Teaching Your Teens Money Management

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Presented on Tuesday, February 8, 2011 to the parents of UCSD students.

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Teaching Your Teens Money Management

  1. 1. Teaching Our ChildrenAbout “Money”<br />Presented By<br />
  2. 2. MONEY MANAGEMENT FOR YOUR KIDS <br />“Well, one way or another you develop financial habits when you are very young. And the habits you develop live with you for the rest of your life.” - Warren Buffet<br />Ask yourself<br />How well and how often do you work money management topics into daily conversations with your kids? <br />Do I avoid talking about money just because my kids are young? Simple lessons about money should start early in your child's life and become more complex as your child matures. <br /> <br />DebtWave.com<br />
  3. 3. MONEY MANAGEMENT FOR YOUR KIDSK THROUGH 5 IS THE TIME TO START<br />We have to start somewhere! <br />The elementary years are the most important times to teach and reach children about money. <br />Why?<br />There is nothing they really can’t learn.<br />By kindergarten they already have experienced money in some form<br />They already want stuff (and let you know about it!)<br />Spending habits start early and they reflect their parents by watching<br />Influenced spending (What we purchase our kids at their urging).<br />Advertisers and marketers target children as early as 18 months old.<br />Never under estimate the credit card companies!<br />DebtWave.com<br />
  4. 4. EVERYDAY OPPORTUNITIES TO TALK TO YOUR KIDS<br />Question:  If we don’t take the time to use real-life situations, how will kids learn the money lessons they need as adults?  I’m glad you asked!!!<br />Examine your own attitudes towards money and spending<br />Involve your child in the financial planning<br />Give your child the option of doing odd jobs around the house (That way they don’t feel like they should get paid for every chore they do).<br />Show the difference between needs and wants. (This is something even us adults struggle with).<br />Talk about credit early. They need to know it is not “their” $$$.<br />DebtWave.com<br />
  5. 5. BANKING? Yes, banking!<br />Teach Smart Shopping<br />When your child is old enough to understand that money works in stores, start to show your child how to stretch a dollar. When you buy, be a smart shopper, and talk about the steps you take to save money. <br />Note: To benefit from this coin demonstration, your child doesn't need to know how to add or subtract, he or she will get the concept simply by seeing that some coins have been saved and can now be used for another purpose.<br />Build a Four-Bank System<br /><ul><li> When your child reaches age 5 or 6, begin teaching that money can be used in four ways: saving, spending, donating and investing. </li></ul>Build a bank that shows children that money is used for more than spending. <br /> <br />DebtWave.com<br />
  6. 6. SAVINGS LESSON<br />Babysitting Income:$50 per week<br /> $10 per hour, 5 hours a week<br /><ul><li>Household Chores:$15 per week</li></ul> Take out trash, walk the dog or clean dishes <br />Total: $65/week <br />Example: Nicole just got two new jobs! <br />
  7. 7. TEENS SAVING FOR THE FUTURE<br />Create A Money Diary<br /> How are you spending your money? <br />A tool to help you achieve your financial goals<br />Write Down:<br /><ul><li>All the money that comes in during a week or month and where it comes from</li></ul>Write Down:<br /><ul><li> Where you spent your money and why you spent it</li></ul>Expenses<br />Money I owe<br />Money put into savings<br />(paying yourself first!)<br />Food/snacks for school<br />Starbucks Coffee<br />Meals with friends<br />Cell phone bill<br />Movies<br />Clothes<br />iTunes Music<br />Income<br />Allowance<br />Part-time job<br />Debt owed to me<br />Gift Money<br />Part-Time Jobs:<br /><ul><li> Babysitter
  8. 8. Clothing store
  9. 9. Helping family business
  10. 10. Allowance for chores </li></ul>Evaluate:<br /><ul><li> How much do you want to spend on items?
  11. 11. Can you cut back on anything?</li></ul>DebtWave.com<br />
  12. 12. Date your entries and see how often <br />you spend on the same items.<br />My Daily Money Diary<br />Mon 1/31: Snack and soda $1.50<br />Tues 2/1: Cell phone bill $15 <br /> text message overages $8.00<br />Tues 2/1: Starbucks Coffee $3.85<br />Wed 2/2: Chipotle after school $4.25<br />Wed 2/2: iTunes music $6.99<br />Thurs 2/3: Snack and soda $1.50<br />Fri 2/4: Movie and popcorn $12.36<br />Sat 2/5: Clothes from the mall $15.67<br />Sat 2/5: Lunch @ food court $4.95<br />Sun 2/6: New volleyball $5.00<br />Sun 2/6: Lunch at the beach $5.88<br />REMEMBER:<br />$65/WEEK<br />What Can Be Adjusted?<br />Less snacks or sodas?<br />Skip Starbucks?<br />Less music?<br />Less clothing?<br />A better text message plan?<br />START SAVING!<br />Mon 2/7: Snack and soda $1.50<br />Tues 2/8: Snack after volleyball $4.50<br />Thurs 2/10: Valentines Day cards $4.59<br />Thurs 2/10: Present for BFF $6.08<br />Sat 2/12: Lunch after volleyball $6.54<br />Mon 2/14: Happy Valentines Day!<br /> Starbucks Coffee $3.85<br />Mon 2/14: Pizza with BFF $4.39<br />TOTAL EXPENSES: $ 31.45<br />AMOUNT LEFT OVER: $33.55<br />TOTAL EXPENSES: $84.95<br />DEBTS OWED: -$20.00<br />AMOUNT LEFT OVER: -$19.95<br />(Asked Mom and Dad to loan her an extra $20)<br />FINAL AMOUNT LEFT OVER: $13.55<br />DebtWave.com<br />
  13. 13. Can you tell the difference?<br />Credit Cards DO NOT say “debit”<br />Debit Cards say “debit”<br />DEBIT CARDS -vs- CREDIT CARDS <br />Credit Cards are NOT linked to your checking account<br />There is a credit limit b/c it’s a loan<br />Both Cards:<br /><ul><li> Same size
  14. 14. 16 digits
  15. 15. Expiration date
  16. 16. Your name
  17. 17. Bank name
  18. 18. Credit card logo </li></ul>(Visa, Mastercard)<br />Debit Cards are linked to your checking account<br />
  19. 19. TEACHING YOUR TEENS ABOUT CREDIT <br />Together, read a credit card statement. <br />Show your teen how many small purchases can add up over a month. <br />Go over the layout: account balance, APR, location of due date, minimum monthly payment and how long it would take to pay off if you only pay the minimum. Briefly go over credit limits and available credit.<br />Go over important terms and conditions: annual fees, late fees, over the limit fees, cash advance fees.<br />DebtWave.com<br />
  20. 20. TYPES OF CREDIT TO TEACH<br />Revolving Credit:credit cards<br />Installment Credit: cars, personal loans, student loans<br />Service Credit:cell phone, electricity, gas, water<br />Mortgage: home, condo, land<br />DebtWave.com<br />
  21. 21. THE COST OF CREDIT CARDS<br />How Did the Credit Card Companies Make $450 Billion <br />in Profits in 2009*?<br /><ul><li>Interest
  22. 22. Late fees
  23. 23. Over-limit fees
  24. 24. Annual fees (membership fees)
  25. 25. Cash advancement fees
  26. 26. Transaction fees</li></ul>*CreditCards.com<br />DebtWave.com<br />
  27. 27. THE TRUE COST OF CREDIT LESSON<br />Dangers of Making the Minimum Payment<br />Your teen wants an iPad…<br />Price of iPad: $829.00<br />Sales tax (8.75%) + $72.54<br />Purchase total $901.54<br />DebtWave.com<br />
  28. 28. THE TRUE COST OF CREDIT LESSON<br />Dangers of Making the Minimum Payment<br />Average first time student credit card APR: 13-15%* <br />(as of May 2010 )<br />iPad Purchase: $901.54<br />Citi® Dividend Platinum Select® Card for College Students: 14%<br />If your teen ONLY makes the minimum payments… <br />(2.08% of the balance + finance charges: $18.75 for 1st payment)<br />How long would it take to pay off the balance?<br />What would be the total cost of the iPad?<br /> <br />*CreditCards.com<br />DebtWave.com<br />
  29. 29. THE TRUE COST OF CREDIT LESSON<br />Dangers of Making the Minimum Payment<br />It would take 8 years (96 months) to pay off the balance<br />The total cost of the iPad is $1,475.20<br />$573.66 spent JUST in interest<br />X<br />THIS WILL BE <br />OBSOLETE IN 8 YEARS!<br />CLICK HERE<br />DebtWave.com<br />
  30. 30. MINIMUM -vs- FIXED PAYMENTS<br />$18.75 first payment<br />8 years (96 months)<br />$573.66 in interest<br />$1,475.20 total<br />$20 payments<br />5.4 years (65 months)<br />$385.38 in interest<br />$1,286.92 total<br />MINIMUM PAYMENTS<br />$20.00 FIXED PAYMENTS<br />DebtWave.com<br />
  31. 31. $20 FIXED PAYMENTS -vs- $50 FIXED PAYMENTS<br />$20 payments<br />5.4 years (65 months)<br />$385.38 in interest<br />$1,286.92 total<br />$50 payments<br />1.75 years (21 months)<br />$116.61 interest<br />$1,018.15 total<br />$50.00 FIXED PAYMENTS<br />$20.00 FIXED PAYMENTS<br />DebtWave.com<br />
  32. 32. TEACHING THE PROS AND CONS OF CREDIT CARDS<br />Pros:<br /><ul><li>Security from theft
  33. 33. Source of funds in an emergency
  34. 34. Cash back/rewards programs
  35. 35. Can help build your credit history
  36. 36. Convenience</li></ul>DebtWave.com<br />
  37. 37. TEACHING THE PROS AND CONS OF CREDIT CARDS<br />Cons:<br /><ul><li>Costs/fees
  38. 38. Potential for overspending
  39. 39. Terms of the contracts
  40. 40. Target for scams and fraud
  41. 41. Inability to pay will result in a poor credit history/score</li></ul>DebtWave.com<br />
  42. 42. INTRODUCING CREDIT REPORTS AND SCORES<br /><ul><li>A credit report is a history of everything you are doing with your credit now and everything you’ve done in the past.
  43. 43. A credit report is started once you open a credit card.
  44. 44. There are 3 major credit bureaus: Experian, Equifax, and TransUnion.
  45. 45. You can get 1 free credit report per year from AnnualCreditReport.com</li></ul>NOT FREE<br />
  46. 46. INTRODUCING THE EFFECTS OF CREDIT REPORTS AND SCORES<br />Your credit score can affect:<br /><ul><li>Your ability to get a job after college
  47. 47. Your ability to get a loan
  48. 48. The interest rate you’ll pay on loans
  49. 49. Your ability to rent an apartment
  50. 50. The premiums you’ll pay for insurance</li></ul>DebtWave.com<br />
  51. 51. SUMMARY<br />Using A Credit Card Responsibly<br />Protect your credit report <br />Pay bills on time and avoid late fees. <br />Keep track of all your charges and keep receipts. <br />Do not get close or exceed your credit limit on your credit line. <br />Read and understand your terms & conditions<br />Always avoid over-limit fees as they are costly and might cause your credit rating to decrease. <br />Report change of address prior to relocating, so you will receive all of your bills immediately. <br />DebtWave.com<br />
  52. 52. CONTACT INFORMATION<br />Thank you!<br />Chase Peckham<br />Director of Community Outreach<br />Office (858) 292-2096<br />chase@debtwave.com<br />DebtWave.com<br />Don’t forget to tell your kids to find us on Facebook!<br />

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