Financial literacy: Books

Published by Lori Pickert on December 1, 2011 at 02:37 PM

There are three main areas of money management: making it, saving it, and investing it. Frugality is an important branching topic — it can help you save more of what you earn.

J.D. did a great round-up of books about money recently. My favorites that he mentioned are Ramit Seth’s I Will Teach You to Be Rich (a great introduction to finance), Andrew Tobias’s The Only Investment Guide You’ll Ever Need, and Debt Is SlaveryYour Money or Your Life could also be inspirational for some teens. All of these would be great gifts for teens or a great basis for a personal finance curriculum. You can find all of them at your local library, as well as a dozen different financial magazines.

I agree with what J.D. says in his post — your taste may vary, so just check a lot of books out of the library and find what works for you.

And — I think J.D. would add another important area of money management to those I mentioned: getting out of debt. The best part about having your child study the subject of debt is that it may help him or her avoid accruing it in the first place!

J.D.’s blog is the personal finance blog I most often recommend, but there are many. Many, many, many. Finance blogs, books, and magazines are similar to diet blogs, books, and magazines — there are infinite variations on what boils down to the same basic advice. So, find the delivery that you like the most and just get started. Don’t worry about finding the perfect program — it’s more important to just pick something and start.

When it comes to starting a business, I like Jason Fried’s advice about bootstrapping.

If you have financial literacy resources to share, please do so in the comments!

For tomorrow’s post, I’m interested to know — do you pay your child an allowance? Do you have rules about your child spends his or her money?

 

16 comments

Comment by Laura on December 1, 2011 at 05:28 PM

interesting topic. I think one of the biggest things that helped me become a smart spender, was when I wanted to go to a private college. My parents said they'd give me what a public cost, and it was up to me to figure it out. I handled all the finances related to paying for school, they just handed me a check.

Comment by Tana on December 1, 2011 at 07:50 PM

Love the Make Money Slowly blog. I read some stuff today and went straight to my bank to make a few changes. There's a lot *I* could learn about finances while I'm trying to help my daughter.

My daughter got an allowance from about age 5 until she graduated from high school. It was for all non-essential items. For example - we'd buy her the plain shampoo but if she wanted fancy salon stuff she paid for it herself. It was surprisingly easy to draw the line between essential vs. non-essential. She just seemed to inherently get the difference between want and need. When we had extra money, we often treated her to non-essential things like art supplies or books or whatever.

We discouraged her from getting a job while she was in high-school. She babysat, which gave her control over her hours. But we really worried about an "official" job taking her time away from learning, drawing, exploring stuff, and being a kid. My husband started working really young and regrets that his interests became focused on making money, instead of on learning and figuring out who he was.

I think if she'd found some "meaningful, challenging work" as you put it in yesterday's post, Lori, then we'd have been supportive of her working.

Comment by Lori Pickert on December 1, 2011 at 10:23 PM

laura, that's great. i wonder why more parents don't ramp their kids up to independence by involving them more in the work and mechanics of running a household.

tana, i feel like the allowances we give are on the low side — i'm trying to find stats. :)

re: wants vs. needs, i know plenty of adults who struggle with that concept. ;^)

re: meaningful, challenging work, that of course doesn't necessarily mean *paid* work. i lean toward thinking kids should be prioritizing learning and playing, even through their teen years. yet, i know working my way through college (starting at age 18) was hugely beneficial to me. i do think kids who work real jobs in high school can divert their energy away from school .. which totally makes sense because in a way school is less real than work. and it doesn't pay. ;^)

(at least not in the short run!)

Comment by Tana on December 1, 2011 at 11:05 PM

Oh man, I so wished there was some kind of allowance database to use for comparison, kinda like the salary databases out there. I can't remember how much it was when she was little, but it slowly increased and by high school she got $20 per week. She had friends who got nothing and friends who got $20 whenever they asked for it, which was nearly daily. I still have no idea if $20 per week is a lot, a little, or right in the middle.

I will say that she never saved or donated any of it. (Though she did/does love buying people gifts/materials for gifts.) I wished we'd made the save, spend, give cups part of getting an allowance right from the beginning. I love that idea.

Comment by Lori Pickert on December 2, 2011 at 12:14 AM

i just don't want my kids to see that database. ;^) ha!

i don't know how i feel about the save/spend/give system. i almost feel like making your mistakes early (e.g., frittering away your money and not saving, then realizing you wasted it on nothing much) might make a better saver than forced savings. i wonder if there's a backlash effect to forcing kids to save and even donate — maybe those kids, once the shackles are off, can't wait to just spend ALL their money! ;^)

Comment by Tana on December 2, 2011 at 12:39 AM

No kidding! Such a database could be very dangerous! In the end, I think allowances simply have to be whatever amount works for a family. There's no way to concoct a "standard" obviously.

That's an interesting point about forced saving/giving. I wonder if it would make any difference if the cups were there but it was entirely up to the kid to decide where the money went? Like REALLY up to the kid. No guilt or coercion or even gentle prodding. Hmm.

Comment by debra on December 2, 2011 at 12:43 AM

we are fairly lax allowance givers - meaning, i often forget and the girls never remember...we are also not huge "extras" consumers - we live in a small town, where shopping for "fun" is just not an option really, so it occupies very little of our time, thoughts, etc.

when we started giving an allowance (age 6 - it's a dollar a week. like i said, there isn't anything they are wanting or asking to spend money on!!), we made three boxes for save, spend and share, but had no part in helping decide where to put it. our eldest chose to use her "share" last christmas (with a matching gift from us!) to donate to the local dog shelter.

i would love for my kids to get an understanding of money that i still struggle with, but don't want to create false situations to encourage spending, if that makes sense! they just don't have thing they're saving for, wanting to purchase, and i'm kind of happy that they're not fixated on being consumers. i know it will change when they're wanting to put gas in a car, pay for movies and entertainment, etc...but that's a bit down the road!

Comment by Dawn Suzette on December 2, 2011 at 02:06 AM

We don't make the kids save but they have learned already what it means to save for something they really want... or just save it when they have the oppotunity to buy (the book store or museum gift shop) but don't find anything worthy. They have both found things they wanted, saved and returned later to buy.
They are 5 and 8 and get $2/week. Occasionally when we are going to a special spot we will give them an extra $10 or so to spend. There have been times they have chosen to save that too.
Thanks for the links Lori. As usual, I am learning a lot too!

Comment by Deirdre on December 2, 2011 at 07:03 AM

I'm interested to hear/read more of what other families do.

I was raised completely ignorant of any financial skills. I babysat two nights a week and every day of the summer until I was 16---all that cash went into a cigar box along with my sisters' incomes and supposedly it was then used to pay for our "needs". My brother, on the other hand, was allowed to keep his pay! I worked all through high school, and for me personally, it was wonderful. I knew then I didn't ever want a job that had me staring at a clock wishing it would tick faster.

I messed up with my first credit card while in college and become adamant about being debt free from that point on. It was a great early lesson...but I'm almost equally adamant about educating my sons in hope that they don't learn the same way.

Right now they get allowance equal to their school level (50 cents a week for kindergarten, $3 a week for our third grader, etc.). It is not tied to chores, as we see that as part of being a family, part of living together. We're honest that we're giving it to them mainly as a tool to start learning about money.

They each have three boxes labeled Saving, Spending and Giving. They decide how to divide it up themselves.Often it is all or nothing---they just heard about Habitat for Humanity so they want to put all their money in Give, then the next week they put it all in Savings, and the next week put it all in spending in hopes of saving enough for a Hero Lego set. We talk about our grown-up versions of Give, Save and Spend.

We have one rule about allowance. Friday is payday, and it is the child's responsibility to ask for his $. They have until Sunday, and if they don't ask before Monday, the mama bank is closed & they've lost their $. Otherwise we easily all forget about it, and suddenly they are asking for four weeks' allowance all at once.

I love listening in on their money-making schemes. Usually they are motivated by something like wanting to "build their own roller-coaster" in the backyard, but it leads to adventures and more money-management learning.

Comment by Lisa on December 2, 2011 at 07:37 AM

I think one idea that may have been missed in this discussion is value. My daughter learnt very quickly if she spends her money at the dollar store, where almost every toy breaks within minutes, she has wasted her money. She is now learning quality and decision making and will research into better products that are as valuable to her as her tooth fairy money.

Comment by Jacinda on December 2, 2011 at 09:38 AM

The idea is that we give the girls $2.50 a week but recently I keep forgeting and they do too. We started when I noticed one day that I never buy non-essentials. I decided that I wanted them (8 and 6) to experience some autonomy around money and make their own decisions (admittedly not many for $2.50/week!). When they get it, they are free to do what they want with it. They have learnt heaps and now are both a lot more discerning around what they buy. At times they choose to give to something but that is part of our family culture and not because they have to. At times they have also saved together for something since that is also part of how we do things around here.

Comment by marta on December 2, 2011 at 10:49 AM

We have 3 kids. We started giving a monthly allowance to the oldest last year, when he turned 10 and went to the 5th grade (first year of middle school around these parts). We gave him 5 Euros (around $6.50, I guess). This year, because he's in 6th grade, he gets 6 Euros. Next year the girl will be 10 and in 5th grade - so 5 Euros to her to start with as well. And so on. My parents give them the exact sum, so it's always a double figure ;)
My son saved most of what he got from us and my parents to buy a new swiss army knife - he had lost his while playing at the beach.... He went to the store with my Dad and realized all the money could only buy him one of the smaller knives and he was prepared to wait a few more months of savings, but my Dad gave him the extra cash on the spot - like a great brithday gift! He was thrilled (and is taking better care of the knife ;)

We figured it only made sense to give them an allowance once they got more physically and functionally independent from us - my son walks to and from school on his own or w/friends, has access to a vending machine at the new school for candy, ocasionally hangs around the neighbourhood and likes to go to the bookshop, the sportstore, etc. (We live in the capital city, but this is Europe, so very different from most cities in the US, I guess).

He doesn't like to spend, so this year the only item he has purchased - apart from the once a month vending machine spree ;) - is a book at the school's bookfair, with a 10% discount.

We buy him all the essentials (food, basic clothing&shoes, ocasional books, cinema tickets, etc) and give him 10 euros per week to buy the school lunch meal - ridicously inexpensive, as it comprises a bowl of soup, fish or meat with a side dish and fruit - all for 1.46 Euro - so the extra 2 euros something are for daily use at the school stationary shop, the photocopier, or a sandwich at the bar. Schools here don't use money. You charge a card with money and then only use the card in ths schoolbuilding.

If my son wants extra money he has to do extra chores (shoe-polishing, extra organizing stuff around the apartment, etc).

The other kids also get all their money, until now, from these extra chores.
My daughter likes to spend - usually on beads, threads, wool, etc - so that she can create necklaces and bracelets to sell in the neighbourhood park. She still has to figure out how business works, though, as she's still spending a bit more on the materials than what she's getting for the finished product. We're working on that too :D

Marta from Lisbon, Portugal

Comment by Dawn Suzette on December 2, 2011 at 02:31 PM

I think Lisa makes a great point. My kids have learned to save and pay more for something that will last.
We model this too. We often have discussions about trying to find things that are of high quality, made locally (if possible) and how we are willing to save and pay more for those things.

Comment by Kerry on December 2, 2011 at 03:36 PM

I love the idea of an allowance, I think kids need to get used to having money and honestly they deserve to have some say in how at least that small portion of the families income is spent. But, I don't think it's the best way to teach about money. If they receive an allowance but have no obligations for that money, no need to buy food, clothes or other essentials, something is lost in the lesson. I think the benefit of their "allowance" coming from starting their own, even if small, business is that there are expenses for that business that have to be paid in order for more money to be generated. They get to make decisions on how the money is spent, they have income they can choose to spend or save but, they also have money that needs to pay for the running of the business itself.

Comment by Lori Pickert on December 2, 2011 at 04:30 PM

tana, hopefully my boys won’t read anything about salary negotiation and apply it to their allowance. ;^)

that would be a great experiment re: the cups - forced/unforced. my instinct is that kids who grow up in families that give would probably become givers themselves. *forced* giving doesn’t appeal to me, although maybe those kids have a say in *where* to donate their money and that is the point. ??

debra, i’m sorry, i’m fuzzy - do you mean the allowance is divided into 3 but they decide *how* to donate/save or do you mean they decide how to divvy it up themselves? are they allowed to not save/not donate?

it does make sense to me to not create false situations to spend. we are in a similar situation to you - we live in a rural location, never go to shops/the mall, etc. the way we do allowance is a little bit different; i’ll post about it today. ;^)

dawn, we also don’t force savings (i’m probably repeating myself - sorry) and both boys have learned to save on their own. they are both misers! ;^)

thank YOU. :)

deirdre, lol the sexist allowance grab!

i’m glad you brought up tying allowance to chores. we don’t do that either for the same reason. you get pocket money as a family perk, and you do chores and work around the house as a family responsibility, but they aren’t tied to one another.

i like the boxes for saving/spending/giving with no requirements attached - it leaves the *idea* front and center without dictating what to do.

lisa, that’s why we wanted to let our kids have the freedom to spend their money on whatever they liked - and NOT save - so they could learn about value first-hand. nothing teaches like experience!

jacinda, i agree that the chance to experience some autonomy is key! :)

and i love that you bring up family culture - i think that if giving is part of your family culture, your children will give; if it’s *not*, i doubt forced donation would become a lifelong habit.

marta, that is a good point about physical and functional independence. and i’m glad you brought up paying extra money for extra chores. we don’t do that - if there are extra chores, they are just expected to help out! but then they don’t have the opportunity to get that first taste of work and salary. we do talk to them about jobs they might do for us related to family business when they are a little older, as a way of earning some real money.

it sounds like your daughter, although she’s spending more, has the opportunity to really dabble in running a business. there are a couple of great books on craft business .. they are, of course, meant for adults but i know they have information about how to price your wares and etc. - she might be interested in giving them a browse!

your school lunches sound *much* nicer than the ones i grew up with! ;^)

Comment by Lori Pickert on December 2, 2011 at 04:37 PM

dawn, same here. i think the earlier those lessons are learned, the better. and i really think that those early “mistakes” are remembered for a long, long time!

i think modeling and transparency are key. also actually living your values - it’s no good to say “you need to save; you need to give” if you yourself as the parents aren’t doing the same.

kerry, i know some parents ramp their kids’ buying responsibilities up so that by the time they graduate from high school they’ve been, say, buying their own clothing & other needs for awhile.

i think this would backfire for us. i remember toast from “toast floats” blogging about how she gave her daughters enough allowance to cover their clothing/shoe needs for a year and the girls just saved all the money up to buy electronics! i think something like that would happen here. :)

i think it would be beneficial for ALL kids to run a business of their own by the time they graduate - and again, the younger the better. but i wouldn’t want to force it. i would encourage as all get out, though.

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