Return to Transcripts main page

CNN Live Saturday

Money Signs: How To Teach Your Children The Value Of Saving

Aired August 16, 2003 - 16:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ANDREA KOPPEL, CNN ANCHOR: Welcome to "Dollar Signs," where we can help you make the most of your money. Today, we want to focus on how you can teach your children the value of a buck. Every parent wants to make sure little Jack or Jill understands how to handle money responsibly. Our financial correspondent Ali Velshi gives us some tips.
(BEGIN VIDEOTAPE)

ALI VELSHI: Your kids are trying to tell you something. They help out at home.

UNIDENTIFIED FEMALE: I have to clean up the room and make all the beds in the morning

UNIDENTIFIED MALE: I have to help clear the dishes and let the dogs out, I have to take out the trash.

VELSHI: They have jobs.

UNIDENTIFIED MALE: Did just get a job across the street. There's this lady who needs help to pick her weeds in the guarden.

UNIDENTIFIED FEMALE: When I baby-sit, since I baby-sit for three kids, I get $10 an hour.

VELSHI: They get allowances.

UNIDENTIFIED FEMALE: I get $40 a week to buy my own clothes, my own hair products. I have everything necessary for a teenager.

VELSHI: They're certainly no strangers to retail.

UNIDENTIFIED FEMALE: If I go to the mall with my friends I'll go and, like, buy something that I want.

UNIDENTIFIED MALE: DVDs and CDs.

UNIDENTIFIED FEMALE: Clothes, going out with friends and lunch money.

VELSHI: These are all signals that your kids can probably handle and use a few lessons on handling money.

Americans are not good savers in general. And so we try and teach the kids it's important to save. Second, is to have a spending plan or a budget or whatever you want to call it but some framework that says this is how much money I have and this is what I need to do with it.

UNIDENTIFIED FEMALE: So, you're learning to manage your money against a plan. And the third for us is the importance of handling and understanding how credit works.

VELSHI: Don't wait for them to learn about it in school.

UNIDENTIFIED FEMALE: Money has billion much more important. The products are so sophisticated today. They're not teaching the kids how to use their money. They're not teaching the kids the difference between using a check casher, and a checking account.

VELSHI: The responsibility falls to the parents.

UNIDENTIFIED FEMALE: Really, the person who's really taught me about money would be my father.

UNIDENTIFIED FEMALE: If you're going to the store for the week's groceries, you can talk to the kids about how much money you have and how many meals have to come out of that and why you make choices within that budget. Likewise, back to school shopping is another time to say, ok, we have a budget. Let's make choices.

UNIDENTIFIED MALE: Get involved with the kids, sit down with them. Go over their savings accounts, show them how to do a savings plan. Check if they're doing the savings plan. Maybe attach a reward to it.

VELSHI: The benefits to your child's future and financial well- being may be incalculable.

UNIDENTIFIED MALE: Teaching them saving money on a regular basis is an important part of financial planning and really help you secure your future. When a child becomes a young adult and they go into the work force, they'll understand what a 401k is and why it's important to save for the future.

VELSHI: And handle those key questions at the cash register.

UNIDENTIFIED MALE: Somebody had $20, they spent $5 on a book, $15 on a CD, does he get any change?

(END VIDEOTAPE)

VELSHI: No, you don't get any change back, Michael. If fact, if you live in a state where there's sales tax, you end up paying a little more money.

Andrea, the woman in my piece, Muriel Seabert, talking about that schools aren't doing enough to teach kids about financial literacy and financial education

(AUDIO GAP)

KOPPEL: And welcome back to "Dollar Signs." We're talking about turning out financially savvy children and what you need to do to make sure your kids are prepaired. I'm here in Atlanta with our financial correspondent Ali Velshi, and author of -- you're not an author -- "the First National Bank of Dad" David Owen is sharing is expertise from Newhaven, Connecticut. And Dave Ramsey, who wrote "The Total Money Make-Over" is with us from Nashville, Tennessee.

We have a phone call from Margaret in Texas. Margaret, go ahead please, with your question.

CALLER: Yes. I would like to know how to break a child from spending so much money?

DAVE RAMSEY, AUTHOR: Well, one thing, and I'm sure David agrees with this, is it's fun to let them earn some money. We teach people not to use the idea of allowances. Our kids, and we've taught hundreds of thousands of families to do this, are on commission. If they work for it and they have a limited amount in their spending envelope, then when that spending envelope starts to run dry, they realize there's only so much money, money is finite. It's amazing, I've watched my kids, they spend my money differently than they spend the money they earn.

KOPPEL: Can ask you something, Margaret, where are you children getting this money?

CALLER: His dad. Not from me.

VELSHI: There is a whole another question, isn't there?

CALLER: That's right. I grew up knowing how to conserve money, how to use my money wisely, but my husband is the first national bank.

KOPPEL: David, do you have any tips for margaret?

DAVID OWENS, AUTHOR: I was going to agree with Dave, more-or- less, but I think that doing chores and receiving allowance should be separate activities. It's not really employment it's -- because you can't quit. I remember when my wife was -- my wife was a little girl she used to cut the lawn for her father. She hated doing it. He was very meticulous, she asked could I be paid less money and do a worse job. He was appalled, as I would be, but it was an economically astute question.

KOPPEL: When I was a kid, I had to pick dandelions, an entire basket and I got 25 cents.

Let's go to an e-mail from Jeremy in North Carolina. He writes, my girlfriend has two kids, 9 and 10 years old. They both earned $100 each for summer chores from their grandparents. There is constant bickering about what to do with this money. Obviously, they want new video games, but they need new beds. Any suggestions?

OWEN: Well, they earned it. I think parents have a tendency to try to think of reasons to take money away. For instance, they'll say, we have to save this money for your college education. Say it to a 4-year-old. When my kids were 4, they weren't even all that wild about the idea of going to kindergarten, the thought they should give up spending now so 14 years from now my wife and and I could send them to live in another city with people they don't know doesn't have appeal.

Kids should have incentives that sound like incentives to them. They probably think beds that are part of the deal they get from being in the family.

VELSHI: That brings up an interesting question. I'm going to go to Dave on this one. The ways in which you break down the money that your children successfully earn or save or are given, some of it needs to go for savings but some of it does need to be -- some of it needs to go for spending and some of it needs to be saved. How do you get them to differentiate? It seems easier at that age for them to spend than save.

RAMSEY: Well, again, it is age appropriate and I agree with David, there are some things you do just because your last name is Ramsey and I let you live here. You are part of the team. Then there are other things you do that -- because I want them though have an emotional connection between work and money. I meet 54-year-olds who don't have a connection between work and money. I want them to connect that. Everything doesn't become about a union contract in every step. I agree with David on that.

So, the bottom lines is, as they earn it, then, age appropriately, let them set some goals with the savings. For a four 4 or 5-year-old, the goal is, right then, put them in the car and let them go buy some candy or something fun. For someone a little bit older, they need to start saving to put money into their own car.

Around our house, I agree with David, we've taken care of the beds, we've taken care of the college education, those are things that the mommy and daddy do. But I want to teach the children how money works in the process of them touching it, and that involves them earning it, spending it, saving it and giving it.

KOPPEL: And also recognizing that it is not a bottomless pit.

Let's go to a phone call now, Kay in ohio. Your question, please, Kay.

CALLER: Hi. We have three children here. We have a 6-year-old son and two-year-old twin daughters. We're wondering how much the 6- year-old should receive for allowance, whether it should be weekly or monthly, and at what age is it recommended that you start giving allowance? Thank you.

RAMSEY: The 6-year-old is definitely ready. The 2-year-old, depends on -- they're close. I think a 3-year-old isn't too young to have an allowance. You might start by -- there's no formula. I think, you talk to other parents and see what they're doing. You don't want your child, if you can help it, to be too far ahead or far behind the others. On thing to do is, you can ask their child, what do you think fair. Usually, even up into their teen years surprise you by asking for less than you would have done by yourself.

KOPPEL: Dave?

OWEN: I agree with that. I think, it depends on how the kid is wired. I have three children, they're 3 distinct personalities. Some of them at 3 and four years old are ready to do a mutual fund. Others at 16, are still trying to think about the idea.

So, it depends on how they're wired and go with the way they're bent, to use an old phrase. And plug into that. And encourage them to see some of it. Some are a little more naturally ambitious with some of their goal setting for savings and so forth.

OWEN: You shouldn't try to prevent your children from making any mistakes. They should make mistakes. It's how we learn, unfortunately. You want to give them enough money to screw up, to buy some things they realize are mistakes. I think parents too often try to get in there in between and give their children too little room to learn responsibility, which unfortunately, you end up learning from your mistakes.

VELSHI: Well, that is fabulous. And I'll tell you, going back to his excellent point earlier, that most of what they're going to learn is what we model before them. We do a lot of financial counseling with adults that are struggling financially. And we say, to a point, share some of your mistakes with them, so that, hey, don't do what I do. Don't do stupid with zeroes on the end.

Look, momma was stressed out, bought something with the credit card she couldn't afford. Dad was stressed out, did this he shouldn't have done. Don't do that kind of thing. Share that with them, again age appropriate. We don't want to put too much stress in their wonderful little lives.

But it's fun to let them learn from where you stumbled.

RAMSEY: You don't want to trouble them with information that they can't do anything about. If you're in terrible terrible financial trouble, it's more than a 5-year-old can handle. There's nothing they can do to help.

KOPPEL: You're going to send them to their room screaming in horror. Dave and David, hold on there, we'll be right back with more of your called and e-mails right after the break. We will be right back.

(COMMERCIAL BREAK)

KOPPEL: Welcome back to "Dollar Signs." Want to make sure your child never has to worry about debt or finances? CNN financial correspondent Ali Velshi and I are taking your questions here in Atlanta. And we have two financial authors with us, David Owen, is with us in Newhaven, Connecticut and Dave Ramsey, is joining us from Nashville, Tennessee.

Gentlemen, I want to go to an e-mail from David in Florida, who writes "What do you mean when you write kids should be paid a commission? Do you pay them for chores they perform around the house? Are there ever things they do for which they are not paid?", an important point, "Financially, how often do you pay your children daily, weekly, monthly."

VELSHI: Too many Davids around here.

KOPPEL: I know.

VELSHI: I better sit this one out.

OWEN: When I say commissions, again what I mean, I'm trying to create a teachable moment, an emotional connection that's age appropriate. When a 4-year-old cleans their room, that's not an economic event, that's mom or dad picking up 80 percent of the toys, they pick up 20 percent, they get the 100 percent of the "'at a boys", and they get the dollar, and you wad that up and put it in a jar and say you just earned something.

But there's are a lot of things you do just because you're part of the family. Those are just chores we all do. I do some things helping my wife, my wife does some things helping me. The kids need to be involved in that. But when we don't do anything connected to the money, then the children don't have any idea what dad and mom do when they head off to work.

They need to understand that that's happening to cause money to happen. Work is a sure fired money making scheme.

RAMSEY: I like to separate allowance and chores. I think, you don't want to put a child in the position of say, I'm pretty flush at the moment, I'm not going to clean up my room this month, why don't you and mom spend my allowance on something nice for you.

I think kids need money to live. I think it's okay to have jobs that are outside normal bed making, doing the dishes, walking the dog. I think, there are some jobs that are just too horrible not to pay for. I think also kids need occasional opportunities to make money.

I think it's a mistake also to let kids work after school, for example. If there's any way the family can afford not to have all hands pitching in economically, then a child's time is better spent economically and in every other way, doing activities related to school.

VELSHI: Guys, I want to ask you a question. One of the things that happen when you hit 18 and go to college, your kids will be bombarded with credit card applications, most of them are going to take advantage of it. Thats where our bad credit habits are formed and that ends up staying with us through our 20's and 30's and it haunts us.

How do you stop your kids under the age of 18 -- how do you teach them about credit so that when they're finally given some credit, it doesn't hit them and cripple them for the rest of their financial life?

OWEN: We're really strict on this, 19 percent of the people, according to the American Bankrupcy Institute, one in 5 were, college age people. This credit card stuff on the campus is a cancer that is absolutely out of control.

We did, on my nationally syndicated talk radio show yesterday, two hours with callers and e-mailers talking about preparing to go to college. We told them, you've got to go back to the Nancy Reagan thing of just saying no.

RAMSEY: I think that's true. You can also innoculate your kids. Both my kids had debit cards starting when they were 12. They also have a strong sense of money that's their money. I think the kids who are most likely to gets in trouble with credit cards are the ones who never had money of their own, kept on very tight financial leashes by their parents and whose very rational response, whenever money came into their hands, was to spend it, quickly, on something, before a parent took it away.

KOPPEL: All I can say, another lesson people can learn is not necessarily to keep those credit card bills coming in and to try to take a loan and pay it off.

We have another David, believe it or not, on the phone. This time from Atlanta, with a question for our guests. David, go ahead.

CALLER: I just want to say thanks to CNN for doing this. This is a national crisis and more voices need to be raised about it. And you guys are right on. Minor differences about chores and allowances. I hear where you're both coming and I agree in part with both of you.

OWEN: I think we ought to all go out for a drink after this.

CALLER: I'll meet you at CNN center. Listen, I've got a piece of information, I think that you ought to put out in the public and you both ought to look at. There's a Web page called parentware.org, and a product there called family bank that's endorsed by the American Bankers Association Education Foundation. I just wondered if you guys have ever looked at any computer solutions for just the administration and management of allowances?

OWEN: As a matter of fact what I did with my kids was start a bank for them, the Bank of Dad. I decided after several years of doing the wrong thing, I think, what was missing for the kids was an incentive for them. What I did, to make a long story short, was pay them a very high rate of interest on their savings, 5 percent a month, which I decided, for a 5-year-old, that's -- you have to get their attention. Both my kids became savers overnight. My son, who was 5, came into my office with two handfuls of change he found in the furniture and the car, dumped it on my desk and credit this today.

I think, what parents tend to do, we will take this birthday check of yours and put interest the bank where it's going to get -- at the end of five years, you'll be able to buy a stick of gum. The kids know they will never see it again. Once my kids knew -- I told them if you save some of your money instead of spending it all or once, you will double or triple your allowance eventually. They both got it immediately. I think they were financially responsible from that point forward. My daughter is now 19.

KOPPEL: Can I ask you this real quick about that, kids also need to know, you can't just always save. There are expenses that mom and dad have. How do you teach them about that?

OWEN: I think they learn on their own. If these are their resources, these are my resources, I have an opportunity to save that pays me what I think is a reasonable return. I can make my own decisions, would I rather let me money charge up, which is what my son called it, or is this something I want to spend. That's the way grown-ups behave. Not all grown-ups are good at it but I think if kids gets practice early, they become good financially responsible adults.

VELSHI: David, did your kid grow up to be a loan shark?

OWEN: There are other ways to do it, too. The 401k plan is a model. I know a parent who offered a child to match a child dollar for dollar on savings toward a car, starting when she was 12. I think you have to adjust the incentive.

It's just like training wheels, like books with pictures. We have to scale it down to something that the kids can understand. To a 5-year-old, long-term isn't 20 years, it's, you know, a month, two months, three months.

RAMSEY: The beauty of the matching plan is it also works fabulously for -- the siblings catch on. We do we call it 401Dave at our house, oddly enough. We match for a cars. You don't get car at our house if you don't save money. But I will match everything you have. If you save zero, you get to ride the really nice bike you got two Christmases ago.

Otherwise -- the fun thing though, is with a 17 year old, almost 18 now, the 15 and 11-year-old are getting it, hey, I've got to do this, it worked for her, dad did match and the whole family dynamic kicks in as a teaching mechanism as well.

KOPPEL: We're going to have to wrap up unfortunately our David show this afternoon.

VELSHI: And me.

KOPPEL: And the Ali show.

OWEN: There are more Davids. There are Davids all the way down.

KOPPEL: Yes, I want too thank both of you Dave Ramsey and David Owen and, of course, our own Ali Velshi, all four joining us today on "Dollar Signs. thank you very much.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com





Saving>


Aired August 16, 2003 - 16:30   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDREA KOPPEL, CNN ANCHOR: Welcome to "Dollar Signs," where we can help you make the most of your money. Today, we want to focus on how you can teach your children the value of a buck. Every parent wants to make sure little Jack or Jill understands how to handle money responsibly. Our financial correspondent Ali Velshi gives us some tips.
(BEGIN VIDEOTAPE)

ALI VELSHI: Your kids are trying to tell you something. They help out at home.

UNIDENTIFIED FEMALE: I have to clean up the room and make all the beds in the morning

UNIDENTIFIED MALE: I have to help clear the dishes and let the dogs out, I have to take out the trash.

VELSHI: They have jobs.

UNIDENTIFIED MALE: Did just get a job across the street. There's this lady who needs help to pick her weeds in the guarden.

UNIDENTIFIED FEMALE: When I baby-sit, since I baby-sit for three kids, I get $10 an hour.

VELSHI: They get allowances.

UNIDENTIFIED FEMALE: I get $40 a week to buy my own clothes, my own hair products. I have everything necessary for a teenager.

VELSHI: They're certainly no strangers to retail.

UNIDENTIFIED FEMALE: If I go to the mall with my friends I'll go and, like, buy something that I want.

UNIDENTIFIED MALE: DVDs and CDs.

UNIDENTIFIED FEMALE: Clothes, going out with friends and lunch money.

VELSHI: These are all signals that your kids can probably handle and use a few lessons on handling money.

Americans are not good savers in general. And so we try and teach the kids it's important to save. Second, is to have a spending plan or a budget or whatever you want to call it but some framework that says this is how much money I have and this is what I need to do with it.

UNIDENTIFIED FEMALE: So, you're learning to manage your money against a plan. And the third for us is the importance of handling and understanding how credit works.

VELSHI: Don't wait for them to learn about it in school.

UNIDENTIFIED FEMALE: Money has billion much more important. The products are so sophisticated today. They're not teaching the kids how to use their money. They're not teaching the kids the difference between using a check casher, and a checking account.

VELSHI: The responsibility falls to the parents.

UNIDENTIFIED FEMALE: Really, the person who's really taught me about money would be my father.

UNIDENTIFIED FEMALE: If you're going to the store for the week's groceries, you can talk to the kids about how much money you have and how many meals have to come out of that and why you make choices within that budget. Likewise, back to school shopping is another time to say, ok, we have a budget. Let's make choices.

UNIDENTIFIED MALE: Get involved with the kids, sit down with them. Go over their savings accounts, show them how to do a savings plan. Check if they're doing the savings plan. Maybe attach a reward to it.

VELSHI: The benefits to your child's future and financial well- being may be incalculable.

UNIDENTIFIED MALE: Teaching them saving money on a regular basis is an important part of financial planning and really help you secure your future. When a child becomes a young adult and they go into the work force, they'll understand what a 401k is and why it's important to save for the future.

VELSHI: And handle those key questions at the cash register.

UNIDENTIFIED MALE: Somebody had $20, they spent $5 on a book, $15 on a CD, does he get any change?

(END VIDEOTAPE)

VELSHI: No, you don't get any change back, Michael. If fact, if you live in a state where there's sales tax, you end up paying a little more money.

Andrea, the woman in my piece, Muriel Seabert, talking about that schools aren't doing enough to teach kids about financial literacy and financial education

(AUDIO GAP)

KOPPEL: And welcome back to "Dollar Signs." We're talking about turning out financially savvy children and what you need to do to make sure your kids are prepaired. I'm here in Atlanta with our financial correspondent Ali Velshi, and author of -- you're not an author -- "the First National Bank of Dad" David Owen is sharing is expertise from Newhaven, Connecticut. And Dave Ramsey, who wrote "The Total Money Make-Over" is with us from Nashville, Tennessee.

We have a phone call from Margaret in Texas. Margaret, go ahead please, with your question.

CALLER: Yes. I would like to know how to break a child from spending so much money?

DAVE RAMSEY, AUTHOR: Well, one thing, and I'm sure David agrees with this, is it's fun to let them earn some money. We teach people not to use the idea of allowances. Our kids, and we've taught hundreds of thousands of families to do this, are on commission. If they work for it and they have a limited amount in their spending envelope, then when that spending envelope starts to run dry, they realize there's only so much money, money is finite. It's amazing, I've watched my kids, they spend my money differently than they spend the money they earn.

KOPPEL: Can ask you something, Margaret, where are you children getting this money?

CALLER: His dad. Not from me.

VELSHI: There is a whole another question, isn't there?

CALLER: That's right. I grew up knowing how to conserve money, how to use my money wisely, but my husband is the first national bank.

KOPPEL: David, do you have any tips for margaret?

DAVID OWENS, AUTHOR: I was going to agree with Dave, more-or- less, but I think that doing chores and receiving allowance should be separate activities. It's not really employment it's -- because you can't quit. I remember when my wife was -- my wife was a little girl she used to cut the lawn for her father. She hated doing it. He was very meticulous, she asked could I be paid less money and do a worse job. He was appalled, as I would be, but it was an economically astute question.

KOPPEL: When I was a kid, I had to pick dandelions, an entire basket and I got 25 cents.

Let's go to an e-mail from Jeremy in North Carolina. He writes, my girlfriend has two kids, 9 and 10 years old. They both earned $100 each for summer chores from their grandparents. There is constant bickering about what to do with this money. Obviously, they want new video games, but they need new beds. Any suggestions?

OWEN: Well, they earned it. I think parents have a tendency to try to think of reasons to take money away. For instance, they'll say, we have to save this money for your college education. Say it to a 4-year-old. When my kids were 4, they weren't even all that wild about the idea of going to kindergarten, the thought they should give up spending now so 14 years from now my wife and and I could send them to live in another city with people they don't know doesn't have appeal.

Kids should have incentives that sound like incentives to them. They probably think beds that are part of the deal they get from being in the family.

VELSHI: That brings up an interesting question. I'm going to go to Dave on this one. The ways in which you break down the money that your children successfully earn or save or are given, some of it needs to go for savings but some of it does need to be -- some of it needs to go for spending and some of it needs to be saved. How do you get them to differentiate? It seems easier at that age for them to spend than save.

RAMSEY: Well, again, it is age appropriate and I agree with David, there are some things you do just because your last name is Ramsey and I let you live here. You are part of the team. Then there are other things you do that -- because I want them though have an emotional connection between work and money. I meet 54-year-olds who don't have a connection between work and money. I want them to connect that. Everything doesn't become about a union contract in every step. I agree with David on that.

So, the bottom lines is, as they earn it, then, age appropriately, let them set some goals with the savings. For a four 4 or 5-year-old, the goal is, right then, put them in the car and let them go buy some candy or something fun. For someone a little bit older, they need to start saving to put money into their own car.

Around our house, I agree with David, we've taken care of the beds, we've taken care of the college education, those are things that the mommy and daddy do. But I want to teach the children how money works in the process of them touching it, and that involves them earning it, spending it, saving it and giving it.

KOPPEL: And also recognizing that it is not a bottomless pit.

Let's go to a phone call now, Kay in ohio. Your question, please, Kay.

CALLER: Hi. We have three children here. We have a 6-year-old son and two-year-old twin daughters. We're wondering how much the 6- year-old should receive for allowance, whether it should be weekly or monthly, and at what age is it recommended that you start giving allowance? Thank you.

RAMSEY: The 6-year-old is definitely ready. The 2-year-old, depends on -- they're close. I think a 3-year-old isn't too young to have an allowance. You might start by -- there's no formula. I think, you talk to other parents and see what they're doing. You don't want your child, if you can help it, to be too far ahead or far behind the others. On thing to do is, you can ask their child, what do you think fair. Usually, even up into their teen years surprise you by asking for less than you would have done by yourself.

KOPPEL: Dave?

OWEN: I agree with that. I think, it depends on how the kid is wired. I have three children, they're 3 distinct personalities. Some of them at 3 and four years old are ready to do a mutual fund. Others at 16, are still trying to think about the idea.

So, it depends on how they're wired and go with the way they're bent, to use an old phrase. And plug into that. And encourage them to see some of it. Some are a little more naturally ambitious with some of their goal setting for savings and so forth.

OWEN: You shouldn't try to prevent your children from making any mistakes. They should make mistakes. It's how we learn, unfortunately. You want to give them enough money to screw up, to buy some things they realize are mistakes. I think parents too often try to get in there in between and give their children too little room to learn responsibility, which unfortunately, you end up learning from your mistakes.

VELSHI: Well, that is fabulous. And I'll tell you, going back to his excellent point earlier, that most of what they're going to learn is what we model before them. We do a lot of financial counseling with adults that are struggling financially. And we say, to a point, share some of your mistakes with them, so that, hey, don't do what I do. Don't do stupid with zeroes on the end.

Look, momma was stressed out, bought something with the credit card she couldn't afford. Dad was stressed out, did this he shouldn't have done. Don't do that kind of thing. Share that with them, again age appropriate. We don't want to put too much stress in their wonderful little lives.

But it's fun to let them learn from where you stumbled.

RAMSEY: You don't want to trouble them with information that they can't do anything about. If you're in terrible terrible financial trouble, it's more than a 5-year-old can handle. There's nothing they can do to help.

KOPPEL: You're going to send them to their room screaming in horror. Dave and David, hold on there, we'll be right back with more of your called and e-mails right after the break. We will be right back.

(COMMERCIAL BREAK)

KOPPEL: Welcome back to "Dollar Signs." Want to make sure your child never has to worry about debt or finances? CNN financial correspondent Ali Velshi and I are taking your questions here in Atlanta. And we have two financial authors with us, David Owen, is with us in Newhaven, Connecticut and Dave Ramsey, is joining us from Nashville, Tennessee.

Gentlemen, I want to go to an e-mail from David in Florida, who writes "What do you mean when you write kids should be paid a commission? Do you pay them for chores they perform around the house? Are there ever things they do for which they are not paid?", an important point, "Financially, how often do you pay your children daily, weekly, monthly."

VELSHI: Too many Davids around here.

KOPPEL: I know.

VELSHI: I better sit this one out.

OWEN: When I say commissions, again what I mean, I'm trying to create a teachable moment, an emotional connection that's age appropriate. When a 4-year-old cleans their room, that's not an economic event, that's mom or dad picking up 80 percent of the toys, they pick up 20 percent, they get the 100 percent of the "'at a boys", and they get the dollar, and you wad that up and put it in a jar and say you just earned something.

But there's are a lot of things you do just because you're part of the family. Those are just chores we all do. I do some things helping my wife, my wife does some things helping me. The kids need to be involved in that. But when we don't do anything connected to the money, then the children don't have any idea what dad and mom do when they head off to work.

They need to understand that that's happening to cause money to happen. Work is a sure fired money making scheme.

RAMSEY: I like to separate allowance and chores. I think, you don't want to put a child in the position of say, I'm pretty flush at the moment, I'm not going to clean up my room this month, why don't you and mom spend my allowance on something nice for you.

I think kids need money to live. I think it's okay to have jobs that are outside normal bed making, doing the dishes, walking the dog. I think, there are some jobs that are just too horrible not to pay for. I think also kids need occasional opportunities to make money.

I think it's a mistake also to let kids work after school, for example. If there's any way the family can afford not to have all hands pitching in economically, then a child's time is better spent economically and in every other way, doing activities related to school.

VELSHI: Guys, I want to ask you a question. One of the things that happen when you hit 18 and go to college, your kids will be bombarded with credit card applications, most of them are going to take advantage of it. Thats where our bad credit habits are formed and that ends up staying with us through our 20's and 30's and it haunts us.

How do you stop your kids under the age of 18 -- how do you teach them about credit so that when they're finally given some credit, it doesn't hit them and cripple them for the rest of their financial life?

OWEN: We're really strict on this, 19 percent of the people, according to the American Bankrupcy Institute, one in 5 were, college age people. This credit card stuff on the campus is a cancer that is absolutely out of control.

We did, on my nationally syndicated talk radio show yesterday, two hours with callers and e-mailers talking about preparing to go to college. We told them, you've got to go back to the Nancy Reagan thing of just saying no.

RAMSEY: I think that's true. You can also innoculate your kids. Both my kids had debit cards starting when they were 12. They also have a strong sense of money that's their money. I think the kids who are most likely to gets in trouble with credit cards are the ones who never had money of their own, kept on very tight financial leashes by their parents and whose very rational response, whenever money came into their hands, was to spend it, quickly, on something, before a parent took it away.

KOPPEL: All I can say, another lesson people can learn is not necessarily to keep those credit card bills coming in and to try to take a loan and pay it off.

We have another David, believe it or not, on the phone. This time from Atlanta, with a question for our guests. David, go ahead.

CALLER: I just want to say thanks to CNN for doing this. This is a national crisis and more voices need to be raised about it. And you guys are right on. Minor differences about chores and allowances. I hear where you're both coming and I agree in part with both of you.

OWEN: I think we ought to all go out for a drink after this.

CALLER: I'll meet you at CNN center. Listen, I've got a piece of information, I think that you ought to put out in the public and you both ought to look at. There's a Web page called parentware.org, and a product there called family bank that's endorsed by the American Bankers Association Education Foundation. I just wondered if you guys have ever looked at any computer solutions for just the administration and management of allowances?

OWEN: As a matter of fact what I did with my kids was start a bank for them, the Bank of Dad. I decided after several years of doing the wrong thing, I think, what was missing for the kids was an incentive for them. What I did, to make a long story short, was pay them a very high rate of interest on their savings, 5 percent a month, which I decided, for a 5-year-old, that's -- you have to get their attention. Both my kids became savers overnight. My son, who was 5, came into my office with two handfuls of change he found in the furniture and the car, dumped it on my desk and credit this today.

I think, what parents tend to do, we will take this birthday check of yours and put interest the bank where it's going to get -- at the end of five years, you'll be able to buy a stick of gum. The kids know they will never see it again. Once my kids knew -- I told them if you save some of your money instead of spending it all or once, you will double or triple your allowance eventually. They both got it immediately. I think they were financially responsible from that point forward. My daughter is now 19.

KOPPEL: Can I ask you this real quick about that, kids also need to know, you can't just always save. There are expenses that mom and dad have. How do you teach them about that?

OWEN: I think they learn on their own. If these are their resources, these are my resources, I have an opportunity to save that pays me what I think is a reasonable return. I can make my own decisions, would I rather let me money charge up, which is what my son called it, or is this something I want to spend. That's the way grown-ups behave. Not all grown-ups are good at it but I think if kids gets practice early, they become good financially responsible adults.

VELSHI: David, did your kid grow up to be a loan shark?

OWEN: There are other ways to do it, too. The 401k plan is a model. I know a parent who offered a child to match a child dollar for dollar on savings toward a car, starting when she was 12. I think you have to adjust the incentive.

It's just like training wheels, like books with pictures. We have to scale it down to something that the kids can understand. To a 5-year-old, long-term isn't 20 years, it's, you know, a month, two months, three months.

RAMSEY: The beauty of the matching plan is it also works fabulously for -- the siblings catch on. We do we call it 401Dave at our house, oddly enough. We match for a cars. You don't get car at our house if you don't save money. But I will match everything you have. If you save zero, you get to ride the really nice bike you got two Christmases ago.

Otherwise -- the fun thing though, is with a 17 year old, almost 18 now, the 15 and 11-year-old are getting it, hey, I've got to do this, it worked for her, dad did match and the whole family dynamic kicks in as a teaching mechanism as well.

KOPPEL: We're going to have to wrap up unfortunately our David show this afternoon.

VELSHI: And me.

KOPPEL: And the Ali show.

OWEN: There are more Davids. There are Davids all the way down.

KOPPEL: Yes, I want too thank both of you Dave Ramsey and David Owen and, of course, our own Ali Velshi, all four joining us today on "Dollar Signs. thank you very much.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com





Saving>