Is Your Kid Ready for a Bitcoin Allowance? End of 2014 Family Finance Picks

Warning, nerd alert on this first one!

I love this article about a dad who pays his son’s allowance in Bitcoin using a service called ChangeTip. Check out the post Why I Pay My 7th Grader’s Allowance in Bitcoin. Gil explains how he does it and why. It’s as much about father-son bonding and education as it is about money.

I dig the approach, but you have to be willing to jump into the brave new world of Bitcoin which is still fairly daunting and somewhat sketchy in my opinion. Here’s a good place to start if you’d like to see what’s involved: Getting Started with Bitcoin from the Bitcoin Foundation.

Here are the rest of my favorite family finance picks from the month of December.

• Every 25-Year-Old In America Should See This Chart — The graphic in this article demonstrates the incredible power of time coupled with compound interest. If you can get your kids started early with investing wisely, they’ll be way ahead of those who start late — possibly even if they stop adding to their investments later like Susan relative to Bill in the highlighted scenario. Many of the folks in the article’s comments take issue with the aggressive rate of return used (7%), and the relatively large amounts invested at an early age, but that’s a bit tangential. The basic principles still apply at lower rates and lower contributions. The benefit to starting early is very real indeed. Just think of the compounding power of getting your teens to contribute to a Roth IRA as soon as they rake in their first earned income almost 10 years earlier than the example in the featured chart!
• Kids In Philadelphia Are Some Of The Hardest Working When It Comes To Chores — This story shares some fun stats from the ChoreMonster app. For example, the least productive day for completing chores is Friday. What’s the most? Monday. For comparison, we ran the stats on FamZoo and found the same results — cool! Those with youngsters may want to use ChoreMonster and FamZoo together. See here for how that works.
• When Is a Chore Not a Chore? — Speaking of chores, what’s the deal with kids not doing chores or, worse, kids getting paid to do ridiculous ones? Mr. Dad weighs in with this post. His take: our absurdly low expectations for our kids in the chore department are setting them up to fail in a world where “taking responsibility, working hard, and contributing to a team are essential.” Hear, hear. Time to step it up.
• Urban Dictionary: Chore Child — As a closing note on chores, there’s a new entry in the Urban Dictionary that might make a good FamZoo card label: “chore child”. That’s the poor sibling who gets stuck doing the chores while the others go out and play. Doh!
• Prepaid Debit Cards: 5 People They Benefit — NerdWallet lists 5 types of people who benefit from prepaid cards — a teenage child being the first. Amen! I like using prepaid cards for pre-teens too. I also think there’s a much more general audience: Anyone who wants a very simple budgeting tool. You can use prepaid cards as an electronic equivalent of the popular cash-in-envelopes budgeting system. Instead of stuffing cash in envelopes for major categories (eating out, groceries, emergency fund, holiday gifts, etc.), you can load funds onto separate prepaid cards. The nice thing is they can be used online (unlike cash), you can just lock them if stolen, and there’s no risk of debt or overdraft since you can only spend what is loaded on the card.
• The Cost of Owning a Car — Got a teen nearing the driving years? Here's a nice infographic to use as a reference to review the various costs involved.
• Financial Education In High Schools: A Waste Of Time — I’m not fully buying Ron’s analysis here. I suspect the real finding of the study is likely to be: “crappy, irrelevant financial education is ineffective in generating good financial habits.” If high school financial education classes taught teens just one lesson — take a good-sized chunk of your summer earnings, put it in a Roth IRA, convince your parents to match you, and invest it in a broad Index fund — people’s lives would truly change for the better. A man can dream...
• Our daughter wants a trendy, expensive necklace for Christmas. Purchasing it doesn’t fit with our budget or values. — How do you handle the case when your child wants an expensive, trendy item as a holiday gift? Dr Lisa Damour tackles the question. I like most of the response in the article, but I’m not a fan of the last bit of advice: give your kid “a sense of the budget you have for her gifts and ask her to work within it.” That feels like turning gift-giving into order taking, as well as perhaps setting yourself up for your kids totaling up the prices of what they receive and comparing it to each other as well as the advertised “budget”. Kinda gets away from the spirit of giving which is more about getting that special something that really matches a person’s personality, interests, or values. That special something need not be (and often isn’t) expensive.
• Does Santa Make Us Selfish? — Are you setting the Christmas frame right? Kids will behave differently depending how you — or Santa — frame it. Set the “giving frame”, not the “getting frame”! Watch this great video from the Behavioral Science Guys to see the experiment.
• How to Teach Kids to Be Grateful: Give Them Less — You love giving your kids toys, but you want to be sure they have a strong sense of gratitude. A bit of a parental dilemma. Jenn Choi, who runs a toy review site, has a solution that involves engaging kids in the buying process. Read about her approach with Legos. The bonus is they’ll end up being savvy consumers as well. Win, win. My favorite quote: “As parents, despite wanting to give our kids everything, one of the greatest gifts we can give is to literally give less, to force decision-making and awareness among all their choices.”
• Gift Giving Teaches Children About Finances — CPA Erin Clark shares some good tips on having your kids foot the bill for their gift giving, and how that experience can develop some excellent personal finance skills. I love the Secret Santa approach where kids draw one recipient from a pool and agree on a budget cap, rather than all buying gifts for all. Less spending, more fun.
• Uncle Put More Thought Than Usual Into This Year’s Gift Cards — When you get right down to it, gift cards are a pretty lame gift. This little satire piece from The Onion makes the point nicely.
• Giving the Gift of Money to Loved Ones — Looking for non-lame financial gift ideas for someone special? There’s a nice array of options featured in this Wall Street Journal article:
  • Cold hard cash! (OK, this is still lame unless you present it in a super clever way. See this Centsables Pinterest board for some great inspiration.)
  • Series I Savings Bonds online starting at $25
  • Custodial bank or brokerage account funded with cash or securities
  • Custodial 529 college savings account
  • Contribution to child's Roth IRA
  • Pay a student's tuition bill directly
  • Pay a family member's medical bill directly
  • A stock or security (beware cost-basis issues though)
  • Contribution to a donor-advised fund
  Read the story for details about tax implications, college financial aid implications, restrictions, and limits.
• Forget the Toys; Give A Financial Gift This Year — This article adds a few more good financial gift ideas to the list above:
  • Financial planning sessions
  • Payment on a bill for a struggling friend or family member
  • Direct stock purchase plan
  Of course, FamZoo cards for spending, saving, and giving are also a great way to give a financial gift that also teaches good money habits.
• 4 Steps to Teach Your Kids Investing Basics Without Losing Your Mind — Motley Fool’s Casey Kelly-Barton shares some excellent tips on introducing your kids to investing:
  • Start by making it personal. Choose a different familiar stock every quarter or year — e.g., Disney, Hasbro, Twitter, Activision Blizzard.
  • Explain volatility and diversification. Here’s an easy way: walk through a stock chart together and discuss the ups and downs over time. Then, compare the individual stock’s performance to a composite index like the NASDAQ.
  • Create your own “mini market” where your kids can pick stocks on your homemade exchange at a penny on the dollar. That’s the technique I’ve been using with my youngest to teach him about Index funds. It creates an engaging, hands-on experience with real money at stake without the hassle of setting up a custodial account. Here’s how it works.
  • Allocate a portion of regular allowance or job income to investing to make it a regular habit.
• Thanks for Not Buying Popcorn from My Son — It’s important for young budding entrepreneurs to learn that rejection is a natural part of the business world! Trey’s LinkedIn post is a terrific reminder for parents, particularly those of the helicopter variety.