Teach Your Children Financial Independence

Are your kids on the right track to financial independence?

For many of today’s young adults, the weakest link lies in learning the basics. Only 35% of teens know how to balance a checking account or manage credit cards. During the past several years, a decline in overall financial knowledge is especially pronounced among 18-year-olds, and 13% fewer teens have bank accounts.

Achieving economic prosperity is difficult, and it’s especially hard for young people who’ve never learned how to manage money.

New Century Credit Union is ideally positioned to respond because we believe in the power of education. We’re here to help you launch the youth in your life toward financial independence, and here’s how:

Join. For starters, open a NCCU Kids Account for each child in your family. As soon as your children can write, have them fill out deposit and withdrawal slips. Guide teenagers through using a debit card and tracking transactions.

Share. Include your children in household money discussions. Show them how you budget income and expenses. As their skills improve, give them challenges—such as finding a better cell phone plan, calculating the total monthly cost of owning a car, or sticking to a budget for back-to-school or holiday spending.

Coach. Remind your children to ask for help when they need it. And turn to NCCU, Your Financial Family, when you want help. Our tradition of service and philosophy of self-help make us and ALL credit unions a natural partner in pursuing financial security.

We’re here to help. For more information, contact us!

 

Should You Give Your Kid an Allowance?

Do you pay your kids an allowance? Should you? And if so, should they have to do chores to earn it?

As more people recognize the importance of financial literacy for children, experts are debating how most children are first introduced to the concept of money—the weekly allowance.

Ron Lieber, personal finance writer for The New York Times, says he and his wife pay their 7-year-old daughter $3 a week, no chores necessary.

Lieber’s daughter puts $1 in a “save” jar and $1 in a “give” jar for a cause of her choosing. The final $1 she can spend as she wants. Lieber’s reasoning is that an allowance is a teaching tool, and making it contingent on chores muddies the issue. What if the children decide they don’t want money? Do they still have to do the chores?

Lewis Mandell, a financial economist and professor emeritus at the State University of New York, Buffalo, however, says unconditional allowances are a “terrible idea,” citing a 2000 study that showed kids who received a regular allowance left high school knowing less about personal finances than kids who received no allowance—though the differences were slight.

One problem may be that, like many Americans, kids aren’t the most diligent about saving. While 61% of parents pay an allowance, only 1% report that their children save any of it, according to a 2012 survey by the American Institute of CPAs.

The survey found that as children age, they receive a higher allowance, but across all ages the average take is $780 a year. That’s enough to buy an iPad or a good start for a college savings plan—if they were saving.

About 90% of the parents who paid their children an allowance required them to do chores to earn it, but only 81% had spoken to their kids about money management. More parents had spoken to their kids about good manners, their grades, and healthy eating habits than how to handle their money.

So how should you handle an allowance with your own children?

* Use it as a teaching tool. Regardless of how your children earn an allowance, use it as a tool to reinforce good money habits from an early age. Talk about finances early and often, and set a good example.

* Consider matching their savings. To encourage savings, tell your children for every $1 they set aside for long-term goals, you’ll match it in their New Century Credit Union Kids Club savings account. Then let them watch the money accumulate.

* Gradually introduce them to financial products. When they’re old enough, deposit their allowance into a NCCU savings account, later a share draft/checking account, and help them manage them wisely.

Kids who learn to manage money at an early age are better prepared to handle their finances when they leave home. And, ultimately, teaching children good financial stewardship is a sound investment for parents, who often are the ones stuck helping their adult children when they run into real-world money problems.

Back To School On A Budget

Americans have embraced careful spending and financial planning in recent years. The days of loading up a shopping cart with anything and everything are long gone. This relatively new trend applies to all types of shopping, whether it be groceries, apparel or school supplies. With Back-To-School shopping season well underway, families are planning ahead by making budgets to keep their spending in check.

According to the National Retail Federation, the average American family with children in kindergarten through 12th grade, “will spend an estimated $688.62 for back-to-school shopping.” It’s no surprise that the “school supplies” that account for the largest portion of annual back-to-school spending are clothes.  In fact, multiple surveys suggest that mothers spend more on their child’s wardrobes than their own.

The index includes school supplies ranging from pens and pencils to hand sanitizer to flash drives. Students who opt to bring items such as tablets can tack on another $300+ to their overall bill.

Additional expenses such as new clothes or shoes account for nearly 2/3 of back-to-school expenses.

Families are being pragmatic about their spending, which is a good thing, but there are still many ways to stretch your spending even further.

You don’t have to have the newest, coolest thing out there. Take an inventory of last year’s school supplies and clothes. You’d be surprised how many markers and erasers were never used.

Buying a new backpack every year is unnecessary…and expensive. Backpacks can be one of the most expensive items on your shopping list, and some schools don’t even allow them in the classroom (for safety reasons). Purchase a nice, durable backpack that your child won’t outgrow in a year. Ninja Turtles might be cool in 2nd grade, but not in 3rd. Get the superhero-themed notebook and folders, instead.

Go through all of your child’s clothes and see what still fits and what needs to be donated or handed down, if you have other children. You can also set up swap meet with friends and family to exchange clothes. Or you can shop the thrift stores, which has become increasingly more popular over the years.

When you have to buy more supplies and clothes, be sure to compare the prices and shop the sales. Between online purchases and tax-free shopping days, you can save a lot by avoiding sales tax. There are now 17 states that offer tax-free shopping for as long as one week, during the back-to-school shopping season.

The only other shopping season that brings in more revenue for retailers is the holiday shopping season. Yes, you’re going to have to spend a little money to make your child’s educational experience more comfortable, but you don’t have to spend a fortune to cover the basics. Create a budget, stick to it, but have some fun! You and your child are starting a new year full of new opportunities, and it should be something to celebrate.