On Monday’s St. Louis on the Air, host Don Marsh heard from Beth Kobliner, a financial journalist, who recently published “Make Your Kid A Money Genius (Even If You’re Not): A Parents’ Guide for Kids 3 to 23.” Previously, Kobliner published the New York Times bestseller “Get A Financial Life.”
Should financial conversations with your children really start as early as age three? For Kobliner, the answer is an emphatic ‘yes.’
"Research shows that by age three, kids actually understand basic money concepts like exchange (we give money and get something back) and value (a house is worth more than socks),” Kobliner said. “At age three, four and five they also understand needs versus wants. Pointing out the difference between needs and wants is a good way to start children to think in those terms. We have to talk about it and really make an effort to talk about it now more than years ago because financial transactions are done online.”
Kobliner tours the country talking about financial literacy and that’s why she was in St. Louis. Unfortunately, she had to cancel an event on Monday night at the St. Louis County Library headquarters due to bad weather in New York, where she resides.
In addition to offering the basics of financial literacy for kids (and adults too), Kobliner discussed several actionable tips on how to educate your kids about money. Below, find five of those tips you should know. Want more? You can find her book here.
Tip 1: Don’t co-sign a credit card with your kid
Should kids under the age of 18 have a credit card?
“Absolutely not; I feel so strongly about this,” Kobliner said, referencing the idea that paper money and money tied to credit or debit cards is hard for kids to initially conceptualize.
Secondly, in 2009, President Barack Obama signed the Credit Card Act, which made it so people must be 21 years old or older in order to get a credit card unless that person has an income or a parent cosigns.
“And it is a terrible mistake to cosign with your kid,” Kobliner said. “A kid should have a job and income and be able to pay off that credit card debt in full every time they use it. There’s also no need to give a kid a credit card freshman or sophomore year in college.”
Kobliner said that by junior or senior year, your child might be able to handle a credit card but it isn’t necessary.
“I think there’s too much attention on ‘how does my child build credit?’” Kobliner said. “They can graduate and get plenty of credit. They might also have student loans, and as you pay off student loans, that is helping your credit score too. The most important thing is explaining your credit card is a loan and you can get deeply in debt if you don’t pay it off in full.”
Tip 2: The jury is out on allowances
Kobliner found more than two dozen studies from around the world that looked at the impact an allowance has on a child’s development. About half of those studies showed that an allowance gave added responsibility to the kid and half showed it did not matter.
“It is fine to give allowance but you don’t have to,” Kobliner said. “If you want to give kid spending money, be clear about use. Be consistent. And don’t tie allowance to chores.”
Learning to make a bed, do laundry and empty the dishwasher are important skills for kids to learn, but they don’t need to be tied to money.
“Learning those skills as a team player is important for development and it is one predictor of how well a kid will graduate from college.”
Tip 3: Start the college conversation early
While there’s no need to tell your child about how much money you make or what you have saved in your 401k, Kobliner said it is important to start talking to your kids about college and cost as early as eighth grade. By age 16, kids normally start asking parents about their financial situation to learn if they’ll be able to go to the college they want to attend.
“I think it is important not to get your kids nervous or frantic,” Kobliner said. “We know parents who tell their kids that they have saved for the kids’ college … those kids are three times more likely to go to college regardless of how much money is in the account.”
Kobliner recommended starting that conversation using assistance from websites such as the federal government’s FAFSA4caster, which helps kids see how much different schools will expect them to pay and what schools are more generous with financial aid.
Tip 4: Think twice about an after-school job
Studies have shown there is some benefit to having an after-school job, but Kobliner said that often depends on the kid and just how much homework they have.
“When kids work more than 15 hours a week during the school year that has a direct impact on the grades they get,” Kobliner said. “Less than 15 hours a week, which is not that much, including weekends: that’s fine for working. But when you get beyond that, it has a pretty direct impact on grades, which could impact financial aid later on.”
In college, however, studies have shown that students who work 20 hours or fewer a week at a campus job actually have higher GPAs than other students.
“Work-school balance has become a conversation parents have to have with kids,” Kobliner said.
Tip 5: ‘No’ is powerful at the checkout line
When it comes to financial literacy advice for your kids about shopping, Kobliner had a simple answer:
“I think one of the most important lessons you can say as a parent is ‘no,’” Kobliner said. “As parents, now that in more and more cases it is a dual income family and we’re in a rush, maybe you run into the checkout line and one of your kids, invariably, will ask for something. It is hard to say no, but when parents say yes repeatedly at the checkout line, they are wearing away at their impulse control.”
A study from Duke University found that those kids are much more likely to get into credit card debt.
Another part of shopping financial literacy, is to talk to kids about messaging in stores and misinterpretation of messages.
“Twenty percent off something you don’t need is something you don’t need,” Kobliner said. “People get so lured in by that percentage off they don’t realize they are spending money on something they don’t really want. Store credit cards are also a problem. Those interest rates are much higher than average and if you don’t pay it off immediately, that debt could stack up.”
St. Louis on the Air brings you the stories of St. Louis and the people who live, work and create in our region. St. Louis on the Air host Don Marsh and producers Mary Edwards, Alex Heuer and Kelly Moffitt give you the information you need to make informed decisions and stay in touch with our diverse and vibrant St. Louis region.