One of the best and nicest things that we as parents can do for our children is to teach them about money. I don't mean things like balancing a checkbook. I'm talking about fiscal responsibility.
Things like how to earn. How to save. How to buy. How to give. How to invest.
A while back, I wrote in this post about a story that suggested kids today expect that they'll be big wage earners, earning over six figures. I hope its true! But, without knowing how to handle their finances, they'll end up living paycheck to paycheck, no matter what their level of income.
Here are a couple of real quick ideas posted at Free Money Finance on starting the teaching the process with your kids.
Related posts on Money and Credit
Teaching a son about borrowing
Financial Illiterates
Wednesday, March 12
Kids and Cash
Friday, July 20
Day Five The Frugal Parent
The Frugal Parent, this could be the toughest to become in our quest to live frugality defined. From clothing to toys, from ice cream and friends, and from sports to needing a car, our kids put a lot of pressure on us and our purse strings.
One way to make it easier on both you and your kids is to begin setting an example of frugality while they're young. Doing so will help your kids get away from the materialistic mentallity. While young, kids are prompted into materialism by television adds and the examples that they see around them. It should be part of the parents job to protect their kids from suffering from the dreaded and expensive "I want it and need it now" syndrome. This is a learned behavior, however it can be inherited.
Here are a couple of ideas that might help you on your path of living frugal defined while parenting.
-Shop for kids clothes at the second hand store. Start doing this early in your childs life. You might be able to get away with not having to purchase new, name brand until the kid hits 10 or 12 years old. The money that you save by shopping at the second hand store while they're young will help subsidize the financing of the name brand clothes when their older!
-Put a little money away every payday for college. It doesn't have to be a lot, just so long as you set aside something. $15 per week, every week will amount to nearly $18,000 (depending on interest earned, the type of account, etc.) by the time they turn 18 years old. Certainly a good start!
-Buy pre-owned electronics like the gameboy, ps2, etc., whenever you possibly can! Sure, the kids will want the latest and greatest, but let their friends parents buy it, and let the kid visit the friends house! I know its not quite the same as having your own, but the idea is to live within our means, not to keep up with the neighbors. If it is a MUST HAVE item, let the kid(s) work, save and EARN it.
-Minimize TV time. This does a couple of things. First, it keeps the advertisers away from your children. Second, it reduces your electric bill. Third, you won't need to subscribe to an expensive cable package. Fourth, and most importantly, it give you and your kids some time to really be together. Whether your doing household chores or just sitting next to each other while each of you read a book, having this time to interact is very important and missing in a lot of kids routines.
-Go on family outings that don't cost anything! A trip to the amusement park sure is fun, but it is expensive too! Instead, for the cost of a few gallons of gas, take a ride into the country and go on a hike. Find a pond or stream someplace and look for frogs or salamanders. Pack a lunch, food always taste better when you eat outside. Kids love to do this, especially looking for frogs and things around ponds and streams! Very low on the cost scale, and very high on the doing something special scale!
-Read and apply what you've learned from the Series Frugal posted this week on Money and Credit:
The Frugal Shopper The Frugal Home Owner Frugal Banking Frugal Motorist
-Regularly Visit the following blogs to learn more about frugal living;
Frugal For Life Frugal Living Frugal Simplicity Frugal Village Mighty Bargain Hunter
The Frugal Law Student The Secret to Saving Money Money and Credit
Thanks for reading and please comment if you found something that helped you
Thursday, July 19
Day Four Frugal Motorist
Becoming a frugal motorist can be difficult if your not one already. Just jumpin' in the car and driving around for something to do will be a hard habit to break! You'll need to find a replacement habit that is frugal, like reading used books, or walking around!
Tire pressure is one of the things a frugal motorist is going to monitor. Proper tire pressure will not only will it increase the life of your tires, it will dramatically improve your gas mileage.
Frugal motorists plan their trips, they don't just drive to the store, then back home, and then run out to hot dog joint, then back home to pick up the kid to bring to a friends house. Planning your trips, even the short ones, will save time, money and wear and tear on your vehicle.
And, speaking of wheels, specialty shops are where you should shop for wheels. If there is a place in your area that does nothing but sell, mount and balance tires, you'll get a better deal on the cost of the tires than you would if you went to your favorite general service center.
The same is true for oil changes and mufflers. It's less expensive to go to the quick lube place, or the muffler guy. Think of it like this. You wouldn't see a corporate lawyer if you needed to have a deed drawn up, nor would you see a dentist if your foot was bothering you. So, why go to a generalist when your tires need to be replaced?
Drive a steady speed whenever possible. Use cruise control if you have it (and when its safe, don't use it driving through the middle of town!). Doing so will help conserve gasoline.
Shop around for the best priced gasoline, and fill up your gas tank. Don't wait until you're on empty to get gas, because if you HAVE to buy gas because you're on 'E', you won't have the luxury of shopping for the best price in town. The best price around where I live is almost 14 miles away! Some would say that whatever I'm saving in the cost of gas, I'm spending on wear, tear and the drive to buy the gas. I disagree because I lump all of my trips into one, and besides, the drive to get the gas is into another state that doesn't charge a gas tax of .15 cents per gallon. It's like getting a gallon of gas for free!
Car pool if you can, and use public transportation if you can, especially for getting back and forth to work. If you could reduce your cost (gas, maintenance, tires, wear and tear) to get to and from work, it would be almost like getting a raise wouldn't it? If it costs $5 per day in total expense to get to and from work if you drive your car vs. a buck a day to car pool, that's like an $80 dollar per month raise (use this to pay down high rate credit cards, or add it to your retirement savings).
Tomorrow- The Frugal Parent
Sunday, July 15
Frugal- What Is?
fru·gal [froo-guhl]
–adjective
1. economical in use or expenditure; prudently saving or sparing; not wasteful: a frugal manager.
2. entailing little expense; requiring few resources; meager; scanty: a frugal meal.
Webster's Dictionary Frugal defined. That's what we'll strive for when it comes to money and credit. Expending money economically, making sure that we're getting the most bang for the buck!
Prudently saving so that we're not doing more than what we can afford while working towards our savings goals.
Not wasteful or expending money needlessly or wastefully.
A frugal manager knows how not to be wasteful, how to get the most bang for the buck, and how to pursue savings goals without impeding cash flow.
It doesn't make cents, but there are some who save more than what they should. How could this be? They put money aside while paying minimum credit card payments. The build up of the savings accounts sure looks good, but it is costing more than what it is saving. Its not a frugal manager who puts money away in savings earning 4 or 5 percent interest while paying 15-20 percent interest on credit card balances. The frugal manager would forgo the savings until the high rate credit cards where paid, perhaps making a minimum payment into their savings and a maximum payment on the credit card.
I especially like Websters definition #2. By 'being' this definition, you can become definition #1. It becomes almost easy
to be a frugal manager if you entail little expense and require few resources. With little expense and little resource requirement, your savings goals will be easily realized and obtained.
If you've read "The Millionaire Next Door", then you know that living below your means is really the answer and ultimate definition of Frugal.
Thursday, June 28
Financial Dieting
Wednesday, June 27
The B Word
Many of us think of the 'B' word (Budget, what were you thinking?) much the same way that we do about dieting. We know that it would be good for us, but it's a pain to get started. Then, when we finally do get started, we don't stick with it very long.
A good diet will help you stay healthy. A good budget will help you stay financially healthy. In order to succeed, you need a success plan. This is what a budget can be for you; a financial success plan.
So, you think you're ready for a financial diet? If so, here's what you need to do to get started.
First you need to figure out how much money is coming in the door every month by adding up all of your take home pay. This is your income after taxes and any other deductions that are taken out of your paycheck by your employer. This amount is also known as your 'net pay'.
If you are paid weekly, multiply your take home pay by 52 and then divide by 12 to get your monthly income amount. If you're paid every other week, then multiply your take home pay by 26 and divide by 12.
Do not include any bonuses, gifts, occasional overtime, or any other infrequent source of income. Right now, you're interested in what regularly comes in the door every month.
Next, you need to determine your regular monthly expenses. For those expenses that you might pay only once or twice a year, break them down into monthly installments. For example, you might pay $400 twice a year for your car insurance. Take $800 and divide it by 12. Use $66 as your monthly car insurance expense.
For your housing expense, be sure to include your entire mortgage payment (principal, interest, tax and insurance).
Set aside an additional amount for your home maintenance allowance (assuming of course that you're not renting). This amount should equal about 1% of the purchase price of your home. If you paid $100,000 for your home, then you might consider setting aside $1000 per year, or $84.00 per month for this expense item.
You should also think about establishing an emergency fund. Advisers recommend saving 5% of your take home pay. So if you take home $3000 per month, you may want to set aside $150 per month in your emergency fund. Remember, don't touch your emergency fund unless it really is an emergency!
Now, compare your results. If your expenses are more than your take home pay, there's a problem. It's best to address this problem immediately and head on now; it's probably not going to go away on its own. What can you do about it?
Look where you can cut back Some of your expenses are fixed meaning that the amount doesn't change every week or month. Other expenses are discretionary, meaning that you are in control of how much is spent in these areas. Look hard at your discretionary spending first.
Then, invest some time thinking about your wants and needs. The discretionary items that you simply cannot go without are your needs. What's left are your wants. For example; do you need the 1000 channel cable package, or is this something that you just want because its nice to have? This wants list is where you'll start looking to make cuts in your discretionary spending.
There are many budgeting software packages available on the market. In a coming post, I'll name a few that you might be interested in looking at.
In summary, you need to first get a handle on where you are before you can decide on how to get where you want to go. These steps will help you identify your cash flow situation and where you are today financially.
Be sure to visit Blogging Away Debt who is hosting the first Carnival of Personal Finance in July for more posts like these!
Wednesday, June 6
Creditworthiness and the Executive Office
I received my daily news briefing from ACA International yesterday morning, which included this article. I'm not sure if this is a good or bad thing! It's encouraging to see that the Financial Literacy program is making some headway!
More Americans Know Creditworthiness Impacts APR Than Can Name Vice President of United States
Published: Thursday, May 31, 2007
Public opinion survey data shows that nearly 80 percent of Americans know their credit history impacts the annual percentage rate (APR) for financing a new car or truck, while 69 percent of Americans report they can identify Dick Cheney as the vice president of the United States.
"Americans may need to bone up on civics, but they understand that their credit track record impacts the APR at which they can finance a new car or truck," said Eric Hoffman, spokesman for AWARE.
Besides a borrower's credit history, a number of variables determine a borrower's APR, including prevailing rates, the amount financed, the terms of the financing contract, the down payment amount, the vehicle make and model, competition, market conditions and special offers.
According to AWARE, several factors may be contributing to consumers' knowledge of the impact their credit history has on an APR quote. "One possible explanation is the increase in higher–quality financial literacy efforts across the country," Hoffman said. "Community based organizations, financial services companies, and government agencies alike are encouraging people to focus on improving their credit, and to check it on a regular basis. This has been made even easier with the availability of free credit reports in recent years."
Tuesday, June 5
Financial Illiterates
During a recent interview, Robert Kiyosaki, author of Rich Dad, Poor Dad , was asked, "What's the most challenging issue in your industry?" He said "Financial illiteracy. Schools don't teach us about money."
What's the one thing that people misunderstand about you? "That I sincerely care -- and worry -- about the financial future of millions of Americans (especially the baby boomers) who are not prepared for retirement. And the need, worldwide, for financial education."
Not a huge revelation, but noteworthy when a self-made millionaire and two time high school failure talks about his own generation this way. Who is teaching our kids? The baby boomer crowd? Is that a good or not so good thought? How are our kids supposed to prosper if they aren't taught? Where are they learning financial managements skills?
Here's a selfish thought; these kids are OUR future! Without financial literacy, what's in store for us?
I've said it before, and I'll say it again. Implore your schools, churches and community groups to embark upon a financial literacy program for your kids (and perhaps you too!). Contact your teachers, school superintendents, school board directors and ask them what they are doing to add to your kids financial education.
It's a whole lot more than balancing a checkbook. Who does that now anyway? Today its all about controlled borrowing, cash management, retirement investment vehicles, and making money work for you (read Rich Dad, Poor Dad for more on this) instead of the other way around.
By teaching our kids how to be wealthy, we are protecting them, and us!
Have you heard of the National Strategy for Financial Literacy? This is a federal program that endeavors to improve financial education for all Americans.
Taking Ownership of the Future: The National Strategy for Financial Literacy
(Strategy) is the game plan for improving financial education in
America. The Strategy was called for by the Fair and Accurate Credit
Transactions (FACT) Act of 2003, which also directed the Treasury
Department to lead a group of 19 other federal agencies, officially
called the Financial Literacy and Education Commission (Commission),
in an effort to help Americans learn more about their money. In
addition, the Treasury Department is issuing this
Quick ReferenceGuide
, which offers readers a brief summary of the Strategy's tacticsand calls to action, as well as a list of financial education resources.
Tuesday, May 22
Family Screwing
"what should i do? I took a car loan out for my brother in law and now I have to ask him for the money each month. I took a cell phone out for my sister and brother in law and I signed the contract over to them. But now, they never sent it in. I got a bill for 1500. It was an 80.00 a month plan and they never paid it since Oct. 3 2006. My brother in law took two credit cards out in my name and never paid them. I'm in debt for 40,000. What should I do?"
Good question, but here's a better one; what on earth were you thinking?
Unless you're independently wealthy where time and money aren't an issue for you, you should never, never EVER obligate yourself to repay bills and debts for somebody else, family or otherwise! Why? Duh! If you think you know better than the lenders who have turned them down time and again, then you deserve to be humbled this way.
I'm all about helping someone out, but am a firm believer that if you insist on feeding a man, then you must also teach him how to fish. If you aren't willing to take on this responsibility, then you have no place to complain about getting stuck with the bill. Moreover, your judgement (or lack thereof) suggests that you should engage the services of someone, perhaps a debt counselor, that can teach you how to handle your finances.
Sorry to read of your plight, but frankly, you should have known better. Yes, some of us feel some sort of obligation for the financial well being of our siblings, but unless you can afford to pay the bill yourself, don't count on your sis and her man to change their irresponsible ways...
Wednesday, May 16
Teaching a son about borrowing
Just read this post about "Discussing money and credit with you children" by Marc Chase over at My Credit Group.
Marc writes about a dad that was paying his 15 year old son a $20 weekly allowance. This dad thought that he would teach his son about borrowing money and paying interest and late fees.
I think dad was on to something. At the very least, he was taking steps to ensure that his son learned something about using money.
In a previous post here on Money and Credit, I talked a bit about our responsibility to help our kids reach their finacial goals. It was nice to read about this dad that was teaching his kid about being responsible with borrowed money.
