Editor’s Note: This is the first in a three-part series. Part two will appear next month in the AFN.
If you are like most Americans, you had to find out about credit reports, financing, interest rates, even how to balance a checkbook the hard way. One would think that such important topics would be covered in high school, but for the most part they are not. As a society, we try to shield our children from the financial stresses that we may be experiencing, hoping our kids can just be kids. Sometimes though, we forget that our kids need to know about finances before they go out into the world. We think they are too young to understand and we will teach them later, when it comes time. I challenge you to talk to your kids about money now! No matter their age, they can always learn something important about money.
As a small child, my son understood that once he spent all of the cash he had on hand, he couldn’t buy any more. However, he had a difficult time understanding the debit card concept. Because he only saw the swipe of the card, he didn’t realize that there had to be money in the bank account in order to make purchases using the debit card. We spent a lot of time waiting in line at the cash register talking about why we could buy the items that we need, but not all of the items we want.
More recently, my teenager and I opened a joint checking account. He knows that I will deposit a certain amount each month, and he knows how long he must make that amount last. It is up to him to decide what he spends his money on. We talked about overdraft charges, and how nowadays the bank will allow you to continue to make purchases, even if there is not sufficient money in the account to cover the purchases. When he spends $1.50 for gum and a soda when there is only $1.05 in the account, he will actually be paying $36.50 for that gum and soda, which will be deducted from next month’s deposit.
Of course, my son is going to overdraw the account. He knows I do not expect perfection, but I do expect him to check the balance frequently and tell me when he gets an overdraft charge. I expect him to talk to me when there is not enough money in the account to last until the end of the month, rather than continuing to spend when there are no funds available. This may not be exactly like the real world (when was the last time you called your mom because you got an overdraft fee?), but it will allow us to do some problem-solving together, create a budget, and mostly it just means we’re talking about money and how to manage it.
It is important to me to help my son with these lessons before he leaves home. Once it is time for college, managing his money and sticking to a budget will be a necessity, and starting early can only help with his success.
Attorney Denise K. Aguilar is an Ahwatukee Foothills resident whose bankruptcy practice is located in Ahwatukee. Reach her at (480) 455-1881 or visit www.aguilarlawonline.com.