We teach our kids many valuable lessons in their formative years – how to share, right from wrong, respect for others, etc. – but, the one lesson most parents don’t teach early enough is the value of money.
As children grow older, they eventually learn about money with or without our help. But, teaching our children about money, financial literacy, early in life sets them up for a lifelong legacy. Financial expert, author, founder of Youthpreneur, an organization the encourages an entrepreneurial spirit in children, and former member of the President’s Advisory Council on Financial Literacy says, “The more control we have over our money, the less control it will have over you.”
Lechter also explains how important it is to teach children financial literacy because they see us (parents) spend money, but they don’t understand the concept of creating it, keeping it or investing it. “Kids don’t understand the relevance of earning, saving and spending,” she notes.
However, if parents make a conscious effort to teach their kids about money, they are much more likely to value it. By giving children a financial education early, beginning as early as four years old, we can help them learn to be responsible with their cash. We will also do our children and ourselves a huge favor. We will not create and reinforce the fallacy that we are human ATMs (the ole money grows on trees misnomer), setting us both up for friction, frustration and oftentimes failure later in life.
With this said, here are a few ways to get started.
1. Make children work for their money – Most children can do some small chores as early as two years old, like putting their plates in the sink, helping you pick up their toys, etc. By the time they are about four years old, you can begin giving them a small allowance for doing these behaviors. You shouldn’t give them money for doing routine behaviors like brushing their teeth or going to bed on time. They should earn allowance for doing things that are above and beyond normal daily behaviors. Determining the amount to give them is totally up to you. Typically, the recommendation for children starting out is about $4 per week.
2. Teach children to save – Children can learn the concept of saving at a very young age. Let’s say Johnny wants a Lego set that costs $12 and they earn $4 per week doing their chores. Explain to him that it will take three weeks of saving to earn enough money to buy the Lego set. This also begins teaching basic math skills (i.e. 3 weeks X $4 = $12). When they get a little older, you can throw in the lesson about Uncle Sam, the infamous TAX MAN. But for now, keep it simple.
Note: Most young children don’t quite grasp the whole savings concept. You will need to remind them and encourage them often. One great way to begin getting this concept across is with a savings jar (make it clear so they can see the money). Each week when they get their allowance have them put the money in the jar. Tell them how much money they now have in the jar and how many more weeks they have to save to get that Lego set. When they get older, you can encourage them to start putting this money in the bank.
3. Teach children to respect property – We can teach our children a lot by encouraging them to value their own property as well as the property of others. If children grow up respecting the things around them, they will learn respect for money as well.
With a younger child, the best way to teach them this lesson is by taking away a toy or other item if they mistreat it. As children get older, it should be the, “If you break it, you buy it,” philosophy. The best way to teach a child to respect property, his or hers or someone else’s, is to make them pay for (at least part of) replacing it if they intentionally break it.
4. Set a good example – Children emulate their parents. So, if they see you saving, they will save too. Set a good example by showing them that you save for things you want too. For example, have your own money jar to save up for the family summer vacation or something as simple as the family Saturday movie theater outing.
As parents, you should also be open about finances in your household. Talk about money and your financial goals in front of your kids. You must use your common sense about this though. You don’t want to worry your children by discussing serious financial troubles in front of them. But, do talk to them about financial matters – directly and in a manner that they can easily understand.
5. Make learning about money fun – Kids will be more interested in learning about money if you make it fun. A great way to do this is to set a family savings goal for something, e.g. a family vacation or a weekend outing, and begin saving for it. Make a chart and display it somewhere the entire family can see it, like on the refrigerator or somewhere in the kitchen. As you set money aside, for example, for your family vacation fund, have the children participate by coloring in the chart or writing in the new number total of the money set aside, showing the increased savings and how much closer the family is to its goal.
As your children get older, you will need to come up with new ways to teach them about money and finances. But, by beginning early, you will make this more advanced later lesson easier, as well as helping them to avoid the pitfalls of bad financial habits.
Summer is just around the corner and most of us have begun thinking about and possibly are already planning for our summer family vacations.
In an ideal world, we’d already have a fully funded vacation savings account to pay for our annual family getaway. However, the reality is that most of us wait until the last minute to begin planning and paying for our summer vacation.
So, here are a few fast track tips to help you save for your summer trip:
1. Start with a budget – discuss and determine upfront how much you want to spend on your family vacation. Have a specific figure in mind. This should include plane tickets or gas if you’re driving, hotel prices and an estimate of cost for meals, admission tickets for theme parks, museums, etc. Then, total it all up. If this figure sends you into a coronary arrest…just kidding…then cut back until you and your bank account are comfortable. The last thing you want to do is to go into debt for a vacation. If money is tight, consider taking a couple of weekend getaways instead of one big dream trip.
2. Prioritize now – are there some items currently in your budget that you can omit or would be willing to sacrifice now for a fun vacation later? Can you downgrade a plan, such as your TV cable or satellite plan or go out to eat less? A typical family with kids younger than 6 spends an average of $240 each month on restaurant meals, according to the National Restaurant Association.
So, go through your current household expenses and cut out some nonessentials or superfluous expenses. Then take that extra money and put it away in a separate vacation savings account.
3. Have a garage sale – a garage sale is a great way to earn some vacation cash quickly. Run an ad in the local paper to attract a crowd and post easy-to-read signs around your neighborhood. Get the entire family involved in this – make this a fun family affair. Have the kids go through their rooms, toy boxes, etc. and tell them whatever proceeds are collected from their items will be put towards their souvenirs. This is also a fun spring-cleaning project. It’s a win-win.
4. Use your tax refund now – if you typically get a sizeable income tax refund from the IRS every year, you are probably having too much money withheld from your paycheck. If this is the case, fill out a new W-4 form and adjust your withholding so that it’s fairly close to what you owe each year. Then begin transferring that extra money into your dedicated vacation savings account. If you still get a refund, stash that away as well.
5. Let your credit cards help pay for your vacation – in the months prior to your vacation, use your credit cards with reward points for everything your normally pay for with cash, debit card or check. Use these accumulated points towards plane tickets, hotels, rental cars and gift cards for restaurants. But, make sure to pay off the balance on your card in full every month or you’re defeating the purpose of a debt-free vacation.
6. Get everyone involved in the saving excitement – chart your savings with a graph, much like you see with fundraisers, on a large poster board. Track your weekly and monthly progress with colorful markers. You can even reward yourself and your family for reaching certain goals, e.g. go out for ice cream when you’ve reach a savings milestone.
In a nutshell, make a realistic plan for your family summer vacation, save for your plan and make the process a fun family affair! By doing this, you will be creating special memories instead of debt.
With tax day looming, it’s a great time to review your current retirement savings strategies and make any changes that are necessary in an effort to keep your plan on track for long-term financial security. This time of year is also a perfect time to start an IRA if you haven’t done so already.
The IRS allows contributions to an IRA up to April 15, 2014 for the 2013 tax year.
There are two types of IRAs available: a traditional IRA and a Roth IRA. The principal difference between the two is the tax treatment of contributions and distributions or withdrawals.
The traditional IRA may allow a tax deduction based on your contribution, depending on your income level. Earnings on this type of account compound on a tax-deferred basis. In other words, distributions are taxable at the time of withdrawal at the then-current income tax rates.
The Roth IRA doesn’t allow a deduction for contributions. However, earnings and qualified withdrawals are tax-free.
When deciding whether a traditional IRA or a Roth IRA is the right choice for you, you need to weigh the immediate benefit of the tax deduction and earnings that compound on a tax-deferred basis against tax-free distributions in retirement.
If you need the tax deduction to help lower your tax bill this year – and you qualify for it – then you may want to opt for the traditional IRA.
To qualify for the full annual IRA deduction in 2013, you must either: 1. Not be eligible to participate in a company retirement plan, or 2. If you are eligible, you must have an adjusted gross income of $59,000 or less for singles, or $95,000 or less for married couples filing jointly. If you are not eligible for a company plan but your spouse is, your traditional IRA contribution is fully deductible as long as your combined gross income does not exceed $178,000.
If you are covered by a retirement plan at work, your 2013 deduction will be reduced if your modified adjusted gross income (MAGI) is:
Between $95,000 and $115,000 for a married couple filing a joint return for the 2013 tax year.
Between $59,000 and $69,000 for a single individual or head of the household for the 2013 tax year.
You must also consider the tax bracket you think you will be at retirement. If you expect your tax bracket to drop considerably and you qualify for the deduction, the traditional IRA may be the better choice.
If, based on the scenarios above, you don’t qualify for the deduction and/or you expect that your tax bracket will not be significantly lower; a Roth IRA may be the better option.
You should maximize your IRS allowable contributions if financially possible. The maximum is $5,500 per individual, plus an additional $1,000 annually if you are aged 50 and older for 2013. Note, those amounts are per individual not per IRA.
Not everyone can afford to maximize his/her annual IRA contribution, especially if you are already contributing to an employer retirement plan. If your workplace plan offers an employer’s matching contribution, then this “free” money may be more of an incentive to than the annual IRA deduction. If this is the case, it may make more sense to maximize the employer matched plan first and then try to maximize your contributions to your IRA.
The important takeaway from this information is that you shouldn’t hesitate to use the remaining time between now and April 15 to contribute or start an IRA. The ability for you to live comfortably in retirement depends on it.
Note: The above article is intended to provide generalized financial information for educational purposes only. It is not intended to give personalized tax, investment, legal or other business or professional advice. Before taking any action, you should always seek the assistance of a professional.
With the growth of e-commerce, consumer online presence and email communication, scammers have also adapted to leverage this medium to con people into providing personal and financial information. One of the most common mechanisms is “phishing.”
Phishing is a fraudulent attempt to steal information, such as usernames, passwords, financial details, etc. by masquerading as a trustworthy entity. Some examples of this would include someone pretending to be social media website, a bank site, an auction site, an online payment processor or an IT administrator – the most popular culprits.
Phishing is typically done through email. The email has the look and feel of the legitimate sender. Phishing emails almost always instruct the recipient to click on a link that is contained in the email. This is a fake link that takes you to a fake website where the scammer – cybercriminal gathers your personal information.
>What to look for in a phishing email:
>Requests for personal information.
>A Sense of urgency – making the recipient believe that something has happened that requires their immediate attention.
>Incorrect spelling and bad grammar.
>Links in email.
>Threats – telling you that your security has been compromised and that you must act immediately to correct it.
>Spoofing websites or companies – scam artists use graphics in the email that appear to be connected with legitimate websites, taking you to phony sites or legitimate-looking pop-up windows. They also use web addresses that resemble names of well-known companies but are slightly altered.
Phishing is big business. As the world gets ready for the XXII Olympic Games in Sochi, Russia, so are the professional scammers. On the heels of the recent payments breach at Target Corp., cybercriminals have already begun targeting the customers affected by the breach, sending fraudulent emails, pretending to act on Target’s behalf, attempting to get personal information.
Quite unfortunately, in a digital world, the safest practice is to trust no one. The Internet is a wonderful too. But we must use it wisely – think before you click and keep in mind:
>No reputable company or organization will ask for your confidential information via email.
>Never click on a link in an email that asks you to give your personal information.
>Never reply to a popup message to provide information.
>Review you accounts (banking, credit cards, etc.) regularly.
>Always check the authenticity of the website.
>Never provide personal or confidential information to “http” links. Look for “https” links and the SSL lock symbol in the browser.
If you suspect that you have received a phishing email, contact the real company and report it to antiphishing.com, the Federal Trade Commission at email@example.com or the Internet Fraud Complaint Center of the FBI website.
Getting Your Fiscal House in Order in 2014
By now, most of you diehard “resolutionists” have committed your 2014 goals to paper. You are full of confidence or at least a hopeful expectation that this year will be the year you really get your life in order. You’ve vowed not to repeat past mistakes and are ready to take the bull, the new year, by the horns.
Before the year gets away from you, as they always seem to do, and you find some of your goals falling by the wayside, again, as they always seem to do, you may want to make sure you get your fiscal house in order first. After all, most people’s resolutions consistently revolve around two things: health and money.
Even the federal government has a New Year’s Resolutions site with links of references to help you stay on track. Not too surprisingly, three of the 13 most popular resolutions are money focused – getting a job, saving money and managing debt.
So before you get caught up in life and your best New Year’s intentions fade away with the glitter of the holiday season, consider the following financial checklist for the new year.
Meet with a financial advisor. If you haven’t had a discussion with a financial advisor in some time, or ever, now is the time to do so. It’s never too early or too late to begin planning for your future/retirement. If you already have a financial advisor it is a good idea to meet with him or her at least once a year to monitor your progress and evaluate your plan.
Look at your taxes. If you are one of the many April 15 procrastinators this could be the year to change that. While you are waiting on your W-2s, 1099s, etc., you can begin getting your receipts in order and/or schedule an appointment with your tax preparer. Why not take the stress off tax season this year and get your taxes done early, especially if you are getting a refund. Please note that the earliest day the IRS will be processing 2013 individual tax returns this year is Jan. 31. This date is slightly later than usual due to the government shutdown last fall.
Develop or review your budget. If you haven’t created a budget, create one, or if you haven’t looked at your budget in some time, it’s time to update it. Things change (having a baby, elimination of a debt, an increase in household utilities, etc.) and consequently this affects your budget. This is also great time to re-evaluate your expenses. Cancel subscriptions or services you never use and contact companies that your do business with regularly (e.g. your cable company) to see if they can offer you a better rate. Increase deductibles on your automobile, home or medical insurance, if possible, to lower your monthly premiums.
Update your will. Like your budget, any changes, good or bad (e.g. divorce), can affect your will. If you don’t have a will, now is a good time to draft one.
Check your credit report. With identity theft on the rise, it’s very wise to monitor your credit. At annualcreditreport.com, you can get a free credit report from each of the three credit reporting agencies once a year.
Evaluate your retirement situation (ties in with ‘Meet with a financial advisor’). If you haven’t begun putting away money for retirement, there is no time better than now to start. Most financial experts will tell you to set aside 10 to 15 percent of your annual income each year for retirement. However, if you can’t manage that, put away as much as you can. Remember, saving something is better than nothing.
If you are on target with your yearly retirement contributions, it’s a great time to review your retirement accounts and strategies. If possible, according to financial experts, savers should increase their retirement contributions by 1 percent each year. You should continue this increase every year as long as you can until you are saving the maximum allowed by the IRS.
As is the case when making any major changes in your life, Rome was not built in a day. However, if you will commit to at least one of these recommendations, your 2014 finances are sure to see an improvement over 2013.
Even in this electronic age, it is still important to balance and reconcile your personal and business bank accounts. For many, balancing and reconciling their accounts is still something akin to having a root canal. But today, with online banking and smartphone apps, this seemingly outmoded exercise is easier than ever before and believe it or not, just as necessary.
Before we begin this discussion, I think it’s important to differentiate between the terms balance and reconcile. These two terms are oftentimes confusing and mistakenly used interchangeably, especially by consumers who don’t use paper checks or a check register to record their transactions.
Balancing – Balancing a check book shows how much money is available in your account at any given time. To balance an account, simply add all your new deposits to the beginning balance of the account and then subtract from that subtotal checks you’ve written, ATM and debit card transactions, cash withdrawals and bank fees. This process will determine your account balance on that given date.
Reconciling – Reconciling an account compares the bank’s records to your records – your check register. Your register should contain a running total of all of your transactions (deposits, checks, ATMs and debit card transactions, ACH debits and credits, fees, etc.). By performing this task on a routine basis you can quickly discover bank errors and most importantly, unauthorized activity.
Reconciling is completed by adding all of the deposits the bank has not yet credited to the bank’s balance and then subtracting all the payments, withdrawals and bank fees the bank has not cleared from that subtotal, confirming that the bank’s records match your check register. This should be done at least monthly – online banking allows the ability and ease to perform this procedure more frequently.
In the old days, these two tasks required paper and pencil and some mathematical calculations. Today, with the advent of technology, this process can easily be completed in minutes.
The benefits of taking the time to complete these two steps, balancing and reconciling, although much less time-consuming today, are still just as important.
By not reviewing your accounts on a monthly basis, first and foremost, you are not being a good steward of your finances. You are not keeping track of the money you spend or where you are spending it. Keeping an eye on your finances helps you maintain a healthy budget, avoiding overspending, overdrafts and incurring unnecessary and costly bank fees.
Many people are reluctant to critically examine their spending habits. The initial examination can oftentimes be painful. However, the end result, especially if this periodic looksee changes harmful spending patterns, is well worth the effort. In addition, there’s just as much value in simply making sure the math is correct.
Another very important reason to go through the balancing-reconciling-reviewing exercise is to spot financial management mistakes and fraudulent activity. This helps you recognize any unfamiliar transactions and unwanted recurring deductions. The sooner you are aware of this unauthorized activity, the sooner you and your bank can take the necessary actions and precautions.
In the end, taking a few minutes to balance, reconcile and review your bank accounts is time well spent. After all, it’s your hard-earned money!
For all intents and purposes another Florida summer is gone. The kids have all gone back to school, the lifeguard stands have been neatly tucked away for another beach going season, our vacations are but fond memories and most of us are counting the days until autumn rears its temperate head.
We typically welcome this period of change, eagerly anticipating a temporary break from the hot, humid weather for which Florida is so famous. Although our seasonal transition lags a tad behind our more northern neighbors, we can still begin to set the stage, our life for all the wonderfully renewing experiences that another season brings.
Add a Few Accents
A new season is a great time to spruce up our surroundings. Adding a few inexpensive touches to our home can make a cheerful impact on our lives – colorful pillows for sofas, new drapes, area rugs or possibly painting an accent wall a bolder, richer color will add warmth to our home.
Bring the Outside In
As the temperature cools and the days shorten, we will be spending more time inside. But we can bring a little nature inside with fresh cut flowers, branches, berries, pinecones and leaves, or even a few dried gourds, adding a lovely autumn touch to our home.
Clean Out and Stow Away
Rather than pack up all our summer gear and warm weather apparel, let’s determine what we want to retain for next year and what we don’t. We can cut down on clutter and storage by making this decision now. Let’s recycle, donate, or have a yard sale to eliminate unwanted stuff, and pack the rest away.
Freshen Up the Kitchen
It’s a perfect time to clean out our pantry, cabinets and refrigerator. Throw out all old and expired items and assess what we will need for the cooler, more comfort food cooking months ahead. In addition to weeding out and stocking up, we shouldn’t forget to give our kitchen appliances a thorough checkup to make sure they are running efficiently. This is a perfect time to vacuum the condenser coils of the refrigerator, clean the oven and eliminate the grease buildup in the oven’s vent system.
Revisit the Bucket List
As another calendar year wanes, let’s review our life list or set out to make one. Let’s jot down our goals, dreams and ambitions, and begin plotting the steps to get there.
Start Cooking Again
Nothing gives our house a homier feel, especially when it’s cooler outside, than the aroma of a delicious home-cooked meal. Let’s break out our cookbooks. Let’s be adventurous and experiment with some new recipes. Let’s start sizzling, sautéing and baking again!
Maintain a Healthy Heart
Now that the lazy days of summer are over, it’s time to light the fire within us. Let’s move our activity level up a notch. Let’s run farther or walk more briskly or add more reps to our workout. Let’s keep in good physical shape over the coming winter months and save ourselves the disappointment of wishing we had when the beach and pool going weather returns once again.
Stay In Touch
As the days grow shorter and cooler, let’s reduce the tendency to shut ourselves in by actively engaging our network of family and friends in our everyday life to maintain a healthy support system. Let’s pull out our calendar and make some dates! Let’s meet for a latte, lunch or gather for a Sunday potluck dinner, and celebrate the beauty of a new season with those we care about most!
From my house to yours, “Happy Autumn!”