By: Stephen Dybwad

“Layin’ it on the line”

“Want to give your grandkids a lifetime gift? Teach your kids good money habits early.” — Stephen Dybwad

Achieving financial literacy in the United States has always been a challenging proposition. With few exceptions, financial education is virtually non-existent in the school system, and teaching kids how to have better relationships with money is generally left up to parents and grandparents.

As a parent, you may feel overwhelmed by this task. Even if you don’t feel qualified, you might be surprised by how easy it is to impart basic financial education to the children in your life. Children are naturally curious and eager to please the adults around them. With a little experimentation and practice, teaching important money lessons can be fun and rewarding.

While it is advantageous to start financial literacy training early—perhaps as early as age 3—this doesn’t mean you cannot impart money wisdom to your middle schoolers or teenagers. Expect some initial push-back, but know that they will thank you for your efforts later.

Teach Kids How to Save 

The human brain has a tough time envisioning the future. That’s why asking someone to delay gratification now in order to receive a future reward doesn’t usually work that well. Instead, make saving fun and entertaining now. Try things such as banks that automatically count coins and provide a running total, transparent containers, or even traditional piggy banks.

If you have more than one child, consider having a contest to see who can save a preset amount the fastest. “Grandma’s Script” consists of coupons you print and give out as rewards when a child finishes their chores, homework, or performs an act of kindness. Some parents establish “stores” where children can spend their script on treats, stickers, or other fun items.

It’s also important to give them a healthy skepticism about marketing. Game, toy, and candy manufacturers specifically target kids, especially those who are still in the magical thinking stage of life. Children are bombarded with ads every day, seeing over 40,000 ads per year, according to the American Psychological Association. While it may be difficult for you to stop the influx of marketing, you can hammer home an important message to your young ones: “Don’t believe everything you see or read!”

Explain How Credit Works  

You may not think your child or grandchild notices when you pull those little pieces of plastic out of your wallet at the store, but they certainly do. While you may have your own issues regarding credit, that doesn’t mean you can’t explain to a child who is 8, 9, or older what credit is and how it works. Explain to them the legitimate uses of credit and the traps they could encounter if they abuse it.

For older kids, it might be instructive to let them go on a credit reporting site to understand what goes into credit scores and why they’re so important. Make sure they can answer the question, “Where does money come from?”

An elementary school in the inner city of Chicago once decided to take their first graders on a field trip to a dairy just outside the city. Teachers reported that many of the students could not imagine that the milk they drank every day came from cows and was not made at the store. In our transactional society, young children see the adults in their lives getting money from ATM machines and think, “Money comes from a machine. You just push a button to get it.”

Explain to your little one exactly how money is made, how it gets to the bank, and how the bank gets it into that machine. It’s never too early or too late to have the money conversation with the children you love. Doing so will have a lifelong positive impact and foster a healthy, productive relationship with money that will pay off again and again.

Steve Dybwad is a member of Syndicated Columnists, committed to a fully transparent approach to money management.

Make sure your comparisons are apples to apples

Which is better, a hammer or a screwdriver? It depends on what you are trying to accomplish, doesn’t it? Both of them can be wonderful, or both of them can be useless. And even though you are comparing similar things (tools), it all depends on the task at hand, doesn’t it?

Now, which is better, a hammer or a banana? What? How do you compare a hammer and a banana? Well, you really can’t, can you? They are completely dissimilar. Although even with their dissimilarities, which of these is best would still be determined by current needs, like, am I hungry? or do I need to connect some 2 x 4’s?

So, which is better, stocks or annuities? Is this a comparison of similar things or dissimilar things? The answer is both. Stocks and annuities are similar because they are both financial vehicles, but they are wildly dissimilar because one doesn’t guarantee ANY of your money, and the other guarantees ALL of your money. Stocks compare better to mutual funds, commodities, and other equities. Annuities compare better to CDs, money markets, and other guaranteed investments.

Whether or not the comparison of stocks to annuities is valid, the comparisons will always be made, and you have to know how to make that determination. It’s relatively simple, and always comes down to this: What am I trying to accomplish? If you need to accumulate substantial sums of money in a relatively short time period and don’t mind the risk of losing your investments, then stocks might be appropriate for you. If you need to protect your money and guarantee it will last for the rest of your life, annuities may be suitable for you.

The truth is this: every financial product is pretty good if it is used for what it was designed to do. That very same product is horrible if it is used to try to accomplish something it was never designed to do. Beware of the advisor who cannot acknowledge the benefits of every financial product even the ones he or she doesn’t sell. Also, beware of the advisor who is more interested in telling you how great his or her investment is than in finding out what you are trying to accomplish.

Asking the right questions, and making the proper comparisons, is often the first step in making sure you get the best information for your situation. I will show you how to stop asking common questions and start asking great questions in my upcoming articles.