What is Digg?131 Comments
- IHaveIssues, on 10/12/2007, -1/+30Agreed. Jonathan 'salts away' $25K for each child and promises $5K upon graduation. Nice...if you can swing it.
- haooken, on 10/12/2007, -2/+26Well, you should have a low-limit card once you get into college to start building credit. Usually banks offer student plans that have very low limits that slowly increase as you progress through school. I mean if you have a $600 limit, then just use it for gas and food. Pay it off in full, on time, always, and you'll end up with a nice credit score when it comes time to buy house/new car/etc...
- raynar, on 10/12/2007, -13/+36Simple way to teach kids.
-make them get a job when they're in highschool.
-make them pay some sort of bill (phone bill, partial or full car payment, etc)
-explain how credit cards work, and why only tards at school sign up for credit cards to get that 'free tshirt'
-sit back and watch.
The end - on9star, on 10/12/2007, -3/+20Nice, wish it was a little longer though
- evilpig, on 10/12/2007, -1/+18That article doesn't seem to pertain to everyone.
- AnteChronos, on 10/12/2007, -0/+12@BobMysterioso
"I carry balances of around 2k each month. I pay $300 or $400 each month on that revolving balance. Sure, they make some money from me, but at the same time I have things I couldn't have bought outright without sending my bank account lower than I like."
I never did understand this line of reasoning. If you saved up for a little while, then the things that you couldn't buy outright become the things that you *can* buy outright. Plus, you have the equivalent of added income in the form of interest that you're no longer paying. It'd be an all-around winning situation for you. - ABadInAlbany, on 10/12/2007, -2/+14@guytoronto: Agreed, to an extent. Same boat here, I had to work for my money, I got a pittance of an allowance for a regime of chores -- dollars per week. I didn't start to have any sort of money until I got a paper route at 11, and started mowing lawns at 14, clearing snow from driveways at 15. I worked a couple crappy food service jobs in high school, until I started freelancing doing websites. Responsibility is all well and good, but it's no guarantee. I don't have credit card debt, but I've still made some piss poor decisions when it comes to finances. I think the key here is to understand that while these are great practices, good values to instill in your children, this is by no means a guarantee.
Also, I'd like to recommend "Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money" -- GREAT read on the subject. How the rich stay rich, how those with lower income can provide for their future in a meaningful way. There are decidedly different ways to live life, some with greater merit, and this book makes that clear. - djchester, on 10/12/2007, -0/+11The good parts:
¤ Explain to the kids what to expect in form of financial support now and in the future.
¤ Give them the responsibility over their own money early and stick to it.
¤ Let them do their mistakes and make them suffer for it now rather than later in life. - HomerS1, on 10/12/2007, -0/+11@haooken
Low limit credit cards look good on paper, but there isn't a bank in the US that will not increase the limit if asked by a desperate card holder. That double digit interest on credit card balances is too addictive for Banks to resist. Banks are much more about making as much money as possible for their shareholders than about teaching your (or my) kids financial responsibility.
The best financial advice any parent can give is to educate their kids early and often on the difference between wants and needs. That and don't make your kids life too comfortable at home so that they actually want to leave the nest when the time comes. - warox, on 10/12/2007, -2/+12"why is our economy so crappy when we keep pumping all of our money into it??"
Our economy isn't 'so crappy' but it's definitely unstable. It's because we're spending more money then we actually have. We have more debt now then ever before, both on a person-to person basis and as a country as a whole. Our growth rate is still moderately strong, but a portion of growth comes as a result of the increase in debt spending.
It seems asinine to me that we have articles like this about how to teach your kids about money, when in reality we should have articles about how to teach your government about money. If I write a bad check I get my credit scored lowered and have to pay a fine. The gov't just issues more bonds (offloading debt to the future) and raises the debt ceiling. - inactive, on 10/12/2007, -1/+11@argoff
Can you explain how going into debt to buy a house is bad? Personally, my mortgage payment is higher than the rent I used to pay, but is approximately equal after I write off all the interest and property taxes I'm paying. In addition, I have the possibility of earning extra income by renting out a portion of the house, which would effectively make my net after-tax mortgage payment much less than my previous rent payment. Also, take into account the fact that the value of houses usually increases or at least remains flat, and the fact that part of my mortgage payment builds equity...
Hrm...pay rent (money goes into black hole)? Or buy house (less amount of money paid, build equity, have a place to call your own)? - scyform, on 10/12/2007, -2/+12I guess I'm the opposite of most college students...my parents actually have to encourage me to use my credit card more often and built up a good rating. I have two atm/debit cards so I figured I should just use money that actually_have. I never really understood how people could think those cards are free money and max them out every month...the buyer's remorse would just about kill me.
- warox, on 10/12/2007, -4/+13The problem with that is you're still spending money you don't have. There are a significant number of college students who don't have jobs, and even a $600 limit (the lowest I've found was $1000, actually) will enable you to rack up bills that you cant pay. I mean, I had a well-paying job at school and it would have been impossible for me to pay off a $600 statement every month. When your finances are tight and you're on a shoe-string budget, it's best to not even consider buying on credit.
I agree with you in principle, though. If you can truly be fiscally responsible, having a credit card for emergencies and to get a head-start on the credit score is a great idea. - xbudex, on 10/12/2007, -0/+9@argoff,
Never go into debt, ever? Isn't that a little short sighted? I took out a couple student loans to go to college. As a result I am about 25k in the hole. I got a bachelors degree in an engineering field. As a result, I am making 60k a year (not bad for a 23 year old, and first job out of college). If I didn't take out a loan, I couldn't go to school, and I would be lucky to make 30-40k.
Yes, going into personal debt can be dumb. Buying a brand new car, for example, is a bad idea. When it comes to buying a house, however, that is usually a good idea. I can spend money that pays rent, and is gone forever. Or I can spend a little bit more, and build up equity. I can pay rent for 20 years, and have nothing to show for it. Or I could buy a house, pay a mortgage and have a house when it is all said and done with.
Also, you mention "There are two kinds of people in society. Debtors and creditors." My brother does not have any debt. Therefore he would not be a debtor. Does that make him a creditor? I can assure you, he is not a creditor. Just because he is not in debt, doesn't mean he is on top. He is just smart enough to know he wouldn't be responsible with a credit card. - inactive, on 10/12/2007, -4/+12@warox
well obviously you aren't supposed to be an idiot and max out your card each month.. - DAGONthehauge, on 10/12/2007, -1/+9Or better - DO NOT BREED.
- redfox2600, on 10/12/2007, -0/+8Well you shouldn't blindly believe anything people tell you. It doesn't matter if they are on digg or not.
- strabes, on 10/12/2007, -0/+8Something tells me I shouldn't take advice on how to raise my kids from digg...
- dalewj, on 10/12/2007, -2/+10not bad overall for an article o on the subject. I have 3 teenagers, ya i know its painful, I have used a few of these rules.
once a child hits high school, they should be getting monthly allowance (not weekly), and they for very few reasons get more money. I will pay 50% of anything over $100 that meets my criteria (Ill help buy a better bicycle to get to work, i wont help buy a new set of shoes). I pay $10 a week over the school food money they get. If they choose to skip lunch and hold the money, good for them, so they in theory get $22.50 a week to use. My middle school child gets $6 a week and food money, same rules.
My older kids work. When they work, they loose their $10 a week allowance (hey dad needs a break too). 50% of their after tax money is theirs to spend as they wish. 25% goes into long term savings (anything over $500). I wont add 50% of my money into the buy, but i also wont comment much on whatever they want to buy. 25% goes into retirement stocks, this makes up about $1000 a year, which they select once a year to buy a long term stock. there choice, they look at it whenever they want to see how rich they are getting :) RISK IS GOOD, when your 15, they understand this, they take it when they buy there stocks. I also go over with them what i think of the stock they are buying so they have a second opinion. 50% of the time they listen, the other 50% they tell me its a good risk. they have been right 80% of the time.
each of my kids has at least $150 in the bank on average, they don't go spend all their money, they save for big items they really want, they don't tend to buy on fads. I'm happy, they seem to get it.
next? credit cards come for the older children i in the next year. not sure how i will train them on this one. i have paid off my credit card monthly for about 10 years, and gone thru the cant afford min payment problems as most people have. how to instill that in a kid? i have no idea. - unixer, on 10/12/2007, -5/+12Its not crappy its the best it has been in 12 years.
- lokai, on 10/12/2007, -0/+7Managing money is easy, especially if you were raised in America. American TV tells us everything we need to know about managing our money:
Spend it all on everything that you want and on expensive things that you do not really need; a person is only as good as his material possessions.
:( - robdavy, on 10/12/2007, -0/+7Ok, let's make it understandable/useful for you if you're looking for instructions:
"Do what the author does" - anniemac, on 10/12/2007, -4/+10Yeah, I wouldn't even say it's "nice if you can swing it". I think it's NOT teaching children good money skills. If you get money handed to you on a silver platter, even after leaving the house... there's a problem there. Money you're given is easily frittered away, whereas when you work for money, you are more aware of how you spend it.
Promising kids they will get out of college debt-free just encourages reckless behavior. Without paying for tuition, they may not appreciate the amazing opportunity that college is. Without paying any bills or budgeting any money, they're free to rack up charges on credit cards, etc. without fear of repercussion. - GunbladeVIII, on 10/12/2007, -1/+7But check cards will NOT build a good credit history of any kind. They're almost worse. I'm a recent college grad, and got a regular credit card at the beginning of college with a very low limit ($1000), and paid the bill in full every month for four years. After I graduated, I was able to get a credit card with a limit almost ten times higher, and was able to get the super-preferred rate on a car loan no problem.
My friends who didn't get a regular credit card, and only a check card? Not so lucky. They can't even get approval for the credit card offers they get in the mail because of lack of credit history, and they're getting crappy rates when they go to buy new cars, almost 2% higher than what I got.
Avoiding beginning a credit history is just as bad as messing it up. You'll need good credit later in life for a mortgage and car.
Credit is nothing to be afraid of, it just has to be used responsibly. As long as you do, it benefits you since you're able to leverage debt to get a car and a house, and the bank. - vypergts, on 10/12/2007, -1/+6Agreed, also he makes no mention of a car (maybe because his oldest is just 16) but I'm sure that would factor in for a lot of parents.
$5,000 for a wedding...pft, yea right. - pHr3ak3r, on 10/12/2007, -0/+5My parents gave me and my sister double our age every month since we were like 10 or 12 and it has worked well. I have no strenuous credit card debt and a significant savings in the bank and I'm still a junior in college paying my own way. Cant say the same goes for my sister but she's still in high school.
- inactive, on 10/12/2007, -1/+6I grew up in a family with big money. My parents both worked on defense contracts for the government. While we had more than enough money my parents still forced me to learn responsibility when it came to finances.
My father made me start working (an actual job that made decent money) when I was 10. I had to raise chickens and sell eggs and sell chickens when they were broody or molting.
I was not allowed to keep the money but instead had to contribute to the family. I had an allowance but did not get all the money made.
When I was 13 I also took on a paper route. At 15 I worked as a cashier and I worked my way through college and took out student loans. My parents gave me help but I also knew it was my responsibility and not theirs.
When I graduated from college my uncle paid off my student loans, my parents gave me all the money I had contributed to the family since I was 11, plus interest. When I purchased my first house they gave me a downpayment of $30,000.
I think they went to an extreme but at the same time it taught me to be responsible about money (funny saying that since I am broke right now due to an unplanned event). Specifically that there is no need to run up huge bills.
An important rule I have tried to live by (I am sure there are many others with the same rule) is that if I can't pay for it now then I don't need it or I should save for it if I really want it. That doesn't mean I don't use credit cards. It just means that if I don't have enough in my bank account to pay the credit card balance in full then I should save for it or not get it at all. - GunbladeVIII, on 10/12/2007, -0/+5On a side note, $20000 for each of his kids' house down payments? WSJ must be paying this guy a lot. That's generous as hell. Excessively generous, I think. Since it effectively eliminates the single hardest thing to save for.
- sergeantmudd, on 10/12/2007, -1/+6I personally am more responsible with a credit card. With a debit card, I never really realized what was coming and going in my account. I couldn't tell you how much I spent each month. Now I put everything on one credit card, so my bill tells me exactly how much I spent that month outside of rent.
- inactive, on 10/12/2007, -5/+10someone failed economics...
- inactive, on 10/12/2007, -0/+4argoff invited me to a party at his cardboard box in midtown. anyone wanna join?
- diggumjonez, on 10/12/2007, -1/+5It should be added that buying a new car is NOT one of the financially responsible things you should be teaching a kid. Do some reading and you'll be hard-pressed to find any financial advice recommending buying a new car, especially with a loan, unless you can take advantage of a 0% APR for the life of the loan AND the car isn't overpriced to begin with.
My kid is not even 10 months old yet, but here's what I am doing/planning:
1) Started a savings account at ING Direct: Any money given to him by grandparents, etc is going into this savings account with a 4.6% APR. I'll give it to him when he graduates high school, after making sure he understands how much money was put into the account, how much interest it earned, and can explain to me how it all works.
2) Start a college tuition fund (have not yet decided whether it's better to pursue the Govt's tuition program or invest a similar amount of money elsewhere) that will cover around 75% of his total financial needs. He can choose to cover the remainder by working or through loans, with the understanding he'll be solely responsible for that portion.
3) Get the kid working early: I look back at the time I spent in jr high and high school, with some really great ideas that could have made me a bajillionaire, but instead spent most of my time on IRC, watching A-Team reruns, and rope-swinging at the lake. Oddly enough, my knowledge of BA Baracus only rarely comes in useful, and rarely pays for itself. - SmirkingRevenge, on 10/12/2007, -1/+5I'm sorry, but while I used to feel the same exact way, you are completely wrong. There's a myriad of great reasons to use credit cards, however they are all predicated on you being very good at managing your money.
1. Assuming you use 0% APR cards, credit card are an interest free loan. As long as money inflates (and with our fiat currency, that's practically a given), you are making money as you are paying for whatever you would have normally bought with cash on hand with inflated dollars. In addition, that cash on hand that you would have spent can instead be used to earn interest or be invested until you need to pay off the balance (when the 0% APR is about to run out).
2. You are being paid back money, subsidized by the poor schmucks who pay cash. Vendors are charged a fee to accept credit cards, usually in the 3-5% range. If you pick you credit cards wisely, you can split this fee with the card company. I receive a minimum of 1% off any purchase I make via credit card due to this cash back payback.
3. You are building a credit history. Unless your fear of credit cards extends to all loans (car/house/business), not having a credit history harms you financially in a big way.
4. You are spending someone else's money. That someone is a very large financial company who cares very greatly about their money. Hence you have greater bargaining power when it comes to refunds and damaged merchandise. In some cases it's almost like getting a free extra warranty.
5. The grace period. Even if you pay your credit cards off in full every month (which you should absolutely do UNLESS you have a 0% APR card, in which case you should pay the minimum until the 0% is about to run out, then pay it off in full with inflated dollars!), you still are getting a guaranteed 0% loan for a little while.
6. Organization and cash flow management. FDIC rules prevent >8 or so with drawls a month from your savings account. While I have a myriad of accounts for various asset classes, I do also have a high interest 5.05% savings account in which I keep practically all cash on hand. Using credit cards allows me to bulk all my transactions into one block to be paid off at the same time via a single with drawl from savings.
In short, as long as you can effectively manage your money, and for the record I'm 27 and 300k above water and I use credit cards as much as I possibly can and have never carried a balance unless it was interest free, credit cards are a no-brainer advantage. Debit cards are a terrible terrible thing to use. - briangig, on 10/12/2007, -0/+4wow your parents gave you a car? Lucky bastard...
- inkyblue2, on 10/12/2007, -1/+5gunblade: agreed. also, credit cards are WAY better than check cards for one reason: when there's a dispute with a vendor or a fraudulent charge, it's the bank's money that sits in limbo while the dispute is resolved, not your own. not a big deal 'til someone ***** up with your money and suddenly you can't buy lunch for a month because you have zero dollars to your name. yes, there are better protections on check cards these days, but credit cards are still miles ahead.
- trer, on 10/12/2007, -0/+4Spend Spend Spend! You're supposed to spend money to keep the economy going! If everyone saved money all the time, the economy would stop.
- allthatsgeek, on 10/12/2007, -0/+3Jesus, the only thing I got from my parents was a crappy hand me down car, free college, I wish, $20,000 down on a house. I wish this guy was my dad. All I got was "good you graduated college, stop being a failure and get a job"
- bacon_skoda, on 10/12/2007, -0/+3finishing college is not an accomplishment?
- pinkert11, on 10/12/2007, -0/+3"So you pay some interest" - "At any point I could pay off my credit cards with what I have in savings."
U Crazy :) You are basically tossing $200.00 or 2200.00 a year out the window so you can carry a 2k dept even though you could pay it off with savings. Then the 200- 300 you pay a month would probably pay off your credit dept each month. You would have an extra 200.00 a month to spend or save. In a year your savings in the back would be back, and in two it would double, just on deposits. If you invested you would really see that grow. In a retirement fund at 200 a month you would could be hitting the hundreds of thousands saved.
Credit Card companies have you duped. You are tossing away money for nothing. Pay it off, then do not carry the balance and then you are winning. :) - ABadInAlbany, on 10/12/2007, -1/+4@djchester: what's the point? they're not building credit, they're not learning how to be responsible with credit.
- inactive, on 10/12/2007, -2/+5Actually it is an awesome deal, because I'm getting 5% cash back ($115) and have a month to float the money so I can earn interest on the $2300 in a money market account until I pay it off in full at the end of the month.
Credit cards are necessary. They build credit, which lets you buy things like houses and cars. They are only bad when you carry a balance. Any fiscally responsible person understands this.... - cmiz, on 10/12/2007, -0/+3I agree, I don't know how much it helps you learn financial responsibility when your parents are just tossing money in your account for no reason. In the real world, if you run out of money, you can't just wait a little while before some magically appears in your account. I've tried that before, it usually doesn't show up!
Sure, my parents gave me money before I got myself a job in high school, but there were always chores involved to at least make it seem like it wasn't a gift. I think that's the way to go so that children also learn that money = work and doesn't just appear.
I also think that some of it just comes down to personality type. One of my brothers is terrible with money (whereas I'm very thrifty/almost cheap) even though we're close in age and were raised roughly the same regarding financial matters. - cstump, on 10/12/2007, -0/+3Credit cards are like guns. If you don't know how to use them properly you'll end up shooting yourself in the foot.
Three golden credit card rules:
1) There is no need to have more than 1 card. If you have a need for more than one then something is wrong.
2) The balance of your credit card should never exceed the sum of your savings and checking account balances (preferably just your checking account).
3) Pay your credit card balance in full every month. No exceptions.
Do that and you'll earn good credit which makes it easier to get loans, mortgages, better credit cards, etc. Plus you can earn airline miles, etc.
You gotta learn how to work the system, don't let the system work you. - ArmandoM, on 10/12/2007, -2/+5I bought my first home at 24 years old. I had my first kid when I was 28.
I'm glad I was able to get a loan. Paying rent sucks. - inactive, on 10/12/2007, -8/+11"and don't forget that some kids were born to big money and never worked for it and are now spoiled show offs while a few "free" marketeers try to convince us that is part of "freedom"".
- howski, on 10/12/2007, -0/+2I am one of 4 of my parents' children. When I was in high school, I got ZERO money from my parents, but I got a car (a beater). College? Nothing. When I bought my home? Nothing. I *still* considered myself lucky that I had use of a car while in high school. I learned how to be responsible w/ a car, and to get myself to and from school/work. If anyone here got ANYTHING from their parents when they bought their first home, he should consider himself LUCKY.
TWENTY GRAND?!?!?! I borrow $200 from my parents and I want to bow and kiss their feet. That is money they they should be saving for their retirement! Not helping our their 32-year-old son (who does not use/have credit cards) who is stretched a little thin that month. - pathy, on 10/12/2007, -0/+2I was always raised with very little money, by which I mean I was given little. Most things that I wanted would be purchased by my mother. (Single parent)
It's the same with my brother and sister. My mother has always given us what we need, and we've always had enjoyable lives. We got two 'big' spendings a year on us - A Christmas and Birthday present. Those would be the big gifts, a few hundred pound, maybe a thousand, or such. We never, ever got given large amounts of money or had it spent on us. If we really wanted something, we'd have to wait.
Now, thinking back, I think I was given about £15 every two weeks. That'd be about, what, $28ish? This was enough for me to save up and buy a computer game if I wanted it, or go to the cinema with friends, go to a McDonalds, whatever....
Anyway, this is coming to ahead in what I'm about to say now -
You might want to give your kids more in life, and have a better life than you did, but that shouldn't be through simply allowing them to have more stuff. You learn to respect what money you have when you have little, and you learn what you really want when those big spending times come around, and you're allowed to get something that you wouldn't otherwise be able to afford. If you wanted it when one of those times wasn't around, you saved up.
Maybe I was a sheltered kid, or was just used to things being different, but the idea of giving kids whatever they want, or even large sums of cash is just bizzare. I suppose being raised by a single parent brings that lack of cash in to focus, and seeing your parent worried about making the bills on time would sometimes scare you in to not wanting anything... Alas, I'm going off on a tangent. - merreborn, on 10/12/2007, -0/+2"No kidding. He's going to basically hand his two kids $60,000.
I can't imagine ever having $60,000 for /myself/, let alone kids."
That kind of goes to show that he might have a clue though, eh? I mean, the dude obviously knows how to make his money work for him. If we all know better than him, why the hell is he the rich one? - howski, on 10/12/2007, -0/+2Wow. Someone who gets it!
- inactive, on 10/12/2007, -1/+3@djchester:
If they spend too much on credit, then they just owe more.. If they spend too much on debit, then they'll owe a slew of overdraft fees.. Using a credit card seems wiser to me. -
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