Teaching Kids About Money: Real Money Skills Before They Use Credit Cards | 595

0:00Sarah A. K. G. Smith:Stop letting your kids use a credit card. What? She has been consistently pulling from her savings, her investments, to pay off credit cards because it's just been a mess. If I give you money, it's coming out of my personal spending and then I don't have any money.

0:14Lindsay D. McCoy:Where's the$40 that I gave you to get your hair cut?

0:18Sarah A. K. G. Smith:And he said, I spent it. It's not about whether you can afford it. It's about what lessons you want to teach your children. Do you make good money but have nothing to show for it? Are you tired of living paycheck to paycheck? Do you have big dreams for your financial future? Do you want to get debt-free, but you don't want to live on beans and rice? Or you don't want to give up those pumpkin spice lattes? If you don't already know how to budget, or if you're using credit cards to get through the month.

0:40Lindsay D. McCoy:If you want to seem like you have your finances all together, or you're not on the same page with your spouse when it comes to finances.

0:46Sarah A. K. G. Smith:We know what you're doing probably isn't working, but guess what?

0:49Lindsay D. McCoy:You're in the right place. We're Shana and Vanessa. We're best friends, business partners, and master financial coaches trained by Dave Ramsey. We've been in business since 2019, helping hundreds of amazing people like you create budgets, get out of debt, stop living paycheck to paycheck, and know exactly what to do with their money.

1:07Sarah A. K. G. Smith:In this podcast, we'll share with you everything we know, plus everything we're working on with our clients so that you have the best chance at reaching your financial goals.

1:14Lindsay D. McCoy:We want to help you take the guesswork out of your budget, improve your marriages, and even bring your kids in on the conversation.

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1:39Sarah A. K. G. Smith:Stop letting your kids use a credit card.

1:42Lindsay D. McCoy:What on earth? Could you imagine? Oh, I can't let myself use a credit card. Yeah, I don't trust myself. 39-year-old adult, very responsible adult with a credit card. Why would I give it to a child?

1:53Sarah A. K. G. Smith:Yeah. Now, this particular person, I'm going to give them some leeway because she's single parenting, lost her husband. And so maybe this started as just like a, I don't know what's happening. Just figure it out. But it's so wonderful, the transformation that they made. So when daughter, for example, she was getting a gown for graduation or gowns. I don't know. It's a whole thing. Are there multiple? It's probably so many events you need one for, I guess. I don't know how it works. Anyways, she texts mom, I'm going to use the credit card for these gowns. And mom's, oh, but you're not. Because now we've started to set up her system.

2:27Sarah A. K. G. Smith:So she has a senior, obviously, who gets money. She has a, I'm going to say freshman or junior or sophomore. I'm not sure what grade he is in. He gets money. Mom gets money. Everybody's getting money. It's so exciting. And now we're living off of that instead of credit cards because she has been consistently pulling from her savings, her investments to pay off credit cards because it's just been a mess. and I totally get it. Like she works, she travels, all of that. She has two kids, she's single momming. So we've got it nice and organized for her. So anyway, her mom told her, hey, and so she said, no, we're not using credit cards.

2:58Sarah A. K. G. Smith:You have spending money. And, but shockingly, this young lady, maybe it's spent most of her spending money or spent a lot of her spending money already.

3:05Lindsay D. McCoy:No. So that never happens. Yeah.

3:08Sarah A. K. G. Smith:So she said, so mom said, hey, if I give you money, it's coming out of my personal spending. And then I don't have any money. And they had this conversation that, do you think they ever had a conversation like that before? And it's nobody's being mad. It's just this is reality. And especially dear daughter, who's a senior, I need to teach you this now, as you're about to leave. And so then what and the mom also said, I'm taking your son to basketball weekend, he has basketball playoffs or whatever. So then I won't have any money for that. And it's just a very regular conversation. It's not no, it's like, I won't have any money if I do that.

3:40Sarah A. K. G. Smith:And so daughter ended up figuring out, I guess I don't need all of these dresses. I just need this one. And then maybe as I get closer to graduation, I'll buy a different dress, maybe one at a time instead of everything that I see I want right now because it doesn't matter. I'll just spend it. Mommy takes care. Yeah. And so mom gave her$25 and she was able to get the one. And between all of that, she decided I'll get the one dress and then next month I'll get the next dress. Which is exactly the point. This is exactly the point. It's not no. It's let's learn to manage the money. Let's learn to steward the money that we've been given.

4:11Sarah A. K. G. Smith:And if we want more, I always love this caveat. If you want more, you can go make more, especially as a teenager. Go babysit, girl. Go do whatever you want if you need more stuff. But mom has given you a set amount, and that's what you need to live on. And then they worked it together. And this is like a whole different concept for all of them. None of them are using credit cards. They're all having to live in the spending money. And this sets up such good conversations for them to have as a family.

4:33Lindsay D. McCoy:No, I love that. And I think that, again, it's just like you said, she's a senior. These are conversations that she's needing to have now before she goes off and lives on her own maybe, or gets married, or whatever that looks like in the next 5, 10 years. If she doesn't have these money foundation, these conversations, the financial literacy that she needs, what does she create? What is the mom, not necessarily the mom, but the daughter, what is she going to create for herself, the future her? And yes, we think that the sooner you can have these conversations with your kids, the

4:59Sarah A. K. G. Smith:sooner you can have these lessons in the moment as you're teaching them.

5:02Lindsay D. McCoy:Again, it doesn't need to be ugly. Nobody needs to be yelling. It doesn't need to be a money scarcity conversation where we can't afford it. We don't have it. No, it's not about that. It's yes, we have the money, but we're choosing to do something different with our money so that we can all be successful in the end. I feel like this is real because we're about to get into this season of life for ourselves, Vanessa.

5:18Sarah A. K. G. Smith:I think the other key thing here, guys, is to make sure you have a senior year budget, savings bucket, whatever you want to call it. Because every time I work with clients, there's more expenses that I didn't know that we were going to have on our seniors. And you can still make decisions, but it will be helpful to you to have these sort of thought out beforehand if you have a senior between dresses, suits, whatever they may need, photos, college visits, listen, lady, college applications, testing fees to get their SATs or whatever. There's so much, you guys. And having a separate savings account or budget for that so that you know that's where that's coming from is really going to help because not everything should come out of your spending.

5:56Sarah A. K. G. Smith:If she wants to do some things for senior, maybe we would have set that aside as a savings bucket beforehand so that it's not all draining your spending every month.

6:04Lindsay D. McCoy:Yeah, I think that, again, having these conversations with them, laying it out. What is your senior year going to look like? What do we have? Find a mom who just had a senior, right, in business college, and then be like, can I pick your brain on everything that you spent money on this past year? In fact, I'm going to say, Vanessa, we're inviting someone. We're going to do that for ourselves. You come on our podcast, and we will interview you, and we will help all of us. You'll help us.

6:28Sarah A. K. G. Smith:Yeah, we'll get ready for our senior years. The boys are coming up, and then it'll help everybody else, too.

6:32Lindsay D. McCoy:So email us hello at budgetbestlies.com if that's you. Yeah, absolutely.

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7:27Sarah A. K. G. Smith:Six months from now, you'll wish you started today. I had a situation last week when I was coaching my client where she gives her kids money every

7:37Lindsay D. McCoy:single month. I think she does it every paycheck, but they get money as an allowance. And she also, she has one kid who, she has two boys. He doesn't really like to get his hair cut that much. So it's like maybe once every five months, six months or whatever. And when that happens is when she'll give him the cash. I'm interested to see what he looks like. I know.

7:55Sarah A. K. G. Smith:It's funny. Maybe it's like long, like a ponytail or something.

7:57Lindsay D. McCoy:Or maybe he just doesn't grow as fast as that. I don't know. That could be a thing. But she has – so she has a kid's savings bucket. She actually – I talked her into separating her kid's savings bucket. So she has two of them, one for each child. And so she has all their expenses separate.

8:10Sarah A. K. G. Smith:It's probably a lot easier.

8:11Lindsay D. McCoy:Yes. It's so much easier for Brian. She loved that idea. So she did that. So she has his haircut money in there where every so often she'll give him the money. But the other son has been consistently getting his haircut every single month. So she's just been adding it into his allowance to get his haircut. Yeah. The end of March, she noticed that he hadn't got his haircut yet. So she said, hey, why didn't you get your haircut? And he was like, oh, I just didn't do it. And she goes, okay, where's the$40 that I gave you to get your haircut? And he said, I spent it. It's gone. Rather spend it than get a haircut.

8:44Lindsay D. McCoy:Hello. So when she had a session with me, I said, so I just waited and I was, I didn't tell her what to do. And she said, so I think I should get that back. And I said, I think you're right. I think that's a great decision. And so she came to her own conclusion. And so she asked him for it back and he wasn't happy about it. They didn't, it wasn't a fight, right? So again, having these healthy money conversations where she said, look, I give you this money every single month for you to get a haircut. You chose this month to not get a haircut, but you spent the money that was supposed to be for your haircut.

9:16Lindsay D. McCoy:I don't give your brother extra money. Like you're the one that normally gets your haircut every month. So I just go ahead and give it to you. If that's not going to be the case. I'm no longer giving you the cash until you need to get your haircut. I will do the same system that I'm doing with your brother. So reluctantly, she said he did give her the money back, which was great. It was a, I know, great lesson. I said, go you girl. I'm so happy for you. I'm proud of you for having that conversation with him. And then he gave the money back. But I just think it sets up again, these lessons, these moments for them to learn from, and that you're eventually, you're not creating another, you're creating somebody who's going to have wonderful foundations as they get older.

9:54Sarah A. K. G. Smith:Yeah. And I want to add to that, but that's the only money I give my son every month is haircut money. And I don't know why, but I feel like I want to help you with something and you need to do the rest of it. He doesn't spend a lot of money anyway. However, you want to decide those things. Like what do you want them to come up with, especially considering their age? Our boys are older. What do you want them to pay for themselves? And what are you paying for as the parent? Those are like two different categories and it's really helpful to think it through. And then that's always what we've said.