Tips for raising financially smart kids

This was originally published on Monday, August 24, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

As a parent, teaching your child the importance of financial skills is imperative. Many young adults are not prepared to handle daily financial decisions and the consequences that may come with them. In this rapidly changing world, teaching your child how to manage money is more important than ever. There is plenty of misinformation out there that children hear about finances especially as they get older. It is best to hear the correct information from a trusted source. Here are some tips for raising financially smart kids:

Start early – it is never too early to start. Form an early age, explain why you work and why the family needs money. Children really start to understand the importance of money around the time they start school. As they get older, start introducing the concept of saving, investing and credit.

Teach the importance of hard work – what do most kids know about money besides the fact that there is never enough and that it mysteriously comes from mom and dad? As they get older they will soon find out that money literally does not grow on trees or come from machines and that they will have to earn it. Today’s society is full of messages of being entitled. As a parent we want to instill that a good work ethic. Sit down with your child and discover how much certain jobs pay. Of course it is not all about the money when choosing a job. The love for what you do is just as important, if not more. But it is good for them to know what the future holds and to prepare accordingly.

Involve them in the family shopping – the best way to get kids to understand that money is not limitless is to get them involved in the family shopping. It is a great way to learn how much money is required to purchase everyday items. Explain to them the importance of spending wisely and how it effects what they want.

Let them practice – give or let your children earn an allowance. Let them decide on how they want to spend their money. Give them the power to make choices. If they want to spend it all on toys and then want something else, remind them of their choices and that they will have to wait until they have the money. Help them create a list when they go shopping.   Have them total up how much it will cost and what their change will be.

Taxes – No one is ever quite exempt from paying taxes. Explain to your children that the government has to provide certain services, so we pay taxes. I have seen parents include taxes in their children’s allowance to help prepare them.

Mistakes are part of the lesson – when you started to learn about money you made mistakes and so will they. Use your mistakes as teaching points. A parent’s instinct is to help. If they were saving up for a new game and do not have the money, don’t bail them out. Let them wait and earn the money they need. By bailing them out you are teaching them that they do not need to stick to the amount they have been given. If you do give it to them, this is a great time to teach them about interest. Let them know that they can borrow the money from you but they will have to pay more than what they borrowed initially. Helping them be disciplined and understanding how credit works at a young age is a lesson best learned when the stakes are not as high.

Give back – teach your child that as a citizen of the world, caring about others less fortunate is a good thing. They can keep a jar of loose change all year long and during the holidays make a donation. They can donate items they no longer need or volunteer.

Be the role model – let your children observe you practicing what you preach. Be open about your budget and spending priorities. If you want a high price item let them observe you holding off until you saved enough. Putting instant gratification aside is a mature characteristic and one that is practiced and learned. If times are rough find a way to involve your children in an age appropriate way.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at


Teach your teen how to make a budget

This was originally published on Monday, August 17, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

Q: My teenager just started driving and my husband and I are thinking of opening a checking account for him. Do you have any tips to help teach budgeting to a teen?

A: One of the most important tools you can teach your teen to be financially healthy is how to create and stick to a budget. It is great that you are taking initiative to teach him. Unfortunately many teens do not gain the skill of budgeting before going off to college or obtaining their first job. Teaching teens how to budget their money today will instill good spending habits for the future.

Sit down with your teen and discuss how much he will earn monthly. Have him list his monthly expenses such as gas, clothing, incidentals, and entertainment for which he will be responsible. Come to an understanding about what you are willing to pay and for what he will pay. Include paying for proms, yearbooks, class ring, and so forth. Talk to him on how to put some money aside to save for emergencies and to save for those large expenses. Agree on a percentage of how much he should save. Let him start with the monthly budget you both agree on. After a few months reevaluate the budget and make any necessary changes.

One of the best ways to teach your teen about budgeting is to share your household budget. Many parents feel that the amount of money they make and how it is spent is personal. But being open about how money is spent in your household will only benefit your teen. Talk about how to prioritize where the money is spent and how to save in real-world scenarios. A survey performed by the Consumer Federation of America found that only 73% of parents feel capable of teaching their children about finances. Some parents may feel inadequate because of their financial woes. If your financial health is not the greatest, it is a lesson that you can pass on to your son. Discuss what decisions you made that put you in the predicament you are in today and what steps you are taking to correct it. You may want to stress that it is a personal family matter and that it stays within the immediate family. Parents play a very important role in teaching their children about finances. Don’t let your financial confidence or stability stop you from teaching your child.

Among the hardest lessons for both teen and parent are the consequences of not following the budget. If your child comes up short at the end of the month and wants to go to the movie, bailing him out will not teach him to stay within his means. It may mean having to say “no” and wait till the next pay period. It is a lesson best learned now instead of later down the line when the consequences are much more dire.

Another lesson teens should start being aware of, is how debit and credit cards work and when it is acceptable to use them. Like anything else, there are pros and cons. They are great in emergency situations, it builds good credit history, it may earn valuable reward points and it does give you time to pay. On the other hand, interest adds up and depending on credit cards to overcome shortfalls in the budget can lead to some unfavorable practices. Discuss what a credit score is and how a bad credit score can effect getting a job or a loan, or even purchasing a cellphone.

Learning how to invest money at this age is also beneficial. Go online and find a financial calculator and discuss how much money they want to retire. Break it down into how much a month they will need to put away to achieve it. Inform them on how retirement funds and the stock market work. If you need help there are many online tools to assist.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at

Allowances can teach value of money

This was originally published on Monday, August 10, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

Q: I have two children, ages 8 and 12. I am conflicted if I should pay them to do their chores around the house or just give them an allowance. I have asked several friends but I am still quite conflicted.

A: There is no right or wrong answer; it is a personal choice. Each household handles this differently depending on how they were raised, availability of money and their perception of chores. Some parents believe that chores are a job and children should be justly compensated. Others believe that it is a responsibility that children are a part of the household unit and everybody needs to chip in and help.

If you really are on the fence, maybe finding the right balance between the two may help. Give them a base allowance as a teaching aide. For jobs that aren’t their normal chores, such as yard work, washing cars, or helping with a household project, perhaps you could pay them for that.

No matter what your choice is, keep in mind that the goal is to prepare your children for the real world. The real world that consists of a job, bills, taxes, investing, and the many different daily financial decisions that they will face. An allowance, however they earn it, is an excellent way to teach your children about the value of money.

Being entrepreneurial is also a great money teaching technique. It may even be more valuable than allowances and chores. Yard services, babysitting, car washing, pet grooming, newspaper routes and even a lemonade stand can teach children how money really works. Children will gain real-world experiences about loss and profits, prioritizing where money should go, budgeting, and even investing. It will teach them the value of hard work and that money is never freely given but earned.

Another real-world experience is having them pay for their wants. If they want that new video game, toy, or even an upgraded cellphone, teach them the value of money by saving up for it. I recently went through this with my 11-year-old son. He wanted something so I walked him through the thought process. He decided to get the item with his money he saved from chores, birthdays and Christmas. This is no different than what we adults have to do when purchasing a high-value item like a car, a luxury item or a family vacation. Give them opportunities to make money around the house. Another option is to clean out their closets and hold a yard sale. Whatever is not sold can be donated to a charity of their choice. Both options benefit the household and the child.

At this age, they are exposed to a lot of advertising, especially on television or in magazines. Enlighten your children that companies have to make money and they do so by appealing to your emotions. Show them the fine print in ads and commercials that some of these products do not work as seen in the media. Begin to immunize them to commercial propaganda and that their choices should be based on a number of factors, not just emotions.

Once your child starts receiving an allowance they will need a place to put their money. Many banks offer children’s accounts that are free or cost very little to open and maintain. Encourage your child to make frequent deposits, especially when they receive monetary gifts. As the balance grows you can explain how interest works.

Start getting them involved in family financial decisions. If you are saving to go on vacation, let them be part of the process. At this age, they really are interested in becoming part of the family unit and craving to be more responsible. They can clip coupons, comparison shop, assist with meal planning and shopping lists, and help balance the checkbook. Involving them in your daily financial practices is the best teaching tool to prepare them for the real financial world.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at

When to teach kids about money?

This was originally published on Monday, August 3, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

Q:  My wife and I have a 2-year-old daughter and have different opinions about whether or not our daughter is too young to start learning about money. Do you think you could give us some advice on when it is appropriate to teach kids about money?

A:  I want to congratulate you on at least talking about teaching her the value of money. Of course when and how is different in every household along with the maturity level of the child. I believe that teaching kids to be financially aware at an early age will set them up to develop good financial skills as an adult. Setting a good foundation early is the key.

Personal finances have changed a lot in the past 10 years.  Most people rarely carry money anymore and the use of “invisible” money is much more present. Children see parents at a store using credit or debit cards, banking and shopping online, and getting money from a machine. This can be quite confusing since they never see an exchange of money and may get the idea that money must come easy. My daughter once said, “Daddy, just get money from the machine; it always has money.”

Teach kids with real-life situations.  You use money every day, so there are many opportunities to teach where money comes from and how it should be spent.

ATM – Kids see you put your card in and money magically appears. Explain that when you go to work you are paid. The money you are paid goes to the bank, which safely holds your money. When you need your money you take it from your bank account which means you have less money to spend.

At the store – This may be the best place to have your children understand how money really works. Usually when we shop we are faced with different prices for the same item. Explain why you make the decisions you do when picking out an item. Does it cost less? Do you get more in the container? Although she may not be ready to know which costs more, just opening up the discussion is a good way to get the lessons started.

Don’t be afraid to say “no” when out shopping with her. As she gets older, share with her that it costs money to buy things and you can’t always get what you want.

Paying bills – If you pay your utilities at a bank or at the agency take your child with you. Let them see that you have to pay for the power they use to watch television or the water needed to take a shower. Help her understand that paying these bills must be done before paying for a new toy.

Receiving money – At your daughter’s age she might not be ready to start doing chores around the house. She may get your change after a transaction or from family. Help her start identifying the different coins. A fun way is to set up a play store and have her shop for different items. By exchanging money for goods, your child will start to understand how commerce works. As she gets older, add coupons and sales.

Start teaching her the difference between needs and wants and that you have to have money to purchase items or services. Just as you would teach her about good manners or being safe, teach her at an early age to foster skills that will help her be financially smart.  That is a lesson that is never too early to start.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at

Teaching kids the value of money is a life lesson

This was originally published on Monday, June 24, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I have a young niece who goes through her allowance as soon as she gets it. I would like to start teaching my niece about money. Do you have any ideas?

Answer: I commend you for recognizing the pattern early. Learning the value of money should begin at an early age. As we grow up, having money is a necessity and being able to properly handle the money we make is a great skill to have. Being financially fit takes practice and it takes correcting if you see a child is irresponsible with money. Adults should layout guidelines about spending, saving and donating to charity.

Children must understand that money is something that has to be earned and not just given out for free through an ATM machine. Having an allowance can be an effective tool for teaching children that lesson. If they want to get paid more, sit down and negotiate, as they would with an employer. Help them understand that not all their allowance has to be spent at one time.

For older kids, getting a prepaid debit card can be beneficial. The child can then spend it anywhere a debit card is accepted. Some debit cards keep record of your teen’s spending so that you can track purchases or know when you need to reload the card. It is a good opportunity to teach teens budgeting skills in a real life scenario.

Help your niece set up a budget. If she has been eyeing a particular pricey item, explain to her how she would be able to get that if she waited an “x” number of allowances. As she gets older, her budget can get a little more complex, such as setting aside 20 percent for savings. You can even make a pretend tax of 10 percent that she must pay you (you can, in return, pay them back every April). For older kids in middle or high school, include their weekly expenses such as, for example, lunch and gas money in their allowance. This lesson can even be done using play money.

Expect children to make mistakes. When you take your niece out shopping next time and she once again spends her allowance on something frivolous, ask her a week later if she is still pleased with her purchase, or if the item is misplaced, or broken, or if she wishes she had kept that money for something else. If she agrees with you that her money could have been better spent, ask her how she will change it next time. Engage her in conversation; although she may make the same mistakes over and over again, she will in time get the hang of it.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at

Allowance helps build good habits

When you want to teach a child good financial habits, allowance can be a powerful tool. When you give your child allowance, you give them freedom to experiment with financial behavior. Children can make good decisions or bad decisions, but they do so on a small scale, in a safe environment, learning from their mistakes or earning rewards for good behavior.

When they’re learning how to manage their allowance, it can be helpful for your children to see their good and bad decisions in front of them, in the same way that it’s helpful for you to review your past expenses before you adjust your budget.

So here’s what you can ask your children to do: write down what they buy with their allowance.

You want to help your child become aware of his or her own spending habits, and that’s easy to do with a journal. Once your children can see their own decisions on paper, it’s much easier for them to think about trade-offs, about things that they would have liked to have bought and can save money for in the future.

Just like with adult budgeting, basic, honest financial awareness is the first step toward making a plan for future spending. When it comes to your child’s allowance, you don’t want to control the financial decisions yourself. You want to guide them toward making good decisions for themselves.

So when they show you their financial journals for the week, you can ask them about other things they may want to buy with their allowance. You can help them portion our their allowance, between things they want to buy now, and things they want to save up for with a little extra planning.

Respect for money

Writing down every purchase also teaches your child a basic consideration and respect for money. When you keep a record of something, it’s a sign that this is something that’s important enough to keep a record of, to give some care and consideration. Money is something that people work hard for, that you worked hard for, and it’s something your child is going to work hard for when he or she grows older.

It’s also a limited resource, and having respect for those limits early on can keep your child out of financial trouble in the future. Money should be handled with care, even as it brings enjoyment, and the simple act of writing purchases down reinforces that lesson.

Building up that simple discipline and sense of awareness is bound to help your child as he or she grows older and makes increasingly complex financial decisions. It also strengthens basic reading, writing, and arithmetic skills, so that your child is continuously learning. When your children gets started, help supervise your children as they remember and write down their purchases. You can ask to see their complete journals when allowance time rolls around next, so that you can help them review their purchases and make upcoming plans on a regular basis. That consistent attention and involvement will build the foundation for solid financial management in the future, as your child learns and grows.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii. You can email him at