Farnoosh’s Mail Bag: Answering Your Questions
- Pay off debt (excluding mortgage)
- Invest in 401(k)
- Fund a 529
- Create a savings of $1,000
- Create a savings of 3-5 months salary
My first tip is to be mindful of how you spend and shop. Studies show that kids learn the issues of spending first, such as the relative costs of things like games, candy and toys. To that end, use cash more than credit when they’re around. Using a credit card can be more convenient, but do you ever explain as you swipe what a credit card is? Do they understand that an ATM isn’t a machine that disperses free money? Do the kids understand that you’re making a promise to pay for all the items before the end of the month? Don’t underestimate the educational power of using cash. It teaches kids that money has its limits. When they see you pay $50 for groceries and then ask you for ice cream during the car ride home, you can explain that you used up all your cash at the grocery store, so you’ll need to make dessert at home. The cash is gone, simple as that. Credit cards, on the other hand, have the tendency to make money appear endless.
It’s also important to demonstrate that you’re price comparing while shopping. We tend to shop in a hurry or neglect to involve our kids in the decision-making process. I remember my parents taking me furniture shopping with them – as we’d go from store to store…to store – all with the mission of finding the best deal. It was nauseating for the 8-year old me, but the message of why you need to price compare came across loud and clear. The same drill occurred when my parents went house hunting. I would overhear their discussions and watch as they financially sized up each home. Next time you take your kids on a shopping excursion make sure to explain why you’re buying what you’re buying, especially big-ticket items. Is it a need or a want? How have you compared prices? Why did you ultimately go with the choice you did
As much as possible, avoid money arguments without resolve. We can all remember at one point or another our parents having financial differences. And while we’re all sort of hard-wired to find our financial opposites (studies have proven this), know that it’s okay to engage in conversations/debates/mild arguments over money with the kids around. But don’t drop the subject and let the argument turn into silence. If you can respectfully debate and come to a resolution in front of the kids, that can be really healthy and helpful. I just finished reading a great book called Nurture Shock by Po Bronson and Ashley Merriman and the authors point to a ton of research that shows how witnessing conflict resolution helps kids understand how to compromise and reconcile. Who knew?