Lending Club

Prepping Financial Fledglings for College

Mike Smith — Sun, 30 Nov 2008 14:54:22 +0000

Another benefit of discussions many parents are forced to have with their children about troubled family finances is that they open the door for further guidance on the topic. Before children go out on their own, preparing them for the realities of the world is often limited to lifestyle topics. While those are certainly important discussions to have, the first few years outside of your care are also when they’ll establish many of the financial habits that will guide the rest of their lives.

In his Letter to My College-Bound Daughter, Money Magazine contributing writer Dan Kadlec imparted what many children at this age need to hear. The letter was a masterful balance of gentle advice and relinquished control. Without missing the fact that most of the lessons in college are learned outside the classroom, he advised his daughter to enjoy every minute of it, but to be careful, too. The high level advice of furthering one’s financial education, living within one’s means, and building a credit history with responsible use of credit is beneficial to all students beginning their lives in the real world.

Young college students are often experiencing many things for the first time. Along with the lack of parental oversight comes personal responsibility for consequences. Allocating a portion of your advice for matters of money will serve your children well. It is in these early years that massive student loan debt and a tarnished credit history can erase many of the potential financial gains a college degree can afford.

Our kids are going to make mistakes in all aspects of their lives. Some lessons are best learned through experience, both good and bad. As parents, there is only so much we can do for our children. Eventually we have to trust that the lessons we have tried to instill will carry them as they venture out on their own. A positive relationship with money is surely not the most important of these virtues, but it is one upon which our children will certainly rely.

What do you wish you knew about money back when you were heading off to college?

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Spare the Rod (and the Designer Jeans Too)

Mike Smith — Sat, 29 Nov 2008 23:53:23 +0000

The troubled economy has been hurting many families for quite some time, though the effects are starting to be felt by a new group of people: teenagers. Many parents, who have always been the major funding source for their kids’ spending, have started saying “no” out of financial necessity.

The New York Times detailed this trend in The Frugal Teenager, Ready or Not. The article cites a survey that found “discretionary spending by teenagers, whose money comes from allowance, gifts and part-time jobs, had dropped 27 percent to $2,600, from its spring 2006 peak of $3,560.” While a portion of this may be attributed to cutbacks in part-time positions by struggling retailers, reduced handouts from Mom and Dad are likely a key factor as well.

Children asked to cut back on their spending responded in a number of different ways, but disbelief about the reality of family finances seemed to be the most common. One woman found her children more receptive to cutbacks after showing them specifics of their household expenses. It would seem that for all their confidence on the subject of money, few teenagers realize the actual costs of running a household. What’s more, parents who themselves are novices in personal finance have little hope of adequately teaching the subject to their children.

It’s not surprising for children who have always gotten what they wanted to be confused by difficult times. In many cases it’s more likely the parent’s fault for having always said yes. Regardless of where the blame lies, it is difficult to find a solution to this case, if one even exists.

As more children become affected, the problem may moderate itself to some degree. Frugality and thrift could become trendy as more children engage in the practice out of necessity. That, along with an increased awareness of financial constraints and learning to decide between multiple wants could be a real positive outcome of this whole mess. Whether you’ve always given your children just what they’ve needed, everything they wanted, or some combination of the two, now is an excellent time to further their financial education. You’ll likely learn something along the way as well.

Have you recently had to curtail your children’s spending? How did they react?

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Give Children a Gift That Will Keep on Giving

André Nosalsky — Wed, 26 Nov 2008 14:42:32 +0000

There are many occasions for giving gifts, especially to children. And one of the biggest occasions is coming up: Christmas. You might give clothes that the children can wear or some toys that will keep their attention, or you can gift them some shares of stock.

Buying them shares of stock might set a different course for their financial lives and get them interested in investing and personal finance at a young age. If presented as a fun game, kids will usually enjoy the experience and will want to learn more. You can even download software for them to track their stocks or you can use a simple spreadsheet.

There are different ways to accomplish this. If you already use a brokerage house, there might be offerings available to help you, so check that out first. You can also use a service like OneShare to buy one share and have a certificate framed and sent to you. OneShare might not be the best option if you plan on adding more shares. The last option is to open a guardian account with a low-cost broker. This would also allow the children to log in and track their investments in all kinds of graphs and get them accustomed to online investing.

Once they have their shares, you can also introduce the children to fantasy stock markets where they have an imaginary amount of money to trade and compete with other children. There are many benefits to having children learn stock investing. A good place to begin might be Young Money, where they can start with an imaginary $10,000 in fantasy money.

If you wish to give something more hands-on, consider Cash Flow for Kids, or the regular Cash Flow game if the children are older. Cash Flow makes it real and offers a fun way to learn the basics of personal finance.

Whichever gift you decide to give, make sure it’ll be something more than just a temporary moment of excitement and continue to pay dividends for a long time.

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