#297： Make Your Kid a Money Genius
Episode Stats
Summary
Do you have a not so rosy financial history and are worried that you're passing on your bad money habits to your kids? My guest today on the show says you needn't worry with a bit of thought and some self-education you can clean up your own money problems while simultaneously teaching your children how to avoid mistakes you ve made yourself. Her name is Beth Kobliner and she's the author of one of my favorite personal finance books, Get a Financial Life, and in her latest book, she shares research-backed advice on how to teach your kids the principles of sound personal finance.
Transcript
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Brett McKay here and welcome to another edition of the Art of Manliness podcast. Do you have a
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not so rosy financial history and are worried that you're going to pass on your bad money
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habits to your kids? My guest today on the show says you needn't worry with a bit of thought and
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some self-education. You can clean up your own money problems while simultaneously teaching
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your children how to avoid mistakes you've made yourself. Her name is Beth Kobliner. She's the
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author of one of my favorite personal finance books, Get a Financial Life. And in her latest
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book, she shares research-backed advice on how to teach your kids the principles of sound personal
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finance. Beth shares the research at which age most kids develop their money habits they'll have for
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the rest of their life. And it's surprisingly young and provides some basic guidelines of what you
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should and should not talk about with your children when it comes to money. We then dig into specific
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tactics on teaching your kids, whether they're in preschool or college, about savings, work,
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insurance, and even debt. Even if you don't have kids, you're going to find some useful reminders
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about getting your financial life in order in this podcast. For those of you thinking about getting
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married soon, Beth shares some fascinating research on how the amount you spend on the engagement ring
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and wedding ceremony correlates with the marital success and happiness of your future marriage.
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Definitely provides some conversation fodder discussed with your significant other.
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After the show is over, check out the show notes at aom.is slash Kobliner. That's K-O-B-L-I-N-E-R.
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Beth Kobliner, welcome to the show. Oh, it's so great to be here. I've been a fan of your work.
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You wrote a book, How to Get a Financial Life, a couple years ago. It's been a great resource for
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me personally, but it's been a go-to resource when I've written personal finance content on the site
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because you do such a great job just explaining things in layman's terms and you hit all the
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essentials, which is fantastic. You got a new book out. It's called Make Your Kid a Money Genius,
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Even If You're Not. Here's the first question. How is it possible if you're a parent and you're not a
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money genius, you're terrible with money, how is it possible to make your kid a money genius if you
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don't have money genius? Right, in you. I've been writing about personal finance now for 30 years
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and I feel like the best kept secret is how you really just need to teach your kids a few basic
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concepts. If you know those basic concepts, you're ahead of the game and that makes you and you then
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make your kid a money genius because you know more than most people know, which is very simple
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advice about how do you teach your kid about delayed gratification and saving and what is the
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research? It's a lot of research-based. How do you teach your kid about the magic of compound interest
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or how do you talk about saving when a kid, all they really want is a Shopkins or another Lego set?
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How do you talk about these concepts? And there's some really interesting research out there,
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but I think the most important point is that everyone has some financial baggage. You know,
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I meet people who came from parents who were great savers and the people say, well, now their grown-up
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kids say I'm not a good saver because my parents were so thrifty and I want to live life. And I've met
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the reverse. I'm a terrible saver because my parents were terrible savers. Nobody ever taught it to me.
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But whatever your financial baggage is, I think it's so important as a parent to set that aside
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and go through the basic concepts of money to impart them to your kids. You know, and I do that in this
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book and I've been sort of going all around the country to 20 cities and it's been fascinating to
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talk to some parents who are investment managers but never talk to their kids. Some parents who are
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horribly ashamed of the credit card debt they still have, but they realize they still need to
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talk to their kids about money basics. So reading the book is a way to teach yourself to then teach
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your kid about money. Yeah, that's what I was thinking. I mean, a lot of the stuff in here,
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it's stuff that any adult should know. So as you're reading this, you're going to learn this stuff and
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then you can impart it to your kids. Right. And some people are telling me, it's sort of like,
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I'm pretending to read it for my kids, but really I'm learning about, you know, inflation and
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retirement accounts that I should have paid attention to a while ago. But the book really
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does focus on a wide age range with age appropriate advice. What you need to teach kids as young as age
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three, which research shows that they start understanding basic money concepts all the way up
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to 23 when our kids are often finished with college, hopefully, but also probably living on
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your couch. So that wide range of kids is what the book speaks to. And it really talks to parents how
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to talk to them. What I thought was interesting, why it's so important to start talking to your kids
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about money, even when they're three years old, is that their money habits are established pretty
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early in life, aren't they? Yeah. Yeah. I mean, it's interesting by age three, kids can understand
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basic money concepts like exchange, or they can understand value and even understand making
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choices. We can buy, you know, two apples or three bananas with our dollar. Those kinds of choices are
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important to have with children, to let them have those choices and talk about those concepts at very
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young ages. We also know by age seven, some money habits are actually set. Things like, you know,
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impulse control. So you want to talk, that's a real sweet spot between age three and age seven about
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money. It's not that you can't talk to them more at age eight and you have to all through their
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teenage and then early twenties. But starting early is really, I think, makes it a whole lot easier
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for you as a parent. But it is possible, say you're getting a late start, your kids are in their
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teenage years and they got some bad money habits. Are you able to correct that as a parent or help
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correct that? Absolutely. I think like any parenting advice, you know, it's, it makes it easier for you
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if you start earlier, but when you start, it's absolutely possible to talk to a teenager about,
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you know, first of all, in middle school, you start talking about their college and, and instead of
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putting stress and pressure on the whole topic, talking about how we're going to approach this as a
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family. And that's why I have a whole chapter on paying for college and talking about finding an
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affordable college for your family. That's also a good, great place for your kid. And all of those
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topics, even if a kid has a part-time job, first of all, does it make sense for your child if they,
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you know, don't need a part-time job to help the family with its budget? How do you figure out a way,
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you know, does your kid work? Do you instead, does your kid do other extracurricular activities?
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Or if they do work and they make money in the summers, how do they save that money? They're great
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ideas for even opening a very, very small Roth IRA. When you start at very young ages, you know, you save
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$100 a year from age 10 to age 20 in a Roth IRA and never look at it again until you're, you stop
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working. You can easily have $50,000 in that account alone. So little tips that can help parents,
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you know, show their kids the importance of saving is really key. And you can have an entry level at
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every age. And we'll get into the detail more. Some of these tips are great, but I'd like to talk
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high level here. Sure. So we need to start talking early to our kids about money, age three. How should
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those talks be? Because I think a lot of parents, they're uncomfortable talking to their kids about
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money. I'm sure every parent's been asked that question, like, how much do you make dad?
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Right. You know, do I talk about that? So what things should you talk about with your kid? And
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are there things you should avoid talking about when it comes to money?
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Right. Well, I think with as young as age three, you can really start talking about basics. Like
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I make money from working and I have a job and let your kid bring your kid to your job. And just
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explaining that concept. There's a woman in my office who thought her dad's job was to read the
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newspaper every day since he left home and had the newspaper under his arm. So she didn't understand
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until years later that he was a teacher. So just explaining to your kid, you have a job and you
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make money from that job and that helps buy food and clothes and those basic concepts. But when it
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comes to kids asking bigger questions, like how much money do you make? I don't think you really need
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to answer that question directly, especially if a child's young, say 11, 10, 9, those ages,
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because I don't think they really have context. Once a kid starts becoming closer to age, you know,
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to applying for college and you're filling out the financial aid form, then it may make sense to say,
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look, you know, this is how much we have and this is how much we've saved or didn't save for college.
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And this is how much we're able to afford. And I go through a really step-by-step analysis of that.
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But when it comes to how much money you have, you don't have to tell your kid what your salary is,
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how much money you have in your 401k, probably best to avoid, you know, how much you pay a babysitter
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or, you know, why your aunt Louise is cheap, but your uncle John is really rich. You know,
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all those kinds of, uh, comments are probably best left unsaid unless there's a particular reason,
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again, like your kid is applying for college and you need to sort of buckle down and explain
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the, what you have to pay for it. Right. Yeah. That advice about like not telling your
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account what you pay the babysitter. I thought it was pretty good because it gives your kid
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leverage and situation. You'd be like, well, my dad pays you blah, you know, so you gotta do what I say.
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Right. And they're not the boss. You're the parent is the boss and the babysitter works for
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the parent. And it's really important, I think, especially with young kids to keep those lines
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very clear. First of all, a lot of younger children don't realize the babysitter is paid at all. They
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think there's just like a grownup who wants to hang out with them and why wouldn't they? But I think
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that, you know, as kids get older, you want to be careful about not empowering them with so much
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information that when you go to the parent teacher conference, your, you know, teacher not only knows
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how much you have in your 401k, but how it did last year and what your salary is. Because I think kids
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also really just don't know what to do with that information. You can say, you know what? The median
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salary in our country for a family is about $65,000 and then go from there. You know, we make a little
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more of that and we're very comfortable and we're so lucky. We have a home and food and clothes,
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or we make a little less than that. And that's why we have to be really careful. And when, you know,
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I know we want to go on a trip like our neighbors, but we can't, but we could do is have, you know,
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our weekly family pizza night or whatever. You know, that's something that comes up a lot. Parents
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saying that they have trouble when their kids start asking them questions about why don't we have,
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why aren't we going on this vacation like the neighbors? Or why can't I buy these $300 sneakers
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like my best friend has? And I think talking about it very directly and honestly with kids
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and saying, yeah, there's some things I'd like too, but we don't have them, but we have this other
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family thing. You know, we're not going on a trip to Tahiti, but we have a ping pong table in our
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basement. So we have fun doing that. Whatever it is, I think those kinds of conversations are very
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important to have with kids. Yeah. Never lie to them though. Never say we don't have,
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I don't have any money. Yeah. That's really important. First of all, you're going to get
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burned. You know, if you say you're in a store and they're like, Oh, can we buy this? And you
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say, I don't have money. And then you use your credit card in a minute, a minute later to buy a
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coffee for yourself. They see that and they either think you're lying or they don't even,
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they don't understand what's going on, which is another big issue. Most younger kids haven't seen
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cash before. So they see card swiping and phone swiping with, you know, Apple pay and Venmo.
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So that's, that's one issue, but also just the lying factor. You lose credibility. It's better
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to say, you know what? We're not here to buy that now. Maybe we can put it on your wishlist for your
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birthday or holidays, or there are so many different techniques and ways to move along and get your kids
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to understand they're not going to get what they're asking for when they want it. And there's even
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research that shows when you give in at the checkout line to a child repeatedly that those children were
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then tracked and it found kids whose parents did that were more likely to have financial problems
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and specifically debt problems when they were young adults. So you want to say no, you want to make sure
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your kid knows that his impulses are not going to be indulged every time they want something because
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that teaches them that they're going to have to wait, um, for something that they want.
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Right. Well, another solution to that, um, for those impulse buys is providing your kids an allowance
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so they can learn how to make financial decisions with their own money. Right. Correct. Right. So what's
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your take on allowance? Everyone's got an opinion on allowance. Right. Allowance really is one of those
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big hot button issues. And because of that, I decided to look at the research and believe it or not,
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there are about two dozen studies that have been done on allowance from all over the world. And
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after looking at them, the bottom line is it doesn't really matter if you give your kids allowance or not
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in the sense that it doesn't make your kid brilliant at money by giving them allowance. And it doesn't make
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them, you know, worse because some people and some studies actually showed that when you give a kid's
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allowance, it could make them feel more entitled because they're not earning that money necessarily.
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It's sort of across the board, but there's three things you really need to do. If you're giving
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your kid money, whether it's through a regular allowance or they sometimes get money from their
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grandparents or from you is to first be clear and realistic, you know, what are they expected to
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use that money for? You can say it's for, you know, when you, you're going to so many birthday parties,
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it's to buy your friends birthday presents. When, if you're only giving them $5, you know,
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a month or $10, even $5 a week, it may not be enough to buy a present for each party.
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So being realistic and then setting, you know, keeping to that, being consistent. And if you say,
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well, I'll pay for a concert with your friends this time, but next time you have to pay for it for your
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own money, you have to be consistent and really stick with that. And it's hard because kids pull
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on our heartstrings and say, but everyone's going and I want to do it. And that's when you have to really
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be consistent. And the final one is not to tie allowance to chores.
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Yeah. That's the, that's the kicker one. That's the thing people argue about the most.
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Right. Well, again, looking at the research, it shows there was this really interesting study
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done out of university of Minnesota. And it found that kids who were given household, basic household
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chores, like making the bed or, you know, putting the dishes in the dishwasher at very young ages,
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four, five, six, and they were consistently doing those chores and were not paid by their parents.
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Those kids, when tracked over time, built up a sense of responsibility and the, the notion of
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contributing to a family. And then those kids were shown to be more likely to go on to finish school
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or even start a career. So the responsibility that comes with being a team player and not being
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paid for chores seems to be a very important factor in a child's development and building up habits that
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help them throughout life. Right. I guess a compromise to that is you don't pay allowance for like basic
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chores, but you'll pay for like work above and beyond. Like, you know, say the kid, Hey dad, I noticed
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this needs done. Will you pay me $5? And you can have a talk about that. Yeah, that's a great point.
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I absolutely agree. Like one off, one off chores that you'd pay someone maybe to do anyway. Like
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I'm, I don't, I'm still not good at organizing photos on, you know, my, my computer. And I,
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so sometimes I'll, you know, throw my kid a $10 bill, you know, could you, you know, really organize
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all these birthday pictures in the last 10 years and put them in files for me and, and that kind of
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thing that you'd probably pay someone else to do it anyway. It's, it's, I think that's really fine.
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It's just those regular chores of everyday life, putting your clothes in the hamper, you know,
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those kinds of things should be part of a, you know, internally intrinsic to a child being a member
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of the family. It's doing those chores. Gotcha. So let's say you're paying your kid a regular
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allowance, whatever it is. Um, you want to teach them to save some of that money set aside for long-term
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goals at different phases of their life. Say he's in elementary school. What's the best approach?
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You open up a bank account or you just use a save jar? At what point do you introduce, you know,
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financial institutions to your child? Yeah. Great question. I think that first I would say
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for kids, you know, kindergarten, first grade, younger than that, having jars by far is the best
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way, you know, first grade, second grade, cause they see the money building up. And the whole thing
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here is just making a goal. Your kid wants, you know, a Lego set and you like, well, you have six
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of them, you know, you're gonna have to wait for your birthday or you can save up for it. Having a
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jar or a piggy bank and putting money into that when they get their allowance or money from
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grandparents too. And having that, you know, and you could teach opportunity cost in the sense that
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if your kid walks home from school every day and they have a dollar to buy a snack, you could say,
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you know what, you can spend it on the snack or you could put it in the jar and you're going to
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get to that goal faster. I do think that opening a bank account makes sense for kids as young as
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five, six. I think that they enjoy the experience. It feels like a rite of passage. Now, of course,
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interest rates are quite low right now. Hopefully they'll be going up a little bit, but just the
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experience of opening a bank account, there's some banks that offer special, slightly higher rates
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for kids. So you can shop around for that. But when I was a kid, there was passbook savings account
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and everyone had a passbook savings account because it was really a way to feel like a grownup and start
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saving your money and you'd get it stamped each time you go into the bank. That doesn't sadly exist in
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most places, but you still can have that experience of taking money seriously and, you know, call in
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advance ideally and get a bank manager there who can explain to your kid and make it a nice
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experience. And I found that, and parents have told me that that experience makes it kind of concrete
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in a way and encourage the ZUM. And you don't have the bank passbook savings account, but you can
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print out a statement and show, wow, you have more money. And every time you put money in,
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you have more money and a teeny bit of extra money interest.
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Right. And that's an opportunity to teach your child about interest, that you make money on your money.
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Exactly. Exactly. My interest is free money. You get a little bit extra. And when they get into maybe,
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you know, the later elementary school years or even middle school years, you can talk about,
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you know what, we can transfer the money to an online bank that might pay 1% or even higher now.
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So if they're interested in that, I think some kids get really into the idea of how can I make the
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most of my money? And, and other kids are just, you know, happy to know, okay, it's in a very safe place,
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just so you know, and you could tell, teach them about why it's safe and the federal government
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guarantees it. And you know, that this is a place that you can save up money for something you really,
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Right. And earlier you recommended even opening up a Roth IRA for your child. So what's the
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approach that, do you open it up in their name? It's like that it's their Roth IRA.
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Well, when you have say a high schooler who has either a part-time job and just to tap on that for
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one second, research shows that having a part-time job during high school is fine. As long as your kid
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keeps the hours under 15 hours a week, once you get beyond 15 hours a week, and that's including
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weekends, those, it tends to on average cut into kids grades. So, you know, it's, it's good to keep
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in mind and some kids in high school get a part-time jobs and they love the idea of making
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money. So they kind of, you spend much more time on those part-time jobs than doing their homework.
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And you see, you want to keep that balance and make sure it's not over 15 hours. But when they
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start earning money, maybe in the summer, you can really encourage your kid. If you make $500,
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open a Roth IRA and you could show them these examples of how money, when it grows free from tax,
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as it would in this Roth IRA, it's called a retirement account, but it's really a super
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smart savings account. It grows exponentially quickly. And starting when you're 15, 16 makes
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your money will, it will grow so quickly. And even if you don't put money in it again, it's a great way
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to save for the few years you're making some extra cash, but you could only put in as much as you earn.
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So you might want to say to your kid, all right, you earned $500. I'm going to give you 250. You put
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in 250 to your Roth IRA, and then you could keep that other 250 to yourself. In other words, you
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could only put in as much as you earn, but you as a parent can kick in some. And that's where at any
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age matching your kid's money, if that's something you can't afford, is a great incentive for getting
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your kids to save more. That's awesome. I love that. And also when you open up the Roth IRA,
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it's an opportunity to talk about investing. Exactly. The stock market. Exactly. What's
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interesting now is there are ways to invest money at very small amounts. I'm a real fan of index funds,
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which are low cost investments, and you can get them at companies like Schwab and Vanguard. And I don't
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work for any of these companies. They're just my favorites because they have very low expenses. They're
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much cheaper ways to get into them. But also there's something called ETFs, exchange traded
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funds. And I go through the details in my book, but the bottom line is there, at least at Vanguard,
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you could start with as little as one share, which would cost about $100. And that's a very good way
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to introduce a kid to investing, to learn about it, to own it with not a lot of money.
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Right. And besides actually investing money in the stock market, are there other ways you can
00:22:50.700
talk about investing in the stock market with your kids when they're, say, in elementary school?
00:22:55.840
Yeah. I mean, I think that when it comes to the topic of investing, a lot of parents sort of go to
00:23:03.280
the first off thing, well, we'll track a stock and we'll play a stock market game with pretend money.
00:23:11.660
And that's absolutely fine if a kid is into it. But I'm not a big fan of, I know people who gave
00:23:17.240
their 16-year-old a chunk of money and said, okay, now you could invest it for fun. I think if the
00:23:23.420
kid makes a lot of money, they're like, oh, I'm a genius. And it's luck. Or if the kid loses all the
00:23:28.240
money, they think, oh, that's bad. I'm never going to put my money in the stock market. But I think
00:23:32.720
something as young as, you know, my favorite book to read to my kids, they're all pretty much grown
00:23:37.700
now. But The Little Red Hen, you know, the story of the one hen was getting the grain and making the
00:23:44.340
flour. And, you know, I'm not a baker, so I don't know exactly how you make bread, but doing all the
00:23:50.300
things to make the bread and the other animals watch on and don't help. But in the end, the hen says, no,
00:23:56.100
I put the time and effort and investment into this bread. And I'm not going to, this is not something
00:24:02.780
that you guys get to jump on and eat the bread. You have to really work for it. And those kind of stories,
00:24:08.480
I think, are interesting to kids. I think making it clear to your kid that playing the lottery is a
00:24:15.800
really bad investment. I have a fun chart in my book that, you know, our chances of winning the
00:24:22.900
Olympics or being in the Olympics or, you know, becoming a movie star are actually better than
00:24:28.360
our chances of winning the Powerball ticket for the lottery. So what, you know, what makes sense and
00:24:34.780
what doesn't make sense. And there's a good website, investor.gov, that lets you put in different
00:24:40.380
numbers and see what, how quickly an investment will grow if you get, you know, a 2% rate of return
00:24:46.480
versus a 7% rate of return. And not all kids are interested in this, but I think starting these
00:24:53.180
conversations, particularly with daughters, because research does show we talk to our sons much more
00:25:00.440
about money and investing than we do talk to our daughters. And obviously that's a real mistake.
00:25:06.240
And we have to try hard to notice when we do that. One guy I know who's a great guy who runs a
00:25:12.280
nonprofit. After he read my book, he said to me, you know, I realized I joke with my daughter about
00:25:17.620
how much she spends shopping. And I talked to my son about stock investing. And I kind of never realized
00:25:24.860
how sexist I was being until I thought about it. And I think that is something that just being aware
00:25:30.980
of it can change your patterns. Gotcha. That's good advice for all the dads out there. So debt is
00:25:38.080
another issue you tackle in this book. And debt can be kind of hard to explain to an elementary school
00:25:43.980
kid because it's like negative numbers, right? And that's a very abstract concept. So how do you start
00:25:49.080
talking about debt and what it is to say a five-year-old? Right. Absolutely. I think the
00:25:54.200
first one is that you can't always get what you want, like the song, you know, and you have to make
00:26:00.360
it clear that we might want something, but if we don't have the money to pay for it, we're not going
00:26:08.100
to buy it. And that's very hard to explain to kids nowadays because they don't see us using cash.
00:26:14.660
They see us using cards and plastic and they see us, you know, using our phones. And I'm a real
00:26:21.720
believer, and this is a little bit of a radical idea, but with young kids, when you're giving
00:26:27.280
allowance, make sure to give them cash. When you're buying things in a store, make sure to use cash
00:26:32.600
sometimes. Let them see you use cash because without using cash, you're not really realizing that you're,
00:26:38.940
you know, teaching them counting, you're teaching them how to make change, you're teaching them that
00:26:43.660
money's a finite thing. And I know, you know, when my daughter was younger, she went shopping with
00:26:48.660
some friends when she was a teenager or like 13. And she said, oh, my friend's parents are giving
00:26:54.040
them a debit card or a credit card. And I said, no, I'm giving you cash because I know. And sure
00:26:58.940
enough, she came back and said, oh, I bought three things. But when I hit the limit of $50 that, you
00:27:04.420
know, the things I bought cost $53, I had to put one thing back because I didn't have the money to pay
00:27:09.840
for it. And I think cards make that deceptive. So making that point to kids are probably, it's
00:27:15.920
probably the most important thing you could do to letting them know that cash is really what money
00:27:22.240
is about, but also teaching them that a credit card is a kind of loan. And when you buy something
00:27:29.280
on a credit card, if you don't pay it back immediately, you're paying extra money, interest
00:27:35.480
to a credit card company. And just like we like getting interest from a bank, we don't
00:27:41.560
like paying out interest to a credit card company because it makes if you buy an iPad, you know,
00:27:46.760
for $800, it really is costing you closer to $1,500 if you only put it on a credit, if you
00:27:53.980
put it on a credit card and only pay the minimums. So starting that discussion early and often,
00:27:59.940
I think is really important. You know, just like we know, we should talk to kids about
00:28:05.080
smoking at young ages or not smoking and talking to kids about, you know, not drinking at young
00:28:12.220
ages. We should also talk to kids about credit card debt. And that's just, can be really not
00:28:17.960
only expensive, but stressful in people's lives if they can't afford what they buy.
00:28:23.280
Right. Yeah. One thing I do with my son, Gus, he's six, that kind of teach me the concept of debt
00:28:28.440
is say we go somewhere, usually if he wants to buy something, he'll bring his money, spending
00:28:32.900
money along his allowance. Let's say he, he doesn't do that. And he sees something that
00:28:37.340
he wants. We'll say you can get it. But like, when we get home, you have to pay mom and dad
00:28:42.700
back. Like, we'll give you a loan. And it's kind of funny to see his reaction. Like he'll
00:28:48.280
buy the thing right, right. Then like he gets it and he's like really happy. And then we
00:28:51.960
get home and we're like, we're collecting or here we are collecting the debt. And he starts
00:28:55.900
getting really sad. He's like, Oh, this is so terrible. I have to get my money away. But I think
00:29:00.460
that's one way is just, you know, float a loan to your kid short term and then be a debt
00:29:05.660
collector. Right. Tell them how generous you are that you're not charging them interest.
00:29:09.620
You know, if I bought this on my credit card, it'd be extra money or, you know, just trying
00:29:13.720
to, for the six year old, that's probably a little bit complicated, but it's awesome that
00:29:18.580
you're doing that. And I agree with you. Like once you're out, you can say, you know what,
00:29:22.240
it's okay. You don't have your money. We'll give you the money. But do you ever get home
00:29:25.740
and say, ah, forget it. Or do you always make him pay you?
00:29:28.460
No, we always make him pay us. I remember that stuff.
00:29:33.240
Yeah. That's awesome. That's exactly, I think just by doing that, you know, he is getting
00:29:38.920
it. He knows it's probably really hard for him. He's like, ah, I didn't think I really
00:29:44.740
And he'll remember that the next time or you remind him of that the next time. And I think
00:29:49.720
that's what it's all about. And even with older kids, you know, we gave our kids, we have
00:29:54.540
two kids in college. And when I was in college, my parents didn't have any money to give me.
00:29:59.500
So I worked and had jobs and our kids have, you know, our daughter works, but she also,
00:30:03.920
we decided to give her a little extra money beyond she gets her food, the meal plan at school.
00:30:09.500
And man, is she good at making sure not to spend that money because she is very aware it's her money
00:30:17.460
or she sees it as that way and is very careful about making choices. And that's money she has
00:30:22.860
to use if she wants to go on a weekend away with friends or that's on her completely. And she will
00:30:29.220
spend hours trying to find one. In one case for spring break, kids were flying for a ski weekend
00:30:34.780
and she doesn't even ski, but she wanted to go. And she was like, well, I can fly or I can take the
00:30:40.760
train and she ended up taking the eight hour train because it was, you know, she saved $300. And if
00:30:47.880
she flew and at a moment there, I was saying to my husband, ah, we're letting her go on a train for
00:30:53.460
such a long train trip. And I stopped myself and he reminded me, you're the personal finance person.
00:30:58.840
That's important. You have to stick to it. And it's hard as a parent sometimes, but you're doing such
00:31:04.020
a good thing for your kid. And we did, and she took the long trade ride and got our homework done and it
00:31:10.120
was great. That's awesome. Um, so you devote a section that I thought was really interesting
00:31:14.560
about money and weddings. And I'm sure there's listeners who have kids who are about to get
00:31:20.040
married or there's people who are listening to this podcast who are about to get married and they're
00:31:25.280
trying to figure out how much should I spend on an engagement ring? How much should we spend
00:31:28.440
on the wedding itself? So what does the research say about those two things, engagement rings and the
00:31:34.500
wedding ceremony itself? Right. Well, for the ring, um, it's very important to buy a ring you can easily
00:31:42.260
afford. I know for a while there was this sort of myth floating around that an engagement ring should
00:31:49.320
be equal to two months salary. And as best as I could, I trace that back to, you know, the diamond
00:31:55.940
companies who figure out, you know, formulas that really result in people feeling like they should spend
00:32:02.560
more money on a ring than they should. Um, there was a cool study from Emory University that found
00:32:10.460
that when a man spends between $2,000 and $4,000 on an engagement ring, he and his spouse were more
00:32:17.840
likely to divorce than when a couple paid between $500 and $2,000 for a ring. And, you know, one,
00:32:26.460
we don't know the exact explanation for that, but it could be that, you know, the couple didn't have to
00:32:30.400
go into debt for buying the ring. And a similar kind of thing when it comes to weddings, the less
00:32:36.940
money you spend on the wedding, research has shown the longer your marriage is likely to last,
00:32:43.140
which I think is just amazing and really important for young people to hear.
00:32:49.060
Right. And like, what do you do if you're a guy and you're like, okay, this sounds good. Like,
00:32:52.300
I want my marriage to last and I don't want to spend that much money. And, but you're like,
00:32:55.960
your fiance is like, no, like I want the, the big, you know, awesome wedding that you see on TLC.
00:33:01.880
What happens when you have that conflict there?
00:33:04.520
Yeah. Yeah. It's tricky. I think you have to, they should show them this part from my book on page,
00:33:10.880
you know, 118 and 119. If they want to even go into a store, take a picture of that page. I'm fine
00:33:17.060
with that to show their future spouse, but really also just to talk about it and say, you know,
00:33:23.540
maybe there are ways we can do this that look great or we focus on what we really want and we
00:33:29.840
skip the flowers. I'm hearing so many people are like, we're not going to have flowers. We're going
00:33:33.580
to do, we're going to do this in a way that we can afford. And we're really, what we want is a
00:33:38.620
down payment on our home. So we're going to take any money we would have paid on extras, figure out a
00:33:44.600
way to make it look beautiful. Cause it really, you know, a wedding's all about the bride and groom's
00:33:49.620
mood. And that's no study. That's just me having been married for 24 years and my parents were
00:33:57.180
happily married for 65 years. So, but I think that talking that through and not making it a tense
00:34:05.840
conversation, but Hey, let's decide as a couple, what we want and being realistic about it and sitting
00:34:13.280
down. And it's great to have ideas of what, you know, we all want great things, but what do we want
00:34:19.600
as a couple? And the fact is, I think you're going to need to be able to have those conversations
00:34:24.660
throughout a marriage and expectations and talking about values is really important now. And if it can
00:34:33.740
be done without judgment of we can't afford that, that's crazy. Or wow, you're so cheap. Why won't
00:34:40.580
you want to do this? It's just calming down and discussing it, I think is so, so important. And
00:34:47.380
really in order to be good at money as a couple, and then eventually good as money as parents,
00:34:53.360
you need to have those conversations. Right. Make sure you're lined up on the same page.
00:34:58.180
So another concept you dig into that you should give explanations, how you can talk about it is
00:35:02.400
insurance, which is funny because I don't know how the conversation came up between me and my six
00:35:07.460
year old, but he asked me like, what's insurance? Like what's car insurance? And I'll be honest,
00:35:12.620
it was like hard to explain. He's a smarty, I like him. Yeah. I was having a hard time explaining to
00:35:17.400
him. I was like, well, we pay this money in case we get in a wreck and then we get some money back
00:35:22.940
if we get in a wreck. And I could tell he was kind of having a hard time wrap his mind around it. So
00:35:27.020
how do you start explaining about the importance of insurance or what insurance does to your kids
00:35:32.100
during various phases of their life? Yeah. I mean, it's sort of an interesting concept,
00:35:37.340
which I put a whole chapter on insurance in my book. And I feel like with young kids, just,
00:35:45.720
you know, there are things you can do to protect yourself and your stuff. And, you know, the basics
00:35:51.840
of when we Scotch guard, you know, shoes to protect them from the rain, or we, you know, tie mittens on
00:36:00.700
a string through loops, through a coat of an arm to make sure we don't lose our mittens. Those are ways
00:36:05.640
we're trying to protect ourselves. And we do that with the stuff we own too. And we also do that with
00:36:11.080
our bodies. I think the easiest way to start these conversations is when you go to the doctor,
00:36:16.180
hopefully you have insurance and, you know, and you start talking with your son about when you
00:36:22.380
go to the doctor, often you give, show them your card, which is an insurance card. And that means that
00:36:28.820
some of the cost of going to the doctor is paid by an insurance company. And some of it is
00:36:35.400
paid by us as the people who were treated by the doctor. And what's nice is that if we ever have
00:36:44.020
big expenses, if we break our arm or sprain our ankle, it can cost a lot of money. So we know that
00:36:50.640
we're protected, that this insurance is going to help us pay for some of that expense. And kids could
00:36:57.680
really understand when you go through that very clear, you know, if you go through a clear explanation
00:37:03.360
like that, you can say, just like with the car, if we get hurt in the car or we accidentally hit
00:37:11.200
something and it dents the car, that would cost a lot of money. So the, you know, we wouldn't want to
00:37:18.000
spend all our money on it. But so by getting insurance, we pay them a little bit a month or a
00:37:23.560
little bit a year. And then if something happens, they will come in and pay that big bill. Now,
00:37:29.200
obviously that's a simplified explanation of insurance and you might want to roll your eyes
00:37:35.060
and say, gee, we think they should be paying more for them than they are. But if you can kind of leave
00:37:39.800
out the sarcasm on that one and really explain to your kid what the point is, it really, insurance
00:37:50.600
protects us from really big losses. And if we have an accident and we get hurt ourselves, damage,
00:37:59.740
something happens with our body or our house, that this will protect us and help us pay for that
00:38:07.760
damage. And I think probably that kind of explanation, if you repeat it in different ways at different
00:38:14.060
times and kids are interested, you can talk to them. I also have a box on Lloyd's of London
00:38:20.240
that cool insurance company, which in London, which it's been reported, you know, I don't know for
00:38:28.200
sure, but like super model Heidi Klum's legs were once insured for a couple million dollars. And,
00:38:35.480
you know, David Beckham, same with him, you know, so that people insure things that are real value to
00:38:42.920
you. And it was rumored Bruce Springsteen insured his voice, you know, all those things kind of make it,
00:38:48.780
it's a fun way of explaining the concept of insurance as well.
00:38:52.780
Right. And then as they get older, and maybe your kids start making some big consumer purchases,
00:38:57.540
like computers or things like that, opportunity to talk about insurance that you might not need, that's not
00:39:02.620
useful. It's just a money grab for the company.
00:39:05.700
Really good point. I mean, you want to talk about you need health insurance. When you go to college, you need car
00:39:13.900
insurance if you're driving the car, and that may or may not be something, you know, if you have a high
00:39:18.480
schooler, do you want him to chip in on it or not? And if you're willing to pay it for him, then you
00:39:24.760
have to, you know, it's good to tell him, this is what it costs, and this is what we're paying, and just
00:39:28.940
to let him know. But you usually don't and shouldn't get things like extended warranties or service
00:39:36.840
contracts. When you buy like appliances, they're often will say, do you want the extended warranty?
00:39:43.680
And usually it doesn't make sense. Because people are more likely odds are to replace the item,
00:39:51.000
you know, and need a new one before they actually take advantage of the warranty. Or you don't need
00:39:56.240
airline insurance. If you fly, I think that there are, you know, all kinds of different like laptop
00:40:02.240
insurance. It kind of depends. If you are able to set enough money aside for a pair or even a new
00:40:08.680
computer, you probably don't need it. But if you're clumsy, and you, you know, may benefit from a one
00:40:14.560
year policy, as my daughter did, then it may make sense to buy it. But I do go through all the different
00:40:20.220
kinds of insurance. You know, it's important to know whether they really pay off or not. And also what
00:40:27.940
your habits are. And is it something that would make sense for you? But often, when you're talking about
00:40:33.380
insuring small things, it's probably better to skip it.
00:40:38.380
Gotcha. Well, Beth, we've been talking about what parents can do to raise money geniuses. But like, let's say
00:40:43.540
as you talk to me, these things about your kid, you hopefully will start putting things in order in your
00:40:47.260
own financial life. But in your your years as a financial person, what are some like the big, like the
00:40:54.800
the small changes that adults can make in their financial life that has like an immediate ROI?
00:41:00.500
Right, right. Turn on investment. Yeah, right. I think, and in my book, the last chapter is really
00:41:08.400
advice for parents, like what you need to know about your own financial life. And of course, having
00:41:15.120
health insurance is a no brainer. Having life insurance, if you have kids is really important.
00:41:21.620
But you want to stick with term life insurance, which is way cheaper than pretty much anything
00:41:27.980
else. But I think some of the real basics are, you know, pay off high rate debt. If you have a
00:41:35.260
credit card that's charging a rate of 18%, paying it off is the equivalent of earning 18% on your money
00:41:43.160
guaranteed after taxes. And you can't really earn that anywhere. The other big one, even maybe before
00:41:49.800
paying off high rate debt is 401ks with matching. If you have a 401k at work, you absolutely should
00:41:55.880
put in as much as the company will match. I spoke yesterday at a company and they matched dollar for
00:42:01.940
dollar up to 5% of what people put in, which is a good deal. And half the people admitted they hadn't
00:42:10.420
been contributing. And that's just leaving free money on the table. That's actually dollar for dollar
00:42:15.440
is 100% immediate return on your money. So max out of the 401k with matching, pay off high rate debt
00:42:22.100
using savings you have even. People say, oh, I don't want to lose my savings. But you have a chunk of
00:42:28.300
money sitting in a bank account paying you less than 1%. You should use a big chunk of that to start
00:42:34.520
paying off your high rate debt. Because if it's sitting in the bank account, you're basically earning
00:42:39.300
zero. But if you have money on that credit card, you're paying out way much more than that in interest
00:42:46.640
payments. So paying off debt, starting to save in the up to a company will match, opening a Roth IRA is a
00:42:55.020
really good idea. And then having an emergency cushion, trying to save money automatically. In all these cases,
00:43:03.240
particularly the savings, doing it automatically makes sense. I wrote my book, my first book,
00:43:09.640
Get a Financial Life, 20 years ago, actually when I was in my late 20s. And then I actually just came
00:43:16.620
out this week with the 20th anniversary of Get a Financial Life for millennials. So time flies.
00:43:24.880
But it really is, I've had people come over to me who are in their 50s and say, late 50s and say,
00:43:31.780
you know, I read your book 20 years ago and I put the most I could in my 401k. And I am so glad I did
00:43:39.960
because now I have a lot of money saved. And it makes me feel great to know. And I think it's
00:43:46.360
important for people to know that small steps now make a huge difference later. And especially if you
00:43:52.240
do it automatically, you know, if you set it up, you just have it happen and you adjust your lifestyle
00:43:57.980
to fit that, you know, how much you have. And I've had some millennials say, you know, and I, you know,
00:44:04.940
God, people in their 20s are amazing. They're actually doing great in many ways. They actually
00:44:09.260
do save more than certainly the Gen X generation or the baby boomer generation. But they'll sometimes
00:44:16.060
say, you know, but we have it really hard. We don't have that much money. And I agree. But I do know
00:44:22.540
the great thing about getting older is I'm like, yep, everybody said that 25 years ago,
00:44:26.620
that when we were in our 20s, we couldn't save either because it really was actually a very bad
00:44:31.240
economy too. But you have to do it. You have to force yourself, whatever you earn, if you can put
00:44:37.040
away 3%, 5% of that, force yourself. It really can make a difference in the long run.
00:44:44.100
Awesome. So pretty basic stuff. That's the secret of personal finance. It's all pretty basic.
00:44:47.840
Yeah. Yeah. I mean, that's why, you know, I call it make your kid a money genius, even if you're not,
00:44:53.540
because a lot of people just don't know the basics, you know, getting, paying off your bills on time,
00:45:00.000
that will get your credit score in order. You want a credit score of 700 or higher,
00:45:04.420
and that will help you get better deals on, you know, mortgages and auto loans and credit cards. So
00:45:11.760
keep, you know, keep, keep your bills being paid on time. That's key. And paying off the
00:45:17.680
high rate debt and putting your money in a 401k with matching, that's kind of the basics,
00:45:22.880
you know? And if you do that, you're, you're on a really good path.
00:45:27.940
You're going to be good. Well, Beth, is there some place people can go to learn more about your work?
00:45:32.300
Yeah, I have a website. It's just bethcobliner.com, but, and the books are available online at the
00:45:40.500
obvious places or in local bookstores. So there's either make your kid a money genius or the new,
00:45:46.060
totally revised, get a financial life for millennials or people in their twenties and
00:45:52.040
thirties. Awesome. Well, Beth Kobliner, thank you so much for your time. It's been a pleasure.
00:45:59.060
My guest today was Beth Kobliner. She's the author of Get a Financial Life. Her latest book
00:46:03.380
is Make Your Kid a Money Genius, even if you're not. She's also updated, Get a Financial Life.
00:46:07.980
Check it out. You need it. It's a great book. One of my favorite. Those are both available on
00:46:11.060
amazon.com. Also find out more information about Beth's work at bethcobliner.com. Also check out
00:46:16.460
our show notes at aom.is slash kobliner, where you can find links to resources, where you can delve
00:46:33.100
Well, that wraps up another edition of the Art of Manliness podcast. For more manly tips and advice,
00:46:37.260
make sure to check out the Art of Manliness website at artofmanliness.com. If you enjoy our
00:46:41.360
show and have gotten something out of it, the times you've listened to it, I'd appreciate if you take
00:46:44.420
a minute to give us a review on iTunes or Stitcher. That helps that a lot. As always, thank you for your
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community support. And until next time, this is Brett McKay telling you to stay manly.