Friday, September 28, 2012

TEACH YOUR CHILD THE “WHY” OF SAVING





We have a very low success rate of saving in the United States.  According to the Wall Street Journal, savings fell to 3.6 percent of personal income in the first quarter of this year.  We have to start teaching our children about saving when they are young.  The key is to make saving a habit and I start these lessons when a child is as young as 3 years-old.

Begin by explaining to your children that we save in order to get things we want in the future, but also to get things we will need in the future.  It's difficult to think about the future when you're young because most children think of the future as next week, after dinner or five minutes from now. A three year-old is not going to understand the concept of long-term saving, neither is a ten year-old.

In “Money Doesn't Grow on Trees” I explain that saving means putting something away in a safe place to be used, if necessary, at another time.  I suggest having your kids make a list of things you can save besides money.  Squirrels save nuts to eat during winter; most of us save empty bottles and cans for recycling.

In my Allowance System for Children it is a rule that they save some of their money for long-term.  With your help, they have to decide what they are saving for.  I like to suggest saving for college. A good savings plan begins with setting goals.  Talk to your children about what some of their longer term goals could be: a house, a car, other large-ticket items.  Explain that it takes planning and unless you think about these expensive items when you are younger, you probably won't have the money to obtain them later on.

Explain that a goal should be realistic and obtainable.  If you know that you and your children will never be able to save enough for a private college, don't set that as a goal.  The goal should be state school tuition but acknowledge the possibility that your child could get a scholarship to that private university.

Remember, at this point, they don't have to plan out their entire life but it is important to set aside money each month.  Financial planners recommend putting aside 10-15 percent  of one's net pay for savings.  The point is to create this habit of saving while the children are young and “pay yourself first”.  That means putting your own money aside each time your receive it for your savings goals.  Explain what college costs today and what they could be when they are actually ready to go.  Make sure they understand how prices rise.  They need to understand real budgets, real money issues and what it will take to save for real goals.

Monday, September 24, 2012

EVERYONE NEEDS GROCERIES


Aside from working, paying taxes and sleeping, everyone has to eat.  Dining out is a luxury.  Dining in is practical, healthy and financially sound.  This means grocery shopping is a part of life.  It also provides valuable life lessons for your children: budgeting, making smart choices and savvy shopping tips.

Do your homework.  Before you go shopping have your kids help you take an inventory of your groceries.  This will help you decide what needs replenishing and helps eliminate buying duplicate items.  Think of what meals you will be making during the week. Make a shopping list.

Take advantage of money-saving strategies.  Using coupons, enrolling in your grocery store's customer loyalty program and being aware of rebates will all save you a significant amount of money.  Make this a fun project: once a week hunt for coupons in your local newspaper with your kids.  Generally local newspapers have one day a week for coupon offers.  Keep in mind that just because you have a coupon for an item it's not a bargain if you don't need that item.  Check coupons against your shopping list. If you have a coupon for an item on your list put an asterisk next to that item to remind you.

Remember that store brands can save you quite a bit of money over regular-priced name brand items.  According to Consumer Reports, blind taste tests revealed that companies have made such great improvements in their private-label brands that it is often difficult to distinguish taste between the two. This can save an average of 30 percent off your grocery bill.

Common wisdom suggests eating a healthy snack before grocery shopping helps cut down on impulse buying.  Sticking to your list will also help with impulse buying.  Allow your child one healthy impulse buy such as a piece of fruit or some other nutritious snack and set a price limit.  This will help your child learn the value of using a choice wisely...it will also make your shopping trip just a little more pleasant!

Finally, pay attention to the check-out process.  Have your child watch as items are scanned to be sure you are being charged accurately.  If you feel an item has wrung up incorrectly, question the clerk.  If necessary ask for a manager to check the price on the shelf against the scanned price.  Some grocery stores will even give you the item for free, or some other reward for an incorrect scanner price.

Go green and put your kid in charge of bringing reusable shopping bags with you. This helps to reduce the energy and natural resources required to make paper or plastic grocery bags and keeps them out of landfills. Teach your kids a valuable ecology lesson by example.

Monday, September 17, 2012

TEENS AND JOBS




Now that kids are back in school, many teens will be thinking of getting a part-time job to help  supplement their allowance or to save for a car. Because of economic conditions, for some families,  there may be no choice but for the child to contribute to the household income if possible.  While I am a strong advocate of teens working a full-time summer job and even some weekend work during the school year, I don't believe that an after-school job is a good idea. Parents need to help your children balance work, school and time off.

Let's talk about the principles of of a budget but instead of money, apply them to time allocation.

Sleep is the foundation upon which our mental and physical health are built. Nobody gets enough sleep these days but teenagers especially need their sleep.  According to a National Sleep Foundation study on teens and sleep, teens need 8.5 to 9.25 hours a night.  This means that sleep time is budgeted as a “fixed” time allocation. School hours are also non-negotiable.  Your kids have to go to school.  They must not miss days or cut classes because of the demands of a job.

Homework, extracurricular activities and household responsibilities can be variable time allocations but they have to be counted realistically.  Make sure you budget enough time as these can't be shortchanged.

Time off means free time.  This is time just for the teen which doesn't have to be accounted for.  Everyone deserves a certain amount of “down time” whether it's time to take a bike ride or read a teen magazine.  How the time is used is up to the teen but it must be included in the budget.

If you add all this required time it doesn't leave much left for an after-school job.

Successfully managing their school time should be the main focus for our teens because the more education our children complete, the higher their lifetime average earnings will be.  This is true for both boys and girls but boys are more vulnerable.  According to the Manhattan Institute for Policy Research, 72 percent of girls compared to only 65 percent of boys graduate high school.

We know that work is good and healthy but it is not always good for our teens. If your teen is going work, be involved with your teen in the job choice. Be careful not to take on their responsibilities but it is up to you to discuss safety, training, location and schedule.  The National Institute for Occupational Safety and Health reported that an average of 231,000 teenagers under the age of 18 are injured at work each year.

If your child does work, it is up to you to monitor your child's work environment and to keep tabs on school work.  Confirm that grades don't suffer because your child is too tired from working and keep an eye on attendance.  School comes first.

Thursday, September 13, 2012

COLLEGE KIDS AND CREDIT



College is a busy time for young adults. With part-time jobs, research projects, classes and dating most college students are more concerned with their GPAs than their credit scores.  It's pretty easy to make some really dumb mistakes that can harm their all-important credit score which can cost money later on when it's time to get a car loan or mortgage.

In 2010 the landmark federal legislation that overhauled the credit card industry went to college.  The laws began reaching into college campuses to protect students from “unfair or deceptive” practices by issuers.  The legislation proscribes unique protections for the young consumers who are such an attractive market for the card companies.  According to Sallie Mae, about 42 percent of college students have a credit card.

Credit card companies can still market cards on campus but they can no longer offer gimmicks or “come-ons” such as t-shirts, coffee mugs or even concert tickets just for filling out a credit application.  If a student is younger than 21, it is now tougher to get a credit card but it is not impossible.  “If they want to get a credit card, they're still finding ways to get credit cards,” said John Ulzheimer, President of consumer education at SmartCredit.com.

Even with the new laws students can still get into trouble with their credit.  According to Quicken Loans, there are two areas that cause these kids to have lower scores: high balances and credit inquiries.  Most students, and many adults, don't know that just applying for new cards can damage a credit score.

Long before your kid has gotten to college you should have been teaching them about finances and preparing them to be out in the world.  If not, it's never too late.  Students should not think of credit as cash.  They should know the difference between a debit and a credit card.

Parents may turn to the plastic for everything in order to rack up airline miles or other rewards but hopefully you have been careful to explain that you have to have the cash to pay that bill at the end of the month.  Paying the monthly balance in full avoids interest and builds solid credit for the future. Credit cards are not “magic” money.

Credit card abuse and high credit utilization are not the only ways to damage your credit score.  Even students who don't have a credit card can get in trouble.  Many college students who graduate are stunned to find that their credit scores have been hurt by unpaid utility bills.

They all move out of an apartment they rented off campus with friends and no one pays the bill.  The utility bill goes into collection and the student named on the bill take a credit report hit of 50 points or more. It's easy for a bill to go unattended to and go unpaid.  It could even be an honest mistake or misunderstanding but there is still a negative impact.

Send your kids off to college with the knowledge and tools they're going to need to get them through their adult financial life.

Monday, September 10, 2012

BIRTHDAY PARTY CRAZY


Remember when kid's birthday parties featured “Pin the Tail on the Donkey”, ice cream and birthday cake?  The guests were a few classmates and the birthday kid's grandparents.  At some point everyone would gather around the cake and sing “Happy Birthday”. Gifts would include a car model or some doll clothes.  Hula hoops were pretty cool.

Those days are gone.  We have entered the age of “Extreme” birthday parties.  “Pin the Tail on the Donkey” has been replaced with a live donkey.  The birthday cake has to be a creation worthy of a Food Network competition and follows a catered meal.

The pressure and expense of the “birthday circuit” have become impossible.  In addition to the soccer games and music lessons, the already over-busy kids have invitations to these enormous parties many weekends out of the school year.

According to family therapist Bill Doherty, one Minnesota family rented a bar for a princess-themed party.  Guests were picked up in limos.  The adults wore formal attire.  There was live music and even  champagne for the adults.

The birthday “princess” was turning 4!

Parents don't want their child to feel less important than their classmates and so the cycle continues.  The key here is to adhere to your own value system.  It is great to mark events such as birthdays but it is important to keep perspective.  As with most of our milestones, use this as a teachable moment.

When my daughter was at Dalton she gave a wonderful pair of mittens to one of her friends as a birthday gift only to have the kid come to my daughter's birthday and give her an expensive stereo system.  We called the mom, thanked her and returned the gift.  The next day I called the Class Mother and told her there was going to be a new gift rule: gifts had to be no more than $12.00.

Many children have three or four birthday parties each year: one for classmates, one for nuclear family, one for family friends and one at school.  It would be OK to cut this in half.  There can be one party for youngsters and one for adults.  Keep the list short.  Keep the party simple. The goal should be for the birthday child to enjoy spending time with friends and family.

Tuesday, September 4, 2012

KEEP THOSE GRADES UP!


In today's economic environment, higher property taxes and cost of living, frozen wages and withered home equity have put the crunch on middle-income parents.  Many no longer have the savings or even borrowing power to keep up with the ever-rising cost of education.

A family making $75,000 a year might have to contribute $10,000 a year toward the cost of of college before qualifying for need-based aid.  For a family with $150,000 in income the contribution jumps to $35,000 a year or more.  The need for student loans has skyrocketed.

Universities like Tulane are offering sizable amounts of aid based mostly on academic promise in order to bridge the loss of brighter students to less-expensive public colleges.  According to an Education Department study, the percentage of students receiving merit aid since 1995 has grown to significantly rival the number of students with need-based aid.

Merit aid is one of the most promising answers in college financing now.  Students can be attracted to schools for any number of emotional reasons including the look of the campus, having a friend also attending or even the climate.  Then the parents have to figure out how/if they can pay for it.  Remember your budget.

Put financial consideration high on your list when making the college “wish list”.  Be sure to include schools which offer substantial merit aid.  Look at schools that will want you and be willing to help out.  The University of Miami, for example, awards merit scholarships averaging more than $23,000 a year to nearly one quarter of it's freshmen.  Tulane offers similar statistics.

Good grades are not only necessary in order for your child to get accepted by the college of choice, but to help pay for it.  It is important to note that once accepted, the student has to continue to get good grades and meet set standards in order to renew the merit-based aid.