both agree that far too little time ABC's of Wealth Coverhas been spent teaching financial literacy in the past. Still, we also acknowledge that becoming financially literate can be a daunting task. She consciously created her book to be approachable so that there would be “no excuses” to avoid the conversations. The easy-to-read verses get stuck in your head like a pop song. She hopes that you and your child will easily absorb financial literacy vocabulary by creating rhymes and memorable text.

The Mission

But back to wealth. During our conversation, Felicia brought up the question, “What is wealth?” repeatedly, and for a good reason. Felicia’s objective with the book is to get people financially literate, but more importantly, her mission is to have people define what wealth means to them.

“Over the last 200 years, we have lost focus on what our intrinsic value is”. “Money has become the master,” and “we’ve devalued ourselves,” Felicia explains.  She went on to say that she wants to shift the “underlying mindset” with our relationship to money to be “based on our own definition of what wealth and value is.” Right now, she believes those definitions “are being shaped by external ideas.”

Put another way, Felicia says she wants people to “define wealth within” and to “look at yourself as your ultimate asset…your mind, abilities and craft”. So rather than seeing a doctor, a lawyer, or a ‘YouTube star’ and thinking that is what wealth is, I will get that.

Value

The idea that we have devalued ourselves reminded me of The Icarus Deception by Seth Godin. The industrialized economy of the past forced us to be a part of a larger system. We only had value as a cog in the larger system in that system. In our new economy, we need to remember that we all have an individual values that we need to offer the world. It is only through creating our ‘art’ that we can then engage in the exchange of value—my ideas, my art, for your connection, attention, and money.

Felicia notes that this is what the billionaires have done. She referenced the billionaires who started with the questions of how I will create value and what idea I have that I can then share with the world. What connections can I make to exchange value? She noted how Oprah created value with the exchange of ideas, Richard Branson with the exchange of music, and Bill Gates with the idea that there could be a better way to interact with hardware. They created value by first having ideas to share.

People have it upside down; they think, ‘let me get the money and then I’ll be important or, ‘I want to be wealthy, so I will work for that wealthy person,’ instead of creating their own idea and exchanging it with the world.

Shifting Mindset

That shift in mindset made me think of those people in our lives who do a 180 in their careers. They put the brakes on hard after spending years climbing the ladder, only to realize years in that they don’t want to be doing what they are doing. Or worse, they came to that realization but kept going even though work brought them no joy, only income. It happens. We get on a path and follow it,  never asking if this is the right path for me? This happens when we do not define what wealth is for us. When we assume that wealth is solely the collection of money, and then we go down the path, we define that will allow us to accumulate the most money we can.

Felicia hopes to make that shift more conscious, not a result of burnout or happenstance, but a conscious decision to say this is what wealth means to me. Time to be with my family, or time to see the world, or just time to sit peacefully with me. And once you define wealth, you use your abilities to create value to reach that goal.

I’ve written about target setting for savings, but this is target setting for living. Defining what success is and what wealth should be done before your career. Then, you can adjust and iterate if needed. And they should be based on your objectives and goals, not on what we see on Instagram, Facebook or YouTube.

How do you define wealth and success?  Have you conveyed your thoughts on wealth to your children?   Who is helping them to define their wealth?  If it’s not you, then who, DJ Kalid, Labron, the Kardashians?

I commend Felicia on her mission to shift mindsets because I agree that wealth should be defined.  You can find Felicia and her financial literacy program at  Power@Play, and you can find the ABCs of Wealth here.

If you are looking for financial literacy resources for children of all ages, please check our my resources page.

Do You Let Your Kid Gamble? I Do

Would you let your kids gamble? How about buying lottery tickets? How about playing the slots at a casino? Right now, you are thinking, this guy is crazy. Who would introduce gambling to their kids? I thought the same thing until I realized that I have not only condoned gambling but have helped to facilitate it.

Pokemon Popularity

Pokemon is big in our house right now. I have to hand it to the creators of that game. They have been able to not just keep that franchise going for 20+ years, but they have been able to capture a new generation of loyal fans and buyers year after year. Think back to when you were kids, while sports cards, pogs and garbage pail kids are technically still around they are nowhere near as popular or successful in terms of revenue as Pokemon.Pokeball

Somehow my son curated a collection of 50+ cards without ever buying a single card. He got a few for Halloween, and friends who had doubles have given him some. But this weekend he went out to buy his very first pack.

The Value Of A Card

My son has been trying to school me on the various values of the cards. The higher “attack value”, the more valuable the card is for him. Simple enough. So when he bought his first package of cards, low and behold he received mostly low attack value cards. I’m not going to lie, I was really excited about that. No, I’m not just a big meanie. I was excited because it gave me a chance to talk to my son about gambling and the lottery. Yes, I’m a super geek, and yes, when my child bought Pokemon cards, I let my kids gamble.

Here is a bit of the exchange we had after he bought his cards:

Me: Did you get any valuable cards?
Him: Not really, not that valuable.

Me: How did you feel before you opened the pack?
Him: I was excited

Me: Why do you think you were excited?
Him: I was hoping I would get an EX (High attack value card)

Me: Why don’t they put lots of EX’s in the pack?
Him: I think they do it so that you have to buy more packs.

And this my friends, is why Pokemon is a lottery. Lots of little wins to keep you coming back for more, and few big paydays. If your friends have valuable cards, you know it is only a matter of time before you hit it big too. Just like those ‘just image commercials’ you see that show you people just like you can win the big one.

Value and Scarcity

That is why Pokemon has been so successful. They have been able to create value and scarcity with their cards. They have also been able to create that excited high we get when we gamble or play the lottery. Yup, I just let my 7-year-old kid gamble on Pokemon. They have also created a card game that people love to play, and included the communal aspect of trading cards that has been popular for years. But I’m just focusing on the gambling here.

I’m not big on gambling, I know the odds, so I don’t play the lottery or go to casinos. I’m not passing judgment on how anyone else chooses to spend their money, but I am trying to educate my kids. And letting them know how lotteries work is part of that.

Other Games of Chance

The funny thing is, Pokemon cards aren’t the only form of gambling that I have introduced my kids to. At our kids school fun fair, they had a few games of chance. And it was my wife that pointed out that the money that was spent to play the games could have easily bought 2-3x the number of prizes that were won.

She was also wise to point out that he was not paying for the prize he was paying for the experience, which is like some people who gamble. But like all other things regarding money, and especially gambling, it is important that we are aware of what we are doing.

My son now understands that if he buys a pack of Pokemon, most cards will not be valuable, but every now and then, one might be. He knows that they do this on purpose to encourage him to buy more cards. And now, if he chooses to buy more cards, at least he is doing it consciously. So yes, I let my kids gamble, but they are informed because we talked about it. And that is all I can ask for.

3 Fun and interesting ways to learn about money

What are some ways for kids to learn about money?  If you have read any of my previous posts, you might think that the only way to teach children about personal finance is through an allowance. This, of course, is not the case.

Here are three super fun and easy ways that you can help your little ones to learn about money.

Play Store

My kids and I used to do this all the time. They take their toys, put them on dressers, shelves and tables, and put little price stickers on them.  They get the toy cash register out, and together, we play store.   To mix it up, sometimes they cook for me. We pretend they are serving me at their restaurant.

Role-playing is a great way to talk about money and get a sense of what your kids understand about the world of commerce. My favourite is the outrageous prices they try to charge. You haven’t seen price gouging until you go to the Little Corbin’s Store of Stuff.  It’s a lot of fun, and while you’re being silly, tell them that $1,000 is a tad high for a cup of milk. It is also a great way to spend a rainy afternoon.

Narrate Shopping Trips

Just like you narrate the other activities in your life for young children, do the same with your financial activities. This narration will give your child a good baseline for when you want to start discussing other financial topics. If you start this early, they will be better able to grasp the concept of selling and buying, renting and owning, earning and investing.

This will help you to get into the habit of talking about money with your little ones. When you are running errands with your children, speak to them about what you are doing, starting with the basics. Ask them if they know what it means that you are buying groceries.

Try to walk through the buying cycle with them. A farmer bought land, seeds, and fertilizer. They spent time and effort growing food. Then the farmer sold the food to the grocery store. Now you are buying it from the store.

Explain how you get your money.  I think this is so powerful.  Let your child know that one of the reasons you go to work is to trade your time, knowledge and skills to your company/clients for money. Explain how that trade works. Do you get paid an hourly wage, a salary, how often do you get paid, do you get paid in cash or deposited into your bank. And my favourite, talk about what you need to pay for with your salary (your food, taxes etc.). I remember the look on my son’s face when I explained income tax to him, and he was indigent “they just take it from us?!?”, Priceless.

Have a Q&A session

I love Q&A sessions with my kids; it gets them engaged in the things that are relevant to them.  My kids often ask me what things are free?  When I tell them that few things are, they want to know why.  To answer I will turn the question back on them and have them take on the role of the business owner, the customer, the landlord, the property developer, the boss, the student, and the farmer. I’ll ask them what those different roles need to trade for money or how they make money?

I’ve also started to ask my eldest about the ads he sees. What are they selling? How are they trying to convince you to buy the product/service? In the long run, this type of Q&A will help them become better consumers, less influenced by advertising (or at least conscious of the effects of advertising).

Let me know in the comments some of the ways you talk about money or have been able to incorporate money lessons for kids into your lives?

Why Didn’t My Parents Tell Me About Credit Card Debt?

My parents did not tell me anything about credit card debt when I was growing up. I’m very fortunate to have two loving parents who gave me more than I needed to succeed. They cared and provided for me both physically and emotionally, so this is not a condemnation of them by any means. Also, I don’t want anyone to think that I’m hung up on things that happened 20-30+ years ago. I am not. I own every step I’ve taken on my path.

What this is, is an honest look at some of the things that I wish I would have understood earlier in life. “What my parents didn’t tell me” is a catcher label than “Things I wish I learned sooner.” It also has the bonus of taking us back to when we were children and still forming our understanding of the world and the way it worked.

My Debt Story

So what is it that I wish I had learned sooner? For me, it would be Credit and Debt. If you borrow money, you need to repay it. It seems so obvious now that it is almost ridiculous to write it out. And yet, I didn’t do it when it mattered. My parents never talked about credit card debt. I also didn’t realize the severe ramifications of not repaying my debt, or maybe more critically, of not paying it back on time.

Specifically, I’m talking about credit cards. I got my first credit card when I was living on my own, around age 18 or 19. At first, I didn’t use them much; they were for emergencies, right? But then I did…for everything. They are so convenient, and who has cash on them anyways? Big or small purchases, it didn’t matter; and since my savings balance didn’t move, it felt like free money. But then the minimum payments started getting higher, and I thought, “Maybe I’ll pay this one a little late. Is MasterCard going to struggle if they don’t get my minimum payment on time?” You see where this is going.

What I Didn’t Know

I didn’t realize what I was doing to my credit score.

It’s crazy, right? How is it possible that I got thousands of dollars in credit without anyone sitting me down to say, hey, this is how this whole system works? No one told me what a late payment would mean or, more accurately, what lots of late payments would mean. If I’m honest with myself, if my parents were to have talked to me about credit card debt with a  “Hey Clif, you know you are not going to be able to get a car loan when you are done school because you are paying your credit card bills late” I would have said, “I’ll walk.” But the fact remains,  I was given a credit card without anyone telling me:

  • A $2 pack of gum bought with a credit card will cost you $50 when you only pay the minimums,
  • Paying on time is just as important as paying your bills at all, or
  • Defaulting on a credit card could keep you from buying a car, a house and, in some instances, from getting a job.
What Will I Teach My Kids

So what does that mean now? Well, for one, I plan to explain the credit system to my children before they live on their own. I will teach them how purchases on credit cards are a loan. I will teach them that paying your bills is just as important as WHEN you pay them. They will learn that their credit history starts from their first bills to their last credit payment. And that information will be used to determine interest rates and creditworthiness for the rest of their lives (or seven years, which seems like a lifetime when you are in your twenties). But more important than any of that, I want to get my children into the habit of paying back.

Lend Your Kids Money

I believe the one thing that would have changed my actions as an adult, even more than understanding the system, is if I had developed the habit of paying loans back.  I didn’t owe anyone anything until I got my first credit card bill and student loan, both when I was about 18 years old. When I started borrowing, I was not used to paying anyone back. And it was easy for me to think, no need to pay this back now.

Some people would never consider paying a bill back late. They are born with that sense of urgency when in debt. Unfortunately, I was not one of them. I want to build that sense of urgency into my children. I need to create repayment habits in my children through actions.   And the only way to make that habit is to lend my kids money!

That’s right; I want you to lend money to your kids too. I’m sure I’ll get some pushback on this. “Advances on allowances will mess with the concept of saving.”  I respect that, but I think just like there are times you use credit to get something now rather than waiting, the concept of credit and debt is something you should incorporate into your child’s money practice.

Lending in Practice

Here is what I have done. If I go out with my kids to buy something with their allowance, I do my best to set the expectation that the toy they want to buy will be purchased only with their money. They should be going to the store with all the money to buy the item, but it will happen from time to time that something else catches their eye that is more expensive, or they forget the tax (I make sure they pay the tax).

In those instances, I tell them I will lend them the money, but as soon as they get their allowance, or whenever they get money, the first thing they need to do is pay me back. I take the receipt from their purchase, write an IOU on the back, and have them sign it. I will not lend out more than one week’s allowance since my objective is not to get them into debt trouble. That is their credit limit.

Here is how it played out the first time I did this with my son. I lent him an extra $4 a few weeks ago. Right before his allowance, he was given $5 for his birthday from, Papa. I will not lie; I felt conflicted telling him that he had to pay me back using his birthday money, and I will also let you know there were tears when he paid me back. But I believe a lesson was learned. And I plan on lending to him again in the future.

How are you teaching about Debt and Credit?

Debt and credit are big on my personal finance curriculum. I do not want my kids to say, “my parents never talked about credit card debt,” when they grow up. So I would love to know if you have any other ideas on how to talk to our kids about money concepts. Also, I want to make “What my parents didn’t teach me about personal finance” into a series. I would love to interview you, yes you, the one reading this, to hear your finance journey. You can remain anonymous, but I think we all have important stories to share. Let me help you share yours. If you are interested, reach out to me: at hello@cliftoncorbin.com.

Lastly, a lot of this post assumes that you have a good handle on how credit cards and the credit system works. If you don’t, I would strongly urge you to read up on them. I will go into more detail on credit cards in future posts, but email me if you feel like you need something now, and I will send you some resources.