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The $400 Temptation

The $400 Temptation

I gave my kids a test this morning.  They passed but only after asking a few questions.  And since they were the right questions, I allowed it.

I received a special invitation in the mail yesterday from American Express.  Often, these special invites go directly to the shredding box.  But the marketing department at AmEx discovered how to get someone like me to open the extra large envelope.

The front of the envelope offered me a $400 gift card to The Home Depot.  Now, ever since I read that the CEO of Home Depot left to spend more time with his family (code for was sent home) and was given a $210 million package (who is worth that much, honestly?!), I’ve had a hard time shopping there.  But the clincher was when, shortly after, a full-page Home Depot ad appeared in the paper.  Apparently The Home Depot was hoping to raise one million dollars to send to the troops overseas.  Granted, they were putting in some of their own money, but, compared to $210 million…well, it doesn’t compare.   Just didn’t sit right with me.  And, hey, I have choices.  So I choose not to shop there.

But I digress.  I did open the envelope out of curiosity.  And maybe a little interest in the cash.  $400 is a lot of money, especially if it’s free.  Perhaps it’s time to lighten up a little on The Home Depot.

I discovered that I had been selected to get a special welcome bonus from AmEx.  Lucky me!  All I had to do was sign up for the Premier Rewards Gold Card and I would get a $400 gift card to The Home Depot…once I spent $200 on the new card before the end of the year.  Tempting.  Hmmm….so that’s how Adam felt.

But the temptation didn’t last long.  I know how these things work.

As the boys were eating breakfast, I told them I could get $400 in free money just by signing up and meeting the $200 requirement.  Should I do it?

Nathan was first to ask, “It’s like getting another credit card?”

“Yes, I’d end up with another card.”

Ryan’s turn, “Is it okay to have a lot of cards?”

“It depends.  If you keep the balance low and pay them off, then it may not be a bad thing.  But every time you open an account it gets reflected on your credit report.  It may have a negative impact…initially.”

Nathan again, “Can’t you just close the account after you get the $400?”

“Sure.  But that definitely gets reflected negatively on your credit score.  For some crazy reason, the credit bureaus don’t like it when you close accounts.”

Both boys in unison, “No, don’t do it.”

And there you have it.  I walked my special invitation over to the shredding box and, as I tossed it in, I was glad that neither of the boys flinched at the possibility of $400 in free money.  But then, the envelope wasn’t addressed to them.

Registry Reflections

Registry Reflections

Nathan and I were “KidsSaving” his recent transactions yesterday.  That’s when we reconcile his bank statement with his KidsSave Account.  But it’s also when we make sure that his recent charity contributions or other expenses, get recorded.

He looked at the balance of his bank statement with wide eyes and said, “That’s all I have in the bank?”

It was over $400 so I was a little surprised at his concern.

“Haven’t you been keeping track in your registry?”  I asked.  He got a checking account this past summer so he’s been making more transactions than appears in his KidsSave Account.  As someone who teaches personal finance to kids, you can be sure I went over the importance of keeping a running record in the registry. 

He wasn’t.  And I knew that, but after reminding him several times to keep track, I decided to wait for him to learn his lesson on his own. I was hoping it wouldn’t be an expensive one.

It wasn’t.   But the scare he got seeing his “low” balance (he had deposited over $300 recently and it wasn’t reflected in his statement) made him a believer in registry recordings.  At least, it did last night.  We’ll see if he follows through, otherwise, it still may end up being an expensive lesson.

One Step Closer to Adulthood

One Step Closer to Adulthood

Nathan got his first checking account complete with checks and debit card.  It’s time for him to move on to the next level of money management.  At 16, he needs experience depositing, cashing, and writing checks.  He also needs to learn to use “plastic” money in the form of a debit card.

I like debit cards.  They’re convenient, practical, and as close to using cash as you can get.  That’s because the money is pulled directly from his checking account so the funds need to be there.  Okay, so banks have figured out how to eek more money out of us by charging overdraft fees.  The key is that Nathan needs to be vigilant about keeping track of his income and expenses in his registry.

Unlike females and their purses, carrying around a checkbook is not something he wants to do so he’s going to need to come up with a plan.  He used his card yesterday and, good boy, recorded the expense.

If he proves he is responsible with his checking account, and there’s nothing that would lead me to believe he won’t be, the next stage is a charge card.  Unlike credit cards, charge cards need to be  paid off each month.  I love the built-in consequence of not being able to use the card if the balance is not paid.

Eventually he’ll move to a credit card.  But right now he’s enjoying the feeling of being all “grown up”.

Show Me the Money

Show Me the Money

I was talking yesterday with a mom of one of the students in my money class about how abstract the concept of spending money can be.  Sure, kids know how to buy stuff.  That’s pretty concrete.  But do kids understand what happens behind the scenes when we buy things using our credit card?

This mom described how enlightened she became when she and her husband took their two kids out to dinner and paid in cash.  Both her boys were shocked at the number of twenty dollar bills they left on the table. They had never really thought about how much dinner out cost because their parents usually just “swiped” their card.

This is a good lesson for all parents.  If you want to teach your kids just how much stuff costs, stuff kids usually take for granted, pay in cash. And if you can’t pay in cash…what lesson are you possibly learning?

Deadbeats Rule!

Deadbeats Rule!

While watching In Debt We Trust with Nathan and Ryan, I found out that those who pay off their credit cards each month are called deadbeats by the credit card industry.  That makes me a deadbeat.  Deadbeats rule!

I’m not a big fan of the credit card industry.  Just because you can doesn’t mean you should.  Well the credit card companies did, and a lot of people are suffering.  And although a tad bit behind…change is a comin’.   Congress just passed new legislation.  No longer will credit card companies be allowed to change rates willey nilley like they’ve been doing. 

Don’t get me wrong.  I love my credit cards!  Last year I “earned” over $600 in cash just because I used them…and paid them off each month.  

But there is a dark side to credit cards.  And our kids need to know about it.  Remember, habits are formed when kids are young.  Bad habits are hard to break.  Let’s form the good ones.

Good habits:  saving, spending wisely, sharing, living within our means, setting personal financial goals, having a money game plan.  If we can instill these habits in our kids at an early age, they’ll have the skills to use credit cards wisely.

So here’s the low down:  A revolving credit card balance is really the same as a high interest loan.  If we can have kids agree how ridiculous it is to take out a loan on a Rise Against CD or a new pair of Ambercrombie and Fitch jeans, then we have a chance of preventing what has become an addiction in our young adults.  But won’t kids eventually need to use credit cards to begin establishing credit?  That was a question I got asked by one of the mom’s in my money class.  The answer.  No.

Remember in the olden days those green American Express cards…the ones you had to pay off each month?  They’re still around, we just don’t hear a lot about them.  Probably because they don’t generate enough money for the card companies. 

They’re called charge cards and they’re the way to go for young adults and perhaps many adults.  They don’t allow revolving credit.  Ya don’t pay the entire balance at the end of the month, ya can’t use the card.  Well, you can try, but it’ll be closed for repairs.

There is usually an annual fee associated with charge cards but for a young adult who is learning the ways of the charging world, it’s a small price to pay.  And the fee for the green AmEx card is only $25/year.

Now how about someone like me who pays off my credit cards each month and loves getting free money because of it?  You know your child.  If you feel he/she can responsibly pay off the card each month, then, when they’re old enough, have at the freebies.  It’s like being a savvy consumer.  But it requires discipline.

You know what’s one of the best things about being a kid?  They’re starting with a clean money slate.  How many under-15-year-olds do you know who are in credit card debt?  Probably none.  My goal is to keep it that way.  Let’s help them establish healthy money habits and raise a generation of deadbeats!