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Times are difficult for many but they don’t have to be. Parents are the most important teachers their kids will ever have. If you want your kids to grow up to be financially independent, then be a good role model for them.

  • Tell your kids school is important. Although a college degree is no guarantee of financial success, those with a college degree tend to make more money than those without. Graduate and professional degree earners tend to make more than those with a baccalaureate. https://moneyprovidesfreedom.wordpress.com/2010/06/18/the-value-of-an-education/
  • Don’t display wealth. If you look rich (drive an expensive car, own a huge house, wear expensive clothes/jewelry), most likely you are not wealthy. You are probably living in debt. Be a good role model to your children and let them know that having money in the bank is more important than trying to impress their friends. To achieve financial stability, you must save more than you spend – it’s as simple as that.
  • Compounding for decades. When your children are young, open a 529 College Saving Plan for them and set up automatic monthly deposits. I opened 529 College Saving accounts for my kids when they were born. Currently there is about $40,000 in my nine-year olds account and about $34,000 in my seven-year olds account. It’s easy if you start when they are young and make it automatic.
  • Teach your kids how to live on a budget, balance a checkbook and to save. When my kids receive money for their birthday or for Christmas, some of the money can be spent but some must be saved for a “rainy day.” Discuss money and bills with your kids in an age appropriate way.
  • Teaching personal responsibility. Hard work over time is the only way to succeed for most people. Teach that success and wealth are not entitlements. No one is entitled to a “free lunch.” I don’t believe in allowances. Kids shouldn’t get paid for doing nothing. It’s not that way in the real world. If you want your kids to have spending money, tie the money to the amount of age appropriate chores that they do.
  • Don’t bail out your kids too easily. Let them experience the consequences of their actions while they are still living under your roof.

Many parents need to do a better job teaching their children about money. Kids want to learn about money and it is up to parents to successfully nurture their thirst for knowledge. By doing so, you help make sure your kids will have a financially bright future.

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Life is fairly easy when you are young and single but add a marriage or kids and life gets real hard real fast. Planning for your financial future today will ensure you and your family will have a brighter future tomorrow.

There are six basic financial mistakes young families make. Can you guess what they are? Read more: http://www.smartmoney.com/personal-finance/marriage-divorce/the-six-mistakes-young-families-make-15555/

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The Story of Jim Schroeder

Imagine recycling enough aluminum to send your kids to college. One man did just that and has money left to spare. Now he’s buying an education for ten more kids he’s never met.

His love of recycling began 28 years ago, when Jim Schroeder and his wife saw too many cans littering the streets.

“My wife said it’s a shame people don’t do something about that, we should start a club…and I said that’s a bad idea, but we’ll try it.”

And that idea– soon turned to gold– or aluminum rather and the can collectors club would earn the Schroeder’s thousands of dollars over the next few decades. The club gained momentum and members– soon more than 100 people– mostly friends and family began to drop cans off at the Schroeder’s home each week.
 
“Initially we save money for our kids post high school education.”

Money earned from the cans helped put all four Schroeder children through college. And though school is complete, Jim still loads up his car each week — and now gives profits to charity.

“This past year we hit our second highest total and collected about 47,000 cans.”

For Schroeder, it’s a fun way to make a little extra cash, and the best part, it’s environmentally friendly. It takes 99% less energy to make these cans from recycled aluminum than it does from raw materials. And if you recycle them, it only takes a few weeks to put these cans back on the shelves (News story from WTVW Evansville, Ind., November 7, 2008).

Although this is an amazing story, I could never collect that many cans. But I can at least supplement my income a bit and do some good for the environment at the same time.  I was able to make over $400 last year recycling can and will make a little more this year. You won’t get rich with recycling but the money I make is invested in my kids 529 College Savings fund and will grow over the years until my kids are old enough for college. Here are the steps that you should follow:

  • Collect recyclable aluminum cans, glass and plastic bottles from work, home, and friends. When you go for a walk or to the park, pick up any cans you find and place them in a plastic bag to take home with you.
  • Segregate and store your plastic, glass, and aluminum containers until you have enough to make a trip to a recycling center cost-effective. I store my containers in the garage.
  • Find a recycling center near you that pays for cans and bottles.
  • Drive to the center, unload your cans and bottles, get them weighed (or counted), and get paid.

Tip: You get paid different rates depending on whether your load is segregated, commingled, by the pound, or by the count. You get paid the most by count but you can only use this method if you have 50 or fewer containers of each type. If you live close to a recycling center and don’t have that many to recycle, I recommend recycling by count because it pays more. Additional information can be found at www.bottlesandcans.com.

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Starting a Roth IRA for a minor child is an excellent way to save for his or her retirement because it will grow tax-free for fifty or more years. Here is what you need to know about Roth IRA’s for minors:

-Age requirements: None. The only requirement is the child needs earned income. According to the IRS, earned income is all taxable income you get from working.

-Does a part-time job or paper route count? Yes.

-Does babysitting or mowing the lawn count? Maybe. It may qualify as earned income if proper receipts and records are kept (check with your tax professional).

-Does an allowance or gifts count? No.

-Contribution limits: Only as much as the child earns up to $5,000 limit for 2010 and 2011.

-Drawbacks? The only drawback is ownership belongs to the child when he/she reaches 18. That means the money may be spent instead of growing tax-free. This should not be a problem provided you educate your child on the benefits of a Roth IRA.

-How do I open an account?

  • Determine eligibility of child with tax documents such as a W-2 form.
  • Check with your bank or brokerage firm. Not all will agree to open an account for a minor. Citibank, Bank of America, Charles Schwab, and E Trade have in the past.
  • Prove income to the bank/brokerage firm by showing the minor’s W-2 form, W-4 form, or other proof of income documents.
  • The parent or guardian must also sign the application.

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In 2009, 67% of college graduates had debt averaging $24,000. The numbers are much higher at private schools and this doesn’t take into account loans taken out by parents. Alarmingly, student loan debt is growing at an incredible rate as college costs rise faster than family income and faster than grants and scholarships. Additionally, student loans are not forgiven in bankruptcy and must be paid back. One of the worse things in the world for a new graduate is looking for a job and trying to repay a huge student loan.

So besides winning the lottery, what saving plans are available? The key is to start early. If possible, start saving when your children are still in pre-school so that your savings have time to grow.

529s: State sponsored investment accounts. The money grows tax-deferred and is tax-free when withdrawn to pay for qualified expenses. For families with multiple children, funds can be moved from one 529 to another, depending on which kid can use the money more.

Coverdell Accounts: Like the 529s, allows earnings to grow tax-deferred and is tax-free when used to pay for qualified expenses. One drawback you can only give up to $2,000 per year.

US Savings Bonds: If purchased after 1989, can be redeemed tax-free when the bond owner uses the proceeds to pay college tuition and fees. US Savings Bonds are very safe investments but tend to offer lower rates of return than either 529s or Coverdell’s.

Custodial Accounts: Are opened in the child’s name and the income is taxed at the child’s rate and not the parent’s rate.

Helpful tips:

  1. Start saving as early as possible. I opened 529s when my kids were six months old.
  2. Set up automatic deposits so you don’t have to think about it.
  3. Rather than giving gifts on birthdays, ask friends and relatives to contribute to your kids’ college savings plan instead.

Let me share with you my own personal example. I have two kids, seven and five years old. I opened 529’s when they received their social security number at about six months. I have automatic investments monthly from my paycheck deposited directly into the funds so I don’t have to think about it. Money earned from recycling and money earned when I cash in spare change goes to the 529’s. Currently, I have about $18,000 for my seven-year old and about $15,000 for my five-year old. It’s really not that difficult if you start early and make an effort to save.

So what do you do if you didn’t start early and your kids are already in high school? Kids can:

  1. Attend a junior college for two years and then transfer to a university or college.
  2. Attend a cheaper school closer to home.
  3. Work part-time.
  4. Research available federal, state, and local grants and apply to as many as possible. Grants do not need to be paid back and can be given based on many factors such as financial need, academic achievement, and ethnicity.

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Parents are the most important teachers their kids will ever have. I believe most parents want the best for their children and want them to be financially savvy. However, many parents are actually doing the opposite and are teaching their kids how to be poor. Here’s how:

  • Telling your kids school is not important. Although a college degree is no guarantee of financial success, those with a college degree tend to make more money than those without. Graduate and professional degree earners tend to make more than those with a baccalaureate. https://moneyprovidesfreedom.wordpress.com/2010/06/18/the-value-of-an-education/
  • Encouraging outward displays of wealth. If you look rich (drive an expensive car, own a huge house, wear expensive clothes/jewelry), most likely you are not wealthy. This type of spending creates financial stress. Famous people who made lots and lots of money but filed bankruptcy anyway include Mike Tyson (boxer), Donald Trump (entrepreneur), Anna Nicole Smith (model-actress), Ted Nugent (rock star), Nicolas Cage (actor) and Larry King (talk show host). You need to save more than you spend to become wealthy.
  • Compounding for decades. When your children are young, many parents don’t open a 529 College Savings Plan or Coverdell account. I recommend opening some sort of college  savings plan for your child before he or she is one year old so the account has many years to grow.
  • By not teaching your kids how to live on a budget, balance a checkbook, or to save.
  • By not teaching personal responsibility. Hard work over time is the only way to succeed for most people. Success and wealth are not entitlements.
  • By bailing out your kids too easily. Let them experience the consequences of their actions while they are still living under your roof.

Many parents need to do a better job teaching their children that managing money is what leads to a rich lifestyle instead of the money itself. Kids want to learn about money and it is up to parents to successfully nurture their thirst for knowledge.

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