by Michelle LaRowe
Editor in Chief
Recently I had a chance to catch up with David Bakke, dad and personal finance blogger. David blogs about family finances and some of the biggest financial mistakes parents make. Here is a little of what he had to say.
eNannySource: Tell us about some of the most common money mistakes today’s parents make.
David: One of the most common mistakes parents make is not saving enough for retirement, as parents who can’t support themselves financially may become a strain on their children’s finances. For that reason, and the fact that Social Security and Medicare both have uncertain futures, it’s important for parents to ensure they have enough to retire. Another mistake is carrying an excessive amount of credit card debt. The worst thing that could happen is for your children to need you someday for financial assistance, only to find that you cannot provide it due to being deeply in debt yourself.
eNannySource: Should kids have allowance?
David: The decision of whether to give your children an allowance or not is a personal choice. It has both advantages and disadvantages, and parents should carefully consider both before making their final decision. Giving a child an allowance is a great way to get them on track for a sound financial future, and can give them a sense of independence as well. If you decide to give your kids an allowance, you should consider tying it into weekly chores or other responsibilities. That way, they won’t feel like it’s an entitlement. Furthermore, you should use an allowance as a means to educate your children about how to save money and the importance of budgeting. The sooner you start teaching your kids about proper money management, the better off they’ll be.
eNannySource: How can parents save money with the rising cost of raising children?
David: First, search for ways to obtain kids’ clothes without paying full price. Garage sales are a good place to start, and Goodwill and other nonprofit organizations also offer a selection of quality, low-price clothes, both new and used. If you simply must have brand new clothes, there are still ways to get them at a discount. Sign up for a Kohl’s charge card if there’s a store in your area and wait for a sale – you may save as much as 30% using the charge card, and the store also has a solid clearance section. Sign up for a website such as FatWallet (a daily deal website), and look for deals and discounts on all kid-related purchases, such as toys, clothing, supplies and more.
There are also plenty of ways to save money on groceries. The cost of feeding those hungry mouths can add up in a hurry, but one of the best ways to cut costs is to clip coupons. Buy several copies of the Sunday paper and get the kids involved in clipping all the coupons for the items your household uses regularly. And during the warmer months, shop for fresh fruits and vegetables at a farm stand or local farmers’ market, which offer very low prices.
eNannySource: Save for college or retirement?
David: Most experts now say that you should forgo saving for college costs in lieu of saving for retirement because your kids will always have federal loans and other financing options at their disposal. But this is a very emotional decision to make. Some parents just can’t get away from the desire to help their kids with education costs, especially since it’s so expensive. And there’s nothing wrong with that – work hard, and find a way to do both. Rid yourself of credit card debt, find ways to reduce your monthly bills and cut back on personal purchases to free up more funds.
eNannySource: Best cost saving tips for parents?
David: Every time you go to reach for your wallet or purse to buy anything, ask yourself: Do I really need this? If you answer the question with complete objectivity, you’ll find that in plenty of cases, the answer is no. Next, never pay full price for anything. If you’re willing to wait for a sale or do your research on the Internet, there’s a way to get a discount on virtually everything that you buy.
Finally, arm yourself with great cash back or rewards credit cards and pay the balances in full each month. For instance, the American Express Blue Cash Preferred card gets you 6% cash back on groceries, 3% on gas and 1% on everything else. What parent doesn’t spend a lot on food and gasoline? Even with the $75 annual fee, you’ll still come out better off in the end over using other credit cards.
Also, consider a Discover or Chase Freedom card, both of which offer 5% cash back on a rotating set of categories throughout the year. And if you shop frequently at Target, consider the Target RedCard. You get 5% cash back on all purchases, applied directly at checkout. You’ll have a tough time getting approved for a large credit limit, but it’s still a great way to save.
eNannySource: Where is the most financial waste in today’s families?
David: One big area of financial waste is that of food. According to a recent report done by the National Resources Defense Council, the average American family tosses one-quarter of the food it purchases. The best way to prevent this is to create a shopping list before you shop for food, and plan out a weekly menu. Be careful not to over-purchase on produce, and keep your refrigerator and pantry organized.
Another area of waste is credit card interest payments. According to NerdWallet, the average American household carries more than $7,000 in credit card debt, resulting in a great deal of wasted money on interest payments. Families that want to get ahead need to seriously address this. One way balances can be paid down is to adopt one simple strategy: If you can’t afford to pay for it by the end of the month, then you just can’t afford it.
eNannySource: Top 3 practical tips for parents struggling financially.
David: First, get yourself on a budget. You won’t be able to improve your finances unless you know where they currently stand. Next, parents should sit down and regularly discuss money to ensure that you’re both on the same page financially. Use this time to establish savings goals, set spending limits on personal purchases and to jointly figure out a way to get out of debt. Lastly, closely examine each monthly bill and see if there’s a way to get your services for less. Cut back your plan whenever feasible, and see if any hidden fees have recently cropped up that you can have eliminated.
David Bakke started his own personal finance blog, YourFinances101, in June of 2009 and published his first book on ways to save more and spend less called “Don’t Be A Mule…” Since then he has been a regular contributor for Money Crashers. He lives just outside Atlanta, GA and most all of his free time is taken up by his amazing three year old son, Nicholas.← Expert Insights with Laura Fobler Coach and Author of The Parenting Struggle | Expert Insights with Mom and Author Rachel Randolph on Living Vegan With Kids →