How To Help Your Children With Money Management Skills

How To Help Your Children With Money Management SkillsMoney management is a crucial part of your overall financial success. The truth of the matter is that this is something you cannot simply read off a book. You need to actually roll up your sleeves and get down to work. It is important that you experience how it is to actually manage real money. This is one of the best ways to be better at it when tough situations come along.

The ability to manage finances is one of the best things you can ever teach your children. It becomes a valuable asset as they prepare to move out and live life on their own. Regardless if it is just for college or getting married, they will eventually move out. As you ponder having an empty nest, you also start to think about your children’s money decisions in life.

As a parent, it is not your duty to shadow them all the days of your life trying to protect them from the dangers of this world. In fact, you need to acknowledge that they will have to go through those difficult times on their own. The best thing you can do while they are still living with you is to prepare them in standing up to their own two feet.

In all these, money management would play a crucial part in deciding their financial future. It could very well be the difference between sleeping soundly at night or a knock on your door from your kids asking for gas money. It can also be the dividing line between a pristine credit score and a bad one simply because you cosigned a loan with your child.

If you are worried about how to proceed in handing down money management skills to your children, here are a few starting points to consider.

Let them put together a budget

Having a household budget is one of the main foundations of great money management skills. That being said, you can have your children start off with a few budgets of their own. You can assign a specific item to them such as the grocery, utilities, or any other part of your actual house budget. This gives them the chance to work on an actual budget.

It would also help them if you get to discuss other areas of your budget. Let them know how to set aside money not only for the needs at present but for those that will be used in the future. This can be anywhere from your emergency fund, your retirement fund, or even their college fund. Giving them these information allows them to appreciate how comprehensive a budget should be.

Get them to pitch into the budget

This would work out great if your children have a job or took on some side hustle while they stay with you. This is not new as there are almost 44 million Americans with a side hustle according to CNN. As much as you love them and want them to have a good life, you need to teach them how to manage their finances. They have to learn how to be responsible with their income and not just splurge anytime they want.

They can choose which part of the budget they want to help out or you can assign them to one. It can be food, some of the utilities at home or just a general amount that you can add to the total budget. The bottomline is that they get used to putting aside a certain portion of their income for expenses at home. This is a habit that will be most useful when they are already living all on their own.

Help them with launch money

One thing you can do while they are helping you with the household budget and taking in some money management skills is set it aside for launch money. This is to be given to them as soon as they move out and start living on their own. Whatever amount they contribute to the budget, you just put it in a savings account or in an investment.

This exercise is able to help you do two things. For one, you get them to experience how it is to manage their money every month. The other, and much more important is you help them save money they can use when they live on their own. They can use it as a starting point in building up their reserve funds in cases of emergency. This will put you at ease knowing they have access to money when push comes to shove.

Here is a video explaining some other ways to get started with an emergency fund:

Encourage a frugal lifestyle

It helps to live below your means as it affords you the luxury of having enough financial wiggle room to move funds around. You would already know this benefit and the challenge is letting your children see the value in it. This is a little more challenging as modern interpretations of having a frugal lifestyle seems to not be socially acceptable. In fact, Fox Business shares that consumer spending is less than the increase in income this May 2017.

One of the best ways to get your children to see the beauty of a frugal lifestyle is to be the perfect example of it. Show them that it is not about dumpster diving but actually being smart with the way you spend money. It involves a lot of creativity to be able to stretch your budget and you can infuse fun in it as well. You can start by learning how to prepare a weekly meal and start cooking for your family. You can even begin to explore how bulk purchasing with coupons can help you save a lot on food cost. The bottomline is to show them that a frugal lifestyle works and it can be a fun financial exercise.

Let them connect present actions to future results

Money management puts them in the thick of things as they plan for what they need at present. However, you need to condition their thinking that it is not all about their present finances. What they do now will affect their financial goals in life. It might be a little difficult for them to visualize this early on in their journey but this is where you come in to help.

You are in a perfect position to help them understand how properly managing their finances at present can help their future plans. Your house could be a great start especially if you are well on your way to paying off your mortgage loan. Explain to them how money management played a role as you saved up for the downpayment on the house. If at all possible, show them how you were able to manage your finances in a way that you were able to save. For the monthly payment, show them what you have to give up so you can meet your mortgage bill.

Open line of communication

As your children prepare to live on their own, it would be great to keep your communication line open. This helps your children tap into your wealth of financial experience. As this happens, they are able to make better and informed money decisions. On top of this, you get to stay in touch with your kids and know how they are doing.

Money management is a skill your children need to learn before they start living off on their own. As parents, you need to help them get the knowledge they need to be comfortable in managing their own finances.

Money Management Tips From A RockStar: What Not To Do

troubled consumer with question marks on top of his headMoney management is a skill learned over time. The foundation for an effective and efficient management of consumer money is largely dependent on a sound financial learning. The consumer would need to understand the basics and apply them in everyday lives. It will be a challenge for an American family to start planning for a mortgage when neither of the parents know the value of a high credit score.

The same goes for money management, consumers need to know the basics of income and expense, budgeting and other money matters to be able to handle the finances of the whole household. Even children should learn money management skills but will only be able to do so if the adults in the house understand it themselves. Understanding is not enough as practicing money management and learning from the experience matters as well.

A lot of people stand to benefit from proper observance of money management in their lives. It results to finances being well balanced and maintained, assets and investments carefully planned and financial risks managed. Regular consumers all the way to popular people are practicing and learning from daily financial management opportunities. Mistakes allow them to learn and correct future decisions as well.

How to manage your money like a rockstar aka the wrong way

U.S. Secretary of Labor Thomas E. Perez announced through a DOL.gov news release there is a proposal to increase the U.S. federal minimum wage to $10.10. An increase in income can be a much needed relief for most consumers having to make do with minimum wage earnings. Being able to stretch that budget to cover living expenses and other loan payments has already become an art form for a lot of people.

But there are people still clueless on how to properly approach money management. They are not limited to one end of the spectrum. They could be minimum to below minimum wage earners to high rollers and rich people. There are still consumers who are in the dark on how to properly handle their finances. And as rockstars are stereotyped to throw caution in the wind for everything they do, here are some rockstar examples of how not to manage your finances.

Prioritize lifestyle upgrade

Making sure that you spend every last minute of your paycheck in sustaining an unsustainable lifestyle spending. Purchasing items just because it is what’s expected of a person in your stature. Buying a new SUV because everyone else in your neighborhood seems to have the newest model. Using tax refunds or commission checks in buying clubhouse memberships because everyone in the office spends their weekends in that exclusive and pricey clubhouse.

Sticking to this notion that upgrading your lifestyle is of utmost importance will put your finances in shambles. As some minimalists would say, it is not so much about the standard of living but more of the quality of living. If the well-maintained old model SUV can still bring you and your family to the beach, that is more important than having to cut down on family trips because of the big monthly payments for the auto loan.

Spend on junk – as long as it will make you look cool

Getting those diamond-studded utensils from a country whose name no one can seem to pronounce or purchasing that platinum covered phone protector is a top priority. These items increase your social status and allows you to come off as all rich and powerful. These frivolous items communicate affluence in every sense of the word.

Junk is junk. You can cover it with all the gold in the world but it will never change the item and what it represents. And holding on to such items will not increase your worth as a person. Getting a gold plated spoon might be different if it falls on your lap but pursuing in buying one with all your earnings just to look cool with the people around you is a classic case of improper money management.

Never worry about tomorrow

Tomorrow can worry about itself so live in the moment. Spend everything today for tomorrow can bring in a new set of income to burn. We do not know how long we have on Earth so it is better to enjoy life to the fullest. Buy expensive clothes, eat at fancy restaurants, splurge on drinks and fast cars. Live today and forget about tomorrow.

This is one of the problem why at present, U.S.debt amount is increasing. Consumers need to properly observe sound money management skills and prepare for tomorrow. If money is coming in at big amount everyday, it does not automatically mean that you can spend it left and right. You will never know how long you have to live but you can plan for the future of your family. Looking at insurance and investments seriously is a great start in preparing or whatever tomorrow brings.

There will be retirement money

There are rockstar legends that are earning huge sums of money even after they have passed away. If this is something possible, then retirement should be a piece of cake. Putting aside money for retirement is a joke meant to limit how you enjoy life to the fullest.

Plan under that assumption that you need more and you will have more. Retirement is a real things as can be attested b baby boomers who are at the right age to retire around this time. Be serious in saving up for retirement because it will dictate if you can retire when you want to or retire when you need to. The latter limits your choices because you might be forced to work for far more longer than you want.

Real life millionaire rockstars

Not all rockstars are terrible in handling money. In fact there are quite a few of them who has lived off handsomely in pursuing their craft and love for the industry. According to Celebritynetworth.com, here are the top rockstar earners:

  • Paul McCartney’s net worth is estimated at $1.2 billion
  • John Lennon’s net worth is estimated at $800 million.
  • Bono’s net worth is estimated at $600 million.
  • Elton John’s net worth is estimated at $440 million.
  • George Harrison’s net worth is estimated at $400 million.
  • Jimmy Buffett’s net worth is estimated at 400 million.
  • Mick Jagger’s net worth is estimated at $360 million

You do not have to be a rockstar to earn millions of dollars. In fact, one of the things that you can learn from proper money management is how much you need to enjoy life. You need to list down all your living expenses and at the very least be able to pay for them with your current income. The next agenda is making sure that you have an emergency fund and retirement fund that is steadily earning a nice sum for you when you need it. Saving up for college expenses of your children is also a good idea considering all the problems with student loans this past few years.

Money management is a great practice in ensuring that you do not blow off all your hard work in such a short amount of time. There are a handful of money management tips you can look into as they can guide you and remind you of your financial targets and goals in life.

Actively Teaching Kids About Financial Literacy Early

Parents talking to their childFinancial literacy is paramount in money management. This is a skill some learn by trial and error and some take self-improvement classes to increase their knowledge about the topic. And then there are corporate institutions investing time and effort imparting their expertise on finances. And then there are those that see that value of managing finances and see a greater value in teaching kids how to be financially literate.

Bluemountaineagle.com reported employees of Bank of Eastern Oregon are reaching out to elementary students to teach financial literacy in a fun and exciting way. This is in part of American Bankers Association Education Foundation’s program Teach Children to Save. This activity was also activated in conjunction with  Teach Children to Save Day.

Financial literacy from parents to kids

As employees from Prairie City and John Day branches made their rounds in Prairie City Elementary School and Humbolt Elementary School to reach out to the kids, they also offered some helpful tips to for parents in encouraging their children to take on an active finance driven mind frame:

Making it fun.

At their age, kids respond to fun activities so injecting a few games and prizes as you go along teaching financial literacy will yield a lot of positive attitude. Opening a bank account and putting in money regularly is a great start. It could be a good practice if they can write their own name on the form, start practicing their signature and prepare a stamp so they know they did a good job.

Going to the bank could be a fun activity for the kids as well. Introduce them to all the people from the security guard to the person handling the account. This will make them feel comfortable in visiting the bank again in the future. Make plans for ice cream or milkshakes after the bank visit.

Story time

Kids still love getting stories before bedtime. Use this as a great opportunity to inject some financial literacy in the story. Talk about animals who save up for winter or fictional people who saved up to buy that horse for the knight. Whatever it is, it has to lead to a common point that saving can be fun and they can start at their young age.

It is a great way as well to let them know how money works. Explain where money comes from and how your wallet is not a magic container that produces money every time you open it or how ATM is not a generous machine that gives money whenever people ask for some.

Here is a video about kids learning financial literacy early on in life:

Dogs and Finances

There are financial lessons in almost every aspect of our lives that kids can learn from. Even lazy people have techniques on budgeting. When buying a dog for your kids, there are also some takeaways we can learn from the experience of buying to owning to maintaining a dog.

Sacbee.com enumerated some of these learnings that we can all benefit from to prevent our pets from chewing up our budget.

The expenses in getting a dog are:

  • Veterinary visits for injections and shots

  • Dog food, snacks and chew toys

  • Training

  • Equipment like beds and kennels

  • Other unexpected costs

Here is how to address these costs and apply them in our everyday budgeting skills:

Prevention is better than cure

As you take your pet to the veterinarian to have the necessary injections and shots for health reasons, we can also take this mind frame and apply it in our own health agenda. Rather than saving up dollars and foregoing health related visits, it is better to have take hospital trips for consultation in a doctor’s office rather than entering from the emergency room.

It is better to maintain a regular doctor’s appointment to check your health and track any creeping situations that can be addressed early on. This will not only save you thousands of dollars for unexpected medical emergencies, it will also help prolong your life.

Buying in bulk

Regularly making trips to the groceries to buy small packs of dog food and other items can be draining dollars from your budget which can be readily addressed. Purchasing in bulk  can help save you precious resources such as time and money.

This starts with careful planning. You need to carefully assess your situation and know what you need to buy in bulk. An internal audit of the things you have will prove useful in this undertaking. Once you know what you have, you can then infer what you need.

Buying in bulk saves you time and money at the same time. It limits the time you have to spend driving to and from the grocery. You can use this time and devote it to other chores or income generating hobbies. Another thing is that when you compute the prices between the same quantity of items, buying in bulk is less costly compared to buying in small packs.

Insurance is beneficial

There are unforeseen incidents in life. No matter how much we stay on budget, these incidents can throw us off track. This is where insurance can help.  A health insurance can foot the bill of medical emergencies we might meet along the way. Without it, we might see ourselves dipping into savings, retirement funds and even charging it to credit.

Invest in insurance instruments to assist us in getting through different life events. It will not only help you keep your savings and retirement fund but also give you peace of mind in knowing you are covered. This relieves the stress over our shoulders in trying to over think the what ifs.

Budget Killers

As much as we want to learn financial literacy, there are points we might overlook when budgeting that lessens the impact of our efforts. There are simple ways to budget but there are also items that can make it harder than it seems.

  • Wants. These are the items that we splurge on sometimes as a reward or a therapy for a bad day. These can even be a regular item we overlook as a costly habit such as coffee, drinks or that dessert at the end of a meal we like. Taking a look at our habits even before starting a budget can help you pinpoint specific areas of improvement.
  • Entertainment. In financial literacy, budgeting should not be boring. As much as you are trying to make it fun for kids, it should be fun for you as well. It doesn’t mean you have to pass up the opportunity to see a great movie in the big screen but you don’t have to go to the movies every time there is a new film. There are alternative options like watching them online which might turn out much less expensive. You can even invite friends over and make your own popcorn.
  • Under utilization. There might be magazine subscriptions we barely have any use for or have too many cable channels that we can’t possibly watch them all. Maybe there are tools in the shed that are just collecting dust. These are some perfect examples of under utilizing items in your life.

You can let go of those subscriptions you don’t even read or check if it is much cheaper to order online copies. Cut down on cable channels to save a few dollars each month. Stick to those that you watch and what your family usually tunes into. Those tools in your shed can have better use than just a dust collector. You can either sell them or put them to good use by building some DIY projects you can sell to neighbors or online.

Learning How To Be Financially Responsible While Pursuing Debt Relief

woman stressed about moneyBeing financially responsible is not a choice that you need to make. It is already a necessity for you to learn. A lot of us found out too late that being responsible with money could have saved us from debt problems. But like all lessons, there is always a chance to redeem ourselves and rise from the financial slump that we have been wading in for years.

As you look around the debt that you have to clean up, you will begin to wonder about how you can sort through all your credit accounts while learning financial responsibility. Well getting out of debt by itself is learning a portion of the lesson already. As you work your way out of your debt situation, you can be financially responsible too.

A month or so ago, we published an article about how debt can teach you to save. In that article, we narrated how low income workers can get a loan but instead of using it, the money will be placed in a savings account. Since it is classified as a loan, the borrower had to pay it back. If they borrowed $500, they will have to pay back the same amount of money. At the end of the process, they would have saved $1,000 and achieved a good payment behavior that would give them a good credit score. That will make them eligible to apply for a mortgage or other loans that can help them grow their personal net worth.

The original story published on NYTimes.com simply tells us that debt, when used properly, can result in something good.

The same is true when you are trying to get out of debt.

How can you achieve both financial responsibility and debt freedom

It is possible for you to be financially responsible as you work your way out of your debt situation. But before we dwell into that, let us define what financial responsibility is first.

According to the definition provided by WiseGeek.com, financial responsibility is all about money management. It is how you take care of your money and the other assets that you have accumulated in such a way that it becomes productive. This productivity has to benefit not just the one who owns the finances but the family living in the same household or community too. You are also considered to be financially responsible when you think not just of the needs of today but also the needs of tomorrow.

Simply put, being responsible with your finances is about making sure that you know your resources through and through so you only make smart decisions about your money.

So how does that relate to your pursuit of debt freedom? It helps you achieve debt relief and it makes sure that you will never land in another debt crisis again. Being financially broke is one thing. Landing in the same situation twice is something else.

The good news is, you can be financially responsible as you try to get yourself out of debt. You just have to make sure that you implement these 4 tips.

  • Find out the root cause of the debt. The first thing that you have to do is to find out the root cause of the credit situation that you are in. The responsible way of dealing with any problem is to go to the source and solve it. If you only look at the difficulties that you are having now, there may be a chance that your problem will happen again. That is like blindly paying off the debt and not doing anything about your overspending habits.

  • Choose your debt relief program wisely. You may want the easy way out but sometimes, that is not how you will learn your lesson. Choose your debt solution based on two things. The first is your financial capabilities. That will give you an idea of how much you can afford to contribute towards your debts on a monthly basis. The second is the type of debts that you owe. There are debts that cannot be solved by some programs. For instance, student loans cannot be solved by bankruptcy.

  • Commit to follow the rules. The reason why you have to go through the first two tips is because you want a realistic debt solution that you can commit to. If you go through a program that is unrealistic, the chances of you completing it will be low. But even if you make the right choice on the type of program that you will follow, it will still not be a walk in the park. That is why you need to commit to follow the rules.

  • Change the habits that got you in debt. Lastly, as you pay off your debts, you need to make sure that you will identify the habits that landed you in that financial situation. For instance, if it is your overspending, you need to correct that. If it is a low income, then you need to earn more.

What happens as you do all of these is that you set up a realistic debt solution that will force you to implement the habits that will turn you into a financially responsible person. That way, you can solve your current debt situation and at the same time, make sure that you will never fall into the same pit again.

Habits you need to develop to be more responsible with money

According to a 2012 study done by the New York Life Kitchen Table Pulse, 57% of consumers were planning on reducing their debt load in that year. 50% said they wanted to save more. The data published on NewYorkLife.com shows that Americans are starting to become financially responsible with their finances. This is caused by the fear that they have for the uncertainties of their financial future.

Fast forward to 2014 and it seems like we have forgotten that commitment. Recent data from the Federal Bank of New York revealed that consumer debt continue to rise. It is evident that we need to seriously look at the habits that will protect our finances from another crisis.

As we mentioned earlier, you need to change the bad habits and replace them with good ones. To help you with that, here is a list of the habits that will help make you more financially responsible.

  • Invest in the future. Another way of saying this is to pay yourself first. Obviously, that means you have to contribute to your retirement fund first.

  • Say no to purchases that you do not need. This is not just saying no to the things that you cannot afford. Even if you can afford something, it is sometimes wiser to choose to save the money instead of buying something.

  • Know the difference between a want and a need. Prioritize the need before you give in to the want.

  • Use a budget always. In addition to that, you need to learn how to check that budget every now and then to check if it is still applicable in your life.

  • Stop looking at what your neighbors have. Sometimes, we purchase things just because other people have them. If you do not need it, do not spend for it.

On a last note, here is an important truth that you need to learn. The absence of debt does not indicate that you are financially responsible. At the same time, the presence of debt does not mean you are irresponsible with money. You can have debt and as long as you are responsible with credit management, you can keep debt crisis at bay.

As you are learning how to be financially responsible, you need to do the same for your kids. Make sure that you impart the same lessons to them. Here is a video of a Clinical Psychologist explaining how parents can teach their kids how to be better money managers.