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Why Talk About Money With Your Children?

Why is it important to talk about money with our children? As a society, we’ve come to understand that staying silent on the topics of sex and drugs can often lead to negative or unwanted consequences. The same is true for money.

Starting the money conversation early, and having it often, in an age-appropriate way helps prepare our children for managing their own money wisely.

Stay silent about it and you risk leaving your children open to the pitches of TV adverts and peer pressure. Much better for you to take conscious control over what they are learning rather than the bombardment of advertising or negative portrayal in films and the media.

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Theresa Harezlak, a financial adviser with Savant Capital Management and a mother of two, says the biggest money mistake that parents make is silence.

“Every time my kids go outside I tell them to be careful crossing the roads and do not talk to strangers, but we never talk about money. In reality”, she says, “the chances of her kids being abducted are very low, but the chances of her children using money are certain”.


Theresa Harezlak

Staying silent about money and you risk leaving your children open to the pitches of TV, adverts and peer pressure. Much better for you to take conscious control over what they are learning rather than the bombardment of advertising or negative portrayal in films and the media.

For example think of how many films or TV shows have the arch villain as some kind of reclusive billionaire. In fact how many positive examples of rich people can you call to mind?

In my view, too many parents don’t talk about money with their kids at all. Others skirt topics they don’t know much about, like investing and debt. Parents are the main source of money information for children, but 74% of parents are reluctant to discuss family finances with their kids, according to the 2014 T. Rowe Price Parents, Kids, and Money Survey. That’s a big shame, because ignorance about money can set up your kids to make bad decisions — and eventually pass those bad habits on to your grandchildren.

The solution: Make financial literacy a family value

In her book, Do I Look Like an ATM?: A Parent’s Guide to Raising Financially Responsible African American Children, Sabrina Lamb details “the business of your family household.” Lamb, says all families should work together on five financial topics: learning, earning, saving, investing, and donating time or funds to causes you value. She recommends a daily diet of business news, occasional meetings between the kids, your bank, or other financial advisors, and support of your older kids’ entrepreneurial goals. This might be a bit idealistic for many but using the news or an online article as a stimulus for a conversation about money could be a good start.

Even if money is tight, don’t stress about it in silence.

When parents are worried about money but are not communicating their financial situation, children pick up on the anxiety and associate it broadly with finances. Rather than learning money lessons from their parent’s mistakes or particular situation, children instead learn that money is ‘stressful’ and ‘bad’.

A 2013 Study by Cambridge University for the Money Advice Service revealed that our money values and habits are formed in childhood often before the age of 7. If a child is growing up with the programming that money is stressful and bad what are the chances that they will ever make any as an adult?

This is why the primary goal behind The Financial Fairy Tales books is to help spread positive, empowering messages about money to children and counteract the negative bias they may be exposed to elsewhere.

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Why Pocket Money Is Important

A child or young person having money of their own is an important rite of passage and pocket money can form the basis of excellent financial education in areas such as budgeting, saving and spending. But it doesn’t have to come exclusively out of your purse or wallet.

A big issue (pun intended), I have with automatically giving pocket money, or an allowance, is that it can easily create an entitlement mentality. Anyone who has seen their teenage child hand on hip, open palmed, demanding cash before going out on a Friday night will know instantly what I mean.

The other place where you regularly get money for nothing is from the benefits system and I don’t believe that many parents are deliberately training their kids down that route!

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One of my favourite money experts, Loral Langemeier is quite definitive on the subject:

“NEVER PAY YOUR KIDS AN ALLOWANCE”

Loral argues that the best investment you can give your child is to teach them the value of entrepreneurship and the way that the economy works. So instead of paying pocket money every week, design exercises and activities that are truly focused on basic finance.

OK you may be thinking but how does this work in practice? Here’s an example, you might sit down with your child and organise some basic household tasks or chores such as doing the dishes or clearing the table.  Work with them to assign a monetary value for each one of these tasks.  Each week as they complete the list, pay them an agreed amount minus a small percentage that goes into a savings account specifically for them. This deduction functions a lot like taxes or regular savings accounts they’d have in the real world.

With teenage children you can add a bit more to this model, including how to manage a bank account, deduct expenses that might make sense given their age, or help save for the things that they’d want to buy.

Why do it this way?  Not only does your child learn the importance of how the economy functions, but they also understand the value of their own work and services.  As they develop their entrepreneurial muscles they may want to take on extra work or start a small businesses of their own. Plus you are automatically encouraging them to save.

Martin Lewis founder of Money Saving Expert and regular TV commentator in the UK is a fan of both pocket money and financial education – and he recommends encouraging children to work for their financial rewards, in order to embed a principle that will serve them well throughout life. Rewards for cleaning the family car or doing the washing up after dinner are great tasks to exchange an agreed amount of pocket money for, but it’s less productive to train children to expect payment for tasks they should be doing anyway, like cleaning their room or doing their homework.

In closing this discussion on the importance of pocket money, a quick word about consistency.

If you promise children a specific amount each week or month, make sure you stick to it. Paying pocket money on an ad-hoc basis will teach them that money promises can be broken; and they will value the money they receive less if you seem to attach little value to the act of giving it.

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Grieving and Growing: Dealing With the Death of a Parent

You never imagined this day would come, when your parents left you behind to go to heaven. Dealing with grief at this point in your life was not something you were prepared for and you need a few moments to think about how to deal with it all. You have been so busy trying to raise your own family that you never prepared yourself for something like this. You want to teach your kids about life and death, but you’re not sure how to go about it. You understand how important it is to grieve the loss of a close family member and then move on with your life. The time has now come to start the process and come to terms with the devastation in your family at this time.

The Practicalities

Before you can start to grieve properly, there are so many practicalities to take care of. You will need to organise a funeral, take care of legal matters and even hire local undertakers. You can easily get swept up in all of the logistical steps that you forget how to be upset. You have to put on a brave face and get all of these jobs done, otherwise it simply won’t happen. It’s fine to be on a mission to get everything sorted, but then you need to take a step back and start the grieving process.

The Grieving Process

There is no right or wrong way to grieve the death of a parent or loss of a close family member; everybody deals with this in very different ways. Whether you spend a few days being upset or you throw yourself back into work and push it aside for a while, there will always be a way that works for you. What you mustn’t do is keep your feelings bottled up inside as you will inevitable explode at some point. Speak to somebody you trust or go to a therapist to talk about your feelings in a non judgmental environment. Once you have come to terms with all of your emotions you will gradually be able to move on and start living your life to the fullest again.

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The Conversations

Talking to your children about death can be incredibly difficult, but it has to be done no matter how old they are. Your little ones are going to have questions about where their grandparent has gone, so make sure you explain it in an age appropriate way for them to comprehend. There are many children’s books out there that help you to explain the process of life and death with your little ones, so this might help too.

The Normal Routine

At some point you will need to get back into the normal routine of life, without feeling guilty about smiling again. Once that day comes you will be able to look back on fond memories without feeling sad and upset about the passing of your parent.

Dealing with the death of a parent is incredibly difficult, but if you can learn to grieve and grow in the right way for you, you will soon be able to process it and move on.

Smart Parents Teach Their Kids These 6 Things About Money

One of our main jobs as a parent is to impart enough knowledge and wisdom to our children so they can not only survive in the world but thrive as well. Of course, in modern society, this means educating them on money and finances as well. A topic you can read more about below.

Spending more than you have is always a bad idea.

While our whole society seems to be built on the idea of borrowing money to pay for things that we could not afford to buy outright, educating your kids that spending more than you have on a consistent basis is a bad idea is crucial. This is because if you don’t, not only does it mean that they will get used to a lifestyle that is way beyond their means, but it also sets them on the slippery slope towards unmanageable debt.

Of course, this makes it an essential lesson that you kids need to learn about money. Luckily, it is possible to instill this wisdom in them from an early age by providing them with an allowance, and then encouraging them to save at least a portion of this each month.

Also, you may wish to encourage children to work and save for items they want, as opposed to buying everything for them. The reason being that this can also help them to get into the habit of raising the money before they spend it.  

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Installing a good work ethic in your kids early on can be a game changer.

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The is usually a way out of a financial jam no matter how tight it is.

Another valuable lesson that you need to impart to your kids is that there is nearly always a way out of a financial jam, no matter how serious it is. For example, there are many debt relief agencies out there that can help consolidate debts, something that means it’s much easier to pay them off at a reasonable price each month, which is knowledge that it is essential for your kids to know about, but not plan to rely on.  

Alternatively, there are also loans were someone else vouches for you and promises to cover the debt if you default. This can be hugely helpful if someone is in a financial fix, but their credit is poor. Of course, you will also need to remind your kids to shop around for the best apr guarantor loans and other financial products as well, as some will offer a lower interest rate and other benefits. Something that can make all the difference when it comes to being able to pay them back, and so could help your children have a better quality of life as well as get out of financial trouble if the need arises.

Saving is good, but investing is better.

Parents also need to emphasize the importance of not just saving money, but also investing it as well. In fact, it is hugely important to teach your kids about investing because no other action can allow them to increase their net worth in such a drastic way.

 

Sadly, even now the investment market has become much more accessible to the everyday person because of apps, and low management fees, few people realize the long-term benefits of this activity. Therefore It’s crucial to make your kids not only aware of all the investment options that are available to them including property, cryptocurrency, and futures but also educate them on how these platforms work.

Also don’t forget that as a rule investment is a cumulative process, and that means the sooner your children can begin on this path, the easier their financial future will be. Therefore be sure to explain and emphasizes the value of investing during their mid to late teens so they can get a jump on the competition.

Money doesn’t make you happy, but it can help.

It is also hugely important that as a parent you help your children to understand that money in and of itself isn’t what makes people happy. In fact, it’s the lifestyles, health care, and reduced stress that those with good finances enjoy that is the key.

What this means is that it’s crucial to delineated the quest for becoming rich and yet not spending any of this in ways that enrich life, and doing the opposite. Therefore, be sure to listen to your children’s opinion on what they want to do in their lives, in term of their career, and their goals, as well as who they want to be and adapt your financial education to this.

After all, just recommending that all you kids go into high paying finance positions is a one size fits all solution that is unlikely to work for most people. In fact, at worst it can land your kids in a career that is unfulfiling, even cause them to resent you for pushing them in that direction in the first place.

Monitoring spending is a task that needs to be done regularly.

It’s likely that as a patient you will make an effort to teach your kids that they need to wash up after they have cooked and eaten a meal and that the need to change their socks and underwear each day. However, it can be all too easy to forget to teach them that monitoring what has been spent each day should be a regular task as well.

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In fact, by establishing this as a part of their daily routine, you give your kids the tools to much better monitor what is happening with their finances. This can help them make improved buying decisions, avoiding impulse buys, and stay out of debt. All things that mean this small daily task can have a considerable effect on their financial well-being through the entirety of their life.

Finances don’t have to be confusing.

Lastly, it’s incredibly important that you teach your kids that correctly managing their money and budgeting doesn’t have to be complicated or confusing. In fact, sometimes the simple systems can work much better not only because they are clearer to follow and stick to, but also because they make dealing with financial matters a lot less intimidating. Thus making this final lesson one that is also crucial to impart to your children.

 

6 Smart Ways To Invest For Your Children’s Future

Regardless of how untroubled about future some people are, it all changes once they become parents. The moment the baby arrives everything changes, especially our nonchalance toward money and savings. Only, this time is not just about rainy days that may come, but also the bright, shiny days when our kids are no longer drooling toddlers, but almost adults with their big dreams and life goals that they plan to achieve. Aside from unconditional love and proper upbringing, it is the parent’s main responsibility to make sure that their kids will have a good starting point in life once they leave the nest.  Saving money and investing in their future is a long-term project, so read on to find out more about it.

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Take care of yourself first

Although this may seem absurd, rest assured that it is one clever way to ensure a brighter future for your kids. Before starting to make plans about investments and children’s saving accounts, make sure to start saving for your retirement.  In addition to that, consider getting a term life insurance, as it doesn’t cost a fortune, yet it does leave you at ease. Also, filing a will is a smart move, even if it seems too early. All of these measures are nothing else but caring for your little ones as you wish to release them of responsibility to financially take care of you in your old age.

Saving accounts

Saving money this way is traditional and perhaps the safest way to put away some serious money for your kids. Even though interest rates are low and taxed as income, keep in mind that bank saving accounts, unlike some of the investments, are completely risk-free. There is plenty of ways to set up a children saving account as well as saving options for children. For instance, in the UK, you can set up a saving account on behalf of children, and when they turn seven, they can start managing their account. Great lesson in money handling as well as adopting saving habits.

Investing in steady growth

Considering low rates, having a saving account may not be the best opportunity out there. There are plenty of financial products and saving plans that will allow you to achieve your goals with much higher interest and substantial return over time. It is a combination of investment strategies and savings that fits your planning horizon and risk tolerance. For instance, couples in Singapore save money for children’s future by investing in unit trusts and education endowments, which are quite flexible and risk managed option, as well as great opportunities for long-term growth. However, these types of investments do require a reliable financial advisor.

A specific education savings plan

Having a well-educated kid costs arm and leg, so start putting money aside timely. There are saving plans that ensure that all the money, including interest, is directed to cover qualified education expenses. These are tax efficient and relatively safe saving plans that hold parents as account owners and children as beneficiaries. In Canada, this is RESP (Registered Education Savings Plan) and in the US is 529 plan (or College plan). Still, aside from the investment risk, there is a possibility that your child will not wish to go to college. In that case, you can change the beneficiary and still spend money on education. Spending money on unqualified expenses will result in penalties.

Try investing in commodities

Investing in commodities is a smart way to make money for the future, but not every commodity can stand the test of time and fluctuation on the market. Instead of investing your money in energy or agriculture, stick to the rarest and most valuable commodity of all – diamonds. It is not for the rich people only, since you probably have one already, on your engagement ring. Safe investing in diamonds involves learning the basics on how to properly diversify your investment portfolio. Also, monitoring the diamond market can be of great use, since lately, there is a big demand for naturally colored diamonds.  Look for rare pieces and rest assured that their value will increase over time.

More ways to save money

Find the way to create passive income, or in other words, way to make money while you do other things. For example, if you have additional space, rent it out via AirBnB. Also, keep in mind that all of your current possessions are frozen money at the moment, so sell things that you don’t need and earn. You can sell outgrown clothes and old toys, cribs, strollers, sports gear, etc.

Conclusion

The world is an expensive place and future is costly. Still, with some planning and logic, it is possible to ensure a good life for your little ones.