Financial Success: Life Lessons for all Ages & Stages – Part 1

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To celebrate the beginning of April’s Financial Literacy month, I thought I would create a series of blogs about money & financial literacy. I am starting at the beginning, when kids are young & will continue through some of the older ages & stages of life.

Part 1: Kids learn by what they see, hear, & do:

 When my niece, Ali, was 4, she used to think money came out of a machine. It made sense, she saw her Mom do it. If you want something, you just go to the machine, get the money, & go to the store. If we don’t tell them any different, kids believe what they see – money comes from a machine.

Little ones quickly learn that they need money to buy things. They need to be taught:

  • You earn money by working
  • You deposit the money you earn in a bank to keep it safe
  • You have to have money to pay for things you need – a place to sleep, food to eat, clothes to wear, maybe, even a car to go places
  • You use money you saved in the bank to pay for things you need
  • There is a difference between needs & wants – needs come 1st
  • You usually have to save money to buy something you want

Kids learn from what they hear. Do you speak positively or negatively about money?

Most of us know that kids are like little sponges & pick up on things they hear & sometimes they repeat us to our surprise (or shock): “We don’t answer the phone at our house, it might be a bill collector”. As adults, we need to be careful with our words. We also need to pay attention to other places that kids can learn by listening – TV, video games, radio, private & public places.

In today’s digital world there are so many ways to educate our kids about money; we can play fun songs for them to hear and maybe learn. One of my favorites is Sammy Rabbit; hIs dream big campaign teaches great money habits for young children. You can learn more about Sammy at http://www.dreambigday.net or sammyrabbit.com.

Kids also learn by what they do. Teaching kids to be financially successful in life should begin early. The Davidson Institute reports that money behavior habits can be formed by age 7.   When we are young, it is hard to learn that we can’t have everything we want. Parents can help by creating incentives & providing rewards.

  • Have kids write goals & create visual savings charts for something “they want”
  • Tell them that writing goals down increases their chance of success
  • Practice “learning by doing”
  • Money earned or received can be divided into 3 groups – spend, save, give. Let them decide where to give.
  • Teach “delayed gratification” – this will provide a great leap forward to becoming financially capable & successful, later in life
  • The concept of “budget” can be taught with things other than money; i.e. 1 sugary item per day – they choose when. I used to tell my son, Jason, if you want sugar on your cereal in the morning, then please don’t ask for a cookie or something else later on in the day. He frequently decided to wait because he did not know what other choices there might be later. Till this day, he still does not care for sugar much and he learned to wait for what he wants. He also works for it.

If you want to teach your kids a little about saving money, tell them that one of the best things they can do with their money, is to save it. Start early & save often. Even a little bit saved, on a regular basis, can add up to much after time. It is like planting a seed and watching it grow. Money can do the same.

A Chinese Proverb is “Learning is a treasure that will follows its owner everywhere”. Learning to make smart financial decisions when you are young will also benefit you for life.

Have fun teaching & helping others learn to make smart financial decisions. Thanks for reading.

Deborah Ann Fox, CPA is a financial literacy advocate who devotes part of her practice to helping others make smart financial decisions by providing education while building client skill levels.  She is available for one on one, local, or remote appointments. Free 30 minute consultations.

website: http://www.debfoxfinancial.com

Phone: 619-549-2717

Money Spent, Wisdom Gained, & 20 Helpful Tips

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Many of us have said, “I wish I had known then what I do now; I would have done things differently”.

This is particularly true when it comes to money & our financial situations. Money trouble or challenges occur for a variety of reasons:

We spend when we shouldn’t or we spend without understanding the true cost:

As a student, perhaps we used some of our student loan to go shopping. Maybe, we bought things we knew we couldn’t afford because we wanted or deserved it, or signed contracts without reading or fully understanding them.

We spend because we lose our job & spent our financial safety net to survive

Sometimes we end up in money trouble just because of unexpected life events. This has happened a lot since 2008 when people suddenly found themselves with a “pink slip” & not able to get another well paying job. Even if you had the now outdated 3-6 months livings expense safety cushion, it wasn’t enough. Debt piled up.

We spend because we don’t have any other choice; it is a revolving circle:

When debt piles up, we may play the “rob Peter to pay Paul” tactic & move debt from one card to another.

We pay the bills for the services that are the most important to us – housing, electric, phone, gas, & food and hope we can pay the rest of the bills -soon. We hope something will change and actively seek solutions.

We spend to pay high service fees: Fringe Banking, Unbanked, & Under -banked:

The movie “Spent: Looking for Change”, is about hardworking Americans who do not have access to traditional banking services. The film tells us that there are nearly 70 million Americans that are unbanked & financially underserved. They use check cashers, pawns shops, payday lenders, & money order services. These alternative financial services are expensive & those that least can afford it spend more than traditional bank users to cash their payroll checks & to pay their bills.

We spend because we want our tax refund now:

Low to moderate income tax payers pay extremely high interest rates & fees to get some or part of their tax refund now rather than wait a couple of weeks and avoid these needless high expense charges.

The National Consumer Law Center’s website provides the following description:

  • Refund anticipation checks (RACs) – RACs are a financial product used to deliver refunds and to pay for tax preparation fees by deducting them from the consumer’s tax refund.
  •  RALs from non-bank lenders – A few payday and other non-bank lenders are offering RALs. These loans could be more expensive and riskier than bank RALs.

Since the 2008 recession, many people have permanently changed the way they spend their money.

Following are 20 tips to help you make your money go further. This, then will provide you the opportunity to either pay down debt, build a safety cushion, or invest in your future.

Money Management & Spending Tips:

  1. Some “assets” appreciate and can go up in value; spending money here makes sense
  1. Other “assets” depreciate as soon as you buy them – cars, furniture; consider buying used or refurbished
  1. Accountants use a term called “Sunk Costs” which means a cost that has already been incurred & cannot be recovered; limit your sunk costs
  1. Opportunity Costs: the value of something that must be given up to achieve something else; limit how much you spend on a things that you want; you might need the money later for a need
  1. Good debt provides you an opportunity to get ahead; there can be a return on your investment; i.e. a mortgage on a home
  1. Bad debt includes high interest rates on unpaid credit card balances
  1. Borrowing on credit is expensive; debt makes you a slave to payments; you’re a hostage with limited life choices & flexibility
  1. Building & Maintaining a good credit score means it will cost you less to borrow money
  1. Forgo bad debt & instead, build toward your dreams
  1. When you want to spend instead of save, think about your long-term goals. Is going out to eat, buying coffee at Starbucks, going shopping because you feel depressed or want something new worth adding more debt or forgoing savings?
  1. Read your contracts & plan for both the best & the worse scenario- can you afford both?
  1. Know that managing money is becoming more simple and that there are is a lot of free help
  1. Use the internet to learn more about personal finance- Coursera offers free classes
  1. Use on line tools to help you determine your best money moves; I have several on my website, on the resources page
  1. Hire someone to help you understand & determine your best possible alternatives
  1. Avoid “problem pile-ups”- it is too hard to solve almost anything that way. Choose one thing to work on, resolve, choose another
  1. Don’t beat yourself up if you made what you consider a “money mistake”. Ideally, we all learn as we grow. This is a normal part of life & it is fully possible to recover & regroup
  1. Don’t assume you know the answer, because you think “it is true” or someone told you. Look for the answer yourself or try to get your answers in writing from an objective source
  1. If you are a parent, be careful that you are not unintentionally teaching your children poor money habits by saying things like, “I am not answering the phone, it is another bill collector”
  1. Sometimes we learned poor money habits as a kid and carried them with us in to adulthood without realizing it. This has become so common that there is a new field of study & help: Behavioral Finance. Learn about this is if it applies to you

Deborah Fox, CPA is working to make financial information affordable & accessible. She helps others improve or protect their personal or business financial health by answering specific money questions. She provides information while building knowledge & practical skill levels for her clients. She is available for local or remote appointments. Thanks for reading.

Website: www.debfoxfinancial.com

e-mail: debfoxfinancial@gmail.com

Phone: 619-549-2717