SK: When should you get children involved in charitable giving and how can you get them excited to do so?
BK: Studies show by age 4, kids get the concept of being kind to people they don’t know. That’s a great time to start. There are so many ways to get kids excited about giving. Look for charities in which a small amount does a lot. $10 for a goat? Adopt an acre for $25? $1 for crayons for students who don’t have them?
Another one I love? Children are obviously crazy about birthday presents — but some get almost as happy about buying a gift for someone else. This organization called Birthday Buds helps your kid buy a present — or something they really need — for a kid whose family can’t afford it.
SK: How early should you start teaching your kids about investing?
BK: Let’s break this one up by age.
Elementary school: The next time you watch a Disney movie or sip a Coke, use the teachable moment to teach! You can say, “Moana is a movie made by many people who work for a company called Disney.” These companies make stuff and sell that stuff. These companies also need money to make this stuff. To get that money, companies sell what is called stock. So put another way, if you buy stock in Disney, you own a teeny piece of Disney.
Middle school: There’s something called compound interest, which is really cool. Say you put $10 into the bank. The bank gives you a small amount of extra money. That’s called interest. If you keep that interest in the bank, the bank then pays you interest on the original $10 plus the interest. When interest earns interest (again and again and again) it makes your money grow really quickly. That is known as compound interest. You can check out a compound interest calculator [here]. It’ll show if you saved 25 cents a day (that’s $7.50 a month) starting at age 10, you could have $50,000 later in life!
SK: I’m freaked out about college costs. What should I do?
BK: Starting early matters, of course, but the thing is to start now. There’s an amazing thing called a 529 college saving plan that lets you invest money for your kid’s schooling without paying federal tax on what you earn. These are state-sponsored deals, and your state probably offers one. And here’s a crazy side benefit of 529s: When kids know that their parents have put aside money in a 529 college saving plan in their name, the kids are actually more likely to go to college. Doesn’t matter how much you save, either.
Start talking with your kid about college when she’s in ninth grade. Sound too soon? It isn’t. At this point, college is less than four years away, and you need that time to plan. And you can’t plan until you have a rough idea of how much it’ll set you back. There are really cool calculators online that will show you how much your family will have to kick in. If it gets overwhelming, remember that college is an amazing investment — a degree will give your kid about half a million dollars more over his lifetime.
SK: Should you give your kid a debit or credit card?
BK: My rule: cash until 12th grade. Stick with me, here.
A mom I know, Lynn, told me this great story. Her 13-year-old daughter Maya wanted to hit the mall with a bunch of friends. She told her mom that the other girls were borrowing their parents’ credit cards. Lynn decided it was smarter to give Maya 50 bucks in cash instead — because if the girl got to the register and her stuff cost even a dollar more, Maya would have to make a hard decision and put something back.
If your kid asks you to make her an authorized user on your credit card account, don’t. If you can’t cover all your kid’s charges, your credit will get hurt. And don’t hand her a debit card linked to your checking account— that’ll give her complete access to your money. Scary!
SK: What’s an easy and/or fun way to teach kids to be savvy consumers?
BK: Take them on a stroll down the cereal aisle. A group of researchers studied the characters on kids’ cereal boxes. We all know they shelve the sugary cereals a little lower, closer to their target consumers. Well, these researchers discovered something even creepier: The eyes on those cereal mascots — Count Chocula, the Trix rabbit and the gang — are angled down so that they meet the gaze of kids. Point this out to your kid, and explain that the people who make these cereals know this makes kids want to buy them more. Believe me, this will make your kid much more wary of other advertising tricks when they start shopping by themselves! Children love feeling like they are getting the cool insider-y view. Watch commercials with your kid and make fun of them: Are those people really super-duper happy because they are using that laundry detergent? You get the idea.
For more wisdom, order Beth Kobliner’s book, Make Your Kid a Money Genius (Even if You’re Not), coming out Feb. 7.