What Should You Teach Your Three Year Old About Money?

Here we have the world's cutest four year old, three year old and 7 month old! But what should they be learning about money right now?

So how do you raise a kid that owns his car, debt free, owes no credit card debt and has a 760 FICO score upon graduating from college (no student loan debt) at the tender age of 22? We've been able to raise a kid (or two or five) that are financially fit. We still have some at home that we're working on! But you can raise financially literate kids, too!

It starts with a "Fiscal Report Card" and checking off what they need to know at various ages. Here's a partial report card you can review and if you want the full version (for free) just email assistant@elliekay.com and put "Fiscal Report Card" in the subject line.

Youngsters

Age 2 to 4
• Picks up toys cheerfully
• Is on a schedule for sleep, play, and work (or school)

Age 4 to 6
• Makes bed in a basic way (not necessarily neat)
• Picks up room regularly
• Brings clothes to hamper
• Knows how to set and clear the table
• Knows how to take out the trash


Middlers

Ages 7 to 10
• Knows how to sort laundry into whites, coloreds and darks
• Can fold laundry and put it in everyone's room
• Is given an allowance
• Has a savings account at home and at a bank
• Manages a fun kid budget (restaurant, zoo, amusement park, etc)


Ages 11 to 12
• Begins to do additional "jobs" for hire within the home and occasionally for friends or family.
• Has a savings account with at least $200 to $250 in it.
• Is learning the meaning of delayed gratification
• Can save up for half of a larger ticket item they want (bike, skates, video game, etc)
• Is regularly contributing to a community organization either through volunteer hours or donating goods (clothing, toys, money)

Teens

Ages 13 to 15
• Can manage and balance their own checkbook with supervision
• Has enough in savings to take out $200 to $300 to start a mutual fund
• Is able to do outside jobs for hire among approved "employers" in the neighborhood
• Regularly pays for outings (movies, theme parks, etc)
• Is saving for a vehicle
• Is aware of the fact their grades in high school will impact their ability to get into college and earn scholarships for college


Age 16 to 20• Can balance a checkbook without supervision
• Has an additional credit card (on parents account) and can use it responsibly
• Can manage and balance a clothing budget and personal financial budget
• Regularly works inside and outside of the home during breaks from school
• Has paid for 1/3 to 1/2 of the cost of their car
• Maintains a good GPA (or what they are capable of)
• Has a regular volunteer position (hospital, coaching, church involvement, etc)
• Can use social media to learn ways to save money

What are you doing with your kids that is working? Let me hear from you!

Ellie Kay
America's Family Financial Expert (R)

Atonement - How to Keep Your Kids from Making the Same Mistakes You Made

Can you atone for the financial mistakes you made and keep your kids from making the same errors? This week in national media, I'm talking about how to help your kids make right financial choices. Here's my main talking points.


Statistics indicate that the majority of high school graduates cannot pass a basic financial literacy test and end up accruing $3800 in consumer debt in college. In fact, a 2010 American Express survey of parents with children between the ages 6-16 revealed that:

• 71% of parents say their children understand we are in a recession.
• 91% of parents say they are committed to instilling lessons of financial responsibility upon their children, with 62% giving their children a weekly allowance.
• One in five children (20%) has indicated to a parent that "maybe we shouldn't buy that due to the recession."

Q. Ellie, in a day where foreclosures abound and consumer debt is at an all time high, there are many parents who are watching who want to help their kids avoid the mistakes they made. Have you ever made any financial mistakes?

ELLIE: Yes, I’ve “been there/done that” and have the t-shirt to prove it. Our family had 40K in credit card debt when we were first married even though my husband had a good job. There were a couple of weeks when we didn’t have money for groceries, things were so bad. We were able to change our ways and became financially healthy and we don’t want our kids to make the same errors we did.

Q. Why do parents need to take responsibility for teaching our kids good money management, aren’t there new financial literacy programs, such as Jumpstart, that are making a difference?

ELLIE: I’ve spoken at Jumpstart conventions and they are a fantastic organization, but these programs aren’t available in every school and it’s up to parents to take that responsibility. In fact, I think that one of the greatest things we can do for our kids is to teach them about money management, something they don’t learn in the classroom. Since the number one reason cited in divorce is “arguments over money” teaching our kids to be financially literate can even help them in their future relationships.

If they don’t have to worry about debt, they know how to manage a budget and they learn smart ways to save money, then we’ve given them the best gift possible. We all know that kids learn most about how to manage money from their parents. And parents have a huge opportunity to teach kids healthy money management habits at an early age so they don’t make the same mistakes we made.

Q. What are your favorite ways to give your kids financial responsibilities without losing control?

ELLIE: There are several options out there for parents looking to stay in control of family spending while still extending financial empowerment to their teens and young adults. One of the things we’ve done is to teach our kids from a young age that if they “borrow” money from us, they pay it back at their next allowance, thus developing the habit of not carrying a balance from month to month. This concept is most closely identified with the Charge Cards that we have with American Express. In my work with their consumer education area, I decided to add additional cards with custom limits to our own account that is in the children’s name so we can teach them about the smart use of plastic and they can never spend more than the limits we’ve placed on the card. One of the reasons I believe in a charge card is that you have to pay it off at the end of each month. These cards are on the parents' account, not the teens, but we can go online and see how they spend the money and we can also set limits for each additional card. Once they turn 18, these cards, while still under our account, can be also used to develop our child’s FICO score.

Q. What are some of your favorite money management tactics?

ELLIE: One of my favorite money management tactics is to teach kids the art of managing an allowance. By getting an allowance, kids learn to manage their own money while they are still in our house and have the freedom to fail under our safety net. We teach them to give, save and spend smart. We’ve also used the tactic of a “Fun Kid Budget” where we set aside a certain amount for trips to the movies, zoo or an amusement park. They manage the money we’ve given them for the fun outing and the key is: they get to keep what they don’t spend. As they get older and become teens, their budgets expand to include a school supply budget, clothing allowance and a gasoline budget. A great option is to put their designated amount on a American Express PASS , which is a prepaid, reloadable card that once again, we control. That way, we don’t have to worry about them taking cash to the mall or using our debit card and the funds can be replaced if the card is lost or stolen. It’s like driver’s ed for the teen’s wallet but parents are in the driver’s seat.

Q. You have a “Family 401(k)” how does that work and what age do you start this kind of savings program with your children?

ELLIE: A “Family 401(k)” is a program where our kids have to earn half of the money for a large ticket item that they want such as a bike, videogame, roller blades, skateboards, etc. It may take months for them to earn their half, but once they’ve earned it and purchased the item, they take far better care of it than if we just bought it for them outright. They worked hard to earn their half so they’re going to make sure that videogame doesn’t get scratched and that they don’t leave their bike out in the rain. They can start this program as young as 6 or 7, depending upon the maturity of the child and their math skills. I remember our daughter, Bethany, saving for 8 months to get an American Girl doll, she was only seven years old but she was so proud of it and took such good care of it that it’s still in good shape and she’s now 20 years old!

Q. How can activities like back to school shopping help parents teach kids about money management?

ELLIE: A recent survey that examines consumer back to school spending intentions, notes that 39 percent of Americans plan to spend more on back to school shopping this year than in 2009, yet the majority (63%) say they will have a set budget and virtually all parents (94%) say they will look for ways to be resourceful and stretch their dollars.

I come alongside my kids and teach them how to compare prices, recognize quality and shop the sales, even using a coupon on some of these items. For our teens, we let them use our smartphone while in the mall to local coupons and the best deals that are accessed on the phone and used at the register. For example, retailmenot.com will list coupon codes and special deals. The fact that we’re using their “language” which is technology drives the financial lesson home in an upbeat and lasting way.

One of the other things we do is to teach them that “we pay for the item but you pay for the brand.” So if my son wants the latest Air Jordans, then we tell him we’ll pay $50 for the tennis shoes and he pays the additional $70 (for a total of $120) for the brand. It makes them realize what’s a need and what’s a splurge, then they can decide if it’s worth it to spend their own hard earned money on a brand.

If we can help our kids do better, then you can, too!

Ellie Kay
America's Family Financial Expert (R)

Red, White and Scammed - Part II- Answering Your Questions

Here's a blast from the past--when our children were little & white tights were in!

This is part two of a series that is an effort to help military families. I've been on ABC News and KLOVE these past two weeks, answering your questions.

Here's a transcript for those of you who asked--Be sure to pass this link along to your military friends!


Q. Ellie, you came to our Army base to speak last November and I think that your message really helped me get through my husband’s deployment. Thank you for the work you are doing with military families. I did have a question about ordering items online. You showed us how to pay 40% less by using some websites, but how do I know if the website is legitimate?

Steph from Rothenburg, Germany
Submitted via online contact form

ELLIE: Steph, thanks for writing and thank you for what you do as a military family member, I admire you so much and know it’s a hard job! To avoid getting scammed online, make sure that you never respond to an email inquiry, but you find the site yourself on your own search. Then, go to BBB.org to make sure they aren’t listed and also check out the FTC.gov, plus the Internet Crime Complaint Center at IC3.gov, to investigate complaints against the company.

Q. I’m 19 and have been a soldier for 18 months. There are quite a few of my friends who regularly go to the payday loan business that is right outside our base. I keep telling them that they are losing a lot of money by getting a pay advance, but they say the interest rates are low and it’s no big deal. What do you think?

"Private Benjamin" from Ft Bragg
Submitted via Facebook

ELLIE: Private Benjamin, thx for your service and you’re the smart one. Tell your friends that some of these payday loan companies are charging as much as 500% interest. Even though the Defense Authorization Act of 2007 put a cap of 36% on interest loans to military members, many of these companies skirt the law by added exorbitant fees and calling the loans “revolving lines of credit” instead of payday loans in order to bypass the law.

Q. My husband’s hazardous duty pay was backlogged by red tape and didn’t arrive early enough for us to pay our bills. How am I supposed to pay things like our car loans while he is in the Middle East if I shouldn’t go a payday loan center?

Justine Long, Fort Drum, NY
Submitted via Facebook

ELLIE: In situations like yours, there are resources as near as your Army Community Services center where they can offer free financial advice. In extenuating circumstances, such as yours, you might even qualify for special programs offered by the Army’s charity, Army Emergency Relief or the AER. By going to these legitimate resources, you can avoid getting ripped off.

Q. Our community here in Alamogordo, NM is very supportive of the military and so is Las Cruces, which is a little further down the road. Many businesses carry banners that say, “we support our military.” Even so, a friend of ours bought a car from one of these places and it turns out that the dealership didn’t own the title and then went out of business. Now our friend has an $12,000 loan to pay and no car to show for it! How can we avoid being “taken” and who can we trust?

Heidi Rothenburg, Holloman Air Force Base
Submitted via blog

ELLIE: Heidi, I’m so sorry to hear of that situation, especially from a business that advertises its support of the military. Unfortunately, auto vendors are a huge source of complaints. In most cases, the salesperson will offer you “easy credit” but you pay jacked up prices, hidden fees and interest rates of 15% to 20%. Military financial counselors have files full of horror stories. Bad dealers have taken cars in trade, promising to pay them off and then they go out of business, leaving service members with two payments. Go to BBB certified dealers and if the deal sounds too good to be true, just walk away, because it usually is. Or go to your base's ACS, Airman & Family Readiness Center or Fleet and Family Support Center for local financial counseling.

Q. My daughter just got commissioned with the Marine Corps and I’m concerned about the possibility of someone taking advantage of her financially. Are military members bigger targets for fraud than civilians?

Sue Simpson, Stillwater, OK

ELLIE: Military members have guaranteed paychecks and won’t ever get laid off. This makes them good credit risks. But it also makes them targets. Some people see the military as cash cows and they want to get their cut. One of the greatest evidence of this fact is that outside of any large military installation, you’ll see businesses that offer payday loans, pawn shops, and check cashers. These are the kinds of businesses that prey on unsuspecting military.

Stephanie, Phoenix, AZ
Submitted via email

Thank you to those who serve!

Ellie Kay

America's Family Financial Expert (R)

Red, White and Scammed - Tell Your Military Friends to Beware!

This week on ABC NEWS and KLOVE, I've been discussing how
thousands of service members engaged in fighting America’s battles overseas are now encountering a foe here at home. Enlisted men and women are easy marks for sleazy car dealers, insurance scammers predatory lenders, and identity thieves. So pervasive are the rip-offs and so troubling is the debt incurred by military personnel that US Department of Defense officials recently labeled the situation a threat to national security.

We have a long tradition of military service in our family. My grandfather was a bombardier who died in WWII, my father is a retired chief master sergeant in the Air Force, my husband, Bob, flew Air Force fighters for 25 years, our son, Philip, is a senior at the Naval Academy and will to cross commission into Marine Corp Aviation, our next son is headed toward the Air Force Academy next year and the youngest son wants to go to Westpoint and be in the Army. In fact, the photo you see is Bob, pinning on the Philip's Airborne wings--the very wings Bob earned 30 years ago when he was a cadet at the Air Force Academy!

Q. The DOD has labeled the fraud situation among the military as a threat to national security. How does getting scammed impact lives overseas?

ELLIE: It’s all about distraction. When military members are distracted, whether it’s worry over identity theft or trying to wondering if their spouse is able to deal with messy finances at home—then that’s when accidents happen. Distraction leads to worry which leads to accidents. And when accidents happen, then there is loss of life. So if we want to help save lives overseas, then we can all do our part to protect our military members by exposing rip offs and scams whenever possible.

Q. What kind of paycheck does a typical recruit make & what are some of the questionable ways that local businesses try to get a piece of that paycheck?

ELLIE: They earn about $1800 per month & these paychecks can be carved to bits by bad deals. For example, a computer store outside of Great Lakes Naval Training Center in Illinois employs attractive women to troll for new sailors. Once they get them inside the store, they are pressured into buying a very basic laptop for more than $4000, which is three times as much as the computer is worth. Then they finance the deal and the computer ends up costing even more with the store also making money on financing.

Q. What are some other common ways that the military is ripped off and people should be aware of?

ELLIE: There was recently a multistate investigation launched into life insurance scams that were being perpetrated against military members just before they took off to the Middle East. These scamsters sold soldiers extremely overpriced or misrepresented policies, taking advantage of the emotional situation of leaving families to go into harm’s way. This investigation ended with the companies offering more than $70 million dollars in refunds to thousands of service members. When it comes to life insurance, military members are offered SGLI or Servicemembers Group Life Insurance, which is a legitimate source for low premiums, so there’s really no need to secure other private insurance!

Q. Tell us about the “Red Cross” scam that is getting a lot of attention among military families?

ELLIE: This is fairly despicable, as it prays on the emotions of family members. A con artist claiming to be with the Red Cross will call a parent of a servicemember or their spouse, telling them their loved one has been injured and they need their social security number to authorize help for them. In some cases, they ask for an initial cash payment. Military members need to clear any report of injury through the chain of command or by contacting the base family community services.

Q. It seems that our military is very young, what is the average age of a service member and do they receive any kind of personal finance education as part of their training?

ELLIE: Yes, they are young, in fact, the average age range of military members is between 22 and 28 years old. Of the groups I routinely speak to around the world, I’d say that the average 22 year old has an even younger wife and a baby as well—so it’s a lot of responsibility for someone so young. The good news is that since 2004, service members learn about personal finance as part of their early training. When I go to give my “Heroes at Home” message I teach about finances and also encourage them to use the resources they have available to them on base. Army Community Services, Airman and Family Readiness Centers, Fleet and Family Support Centers—all of these have personal finance counselors there who are ready and willing to give free financial counseling to service members and their families. It’s what I call my $300 tip, because a couple hours with the caliber of financial professional at any of these centers is equivalent to paying $300 to a CFP or CPA.


Ellie Kay
America's Family Financial Expert (R)
http://www.elliekay.com/