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This was requested in the zuarg thread after I posted my Bank of Dad / allowance set up with my kids. I will circle back and make a better OP but for now, here's what I said: My nine year old gets 10/week for a base of chores with opportunity to make extra for additional work. If he fails his chores, he gets poo poo. Six year olds get five. They automatically get 50% into the bank of Dad off the top. 30% goes into their spend jars that they can watch accumulate and can buy whatever the gently caress they want, although in app purchases need to be scrutinized as they are wasteful buys. 20% is set aside to be given to a good cause of their choosing that we assist in identifying. A local family has their house burn down, or a medical fund for someone sick at their school, or more traditional charities. They get into the habit of saving half their income, not being selfish and greedy with their money, and get to enjoy it too. shame on an IGA posted:I love this and want to know more about how often the interest compounds and when they can withdrawal. Is BofD like a CD ladder? Would you consider opening a Teaching Kids How To Money thread so we can shake more ideas out of the woodwork? It's very simple. I have an excel sheet that shows the balances and add their deposits, each month I add 1% to it. We haven't really tackled how they can use the savings yet. They're in the accumulation stage but have dropped hints about how they'd be able to buy their first car with it. The money isn't actually invested anywhere. It's a category in my YNAB that I budget the interest and contributions to. Conceivably when it gets larger we can pursue that but the amounts are so small we will keep it in-house despite BoD not being FDIC insured. DISCLAIMER: I am not an expert at raising kids or making them good with money. I just like talking about it and sharing ideas. Whatever I have to say may be terrible advice and could condemn your offspring to a life of destitution and (wage) slavery. TraderStav fucked around with this message at 22:40 on Feb 3, 2018 |
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Feb 3, 2018 21:31
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When did you start giving allowance? I think my four year old is still a bit too young but want to keep in mind when I should start. Wife wants to avoid tying the idea of “being good” == “money” since she wants good behavior to be intrinsic. Did that factor in at all?
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Feb 3, 2018 21:36
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ryde posted:When did you start giving allowance? I think my four year old is still a bit too young but want to keep in mind when I should start. At five we started to, but it was always tied to some work that they did. Never wanted them to get passive income without having it come from their savings or something. We gave them some age appropriate chores (and had to help them a lot). I agree that being good and contributing to the family should be disconnect from money. The rules are that to be a member of our family there's certain things that you just have to do: Keep your room clean Put your clean clothes away Clean your plate after meals Etc. The allowance is tied to stuff like emptying the trash, filling/emptying the dishwasher (9 year old for this one), vacuuming the stairs, and the like. Then there's the commission driven stuff. Pay something like $.25 for each pile of dog poo poo they pick up and put in the bin. So many dollars for shoveling the snow. Raking the leaves gets you some cash. We haven't been doing the system fully for very long, just a few months, but I love the results that I am seeing. It's turned the compliance work that we'd fight about to tying that to something tangible for them. The Bank of Dad thing though is set up to develop their attitude about work. I do not want to train a bunch of wage slaves. I want them to understand that there are ways to make money by having your money do the work. This is just the first principle I'm teaching right now. As my nine year old ages a little bit more I'm going to encourage him to start micro businesses he's interested in and see if he can make some money. Learn the full cycle of an engagement with a client/customer or developing a product.
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Feb 3, 2018 21:44
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Subscribed! We had our first last year so I'm constantly on the lookout for ideas. She's only 8.5 months right now so still a little young. How did you start with introducing the concept of money and financial literacy? Did it just come out of them observing things on a day to day basis? In terms of what we've done so far (we're in Australia): - opened her own bank account (we took advantage of a local bank promotion where any account opened for a 2017 baby would start off with a $200 balance. No fees and bonus interest every month where the closing balance is higher than the opening balance.) - kept any income that's hers separate from ours (e.g. we deposited all the cash gifts we received following her birth into her bank account) We generally don't use cash much so one idea I really liked from the parenting thread in A/T was saving milk bottle lids as token currency that she can exchange for things she wants to spend her money on to help her visualise things. I thought about starting a share portfolio for her but didn't bother since my dad is way more into that sort of thing and he beat me to the punch. At some point she's going to get a nice surprise from grandpa! I've also been trying hard to discourage a consumerist attitude by asking people not to buy her loads of toys and things (e.g. for Christmas, we asked everyone to chip in a small amount to just one nice toy). We buy most of her things second hand too. And since kids just copy everything they see, we're trying hard to model good financial habits and mindsets. This one is easier some days than others. ryde posted:When did you start giving allowance? I suppose we've already started in a way - we have an automatic transfer set up every month to deposit $5 into her bank account. I'm not really thinking of it as an allowance though, but more to a) take advantage of the bonus interest and b) treat it as a gift more than anything else. Leng fucked around with this message at 12:38 on Feb 5, 2018 |
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Feb 4, 2018 13:52
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I really like the idea of creating some fun currency for the little one. That's a great way for them to get used to exchanging a scarce good for things they want. It took us a while to get serious about teaching our kids about money. My mother was a huge problem and would just show up with gifts every week and diluting the value of things. Christmas was horrible as we had to bring our roof rack one year to fit all the gifts when my twins turned two. She used gifts and money as a means of control and we haven't spoken with her in over 18 months. My kids are much better off now. There were unopened toys in their closets that the kids forgot about it there was so much stuff. Now they really value and have attachment to the few things that they receive each holiday. Version one of the bank of Dad was the first time we seriously introduced the concept of money, and it was only to my oldest. That version was purely whatever he wanted to contribute and could withdraw whenever he wanted. Over time it turned into a challenge because he'd get upset when I wouldn't let him cash out his savings to buy $20 of Clash Royals gems. He also didn't have any structured income at that point so that's when my wife and I went back to the drawing board. I like all the stuff you're doing. I've been reading about folks holding birthday parties for their kids and asking for no presents. I like that idea, but not sure how realistic I can get that idea rolling. I'm seeing these birthdays as a way for parents to exchange iTunes and Target store gift cards. The kids aren't even opening up toys, it's a weird dynamic. Plus, I love the idea of disconnecting celebration from RECEIVING things. But that's the anti-consumerist Tyler Durden in me that I need to keep contained. In my opinion, the more you can give your child(ren) experiences and YOUR TIME instead of an object, the better everyone is. Convince your parents to give you a membership to the Zoo, or the children's museum, or a parent/tot art class instead of a plastic toy or flashy game.
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Feb 4, 2018 15:37
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A great way I’ve had with kids is “A or B” “you can only have one” reasoning. I have a Little Brother and he’s had absolutely no mentoring (before me) of proper money management. So what I do is I ask him what he wants before we go somewhere. Usually he wants Chipotle, so I often lead with that. Invariably, when we get there he sees something shiny and asks for it. I ask him “ok, I’ll get you that, but then we can’t get chipotle.” Usually he decides he wants chipotle more, but not always. It gives him agency, because he’s making a choice with a limited resource, and I’m there helping remind him of alternatives that he wanted in the past. Kids have a really short attention span after all, and limited self control. It’s also telling when he gets something and then says, “I wish we’d gone to the movies instead” and I can reinforce that he’s making choices, not just at some adults’ whims. Big Brothers Big Sisters even warns its volunteers not to let themselves be treated like Santa Claus. It’s tempting to give in sometimes, because the things he asks for aren’t that expensive for me, but I think the discipline is worth way more than a trinket he’ll play with and then lose/forget/get broken by his siblings. With other kids you can make it “ok, we can buy this with your savings, but that will make it that much longer before you get your bike” - maybe even have a chart showing the money towards their goal, even something like spending money on a trip to Disney or whatever.
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Feb 4, 2018 16:23
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Maybe bfc parents can advise me... So I'm a foster parent and my 18 year old came to me at 16 with such poor financial literacy and money habits that I've been scrambling ever since to try and get her to understand that life doesn't have to be hand to mouth forever but absolutely will be if you let it. I'm actually becoming her payee again because she spends every penny she gets, including money that should be earmarked for books and dorm fees  If you guys were mentoring a teenager, how would you approach basic personal finance literacy with mindfulness towards a history of deprivation and unpredictability? It's hard to get her to feel like she has "enough" and she often talks about me depriving her when I try to save earmarked funds for the future. Obviously the mental health and attachment components are huge, and she's made a ton of progress there. Moving towards adoption this summer seems to have made her feel more secure, because now I "have" to take care of her and not let her be homeless. Adoption also means I'm automatically her payee until she's 21, but I want to be able to trust her and give her freedom! We're working with $900 a month, with tuition, basic meal plan, and housing already accounted for, but not including books ($400/semester), cell phone (30$/month), public transit ($50/month), summer housing/tuition ($1000-3000 unknown), or entertainment/shopping/take out (she can and has spent $900 on this alone in a month)
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Feb 5, 2018 02:53
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TraderStav posted:In my opinion, the more you can give your child(ren) experiences and YOUR TIME instead of an object, the better everyone is. Convince your parents to give you a membership to the Zoo, or the children's museum, or a parent/tot art class instead of a plastic toy or flashy game. Personally, I think this is key to a rich a life. The older I get, the more I realise that it's the experiences that get turned into memories or skills that have value to me into perpetuity. Fighting the "I WANT" urge for stuff is hard though. Sometimes I look around our home and see all the stuff we've accumulated and it just stresses me out so much that I go all in on a cleaning whirlwind. On the note of modelling good financial mindsets that's related to the accumulation of stuff/cleaning: I've resolved to try very hard to teach my daughter to carefully consider the total cost of ownership/return on investment of anything she buys. There's a lot of unconscious mindsets I've absorbed from my parents that I haven't even begun to recognise/deal with until now. Because they grew up so poor and worked so hard to achieve financial security, anything that wasn't food, shelter, education, health or savings just didn't get allocated any money in the budget. Our clothes were all second-/third-/fourth-hand hand-me-downs (and for a more extreme example, when I started kindergarten, I didn't get proper shoes; my parents just PAINTED another pair of shoes black so they would look like school shoes). When things got less tight and we could buy new clothes, we only ever shopped the clearance rack at factory outlets (and only from the ones that were $10 and below). Fast forward to now, and those buying habits have stuck well and good. I used to be so smug about never spending more than $40 on any item of clothing and not being "one of those girls who blows all their money on clothes and makeup". Now I have a wardrobe full of cheap, fast fashion pieces that are falling apart/fading badly/don't fit well/are duplicates/don't work with each other that I know I should replace but I don't because "I don't waste money on clothes". Well, if I had just properly allocated funds in my budget and bought like 10-12 quality pieces I could mix and match year round, I would have spent significantly less on clothes, not to mention being better dressed. DarkHorse posted:It gives him agency, because he’s making a choice with a limited resource, and I’m there helping remind him of alternatives that he wanted in the past. Kids have a really short attention span after all, and limited self control. I like these a lot. I remember being a kid getting bossed around by adults or older kids all the time and it sucked. Giving them agency and the ability to make the (wrong) choices early on is a good way to teach them how to deal with the responsibility of making bigger decisions later on (and the resilience to cope with making mistakes, which everyone inevitably makes). And visualisation I think is always good, especially when money is such an abstract concept in itself. Mocking Bird posted:If you guys were mentoring a teenager, how would you approach basic personal finance literacy with mindfulness towards a history of deprivation and unpredictability? It's hard to get her to feel like she has "enough" and she often talks about me depriving her when I try to save earmarked funds for the future. I have not been a parent for a very long time but I do have a history of coaching friends who are BWM. I suggest starting slow and taking things one concept at a time. It sounds like she has a lack of security so you need to address that first before you can address anything else (remember Maslow's hierarchy of needs). With tuition, basic meal plan and housing already accounted for, that means the only thing you should make mandatory is she buys basic necessary clothing first out of that $900. Then sit down with her and work together to agree what else is a necessity - and be ruthless about what these are. Some examples: - public transit arguably COULD be necessary, but is there another practical alternative? E.g. walk/car pool with friends/bike/etc? If so, not a necessity. - school books probably AREN'T necessary, there are valid alternatives like textbook rentals/libraries/study groups. - cell phone she'll most likely SWEAR is a necessity but really, it's not - savings you can try and argue as a necessity and see if she'll be willing to put a small amount up every month for this. Let her nominate the amount, no matter how small, and even if it's ridiculously small, because it's better to start than not at all. The necessities get money allocated to them every month without fail. Whatever else is left of that $900, let her spend as she likes, but remind her that once it's gone, it's gone. Don't force her to save for future goals (e.g. spring break); but do talk her through the logic of saving for it so she understands. If she still chooses not to save, do enforce the consequences of her spending (e.g. if she doesn't save for spring break, she doesn't get to go with her friends). The lessons you want her to learn are that she is responsible for her decisions; her choices have consequences, and not all consequences are equal. Try not to place any value judgements on her choices but help her weigh the pros and cons of the consequences. At first you'll have to do this retrospectively every time; eventually you'll be able to start helping her thinking through the potential consequences BEFORE she makes her decisions. Note - sometimes the consequences have to really suck for the lesson to stick. Like she doesn't buy a required text, doesn't make time to borrow/find a copy she can use and fails the subject and has to retake it next semester. Suddenly it'll take her longer to graduate and she'll rack up more student debt. It's a really sucky set of consequences, but if you bail her out, all she'll learn is that you're responsible for fixing her mistakes.
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Feb 5, 2018 13:22
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The problem with “let her sink or swim” is that kids who were raised in abuse don’t have the same understanding of consequences as us whereas I might think “gently caress I don’t have rent money for the summer! I need to figure this out!” Her response might be “I guess someone lets me live with them or I could always just kill myself I guess.” Her belief that she is capable of figuring out what to do is very shaky and she sometimes defaults to absolute pathos. I’m in charge of her money at this point, so I don’t think I could forgive myself for letting her spend her way into a suicidal rut...
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Feb 5, 2018 17:44
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Mocking Bird posted:The problem with “let her sink or swim” is that kids who were raised in abuse don’t have the same understanding of consequences as us Learned Helplessness is a terrible thing
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Feb 5, 2018 17:48
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Does she have access to low priced therapy on campus? I know my college had a mental health facility. That could be very helpful. I would say that at least some budget for public transit when necessary, and a cheap cell phone as well. I was always comfortable walking or biking anywhere at any time of night, but I went to college in a very safe town, and a 6’2” Man has less to be concerned about going home at night than a woman, especially one who already feels so insecure from her upbringing most of her life. Finally, you should be proud of yourself for what you’re doing. I know you’ve said in the Zuarg thread you finances are kind of messed up. Most people have no interest in children older than toddlers, you gave her some stability for two years and are trying to do the same after she’s legally an adult and no longer your responsibility. Even people adopted by healthy families as babies can have trust and abandonment issues, it has to be a lot worse with someone who has never known stability or safety until she was 16. 22 Eargesplitten fucked around with this message at 18:16 on Feb 5, 2018 |
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Feb 5, 2018 18:06
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Thanks! Getting her to go to therapy is priority #1 and it’s like pulling teeth. I think what I’m hoping to get from you guys is, what part of budgeting and personal finance should I start working on with her first so I don’t overwhelm her? Making her choose a cheap cell plan (mintSim) and use my old phone seems to be working. To be honest the public transit bill is mostly her visiting me, so I’m biased about it being necessary  She’d be in a much better situation if she didn’t self soothe with take out and junk food... but I’m not sure how to get her to stick to a budget that way without simply keeping the money inaccessible to her. Re: my own finance references in the Zaurg thread, I’m a single income family living in the Bay Area, so paying off debt (student loans and accumulated debt from grad school) is slow and painful, so seeing Zaurg have much more ability to power through debt and squandering it made me mad (plus he can “afford” a house, that rear end in a top hat). I used to have a BFC thread and managed to hash out a workable budget from it that I stick to, so overall I feel like I’m a good example for my kid, but I’m not going to be debt free for 3-5 years. The hard part is convincing her I’m not rich, or that I can have no money to spend even though my account never reaches zero
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Feb 5, 2018 19:27
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Mocking Bird posted:Thanks! I'd say take over most of her accounts for now, and limit her access to what you think is an acceptable/reasonable amount for her to splurge. Of that $900, maybe let her spend $50-$100 on whatever she wants (or whatever the case may be). Then, give her a deal - for every dollar of that spending money she puts away, you'll contribute another dollar or somesuch percent, as long as it stays in there a month. It might have to be big and physical at first, like a big money jar and her physically putting it in there and you putting the bonus in with it. Later on you can build that up to the Bank of Bird, where compound interest comes into play. The goal is to build up her understanding of how much she can leverage her money by delayed gratification. If she has a long term goal, track that and her progress towards it, like going on a trip with her friends. Any time she spends money, either from her $50-$100 or the Bank of Bird, ask her if that's really what she wants. Then let her make her choice, and then stick by the consequences of that choice. Until then though, you'll have to spell it out for her over and over until she hears your voice any time she's about to make a decision, and then hopefully internalizes to her own voice. In this way you model good behavior, you provide a safe space for her to make mistakes, and you limit the consequences of bad decisions. As she proves herself more responsible you can give her more control over the money.
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Feb 5, 2018 20:01
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Leng posted:- cell phone she'll most likely SWEAR is a necessity but really, it's not She needs a phone for job purposes, if nothing else. I assume she doesn't have a job now, but I also assume Mocking Bird wants her to get one at some point before she's thrown into the world of post-college employment. Having a cell phone is also nice for things like dialing 911 if no one else is around, calling a cab/a friend to pick her up in relative safety if it's 3am/she's drunk/whatever, and other general safety issues. Mocking Bird posted:Making her choose a cheap cell plan (mintSim) and use my old phone seems to be working Mocking Bird posted:The hard part is convincing her I'm not rich, or that I can have no money to spend even though my account never reaches zero Mocking Bird posted:She’d be in a much better situation if she didn’t self soothe with take out and junk food... but I’m not sure how to get her to stick to a budget that way without simply keeping the money inaccessible to her.
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Feb 6, 2018 01:26
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Mocking Bird posted:I’m in charge of her money at this point, so I don’t think I could forgive myself for letting her spend her way into a suicidal rut... On the "sink or swim" thing, I don't mean literally do not bail her out if she is drowning and in a life threatening/dangerous situation. I missed that rent for summer isn't included in the housing and needs to come out of the $900. In which case, yes, I agree, that needs to be a necessity especially if she know she's incapable of saving for it at this point. The point I was trying to make is very few other things have actual permanent consequences that you can't recover from. E.g. if she doesn't have money to eat out with her friends in the last week of the month because she bought takeout everyday for the first 3 weeks, you can let her take that fall. Mocking Bird posted:Getting her to go to therapy is priority #1 and it’s like pulling teeth. I think what I’m hoping to get from you guys is, what part of budgeting and personal finance should I start working on with her first so I don’t overwhelm her? Mocking Bird posted:The hard part is convincing her I’m not rich, or that I can have no money to spend even though my account never reaches zero DarkHorse posted:In this way you model good behavior, you provide a safe space for her to make mistakes, and you limit the consequences of bad decisions. As she proves herself more responsible you can give her more control over the money. This is a good suggestion for another way to go about it. Your choices are really a top-down approach (DarkHorse's suggestion, where you control everything except for a small allowance) or bottom-up approach (my suggestion, where you only control the necessities, and you give her free rein with everything else). Pick the one that's going to make her feel the most secure. Hell, give her the options and get her to pick. Haifisch posted:This is one of those things where you don't want to go overboard, or else you'll look so out of touch that the rest of your advice might seem questionable too.
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Feb 6, 2018 13:55
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A shiny new phone would be a great long term goal! You could ask if that’s something she wants to work towards, then take some portion of her fun money out to contribute towards that. Make sure she sees the progress and that it’s “her” money doing it and maybe that will get through 
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Feb 6, 2018 14:49
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We talked last night about what she wants to do, and her perspective is that she wants me to save $500 off of the top and give her $400 at the beginning of the month, and then ignore her pleas for mercy if she runs out of money. I think we need to adjust those numbers a bit, but overall I don’t think it’s the worst way to experiment with her ability to budget. Prior to this (in high school) she was getting a weekly allowance and did ~okay~ with that, and she was absolutely unable to manage a semester of $900/month checks, so maybe we need to see how she does on the medium setting. I like the idea of her cell phone not being a part of her “mom bills” that I skim off the top, I actually already make her pay for it. The only regular bill I pay is the public transit because I want her to visit me. I think I might be expecting too much from an 18 year old in terms of impulse control. A typical teen parent would be doing exactly what I’m doing - giving an allowance and threatening murder if they open a credit card. Most 18 year olds don’t have this kind of money unless they have jobs. She works odd babysitting gigs but to be honest she’s not a good enough student to balance a job and class work. She did ask for help practicing grocery shopping and batch cooking this summer while she’s home  She said she misses being able to pull individual portions of spaghetti and beans and rice out of the freezer when she’s hungry. My influence does work!
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Feb 6, 2018 16:50
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Mocking Bird posted:We talked last night about what she wants to do, and her perspective is that she wants me to save $500 off of the top and give her $400 at the beginning of the month, and then ignore her pleas for mercy if she runs out of money. Keep it up! It’ll take time to develop good habits, and teenagers still don’t have fully developed executive function anyway.
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Feb 6, 2018 21:20
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Mocking Bird posted:We talked last night about what she wants to do, and her perspective is that she wants me to save $500 off of the top and give her $400 at the beginning of the month, and then ignore her pleas for mercy if she runs out of money. Mocking Bird posted:I think I might be expecting too much from an 18 year old in terms of impulse control. A typical teen parent would be doing exactly what I’m doing - giving an allowance and threatening murder if they open a credit card. On the credit card note, what's everyone's thoughts on when to introduce these?
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Feb 7, 2018 22:41
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Leng posted:Good result!! Sounds like you guys found a way to get on the same page which is really good. I got a joint one with my parents while I was in high school, with the understanding that I had to pay for anything I bought and if I abused it I would get it taken away. I didn't use it much except for gas, but it got me in the habit of paying the bill each month and in an environment where my parents could keep an eye on it if I was really loving up. Worked well for me 
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Feb 7, 2018 22:50
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Leng posted:On the credit card note, what's everyone's thoughts on when to introduce these? I applied for one with my mother's assistance when I went off to college, which was age 19. It had a $500 limit and was set up so that a copy of the bill still went to my home address for parental review. That being said, my mother wasn't really financially savvy and didn't know any better, and we picked out a terrible, exploitative card intended to prey on students who aren't used to debt or how payment processes work. (37% interest rate, regularly forgot to send bills and had no online systems because it was 2001, delayed processing payments for weeks at a time while charging late fees, had a phone system for checking your balance that reported your balance as of EOB previous biz day, and it charged a monthly fee to your balance if you didn't accrue new charges or maintain a previous balance in a given calendar month.) I had far too many late fees / balances because neither of us received the bill and effectively forgot about paying it, or because they just somehow forgot about my address change and claim they sent it to my previous dorm, etc (while my parent still didn't get it at the same address from the previous year). If it was up to me, I'd... 1) Introduce them around 18-19, earlier only if they have reason to have independent charges that you can't easily help with (early university, working a summer job with commuter costs, working holidays, etc). 2) Be certain they know they're on the hook for the balance and that if you have to cover them for some reason, you're going to take it out of somewhere else. 3) Run them through some numbers to show them why they need to pay it off and not let it compound forever 4) Walk through the terms and explain why they're good or bad, show them what they should avoid 5) Help them pick something that is the best they can do at their age regarding point 4, co-signing if required while keeping the credit limit low.
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Feb 7, 2018 22:55
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Alternative hot take: don't get one at all.
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Feb 8, 2018 00:09
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Chemondelay posted:Alternative hot take: don't get one at all. I'd argue it's better to teach good habits in a safe environment, rather than not teach them anything and then they sign up for a credit card and get into a huge amount of debt because they didn't know how they worked. Things are better than when they let college kids just sign up for a novelty mug on campus, but I bet there are still tons of college kids who derail their financial stability because they were never taught how to use revolving credit responsibly.
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Feb 8, 2018 00:27
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That's true, just want to throw out the possibility that you don't need one. I'm 33 and a poor and have literally never had a credit card. No judgment of people that do decide to get one, but never spending what you don't have is a good discipline too. One thing my wife and I can be glad about us that we don't have any consumer debt.
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Feb 8, 2018 00:40
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Yeah never learning now to properly use credit and leverage is a big part of what keeps poor people forever poor
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Feb 8, 2018 00:43
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Chemondelay posted:Alternative hot take: don't get one at all. ||SNIP|| never spending what you don't have is a good discipline too. I agree that you should not spend what you don't have (barring some extreme emergencies, in which case that's the point of credit I suppose), but you can teach proper use of credit and start developing a credit history without teaching that the card is free rein to go to the mall every weekend.
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Feb 8, 2018 00:59
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Chemondelay posted:That's true, just want to throw out the possibility that you don't need one. I'm 33 and a poor and have literally never had a credit card. No judgment of people that do decide to get one, but never spending what you don't have is a good discipline too. One thing my wife and I can be glad about us that we don't have any consumer debt.
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Feb 8, 2018 01:08
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Sundae posted:I agree that you should not spend what you don't have (barring some extreme emergencies, in which case that's the point of credit I suppose), but you can teach proper use of credit and start developing a credit history without teaching that the card is free rein to go to the mall every weekend. Absolutely, though if you have discipline you can use it for purchases you'd normally pay for with cash, but get the benefit of building a credit history (which then lets you get approved for loans, often at preferable interest rates)
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Feb 8, 2018 02:06
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My credit score is good, just from paying bills on time I guess. It's not a bar to getting finance when the time comes. I'm Australian, so there might be a slight cultural difference at play too. No one in my wife's immediate family has ever had a credit card. My parents use them (largely without problems, I think), but my sister and several of our friends have struggled with credit card debt.
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Feb 8, 2018 03:18
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Chemondelay posted:My credit score is good, just from paying bills on time I guess. It's not a bar to getting finance when the time comes. I'm Australian, so there might be a slight cultural difference at play too. No one in my wife's immediate family has ever had a credit card. My parents use them (largely without problems, I think), but my sister and several of our friends have struggled with credit card debt.
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Feb 8, 2018 03:20
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Hoodwinker posted:The credit score is in my opinion significantly less important than the consumer protections paying with credit affords you, as well as the 1-5% cost reduction you get via rewards points. Being able to reduce a huge chunk of your spending by a flat 2% is a serious decrease in money spent over time. Australia has very strong consumer protection legislation, so I've never really thought about the first point. (We want to move overseas in the next few years, possibly to the States, so it might be something to think about then.) There are definitely benefits to churning or otherwise taking advantage of rewards programs. I suppose I just see those as relatively marginal, i.e. something to be done after you've learned basic financial discipline. Two percent is nothing to sniff at, but you have to weigh it against the enormous potential for financial ruin that comes with relying on credit.
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Feb 8, 2018 03:51
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I don't bother with churning because  but having 1-2% cash back is niceI totally get not doing credit cards if it doesn't fit into your life, but I still think it's a good idea to teach young adults how to use them responsibly. Not being in the States obviously changes things though.
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Feb 8, 2018 04:02
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Chemondelay posted:Australia has very strong consumer protection legislation, so I've never really thought about the first point. (We want to move overseas in the next few years, possibly to the States, so it might be something to think about then.) There are definitely benefits to churning or otherwise taking advantage of rewards programs. I suppose I just see those as relatively marginal, i.e. something to be done after you've learned basic financial discipline. Two percent is nothing to sniff at, but you have to weigh it against the enormous potential for financial ruin that comes with relying on credit. The US has strong consumer protection as well. But you know what credit cards offer you? Easy chargebacks. Lawyers working on behalf of the company you're borrowing from to claw money back from bad transactions. The ability not even to be just reimbursed, but to never be charged in the first place. Teaching your offspring about these tools as you teach them in their young adulthood about the power of money is important in the same way that teaching them about safe sex is important. They both prevent long-lasting mistakes.
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Feb 8, 2018 04:07
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It gives me hives to think of my daughter getting a credit card, but I know it will happen eventually. I want her maturity level to improve a bit before we even consider it. My parents were a terrible example - neither of them have cards now because they have such a bad credit history. I feel like at least I can do better than that example.
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Feb 8, 2018 04:07
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Mocking Bird posted:We talked last night about what she wants to do, and her perspective is that she wants me to save $500 off of the top and give her $400 at the beginning of the month, and then ignore her pleas for mercy if she runs out of money. So this is a good idea, that most likely will fail as currently implemented. I suggest offering to give her 100 dollars a week instead of 400 right away. She still gets the same money, but if the first week she spends it all on Monday, she knows she has more money coming in 6 days. Hopefully over time she will learn to make the 100 stretch for the week. I take this from personal experience with someone who can't understand how to spend money. They used to get a similar check at the beginning of the month and 3 days later would be calling begging for money. While I doubt she would squander it in quite this way that money would literally disappear on booze, cigarettes and gambling in 3 days. Sadly in our situation we're not going to be able to see a learning to not squander money, so we've limited the weekly allowance as described above.
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Feb 8, 2018 04:10
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Hoodwinker posted:This isn't a thing. You don't have enormous potential for financial ruin because you use credit. Nothing about credit is inherently ruinous, in the same way that a hammer isn't particularly dangerous when you use it correctly to hit nails. Credit has the capacity to generate debt, and that capacity is deeply mitigated by being educated in what credit is best used for. Like safe sex, the solution isn't avoidance, but education. I can appreciate that views differ, and don't really want to wade into semantics, but you're arguing against something I didn't say. I said that there's a potential for ruin in relying on credit, i.e. taking on debt. I didn't (and wouldn't) say that credit is "inherently ruinous". The only reason I bring it up at all is that we're talking about teaching young people to be financially responsible, and they're often prone to the kind of impulsive decision-making that could get them into trouble. One way to help them avoid that is to teach them to use credit cards responsibly early on. Another way is to teach them to avoid relying on credit at all. I don't know which is better, but I do know that encouraging someone to avoid using credit cards isn't remotely comparable to telling them to abstain from having sex. Edit: Actually, I can see how they're similar in the sense that you may be sure your kid is going to go out and get one anyway. In that case, yeah, teaching them how to use it properly must be your best bet. I guess it depends on your situation, everything else being equal. Vinz Clortho fucked around with this message at 04:39 on Feb 8, 2018 |
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Feb 8, 2018 04:22
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When I got my first credit card it had a limit low enough ($800) that I could definitely pay off the balance if I maxed it out once, and it was made very clear to me that the only practical difference (for me) was that the credit card had better fraud protections than my debit card. And I was required to pay the bill in full every month, because that was what my parents did with theirs and that was just my family's understanding of "how to use a credit card". So I'd suggest something around the lines of "low limit" and "keep the limit's worth of money in a separate account and if for some reason you can't pay off the outstanding balance in full on a given month, take the remainder out of the backup account, pay it off, and stick your card in a block of ice in the freezer until the backup account has your limit on it again". This only works if you're not living paycheck to paycheck.
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Feb 8, 2018 04:39
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Chemondelay posted:I can appreciate that views differ, and don't really want to wade into semantics, but you're arguing against something I didn't say. I said that there's a potential for ruin in relying on credit, i.e. taking on debt. I didn't (and wouldn't) say that credit is "inherently ruinous". The only reason I bring it up at all is that we're talking about teaching young people to be financially responsible, and they're often prone to the kind of impulsive decision-making that could get them into trouble. One way to help them avoid that is to teach them to use credit cards responsibly early on. Another way is to teach them to avoid relying on credit at all. I don't know which is better, but I do know that encouraging someone to avoid using credit cards isn't remotely comparable to telling them to abstain from having sex. As to your edit, this is exactly why I was making the comparison. Young adults can still get credit card offers in the mail, and helping them to understand what they mean and what they're for is important. *Maybe the emphasis should be on "enormous" here. Obviously the potential for abuse exists. Colin Mockery posted:
Hoodwinker fucked around with this message at 04:50 on Feb 8, 2018 |
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Feb 8, 2018 04:48
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lord1234 posted:So this is a good idea, that most likely will fail as currently implemented. I suggest offering to give her 100 dollars a week instead of 400 right away. She still gets the same money, but if the first week she spends it all on Monday, she knows she has more money coming in 6 days. Hopefully over time she will learn to make the 100 stretch for the week. I take this from personal experience with someone who can't understand how to spend money. They used to get a similar check at the beginning of the month and 3 days later would be calling begging for money. While I doubt she would squander it in quite this way that money would literally disappear on booze, cigarettes and gambling in 3 days. Sadly in our situation we're not going to be able to see a learning to not squander money, so we've limited the weekly allowance as described above. Oh, don’t worry. You and I both know this is doomed to failure. She’s the one who has yet to discover that. We did the allowance system weekly all of last summer (when she was 18 and hadn’t gone to college yet) and it worked well, but she felt “deprived” and resented me. To make this work she really needs to see the value in what I’m doing to try and support her, and maybe a month where she’s blown her wad the first week and gets a stonewall from me on trying to beg extra will lead her to think the allowance system isn’t so bad. It’s about offering choices and letting her revise as she goes, I think. Some posters were right about allowing for mistakes in a safe environment.
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Feb 8, 2018 05:11
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Chemondelay posted:Australia has very strong consumer protection legislation, so I've never really thought about the first point. (We want to move overseas in the next few years, possibly to the States, so it might be something to think about then.) There are definitely benefits to churning or otherwise taking advantage of rewards programs. I suppose I just see those as relatively marginal, i.e. something to be done after you've learned basic financial discipline. Two percent is nothing to sniff at, but you have to weigh it against the enormous potential for financial ruin that comes with relying on credit. I am an Australian who has lived in the US. The way credit works and the culture around it are totally different. The US has such a massive focus on credit score that it's kinda insane, and it doesn't account for any non-US credit history or assets, etc. Trying to rent an apartment in NYC was fun - we had to either have a guarantor or have the equivalent of 6 months' worth of rent in a US bank account because on arrival we had no US credit score. In the end I got around it because I found leasing company that waived both requirements based on where I worked. But this sort of insanity doesn't happen in Australia. The ease of getting a credit card and balance increases in the US is insane. The ease of getting your credit card details stolen are insane (quite possibly because the US hasn't moved onto chips). The fraud prevention algorithms/teams are pretty amazing though, I've never had any fraudulent transactions actually go through to my account, they were always flagged and reversed straightaway. There's also less focus on building credit history so you can qualify for loans, etc in Australia. It's not that we don't have a credit file (we do) but it doesn't tend to be what banks focus on. They care more about your income vs expense ratio, assets and whether you have a guarantor with income/assets to decide whether to give you a loan. Of course, it does help that property prices in Australia are insane. I think the ability to use credit cards responsibly can only come after you've demonstrated the ability to stick to a budget and save, because it's dependent on being able to pay the balance off in full every due date without fail. The whole min/maxing of annual fee/reward points I think requires too much time/research to be worth the headache. I always just pick a card that doesn't have a fee (or is included with something else, like my mortgage) and use that. My parents started me off when I was about 15-16 with a $500 supplementary credit card (so it was in my name, but all the transactions went on my dad's account) so they could monitor the spending. For my kid, I'm thinking I might start her with cash allowances to see how she goes in sticking to a budget. Once she masters that, I'll probably switch her from cash to a prepaid credit card (i.e. the ones you preload with an allowance amount and that can't go below zero) to get her used to understanding that swiping a card = spending money. If she handles that well, then I think I'd start going to a low limit credit card and making paying that off in full part of her chores so it becomes a habit.
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Feb 8, 2018 12:47
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