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Are Allowances Evil? Weekly Family Finance Picks (#48)

We’re constantly scouring the Internet looking for articles related to family finances and teaching kids good personal finance habits. You can visit the FamZoo delicious page to see our ever growing list of family finance bookmarks. We’re up to 1,540 now! Each week, we pick our favorite articles from the previous week and post them here.

Are allowances bad for kids? The timeless parental debate rages on. This week’s picks shed some light on the various perspectives.

Moms Talk: How Do You Handle Allowance?

Is Allowance Evil?

Let’s wade into the debate gently with a wonderful story. Aliza shares her fond recollections of how her parents taught her about money as a child growing up in Brooklyn. I love it. Aliza doesn’t explicitly say she adores, admires, and respects her parents. She doesn’t have to. Her story says it all implicitly. I’ll know I’ve done my job as a parent properly if my kids someday share similar stories and seek to replicate similar experiences with their own kids.

The FamZoo Philosophy page asserts, “We believe a parent is a child’s best mentor.” Aliza illustrates our credo perfectly. Look at all of the elements that come together in her story — leading by example, bestowing responsibility, setting clear expectations, dealing with consequences, living within constraints yet enjoying life (yay chocolate croissants!).

Back to the debate: Notice the role that Aliza’s allowance plays. It evolves, and it’s only a piece of a larger picture — just one tool applied thoughtfully within a sound, loving relationship grounded in clear communication and expectations.

Allowances definitely aren’t evil in this particular scenario.

Allowances: “Welfare” for kids?

Isolated stories are nice, but what does the research show? Lots of bad stuff according to Liz in this article. Allowances undermine the formation of a work ethic. Allowances undermine financial literacy. Allowances undermine paid employment. Allowances undermine college attendance. Allowances undermine smart financial habits. Yow!

How do we resolve these decidedly nefarious “scientific” findings with the undeniably positive allegorical findings above?

First off, the definition and circumstances of an allowance can vary so drammatically that results merely based on the presence or absence of an allowance seem highly suspect. How much allowance? What’s it for? There’s a world of difference between a clothing allowance backed up by a concrete budget and a random allowance doled out purely for spurious “wants.” Does the parent combine the allowance with healthy communication, clear expectations, outside jobs, financial advice, and other educational techniques? How in the world does a study control for all those variables? It sounds like a daunting task to be truly rigorous in this area.

On a related note, what’s the statistical margin for error? For example, the financial literacy conclusion is drawn from results that differ by a paltry 2%. That’s a mighty slim margin to be citing as compelling, definitive evidence.

Suffice it to say, I remain very skeptical of (if not irritated by) these studies and the conclusions that are being drawn from them. They certainly help journalists write intentionally provocative pieces and drive traffic from fervent adherents on both sides of the debate. That’s not all bad — as long as readers actually take the time to wade through the commentary beyond the headlines to reflect on the differing points of view. In this case, Liz suggests some excellent guidelines at the bottom of the article and several readers weigh in with some interesting tips. For example, I like the comment from the parent who explains how they give their child $177 per month in allowance, but after assessments for his share of utilities, TV/cable, phone/Internet, insurance, food, clothing, and an automatic deduction for savings, he’s left with a modest $15 dollars of discretionary spending money each month. Now there’s a real world education.

The kid paid cash — $1,500

For symmetry, I’ll close with another nice story. Lynn writes about a teen who purchaes her own MacBook Air. It’s refreshing — and sadly unusual — to see an article about a teenager with healthy, balanced money habits and perspectives. It appears that the allowance she received when she was little didn’t foster an entitlement mentality or cause any of the other negative side effects cited in the research above.

You might want to keep this story handy when fielding that next purchase request from your teen. And check out the Girl Spends Just $7 On Prom Dress video that’s embedded in the story. For those of you with daughters, that’ll come in handy too. Why? Check out last week’s post!

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Pricey Proms, Minimalism Meets Money, Paying for Peas, Stupid Spending: Weekly Family Finance Picks (#47)

We’re constantly scouring the Internet looking for articles related to family finances and teaching kids good personal finance habits. You can visit the FamZoo delicious page to see our ever growing list of family finance bookmarks. We’re up to 1,513 now! Each week, we pick our favorite articles from the previous week and post them here.

This week we work the payment spectrum: from paying way too much, to paying the minimum, to paying for good habits, to paying for super-stupid stuff:

2011 Prom Spending Survey

OMG!! Prom spending is outta control!

Prom Can Take a Big Bite Out of That Clothing Budget!Check out the 2011 prom spending survey from Visa. Surveyed families in the West who send their teens to prom are shelling out over a grand on average. Yow! Families in the South spend almost half that much, but it’s still a whopping $542. See all the stats from the Visa survey here.

I’m no kill-joy, but that seems like an awful lot of cash for an evening out. You can see that my own daughter took quite a bite out of her annual clothing budget for prom clothing back when she was in high school (see picture). In her case, that meant forgoing clothing purchases throughout the subsequent Fall.

I suspect the lion’s share of prom purchases is for wear-it-once prom dresses. That was the case for my daughter. Which got me to thinking: why not have some sort of prom dress exchange? Wear-it-once becomes wear-it-many with less waste and lower cost. Sure enough. Google “prom dress exchange” and you’ll see lots of options — commercial sites like this one or free grass roots efforts like this one I saw on Facebook. I like how dress exchanges make prom accessible to more kids and shift the emphasis from finances to fun.

The Value of the Minimal Approach

Enough of excessive spending. Let’s go minimalist instead. I love Trent’s iron pot story as an illustration of how to approach spending in a minimalist, non-impulsive way. It’s a great philosophy to model and share with your kids. Focus on the experience, not the bling.

Kids and Money: 5 Ways to Instill Good Habits

I’m always fascinated by the “science” of incentives — a topic that’s guaranteed to spark emotions and controversy (e.g., the great paying for grades debate). Dan summarizes the results of a recent study that paid kids to eat their vegetables. The bottom line: the good habit persisted even after the bribes stopped. Dan postulates the same approach can be taken with other habits that aren’t particularly appealing but are good for you — like personal finance. In other words, pay kids to practice good earning, saving, spending, investing, and giving habits. Check out Dan’s 5 good habit bribery suggestions here. Most are variations on the matching payment theme.

Do you use a matching strategy to encourage good habits in your kids?

In keeping with the “paying for stuff theme” this week, let’s wrap things up with a collection of bonus videos about paying for really stupid stuff. Ever bought something super ridiculous? You aren’t alone. How about your own casket (well before you actually kick the bucket)?

You can see other absurd spending confessions on the Spendster Reality Check Challenge Contest page. Need to get a spending confession off your chest? Go for it!

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More Mom, Quitting Moms, I'm OK - Now Pay Me! Weekly Family Finance Picks (#46)

We’re constantly scouring the Internet looking for articles related to family finances and teaching kids good personal finance habits. You can visit the FamZoo delicious page to see our ever growing list of family finance bookmarks. We’re up to 1479 now! Each week, we pick our favorite articles from the previous week and post them here.

This week, we’ve got more Mom stuff and an interesting new app, along with a bonus video.

Assorted Mom Money Lessons

by Various Authors on FamZoo Article Directory

With Mom on Mother's DayIn the wake of Mother’s Day last Sunday, there were several excellent articles about money lessons folks have learned from their moms — lots of great personal finance tips and touching stories. You can browse through the ones we liked here.

Sometimes, it’s good to take time out and reflect on what your legacy of lessons (financial or otherwise) will be for your kids. If your child were to write a future blog post with the title “Money Lessons I Learned from My Mom/Dad”, what do you think they’d highlight? Be honest. Do you like the answer?

Why Moms Should Quit

Now here’s a provocative twist on the mom theme: maybe it’s time to quit being one. Lisa features a guest post from Mel Robbins (BTW, Mel is a woman) that puts forth a case for “why every woman in America needs to quit.” Stop doing the household work — all of it — and make everyone else pick up the slack. A little extreme? Yeah, probably. But, there are definitely some valid points in here for women with capable husbands and kids (beyond the toddler stage) who aren’t pulling their weight around the house.

That said, I think this is the key quote in the article and the key impediment: “The hardest part is letting go of how you want everything done.” That’s generally the toughest part of effective delegation both at home and in the workplace. Are you able to let go?

I’mOK Wants To Reward Kids For Communicating With Parents On Mobile Phones

You’re only human: when your teen’s out and about — especially at night — and you don’t hear from her, you worry. So, would you pay your teen to check-in with you regularly to let you know he’s ok? That’s the premise of this new app.

Hmmm. Seems like it might be taking incentives a bit too far. How about this incentive instead: “you don’t call us periodically, you lose the privilege to go out.” Seems reasonable. Your thoughts?

And for the bonus video this week, Alisa Weinstein makes a concise case for letting your kids learn to spend their own money, not yours (which is seemingly infinite).

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The Basics - Mom, Lemonade, Financial Fundamentals: Weekly Family Finance Picks (#45)

We’re constantly scouring the Internet looking for articles related to family finances and teaching kids good personal finance habits. You can visit the FamZoo delicious page to see our ever growing list of family finance bookmarks. We’re up to 1,443 now! Each week, we pick our favorite articles from the previous week and post them here.

Let’s focus on the basics this week: Mom, the lemonade stand, and financial fundamentals:

Four Lessons My Mom Taught Me about Family and Money

by Tracy on MoneyNing

Mom's Money TipsIn honor of Mother’s Day this Sunday (you do have your plan together for that don't you?), Tracy offers the top 4 family finance lessons she learned from her Mom. I like’em. How about you? Got any gems to share from your Mom?

OK, I’ll go first with two things that stick out for me from my Mom. First: be organized. My Mom was always (and still is) super organized. Lots of lists and notes to keep all the details together. I definitely inherited that gene, and it’s helped me tremendously in financial matters (among other areas).

Second: appreciate what you have. Mom used to always tell us: “you boys don’t know how lucky you have it!” to which my brother and I would respond with the obligatory teen eyeball roll as a show of thoughtful acknowledgement and understanding. But, take heart parents! The repeated messaging ultimately seeps through. In my case, Mom’s messages instilled a strong sense of moderation — something I consider a key component of financial well-being.

Thanks Mom!

Prepared 4 Life: Inspiring Entrepreneurs, One Lemonade Stand at a Time

Many lament that we aren’t raising our kids to be entrepreneurs. (E.g., see Cameron Hold’s Ted video here.) What’s one of the simplest, most familiar ways for a kid to learn about the full life cycle of starting and running a business? The lemonade stand.

Did you know that last Sunday was National Lemonade Day? Did you know that last year, little Lemonade Day entrepreneurs sold $6.8 million dollars worth of lemonade? I certainly didn’t until I read Tamara’s interview of Michael Holthouse. Michael’s an entrepreneur and philanthropist who founded the non-profit Prepared 4 Life. Their mission: help kids become contributing members of society through practical, hands-on activities — like planning and running a lemonade stand. To learn more about the program, read the inspiring interview here.

Here’s a quick Lemonade Day intro video from Michael himself:

The Financial Literacy Toolkit

As a final homage to the passing of Financial Literacy Month, here’s a great article to bookmark for future reference. JD’s “Financial Literacy Toolkit” provides a convenient, well organized roundup of links to their best material on financial fundamentals. Don’t miss the video links at the end. Keep it handy as you step through financial concepts with your kids over the years. Need to explain credit cards? Compound interest? Budgeting? Mutual funds? It’s all here.

In deference to Kevin McKee, the fellow who edged me out in the GetRichSlowly personal finance video contest, here are two bonus videos from his site, Thousandaire.com. Kevin's mission: give young people a clue about "how to spend, save, invest, borrow, and budget money" because, sadly, most don’t have one. Kevin’s approach: make “funny, interesting, entertaining and sometimes stupid videos where you’ll hardly even realize you’re learning about money.” Here’s the contest winning video: a rap about watching whatever you’d like on your TV (including High Def) without having to pay the high price of cable:

Here’s a second video, about just how attractive budgeting can make you — debt just isn’t gonna get the (right) girl: