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Transcript

Setting Up Kids for Financial Success · Talking FACS

• 0:01
  Welcome to talking facts,
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  what you need to know about family,
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  food,
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  finance and fitness.
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  This nationally recognized award winning podcast is hosted by the University of Kentucky Family and consumer sciences extension program.
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  Our educators share research knowledge with individuals,
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  families and communities to improve quality of life.
• 0:24
  Hello and welcome to talking facts.
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  This is your host,
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  Dr jennifer Hunter,
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  assistant director for family consumer sciences extension at the University of Kentucky.
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  Today,
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  I'm pleased to be joined by Dr Nicole huff,
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  Assistant professor and extension specialist for family finance and resource management and kelly may senior extension Associate for Family finance and Resource management.
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  Welcome to cole and kelly.
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  Hi jennifer,
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  thanks so much for having us.
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  So today's topic I think will be a fun conversation for us because you all know,
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  I always like to talk about money,
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  but I also hope it will be informational and educational to parents that we're going to talk about bank accounts for,
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  for Children and learning finance by doing.
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  And let's get started and just talk about um why is it important to give Children hands on financial experience before they open a bank account?
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  Yeah,
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  well just like in many areas of parenting,
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  we know that Children learn best by doing and you know,
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  um I'm a mom of three.
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  And so I understand this full well and you know,
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  we discipline Children so that they develop self discipline,
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  you know,
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  that's the ultimate goal and in setting boundaries and allowing Children to make wise choices,
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  you know,
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  within those boundaries and um,
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  but if we don't give Children practice at making choices,
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  then they don't learn how to do that on their own.
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  And so the same is true with finances,
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  you know,
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  it's important to provide Children with hands on financial experience because we want them to be adults who have stronger personal finance skills,
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  but that doesn't just happen.
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  It is something that Children need to practice and this can be,
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  you know,
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  hands on financial experience can be simple and so as simple as letting your child make a transaction at a store,
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  but give them opportunities to handle money,
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  to count money,
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  to spend money to save money.
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  Um,
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  and and they will begin to understand some of those fundamental consumer economic concepts that are important so that they can prepare to have a bank account and to better manage their own resources.
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  How should parents begin preparing their Children to open an account?
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  What's really the first step,
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  you know,
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  I suggest that parents model,
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  they model how to how to have a bank account.
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  And one way to do that is to introduce your child to the banking system at a young age.
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  And you know,
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  you may have memories if you're listening to this,
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  you may have memories of going with your parents or grandparents to the bank when you were little and you probably remember getting a lollipop,
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  you know,
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  from the teller,
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  but what you probably don't realize is that those early experiences with,
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  you know,
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  your bank or credit union,
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  helped you understand the role of a financial institution and you know,
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  today's,
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  we've moved so much of our finances online that many Children may have never gone to the,
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  to the bank with a parent.
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  And so um you know,
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  I would encourage parents to begin by being intentional about exposing their child to a bank or financial institution.
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  So if you have a withdrawal to make or a check to cash or deposit,
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  let your child go with you even if it's through an A.
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  T.
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  M.
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  But let them understand that there is likely a brick and mortar building that holds their money and that it is um insured by the federal government and that you know,
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  have discussions with them about um what you know,
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  if if you're putting money into savings,
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  what it might mean to to earn interest or if you're making a withdrawal,
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  explain that that what a debit is.
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  And so having these kind of financial discussions helps to,
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  again your child understand the power of,
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  of money and purchasing relationships.
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  The role of banks and it helps them begin to prepare mentally to manage their own bank accounts someday.
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  And who knows they may get a sucker too.
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  True.
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  Nicole is I'm listening to you talk,
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  I was thinking about one of my earliest money memories is that I was from a group in a smaller town with locally owned banks and that my grandfather would bring me and these no longer exist.
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  But they were these little cardboard books and they would have them for nickels and dimes and quarters and I don't remember exactly how many went in went in each one.
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  But he would bring me those little cardboard books and you know when I go over and visit him he would give me change or sometimes my parents would give me change and I put him in a little cardboard book and then I'd take him to the bank kind of similar to taking in roll roll dollar rolled coins or whatever and they would then deposit those into an account for me.
• 5:01
  But it was really kind of that exact idea that that you're talking about is kind of being very hands on and and learning by doing so kelly tell us what is a good starter account for a child.
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  I love that Nicole mentioned interest because when your kid is ready to graduate from their piggy bank to a real account,
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  it might be a good idea to start with savings so they can earn a little bit of interest on their own.
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  And I think sometimes when kids are very young parents might set aside money for them if they're thinking ahead and so there might already be a savings account open that's intended for the child.
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  But it's probably a good idea to involve the child in the process of opening the account like Nicole mentioned of giving them that experience of visiting the institution and learning about what the account has to offer and what it does.
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  And so it's a good place for younger Children to put their gift money or their allowance money if they get that.
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  Typically child savings accounts are opened with the child and the parent having joint ownership.
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  This gives the child access to the account but also allows the parent to monitor it and maybe to set limitations on how much the child can access the account or what privileges are included.
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  And then some financial institutions today offer mobile apps that would help parents monitor the account while the child practices their own money management skills.
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  And of course this can be scaled based on how old your child is and how open they are to learn in these things and and how much interest they have expressed in finding out more about how the financial system works.
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  So kelly kind of similar to that money memory that I have from my grandfather,
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  that my my entire family was very hands on and teaching my brother and I about finances from a very young age.
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  And one of the things my dad would always say is it takes money to make money.
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  And he was referring to interest and kind of teaching us that the concepts of interest and he had a whole lesson on compound interest that we won't go into today,
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  but it was really how he was explaining it to a to a small child and and how interest adds up adds up over time.
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  And so I love your suggestions and I really like the idea about reviewing statements together.
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  That that's something with our daughter that's 10 for her custodial account.
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  I still have paper statement sent to the house as opposed to just having it on the app or having it online for a couple of reasons.
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  One she likes to get mail.
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  So she likes to have something come in her name.
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  But that also so that she can open it and see that it's a bank statement and we can talk about what is on that bank statement and what it actually means.
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  And that's so much easier to do when we're both looking at the paper together.
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  I think that's a fantastic way for a parent to empower a child by showing them how it's done and doing it together.
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  It gives you together time as well.
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  And if as a parent,
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  if you are less sure about how to explain how compound interest works,
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  maybe talk to somebody at your bank and that might be an opportunity for you to learn together you and your child.
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  So now let's talk a little bit about older Children.
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  Are there different options for them or should we look at different options for them?
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  Yes,
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  as a parent,
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  there are many options today for youth accounts and I know a lot of transactions nowadays aren't cash or even checks,
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  A lot of people transfer money electronically.
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  And so if you have older kids who maybe play video games and occasionally like to make a purchase involved with that,
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  they may need a digital way to transfer money to do something like that or to do any number of things.
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  Um So today there are accounts that are made for Children,
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  older youths usually that can be attached to a debit card for purchasing.
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  So this can be done a couple of ways.
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  You can check through your financial institution to see if there is a youth checking product that would include a debit card.
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  Or you can check into accounts that feature prepaid debit cards that are specifically designed for youth with the parent and control.
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  And so the good thing about the prepaid debit card option is that it's kind of like if you remember going to the bowling alley as a kid and um if you weren't very good at bowling they could put up those bumpers.
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  So your ball didn't go in the gutter.
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  These are kind of designed so that your child can't get a gutter ball by getting an overdraft.
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  So some of these accounts are set so that overdraft is not an option.
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  However,
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  whether you go with that type of account or a traditional checking with debit,
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  you still need to talk about overdraft with your child because once you become an adult that may not be an option anymore.
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  So it's still important to learn what that is and how we avoid having that happen because we all know that can be very costly if an account becomes overdrawn no matter what your age is.
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  So a couple of things to think about when looking for these accounts or debit card products are to um see what kind of apps accompany those.
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  So a lot of this has gone mobile now and you can monitor this online.
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  It may or may not prevent your child from spending too much.
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  So that's good to know what the rules are and how that works and whether or not there are overdrafts allowed and what the fees are for that.
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  And then there can be other features,
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  such as if you pay an allowance,
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  perhaps you can automate that to be paid automatically through the app.
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  Um Some of them include parental monitoring or for example,
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  it might send you an alert when your child has spent over a certain limit or maybe you can limit how much can be spent or block certain stores from being included in in where they're allowed to shop.
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  Um So those are some of the guardrails,
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  you can build into those products if those features are available.
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  So it's good to ask lots and lots of questions to find out what the features are and to find out what it costs.
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  Um If there's a monthly fee and if there are service fees so that you can make sure it's the right product for your family Kelly.
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  As I said at the beginning,
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  I love to talk about money and finance.
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  Right?
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  And um just as as we were going through this with our son who is now 17,
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  but I was trying to remember,
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  I think when he was around 14 he was going on extended program for the summer associated with an extracurricular activity and he was going to be gone 18 or 19 days.
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  And um he could certainly take cash with him.
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  But you didn't exactly know how much to send or what to send or and you know,
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  you also didn't want him to have a whole lot of cash on him because what if he lost it.
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  So at that point in time we kind of went through the same process that you you discussed to identify what type of debit card might be best for him because he needed a way to be able to access money.
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  We needed a way to help be able to monitor it and make certain that he had enough.
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  And and that type thing.
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  And so we were able to work with our local credit union to open a debit card on his,
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  his bank account.
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  So it was in his name.
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  But obviously we were on there as custodians.
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  Now that is kind of transferred a little bit in the last couple of years.
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  But over the years some neat things that that we've kind of learned from that is it's certainly given him access and freedom with money but as he's gotten a part time job and that type thing but it comes up on my app as well so I can kind of monitor,
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  I'm kind of his overdraft protection you know just to double check and make certain that he has his money moved where it needs to be.
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  But then the other neat thing that we've found as he's gotten older is if he runs to the store for me now that he can drive to pick up groceries,
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  I can just transfer from my account to his account,
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  the amount of that grocery bill.
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  So it's it's kind of made moving money around to between us as family members much easier than you know.
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  Well me,
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  me me needing to have say $50 in cash to give him to go to the grocery store etc.
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  So Nicole any other advice that you have for us today?
• 12:47
  Alright well jennifer you bring up an important point about how important it is just to discuss these financial issues with your child and to do what works best for your family and I love that you did look into the options that were available at your local credit union.
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  You know,
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  if you've heard me speak before,
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  you may have heard me mention that my husband is in the banking industry and I think that oftentimes our local banks are underutilized resources because so much is online and we feel that we have to choose,
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  you know,
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  such a savvy app or a third party provider.
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  You know,
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  start with looking at where you're already banking because that may be a natural extension for your financial relationship with your child.
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  And so for the very reasons that you just mentioned.
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  But um whatever account options you choose just really reiterate the importance of saving and spending wisely because we do want to promote those healthy spending and saving behaviors in our Children.
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  And you know um here at the cooperative extension,
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  we provide a lot of information on how to increase financial literacy,
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  how to strengthen personal finance skills.
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  So check with your local extension agent,
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  your your county office to see what resources or programs are available in your area,
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  but also you know,
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  help your child establish a savings goal and one easy way to do that is through um Kentucky saves dot org.
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  You can get online,
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  we partner with them and so that you can establish a savings school um work through a savings plan and take that pledge.
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  It is a free initiative and we will leave that link in today's show notes.
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  Excellent.
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  Nicole and kelly,
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  Thank you so much for joining us today and bringing up the conversation about how to help our Children learn about money at home.
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  Thank you so much,
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  jennifer,
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  thank you for listening to talking facts.
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• 15:17
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• 15:26
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