If you are a parent, you understand the importance of teaching your children good money skills; unfortunately, many of us are not sure where to begin.
Here are some ideas to get you started:
Help your children begin to save. Encourage your children to save a little from all the money they receive, such as allowances, birthdays, bar and bat mitzvahs, etc. Open accounts for your children and assist them with tracking their money. A couple of ideas for tracking their money would be www.mint.com or you could go the traditional paper and pencil route (it doesn’t need to be fancy).
When I was a kid my mom taped a piece of paper on our refrigerator door and that was what she and I used to track my money. I loved making that number grow! So every Christmas and birthday I would make additions; then when I got my first job the additions became more frequent. I was always saving for something but my first meaningful purchase was my car (I paid for one third of it). I was proud and protective of that car because I saved for it. Accomplishing that goal felt good.
Next, teach your children the difference between saving money for short-term and long-term goals. After your children understand the difference between short-term (purchasing a toy) and long-term goals (saving for college) help them to understand how money should be treated differently for the two types of goals. You want your children to understand that bank accounts are great for short-term goals. However, money that is geared toward longer-term goals should be invested appropriately, so that it may grow and outpace inflation.
Summer is almost here and everyone seems to have vacation on their minds. We often get questions about paying for travel; a typical one is: “How much can I afford to spend?” So today we’ll provide you with some helpful tips on how to create a vacation fund that fits easily into your budget. That way you can enjoy vacation without feeling guilty about the expense.
A good first step for creating a vacation fund is to determine how much you feel comfortable spending. Start by recording all of your monthly income sources; some examples are salaries, child support, pensions, investment income, and annual gifts. Be sure to add everything up so that you know how much money is coming in every month.
After you know how much is coming in, you should review and record all of your household expenses. The goal is to gain a firm understanding of where your money is spent. Start by tracking your expenses for at least one full month. It is usually easiest to start by recording your fixed expenses such as mortgage, car, and retirement savings. After you have recorded these fixed costs–for your needs–then identify the costs for things you want, your discretionary items such as clothing, walking around money (WAM), and travel. Write down all of your discretionary expenses. Now you are ready to give careful thought to how much money you are comfortable allocating toward vacation.
Recording your income and spending is a key to success because simply assuming you know the financial details leaves a lot of room for miscalculation. And miscalculation leads to budgets that do not work. Another benefit of tracking your income and expenses is the sense of control you feel when you know where your money is going.
We encourage you give it a try for a month or two. Here is a great spreadsheet to use or you may prefer an online budget system like www.mint.com.
Now you are ready for the second step: Set money aside and earmark it for your vacation. This step is important because it provides you with peace of mind, knowing that your money is there and available before you head out of town.
Everyone has a slightly different approach to this. Here are four examples:
Inheritors often set aside a portion of the income produced by their investment portfolio as their vacation fund.
Business owners tend to earmark a portion of their business profit or bonus to fund their vacation plans.
Executives may decide to set aside a portion of their annual bonus or utilize a portion of their exercisable stock options to create a fund for travel.
Retirees commonly establish a separate account for their social security income and earmark a portion or 100% toward travel.
To recap, start by recording the details of your income and expenses. Then select the way you prefer to earmark money for travel. The sooner you begin the sooner you may feel peace of mind, knowing the money you need is already saved.