Family, Kids and Money
Saving Money
Why you should start now.
You may know that you need a budget to help with your daily, monthly and annual expenses, but do you understand how a budget can affect your future in a significant way?
One major benefit of budgeting is freeing up money to pay down debt or to save toward reaching your goals. In either case, the power of compounding, also known as the "time value of money," is an important concept to understand.
When you are in a saving mode, the power of compounding can help you move toward improving your savings picture.
Dealing with Divorce
The chances of finding someone out there who will tell you that their divorce process was simple and pain-free are probably between slim and none. Divorce is more often a chaotic whirlwind of emotions. Pair that with the process of dividing accumulated assets, all the while incurring new expenses related to the divorce procedure itself, and you've got fertile ground for both parties to lose their cool, not to mention their perspective and a lot of cash.
Amy Whitlatch, a certified divorce financial analyst, suggests taking a big-picture approach. "By clearly articulating your needs and goals, you will expend less time, money and emotional capital over the small stuff," she says.
So what constitutes the big stuff? Read more in Fireline.
Everything Your Kids Want To Know About Money, But Are Too Lazy To Ask
by Jean Chatzky
As the mother of two children, neither of whom (thank goodness) have hit their teenage years, I am keeping a list of things my kids will have to know more about - or at least understand in a different way - than I did at their age. There's Internet safety. A souped-up college application process. Sex (gulp). And money. Today, I think I'll stick close to my comfort zone and focus on money.
The Charles Schwab Foundation's annual survey on Teens and Money shows that although kids are acting financially, in many ways, as adults do, they don't have the appropriate knowledge to guide their behavior.
Money Habits
"Kids today are taking on more sophisticated money habits, yet they don't understand the implications," says Carrie Schwab Pomerantz, president of the Schwab Foundation.
According to the survey, 6 out of 10 teens age 13 to 18 know how to spend money - and not just cash. However, only 4 out of 10 know how to balance a checkbook. Also, it's way too easy to withdraw more money than they have and get swamped with overdraft charges. They can learn to balance a checkbook in a few hours. It's just simple math. According to JA Worldwide, 11% of teens have credit cards in their own names, and 6.2% of 13- and 14-year-olds have their own plastic.
Teaching Teens
With this in mind, it's important to teach teens what interest is and how quickly it adds up. Pomerantz notes that kids don't understand the fees and penalties that come with paying credit card bills late or going over their spending limit. Print out a few online credit card applications as examples. The required Schumer Box displays interest rates, late fees, penalty fees and grace period. Warn against paying the minimum balance.
Start your teen on an allowance as an introduction to a paycheck, says Hollis Harman, author of Money Sense for Kids (Barron, 2004). The idea is to give your teen a part of the money you already spend on him or her, along with some direction on using it.
Harman recommends teaching your teen to save so that it will seem natural to save. Then require your teen to pay for some of his or her recurring expenses, such as meals out or cell phone bills.
Living Day To Day
"Teens will begin to feel the reality of living day to day and how much things cost," says Harman. "If they get a latte every day they go to school at $3 a pop, then that is $15 a week they don't have for the manicure and pedicure. You'll have transferred some of these choices onto them." When they blow this budget (and they will), don't bail them out. They have to suffer a bit to take these lessons to heart.
Model Behavior
Finally, it's not just what you say to your kids that matters, it's the behavior you model for them. One quarter of the teens surveyed by Schwab said their parents often lecture them about money -but then don't practice what they preach. If your kids see you dealing with the choices in your own lives-if you let them in on the fact you'd like the BMW but can only afford the Honda - they'll have a much easier time dealing with the fact that they, too, can't have everything they want when they want it.