A Little Financial Literacy in January Will Bring a Peaceful Holiday Season Next December
January 11th, 2012 - Category: Financial Literacy, Money
We hope you all enjoyed the holiday season with your families. We certainly did. The holidays are perfect for enjoying family time together. They provide opportunities for giving service and teaching our children about faith, charity, patience and generosity. They can also be the source of stress, headaches, overspending, disappointment and unnecessary debt. Which was the case for you?
Now is the time to plan ahead for this year’s gift-giving season so that it can be enjoyed worry-free and debt-free. January is ideal for spending a little time with our children discussing the holidays and planning now to save enough throughout the year to be able to provide gifts for those on their gift-giving list. (We would do well to do the same). Doing so is part of a skill set to be found in “Financial Literacy.”
What exactly is “financial literacy?” It is a set of skills and knowledge that allows an individual to make informed and effective decisions through their understanding of money. The economic principles you and your child need to know to make informed fiscal decisions and the understanding of various banking and budgetary products and procedures that affect your financial well-being all are part of “financial literacy.”
Instilling good, fundamental financial skills in our children will have a profound impact on their future lives. Kids need to understand that the money we spend and the money they are allowed to spend is money that is earned; it is income. Too many children see mom or dad swipe a card and walk out of the store with goods without realizing that money was withdrawn from the account in the case of a debit or, that money is owed in the case of a credit card purchase. It is important that they understand one works in order to earn money and then that income is to be managed well in order to provide for the needs of the family.
Teaching children basic money management skills, including saving, sharing and spending should be part of a financial literacy legacy we give to them. Simple lessons in investing (even by means of a savings account) and credit can help them understand at an early age that money can either serve you or hold you hostage. Such knowledge prepares them to make critical financial decisions. Find ways to teach them about compound interest; time is on their side. (Future blogs will provide examples and website links you may want to use with your children).
Albert Einstein said, “The eighth wonder of the world is compound interest.” Here’s a video clip that might surprise you. Would you rather have a million dollars right now or would like to take the end result of doubling a penny each day for 31 days?
A Penny a Day for 31 Days or 1 Million Right Now Today?
As parents, it pays to always be on the lookout for a “teachable moment.” When our kids are with us when we use the ATM or are in line at the grocery store, explain that the money you’re getting or spending is money you earned. Try inventing little systems and games that help them to understand money and its uses. The beauty of www.myjobchart.com/ is not only how it teaches kids of any age the value of work, it also provides actual experience in “earning” something that they can save, share and spend.
We hope this new year is the beginning of many wonderful and happy times for you and your family and that, together, we can raise up a generation of money savvy consumers; young people who know the value of work and the value of saving for their futures.
Should Children Use Their Allowance for “Special Occasions”?
June 20th, 2011 - Category: Money, Uncategorized
Father’s Day was yesterday. And if you’re like me, you’ve received all kinds of cards, ties, tools, and other manly gifts. At first, your wife undoubtedly purchased your presents. Once children understood the meaning of the holiday, they drew pictures for you. But now, with your child a little bit older, and making an allowance, what are you getting and who is paying for it?
Seems problematic, doesn’t it? You and your children determine what chores they will complete. You decide what items they will purchase with the money they earn and which things you’re willing to pay for. But in all the time you spent discussing allowances and expenses, you probably never factored in gifts.
But just look at this list of possible gifts your child might need to cough up some cash for:
-Birthdays (for family and friends)
-Father’s Day
-Mother’s Day
-Christmas (for mom, dad, siblings, grandparents, and friends)
Ouch! It’s difficult for us as adults to spend money on wedding gifts and shower presents. So is it fair to expect a child to pay for special occasions? Sure, they’ll be expected to as adults. But do you want their efforts at completing their chores to be the means whereby they show their love to friends and family right now?
Alright, I’ll be the one to say it: it isn’t fair. Then again, neither is paying $5 to $20 for your child’s best friend’s birthday party. Especially if you have more than one child and they have more than one best friend.
So is there a comfortable solution? Not really. But here are some great ideas for making this a learning experience (even if you have to fork out some cash).
Limit gifts to $5. Offer to give your child $5 for those special occasions. If they choose to spend more, let them spend their own money. A decent gift can be purchased or made and you’ll hardly notice the five bucks from your wallet. What you may notice is that your child becomes more aware of how much things cost and look for bargains.
Offer them extra chores. You don’t want to be a scrooge, but you can’t just hand out money either. Let them learn what you already know…extra expenses require extra work on your part. Make sure they understand the difference between regular chores and allowance and the chance to make some extra money. Extra is extra.
Keep a box of options. Have you ever picked up random items at a garage sale, or held on to toys, clothes, and gifts your children have outgrown? Well, if they’re in good condition, you should keep a box of those extra items to be used as gifts for friends or younger siblings. If your children need a gift for someone, allow them to rummage through box and see if anything will work. No one needs to know you’re in the habit of re-gifting. Have your child pay you what you paid for the item. (If it’s a hand-me-down, then obviously it would be free).
Help your children think of “Free” gifts. With enough thought, your children can up with some pretty good ideas. And no, we’re not talking about an “I Owe You” booklet either. You could teach your daughter to sew and have her make a blanket out of dad’s favorite, old shirts. An older brother could spend some time in the garage turning a simple piece of wood into a sling-shot for a younger brother. Sometimes, homemade items make the best gifts.
And of course our best advice is…avoid special occasions altogether. No, we’re kidding. But this is going to be a learning experience for both you and your children. As you work together, you can come up with solutions that will work without being too unfair to any one party.
Good luck and happy…whatever the occasion is.
How to Prepare Your Kids Financially for Summer Break
May 17th, 2011 - Category: Money
It’s almost that time of year again. The time when your kids are home from school for three whole months. While you may enjoy having your kids around more, it could end up being exceptionally expensive for you.
With all that time off, your kids are much more likely to:
- Go to the movies (3 or 4 times)
- Hit the local swimming pool
- Play a few games at an arcade
- Find time to visit an amusement park
And don’t forget the family trips you’ve got planned. It can really add up. But unless you want to listen to your children whine about being bored, it’s probably a good idea to talk to your children about what you can and can’t afford.
Here are some ideas for making that family discussion go a little bit more smoothly.
Be honest about your circumstances. Children can be more understanding than you may expect. And telling children now what you’re able to afford saves you from being badgered later down the road.
Discuss your summer plans. If you are planning a family vacation, let your children know. That way, they can save their chore money for souvenirs and you won’t have those last minute arguments when they want to buy a bumper sticker or stuffed animal. Giving them an idea of how much things cost would be a good idea as well.
Offer them alternatives. Instead of a night at the movie theater, you could borrow the neighbor’s projector and create an outdoor theater on the side of the house. Something out of the ordinary may satisfy their need to “do something” and keep you (and them) from spending a lot of money on entertainment.
Encourage summer jobs. If your child is old enough you should encourage your children to make their own money. If they start now, they might be able to secure a few lawn mowing jobs or get a summer job as a lifeguard. This will teach your children a few great financial lessons…and keep them occupied for the summer.
Give them extra chores so they can make extra money. You know you have projects that have been waiting months to get done – like cleaning out the closets. Knowing your children will want extra cash, give them an opportunity to earn it rather than just giving in to their requests.
Ask them to help you save for the summer. If you put a plan in place during the year, you could have a penny jar filled with possibilities for the summer. Teaching your children to save (even change) during the year will show them the benefits of being money-savvy.
Your summer should be just as enjoyable as your kids’ summer. Talking with your children before those summer holidays begin is a great way to make sure you are working together.
Enjoy your break!
Teaching Kids About Money and How Money Works
May 17th, 2010 - Category: Money
My senior year of college I took a finance class where I learned about money and how it works. It wasn’t until after this class that I realized how much I wish I had been able to take a class like this in High School. Teaching kids about money and how money works is so important.
Knowing the value of a dollar can empower kids to do great things and helps them appreciate what they have now and prepare for what they must do in order to have it still in the future when Mom and Dad are not around to provide for them anymore. So what is the best way to teach kids about money? How do we help them understand that money does not grow on trees and that all they enjoy now is a result of hard work and smart financing?
What is a Bank Account?
One of the first things children should know is how a bank account works. It’s easy to think that a plastic card is a ticket to ice cream and toys, but it’s important to properly educate your children on how a debit card works. They need to know that it is linked to an actual bank account that gets depleted and has to be continually added to through working and receiving pay. They also need to clearly understand the difference between a credit card and a debit card.
There are some good bank account board games out there to help teach children how bank accounts work.
Another good way to help children understand this is to set up a mock bank account for them where they keep track of incoming and outgoing money. You can use your chore chart to assign a weekly/monthly allowance. They get a “check” to deposit into “your” bank account and they receive a statement. When they want to purchase something, they can write a check to you for money or for a trip to the store. This way, they learn to balance a checkbook and they also learn the process of working for what they desire.
The Importance of Saving
After you have set up a virtual bank account for your kids, stress to them the importance of saving. One of the biggest problems in society is that we do not save money for a rainy day. When hard times come (and they always do) it’s important to have some sort of nest tucked away in order to maintain the essentials like food, clothing and any permanent bills you may have.
A good rule of thumb is to save 10% of all you earn. Teach children that as they save a small portion of each pay check (allowance) it will continue to grow and grow. Consider offering them a percentage increase on saved funds. Make it a sizable percent to re-enforce that saving money actually makes your money grow exponentially.
The Power of Investing
Once they’ve caught the vision of saving and letting their money work FOR them, introduce to them the concept of investing money in things that can help their money grow even faster. You should make the decision on what age to introduce your child to the stock market and the idea of investing as each child’s understanding is different. However, the sooner they understand this the better.
There are a ton of online “mock” stock markets where you can invest funds in certain stocks and see how well you do with investing in certain companies. You could encourage your children to try these out. Also, talk to them about investing in material assets and businesses.
If they love reading comics, encourage them to invest in buying books in bulk so they can rent them out to their friends. They’re friends can rent them from you for a cheaper price than buying them new and once you’ve read it once you don’t need it anymore anyway so they wont have a problem returning it so that you can rent it to the next person. teach them that investing in a business can help them earn recurring revenue.