Financially preparing for a life with kids
Piggy bank with mortarboard
TEXT OF INTERVIEW
Tess Vigeland: Preparing for or predicting the next bubble may be tough. But here's another way to celebrate Financial Literacy Month: Talk to your kids about money. And for those of you contemplating additions to your family, talk about money before you have kids. Both issues are addressed in Jeff Opdyke's new book called "Piggybanking."
Jeff Opdyke: Hey, thanks for having me.
Vigeland: So last time we had you here, I think it was for your book about how married couples should merge their finances. I suppose this is the next logical step.
Opdyke: Exactly. You get married, and what do you do? You have kids. And what comes with the kids, lots and lots of spending of money.
Vigeland: Absolutely. Well, you know, in the introduction, you pose a very interesting question: Is it ever a perfect time to have a child? You know, you talk about how money becomes a factor in that question, and what's your answer to that?
Opdyke: There is never a perfect time to have a child. And I went through this same questioning of myself, when my wife came home pregnant one day. And I was like, "Oh my God, no." So, the answer is no, there's never a perfect time. And a lot of the arguments are always centered on, do we have enough money to do this? And the answer is, you probably don't have enough money to do this right now. But you're going to make money along the way, and you're going to change your lifestyle along the way, and you're going to find a way to fit kids into your life. The question is, do you want to do it in a way that you can sort of pre-plan some of these expenses and get a control on your spending and your money and know where it's going? Or do you just want to wing it and hope for the best?
Vigeland: And you really talk about how extensive this list of costs is. I mean, it's the diapers and blankets and cribs and that sort of thing, but there's life insurance that all of a sudden you have to think about more than usual. You even talk about date nights, that's going to cost you something that perhaps it didn't before; maternity leave and all that has to figure into your budget.
Opdyke: Exactly, that's sort of the broad point of the book, is that there's so many costs that you need to get a handle on. The challenge that most people have with their budget in general, not just as it relates to children, but just in general, they don't have a handle on all the costs they really have in their life. You know, they say, "Well, I've got a mortgage, and I've got a couple of subscriptions here, and I've got to pay for food there." I mean, they really don't have a handle on their budget.
And the same thing goes with children. I mean, you have to understand all the costs involved, because once you have a kid, you're right, you have to have life insurance to protect your family and protect that kid, in particular, so if something happens to you or your wife, there is an opportunity for that child to continue to pursue education or whatever.
Vigeland: Now, the book is really divided into two topics. And one is, of course, getting ready for the arrival of a child, and the other is teaching that child about money. So let's move onto the money education of the kids, once they're ready to do that. What age do you think they are ready to start learning about handling money?
Opdyke: You know, what I say in the book is, the minute a child is in a store, or even at home, and they say, "I want," that's the moment to begin sort of the financial education process. Teaching them there are costs associated with wants, because that's when consumerism begins to kick in and that's where the necessity for money begins to kick in.
Vigeland: And you have, I think, 15 basic rules for teaching kids about money. And the very first one really fits right into that, which is that spending can only happen after you've earned the money.
Opdyke: That's true. When we talk about children need to earn money before they spend it, I'm not suggesting that a parent, basically, stick their child out on the street and start panhandling for money or raking leaves or whatever, at a very young age. I'm basically saying that children need to understand the concept that the spending that happens, happens because of a process behind-the-scenes that children don't often see these days, and that's earning.
They know that parents go off to work, but that doesn't mean a whole lot to a child. They don't understand there's a paycheck at the end of the week, and they don't often see parents going to the bank to deposit money these days. Everything is electronic deposits and direct deposits and all that kind of stuff. So that means it's not an opportunity for mom and dad to explain on the car ride over or standing in line that "I'm depositing my paycheck from all this work I've been doing. You don't see me go to work, but here's what I do."
Vigeland: A lot of the lessons here are actually about the parents. And you spend a lot of time urging parents to take a look at how they manage their own money, because kids are natural mimics. You talk in the book about maybe mom and dad are contributing matching funds to the piggy bank. And when they do that you, say, act really excited about it, so that the kids are going to feel that excitement and copy it.
Opdyke: Right. Kids are a mirror of who you are. You know, I was out one day, running an errand with my son when he was about five years old, and he wanted to go to the toy store and buy some collectible trading cards. And I said, "Zach, dad doesn't have any money right now. I can't do that." And he looked at me with this sort of weird, quizzical look, like I was lying, and he said, "You do have money." I said, "No, I don't," and I showed him my wallet and said there's no money. And he goes, "Yeah, but there's a credit card. You use that all the time." And he's right!
As a parent, you really want to show your kids -- not just tell them -- you need to show them how this stuff is supposed to work. If you can show them how mom and dad are saving for the future, they pick up on these lessons that you teach, and they're going to pick up on the actions they see you do.
Vigeland: Jeff Opdyke is the author, most recently, of "Piggybanking: Preparing Your Financial Life for Kids and Your Kids for a Financial Life." Great to have you on the show again.
Opdyke: Hey, thanks a lot.
Vigeland: One element of finance many kids don't find out about until too late is how to pay for college. We have one recent high school graduate's story.