Posted in College Planning/Children, Save Money/Budget, tagged 529 savings plans, build wealth, children, college, education, financial advice, money tips, saving tips on October 16, 2012|
2 Comments »
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.
Read Full Post »
Posted in Investing, Retirement/Estate Planning, tagged build wealth, children, compound interest, financial advice, money, money tips, retire a millionaire, retirement, saving tips, smart investing on October 5, 2010|
Leave a Comment »
One of the “secrets” of wealth is long-term investments that pay compound interest. When given a choice between a good investment with compound interest and a great investment with simple interest, pick the good investment every time. Over time, the investment that compounds will outperform.
Throughout stock market history, the average yearly returns for periods of 25 years or longer has been around 9-10%. For example, the yearly returns from 1900-2009 was 9.4%. For the last 25 years, the annual return was 11.9%.
So the secret of wealth is to invest when you are very young so you have time on your side. When your child is 16 and starts his first job, match his income and place that amount in an IRA account. Do this every year for five years and your child will be a millionaire by the time he or she retires.
Let’s illustrate with an example. When your child is 16 years old and starts his or her first part-time job, you place $2,000 into an IRA account for your child every year until he or she reaches age 20 for a total investment of $10,000. Even with no further investments, your child would have about $1.1 million by the time he or she retires at age 67 (assumes 10% interest). That $10,000 investment allowed your child to retire a millionaire.
Opening an IRA for your children when they are young is probably one of the easiest and surest ways to make sure your kids will have a great financial future.
Read Full Post »
Posted in College Planning/Children, tagged 529 savings plans, build wealth, children, college, education, financial advice, money, money tips, saving tips on October 4, 2010|
2 Comments »
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.
Read Full Post »
If you have children or grandchildren who’ll be heading off to college, it’s important to understand what those four years are likely to cost you. By 2020, it could be as much as $250,000 for a private institution and $130,000 for a public institution. So besides winning the lottery, what saving plans are available?
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 is now you can only give up to $2000 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.
- Start saving as early as possible. I opened 529s when my kids were six months old.
- Set up automatic deposits so you don’t have to think about it.
- Rather than giving gifts on birthdays, ask friends and relatives to give to your kids’ college savings plan instead.
Read Full Post »