Dear Dave,Several months ago, my five-year-old son told me he wanted a Nintendo DS. He does little things around the house for me, and at his grandparents’ place, so I told him he’d need to save his money and buy it. Well, he did! He’s got enough for the console, but not to pay the sales tax. Should I help him out?Nina
Dear Nina,Are you serious? Yes, you should pitch in and pay the sales tax! It’s not like he’s 15 or 20. This kid is just five years old, and he’s a financial rock star. I think we can cut him a little slack on this one.
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The older they get, the more hardcore you need to get as a parent when it comes to financial responsibility. But this child is already learning a great principle that will last him the rest of his life. If you’re willing to sacrifice a little bit, you can accomplish anything.
Don’t let this be a one-shot deal. He needs a new goal right now, so go out and find something he’s as excited about as that Nintendo DS. Then, let him start working on that one.
I’m telling you, if we could send some people to Washington who understand what your son already understands, this country would be in great shape!—Dave
Dear Dave,Is it always a good idea to put the maximum amount of money you can afford into a down payment when buying your first home?David
Dear David,Absolutely! Even though most people can’t pay cash up front for a home, you always want to make as big a down payment as possible on any home you buy. Making a down payment of at least 20 percent helps you avoid private mortgage insurance, plus the whole idea is to pay that sucker off and become debt-free as fast as possible. Also, avoid 30-year mortgage plans. Stick with a 15-year, fixed rate loan.
Now, when it comes to putting money toward your down payment, make sure you don’t touch your emergency fund of three to six months of expenses or your retirement savings. Those things are off limits. But scrape together any other extra cash you can, pile it up, and apply it to your down payment. You’ll be glad you did!—Dave
Dear Dave,My mom and dad are terrible with money. They’re getting older, so I’d like to see them start saving something for retirement. How can I teach them your principles?Suzanne
Dear Suzanne,I hate to say it, but you probably can’t. My grandmother used to say, “Those convinced against their will are of the same opinion still.” When you start trying to talk to your parents about money, you run into what’s called powdered butt syndrome. Once someone has powdered your behind, they usually don’t want your opinion on money or anything else.
Still, as parents get older, especially if you have a particular skill or expertise, they might ask your opinion from time to time. It may be hard for them to take you seriously, though, even if you’re a world-renown expert. To them, you’re always going to be their little girl.
It’s great if they will listen to you, but you’ll probably have better luck getting them in front of someone knowledgeable in the field. I’m talking about someone who isn’t you, even if they’re not quite as smart as you!—Dave