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Managing Your Money – Small Beginnings, Big Changes

The concept is straightforward enough, you want to save a little each month and build up a fund that will be there for you to tap into in case of an emergency or that you can grow in order to get that house renovation done, a new car or the holiday of a lifetime.

But while, yes, it seems straightforward it appears that for some of us those good intentions of saving for the not-so-distant future are hard to turn into reality. But what is it that’s holding us back? What prevents us from saving for the things in life we really want? Perhaps it’s a lack of organisation, a problem that exists around our monthly budget or the fact that we always seem to find something better to spend our money on. 

If you’re looking to make some changes in the way you manage money then you’ve come to the right place. In this article, we’re taking a look at how you can get yourself organised in your monthly outgoings and manage to start saving for those big things in life that seem so far out of your reach just now.

Managing Your Money - Small Beginnings, Big Changes - coins growing in jars image
Image by Nattanan Kanchanaprat from Pixabay

The Dreaded Spreadsheet

You knew it would come to this, but if the idea of inputting all your incomings and outgoings into a spreadsheet bores you to tears or fills you with dread, then there are some far more user-friendly options out there to help keep track of your money.

We’re talking, of course, about apps and one of the best out there at the moment is Mint. You’ll find it helps you to set a monthly budget, see exactly where your money’s being spent and with a free sign-up, it’s far more satisfying than pouring over that Excel spreadsheet each month.

But yes, despite the more modern approach you are still tracking your finances and this is exactly where you need to start. Give yourself a long-term goal and simply spend the first two or three months getting used to tracking your money so you can figure out some of your spending patterns. You don’t need to change anything at this stage, this is the data gathering part of the process.

Analysis

When you do go back and take a look at where your money goes, you’ll begin to see some patterns emerging. Perhaps you spend the majority of your money at the beginning of the month and, what with your bills leaving at the same time, you’re left with very little spare cash for the last two weeks before payday.

You’ll also see what you’re spending your money on. That latte bought on your way to work every morning has, over three months, mounted up to quite a cost. This kind of analysis is worth going through to help you make some judgements and changes over how you ration your budget.

Finally, you’ll also be able to see all the direct debits and standing orders that are attached to your account. That insurance for a long ago expired laptop that still goes out or the expensive gym membership that never gets used, it’s a good time to make some changes and to see if there are any cancellations that might help you out. It will also give you the opportunity to shift around the dates that direct debits leave your account if that’s going to help you plan a little better.

Prioritise

Once you’ve analysed your spending, it’s time for the action part of the plan to get started. You’ll need to get to the point where you start prioritising. This might mean that you ditch the latte habit completely or set aside a budget for it where that weekly purchase becomes a once or twice a week treat instead.

You might think about dividing your budget up into several pots, including bills, essentials such as food and entertainment, including socialising and of course luxuries such as that latte.

Once you’ve found a natural rhythm for your outgoings, you’ll be in a great position to then add savings to that list.

What to Spend Your Money On

Once your savings are on their way then you’ll be able to think about what you’re saving for. We can’t recommend enough clearing your debts as a first priority. Not only will it free up your money in the long term, it will also help to improve your credit score. If you’ve been asking yourself How can improve my credit score? Then this is the very best way to make those changes.

Get those debts paid down and enjoy greater financial freedom. What you’re saving for is, of course, entirely down to you, as is the amount you’re able to put aside each month. Some experts believe in following the 50/30/20 rule where 20% of your income will go into your savings pot, 50% on the necessities and 30% on discretionary items.

If this works for you and if you have a fixed monthly income, then this can be a great method. Another equally as valid, though slightly more flexible approach is to set up a sweeper account. In this version anything that’s left in your account the day before payday or at a date you specify is swept into your savings account. It allows for those unexpected expenses, like a broken boiler and recognises that some months the savings are going to be minimal while other months there might be a lot more.

However you save and whatever you’re saving for is your choice but your active decision to begin managing money should be applauded. The difference you’ll make to your account with regular saving will seem minimal at first but you’ll be surprised at how quickly that small pot can grow. The sense of satisfaction, not to mention security you’ll feel is worth the effort of getting your accounts in order. Download an app, go through the process and add an extra layer of security to your finances.

Kids Make Great Entrepreneurs: Here’s How To Teach Them About Business And Life

If you don’t fancy the idea of your children spending all their holiday time watching TV and down the skate park, what should you get them to do? One idea that is becoming more and more popular among parents is getting kids to start their own businesses. Not only is this a good idea, given the direction that the economy is going, it’s also beneficial for helping kids develop confidence and people skills.

Here’s how to help your kids achieve their business goals.

Let Them Pursue Their Passion

Kids find it really difficult to focus on things that they aren’t interested in. This is why getting them to go to school can be such a mission: smart children hate the fact that they have to sit in rows all day, doing things which are boring.

Kids Make Great Entrepreneurs: Here's How To Teach Them About Business And Life - lemonade stand image

Flickr

If you want their new business venture to be sustainable, take a step back and ask them what sort of business they’d like to run. Kids who love animals will probably be quite happy to set up a dog-walking business or even a pet sitting business. Children who are gifted in music or acting could hold their own after school classes. The possibilities are endless.

Tony Hsieh, the founder of Zappos, set up a worm farming business when he was a child, selling worms to passers-by at the tender age of nine. His goal was to become the number one worm farmer in the world.

Introduce The Concept Of Money Management

Because parents provide all the resources that kids needs, many children grow up with the impression that money is infinite. The reality of business soon teaches them that it is not. In fact, it shows that it is often very hard to come by. They’ll soon find out that most companies have to go through lenders, like Colbeck, in order to make ends meet, especially for the first few months and years. Teenagers, for instance, can do things like calculate profit and loss, and how much they would have to repay to a lender every month at a given interest rate. Younger children can practice things like counting up how much money they have in the till and what they’d need to spend to expand their business.

If your children are particularly adept, you could even hold your own investor meeting, where members of the community come to hear the business pitch and commit small sums of money if they like the idea. This will get children used to the fact that they have to offer value to investors in order to receive money in return.

Teach Them About Customer Service

Being able to listen and communicate with people is an essential entrepreneurial skill. It’s what forms the building blocks of all entrepreneurial careers. One of the key skills children need to learn is how their business idea can actually benefit other people. Why do people want to have somebody sit their dog, for instance? Getting children to understand that people want problems to be solved (like the fact that they are worried what their dog will do to the house if it gets distressed while they are out) is the key to giving them good “business sense.”

Learn It To Earn It! Money Management For All Ages

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flickr

It is astounding that with the amount of focus that we place on money, as a society, that money management is not taught in all schools. When we look back on our youth, we never thought of money as important at all. In my 30’s I look back at just ten years ago and didn’t view money as all that important! As the magical overdraft would help me get my cash from the machine and the credit card as free money. In hindsight, this was a bad attitude to have. As I now have mounting debt that I could do without. The pressure to do more grown up things becomes more apparent. Buying a house, planning a wedding, the increase in fuel costs. These are all things that are tagged with the notion of being an adult. The shock of money responsibility just seemed to be slammed down in front of you as soon as you left university or gained full-time employment. So is there a way to help bridge the gap between a child and adult when it comes to money management?

Toddlers
When it comes to teaching toddlers the value of money, the best approach is to use a visual stimulus. The typical method is to use a piggy bank, which is an excellent idea in theory, but the child can’t see the money amounting. So the fruits of their labors go unnoticed. Seeing a jar fill up with coins and talking to them about how much more they’ve got than yesterday is a nice way to reinforce the idea of saving.

Young Children (8 and over)
The best method for young children and tweens is to let them make decisions about their choices in terms of what to buy. For example, if they wanted two items but can only afford to buy one, they need to make the decision. If they are unhappy with the outcome, then they have made their bed and must lie in it.

They also need to learn at this age that money is earned, not just given out. A simple method of teaching this is to reward them for doing household chores. Based on the task, you can give them more or less money. That way, the concept of pay grades is also introduced.

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image from Flickr.com

Teenagers
If you have been able to reinforce some of the previous values at certain stages of their life, then helping them get a bank account is the next logical step. Having their own bank account that they can withdraw money from and are solely responsible for will teach them how to manage their money. If your child hasn’t got a bank account yet, you can apply for new bank account here now. And, as a consequence, if they run out of financial resources, they would need to get a job. That marks their first foray into adulthood.

All ages have their own attitude towards money. So in teaching them the value of it on a level that they can understand, whether by visual stimulus or making sure they know the repercussions of overspending, it will go a long way to instilling the values and responsibility of money management.

Useful Tips For Financial Success From Parents To Their Kids

Management of finance is an important aspect of one’s life and as parents, you should make sure that your child starts learning about it from a very young age. Listed below are a few steps that you can take to teach ways of effective financial planning to your children.

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1) Use the piggy bank method

It is perhaps the most interesting way by which your child learns about money management. There is no point in telling him about the usefulness of saving money, or about the ill-effects of overspending when he is too young, for instance 2 to 5 years old. Therefore, use the piggy bank. Give him a dollar or two each day and ask him to deposit it in the bank. As he is rewarded with a large sum of money at the end of the month or so, he automatically will be inclined towards saving more for the coming days. Therefore, the first lesson of financial planning, i.e., the “usefulness of saving” is learnt.

2) Set Financial Goals for him

As your child grows a little older, say 7 or 8 years old, start setting short-term financial goals for him. Continue giving him a certain amount of pocket money and ask him to save up for an expensive toy or a short holiday trip that he wants. In case of the holiday trip, you can ask him to save enough money so that he can sponsor the lunch at one of the most well-known restaurants of the place you are visiting. Setting short-term financial goals from a young age always helps. In this manner, your child is slowly prepared to set long-term financial goals (like higher education) and save money accordingly.

3) Show Them the Way

Only setting monetary goals and asking your child to work on them will not be sufficient. You have to guide him as well. For instance, if you are asking him to save up for a bicycle, keep dropping hints on how he can cut down on his expenses. Ask him to cover the way to school on foot (if he can) instead of taking a cab. He does not really have to live on abstinence. However, you can definitely advise him to cut down on his entertainment costs, or his expenses on food (keeping in view that it does not harm his health) until he buys the bicycle.

4) Prioritization of goals

When your child reaches his teen, you should gradually start teaching him about the importance of prioritizing his goals. He might have got whatever he wanted as a little child but now is the time to bring about a change in his thinking. In future, there will be times when he will have to make grave choices as far as fulfilling his own wishes are concerned, for instance between an expensive car and an equally exclusive holiday trip. Therefore, start preparing him for these types of situation in life. Advise him to spend wisely. Today, if he is given a choice between keeping aside some money for his higher education and spending the same amount for a short trip with friends, he should be able to judge which is more important for him.

5) Career Tips

As parents, you possibly can’t decide the career path to be chosen by your child. It will depend on his choice, talent, and his ability to make the most of the opportunities presented to him. All you can do in this case is motivate him to follow his dreams and make sure that he gets the right kind of training that is required to transform his dreams into reality. But it would be advisable if he understands that he should choose a career that is fulfilling (in terms of job satisfaction) and lucrative as well. Only saving up money for future will not do. He should earn sufficiently as well to invest in profitable schemes so that his savings are doubled or tripled.

Marie Nelson is a passionate blogger with expertise on financial matters. The global economic crisis has been the subject of most of her recent write-ups and at present, she is writing exclusively for United Finances.

6 lessons to teach your kids how to stay away from debts in future

Many parents are not particularly inclined to discuss their debt and finance related issues with their kids. As an invariable result, kids remain unaware of crucial financial factors like debt management, savings, account dealings and face severe difficulty to handle these matters in the long run. There are certain skills and habits which every child needs to learn and develop from an early age. Financial discipline is one of them. If your kids come to know how to effectively spend, save and survive today, they can surely attain a better financial future tomorrow. Follow the instructions given below and provide your children the basic knowledge required to stay out of debt in future.

  • ‘Children need models more than they need critics’. The first lesson of money management to kids starts when their parents are not even aware of it.  Kids follow the footsteps of their elders blindly. Manage your finances well and spend your money wisely to set a perfect example to them. To stay out of debt spend within your limits. To teach your kids the difference between wants and needs, live frugally. Being frugal does not mean spending no money at all; it means think before you buy, and wait to buy until you can afford it.
  • Discuss your financial issues with your children. No matter how complicated your financial status are, attempt to make some simple bed time stories with them. Do not evade or ignore any of their queries, answer them clearly. Show them how you pay your due bills and how the ATM, checking accounts or credit cards works.
  • Make your children financially responsible by letting them spend money on their own. Of course, you are there to guide them but, make sure your child grow up making some of their own financial decisions as well. Let them commit mistakes and learn the lessons from them. If needed, confide in them your financial blunders in the past. In this way you may not be able to stop them completely from making any mistakes but at least they will be less likely to repeat these mistakes as adults.
  • Take into account your kid’s feedback and suggestions while you are planning your budget. This will give them an overall idea about the price list and monthly expenses. Make sure it should not make them feel guilty or upset for costing you so much.
  • Young kids love to collect and save pennies, present them with a piggy bank to indulge in this habit. For teen kids you better open a savings account and let him watch it grow. It will generate a sense of interest and excitement in them and they will put more efforts and hard work to save in these accounts. Excitement and anticipation both are essential to make your child keener to save money.
  • Start giving your child a weekly or monthly allowance from an early age. Instruct them not only to manage their weekly expenses within limited means but also to save a portion of it. Trigger their emotions by teaching them to donate a portion of their savings to people who are less fortunate.

All these above mentioned points are lifelong ways to teach your kids about money management. When your child becomes old enough to ask for toys or candy, it means they’re old enough to learn some lessons of financial awareness as well. As soon as they learn to count, you can start imparting your basic lessons about spending and saving. Remember the sooner they learn these lessons and apply them to their lives, it is better for their financial well being.