Finances Archives | Kids Ain't Cheap

When You Really Should….

March 4, 2014 | Leave a Comment

While everyone loves getting free stuff it is also smart to try out a product or service in a trial setting, particularly when there is a risk involved in losing and you are someone who is learning the ropes. Given their potential high-risk nature, the saying really couldn’t be truer for the two activities below:

Investing

With the BoC base rate at a historically low rate of 1 percent and no sign that it will rise in the short term bank savings accounts give ordinary investors little to get excited about. Even though inflation has come down in recent months, the chances are that the money you hold in a savings account is actually losing its value year on year. One alternative is of course online share trading, perhaps through an ISA or your local stockbroker.

Picking stocks can be a minefield for the uninitiated. Values go up and down and the array of options to choose from is bewildering. Are you investing for growth or income? Do you want access to international shares or just the Canadian market? It is enough to scare anyone off taking a crack at the whole world of online share trading. But, there is a way you can dip your toe in the water. Some online trading platforms, like Selftrade, offer virtual accounts where you can play around with different types of shares and see how your portfolio does in the real market but without actually risking any money. It is a great way of trying out your investment system in a safe environment before you are ready to invest for real. Virtually investing like this is free and can allow you to make your mistakes upfront, hopefully avoiding some of the more costly beginner’s errors.

As a word of caution, when you are ready to start investing, look into the fees your provider will be charging. Fees are one of the biggest drains on your investment fund and can hobble it if you aren’t careful. For further information on this can be found here.

Gambling (online poker)

There are thousands of sites for budding card players to choose from and plenty of different ways to lose your money. Online poker play is quite different from the real life version. For one thing it is played at a much higher speed than real life poker and it is common to see several thousand hands an hour being played. Other players can also often see each other’s stats so new fish can be at a disadvantage. Even if you are a pretty good player you will be at a disadvantage when you first start playing online. Fortunately there are sites where you can try playing for free before putting up a stake. Do you play aggressively and aim to scare other players into folding? Or do you play it more cagey and suss out other players’ strategy before raising the stakes? For players starting off there are sites available where you can test your strategy before putting skin in the game. Learn how the format works and play a few hands before buying your chips.

Prepping Your High School Grad’s Finances for College

October 25, 2013 | 1 Comment

Within the next few weeks, high school kids around the world will be prepping to embark on one of the biggest adventures in their life. They will be leaving the comforts of what they know and preparing to attend college.

Start Early

College, is an experience that far too many kids are not prepared for. It is an exciting time full of many emotions. Graduation is not the time to start preparing your child for financial independence.With other concerns at the forefront of their teenage brains, such as prom and ironing out frosh-week plans, your child will likely not be in the best mindset to absorb all the important information you have to share. For this reason, it is important that you start financial lessons early in their life. The earlier you start, the better equipped they will be.

For example, even before thinking about college, you should encourage your child to get an internship or apprenticeship so that they can learn the tools of the trade they are interested in. Places like City & Guilds has lots of information that can help you start early.

Start With Basics

If you accomplish nothing else, make sure you don’t send you child off until they know the financial basics. Ideally these foundations are laid throughout their upbringing but make sure the absolutely understand the basics before leaving home. The financial basics include:

Budgeting
Borrowing and implications of borrowing (loans, credit cards, lines of credit etc)
Debt and all responsibilities associated

If they don’t understand these simple basics, they will be starting their life, in a financial turmoil. A child needs to understand how to manage money before leaving home since the ”real world” will completely overwhelm them with opportunities to make bad decisions.

Opportunities

Opportunities to make bad financial decisions are everywhere. Most of these decisions are due to lack of education but totally avoidable.

It was lack of education that was the catalyst of my bad financial decision-making. I started university, knowing nothing about budgeting or borrowing money. I knew that credit cards eventually needed to be paid back but, like so many, thought as long as I was making the minimum payment I was fine. I thought a credit card was a great invention; instead of using my hard-earned paycheque to pay for gas/clothes/textbooks, I could charge it onto my credit card only be required to make a much lower minimum payment. It wasn’t until many years later that I truly understood the implications of my actions.

Smart Doesn’t Mean Knowledgable

Though I would consider myself well-educated, understanding my personal finances was totally foreign to me. I wish I had been educated prior to getting my first credit card but I didn’t, and subsequently ended up borrowing much more than I needed for university. Just because someone is smart academically, doesn’t mean they know anything about simple life basics. Too many parents assume that their bright children work hard in school, get scholarships and have life totally figured out. This is completely untrue.

Knowledge is based on a lifetime of experiences, something most young high school grads lack. Given their age, it is impossible for them to have had much opportunity to become well knowledgeable on real-world finances. It if for this reason that we as parents need to teach them from what we have learned.

What financial lessons have you learned, the hard way, which you’ll now be able to teach your children?

Are Your Children Ready to Handle Adult Finances?

October 24, 2013 | Leave a Comment

Now is the time that high school seniors take their college entrance exams and send out their application packages to the colleges of their choice. In so many ways, these kids are on the brink of adulthood. Yet, because very few high schools now have personal finance classes, many of these students are not ready to handle their own finances. However, in just one short year, they’ll be in college and financially independent.

Before your child leaves the nest, make sure you cover the personal finance basics with him or her.

Have the Student Loan Chat

Many students see the price tag for college and then see the financial aid package. If they get approved for enough loans, they think they’re okay and they can afford the particular college of their choice even though they’ll be buried in student loan debt.

Make sure that your child understands the repercussions or student loan debt completely. Show her how much she will be paying over the life of the loan. Let her know what her monthly payment will be and how much of that monthly payment will be interest alone. Show her how much she will likely take home from her job and how much of her salary those loans will eat into.

Teach Him to Save for Retirement

The earlier your child can save for retirement, the better. Again, give him hard numbers and show how much his money will grow the sooner he begins investing. Even investing 10 years earlier can make a big difference in the amount of money he has for retirement. In addition, show him some resources such as reading up on retirement on Suncorp’s website.

Teach Him to Live Like a Pauper in College

Sure, living in the best apartment on campus, hitting the bars and restaurants every night and taking great spring break trips are fun, but they’re also likely the activities that will land your child in deep credit card debt. Teach her to live like a pauper in college so she can begin her career and her adult life unencumbered by debt repayments.

Just Say No to Debt

This point links in with point three. The earlier you can teach your child the he can only afford what he can pay cash for, the better. If he can stay out of credit card debt as well as substantial student loan debt while in college, he’ll have greater freedom when he graduates. If he wants to take a job for a year or two working for a non-profit or joining the Peace Corp, he’ll have a much smoother path if he doesn’t have debt weighing him down.

Ideally, your child has learned many of these lessons, but if not, don’t despair. Many American teens haven’t yet learned these. Just make sure to teach them to your child before she heads off to college, a place where she can make–or break–her financial future.

How do you help your children become ready to handle adult finances?

Greeting the New Year with…a PLAN!

January 2, 2011 | 2 Comments

I don’t know about you but I always like to sit down and plan things as best I can and as early as I can. I find this is really important, especially as a single parent. Since I’ve started planning my year, I’ve been able to keep my budget and time in check . Here are some tips that you might find helpful.

According to E-Home Fellowship,

A good budget is a spending plan that includes everything you will spend money on and stays within your income. A wise budget includes everything you will spend money on, savings for a ‘rainy day’, savings for large purchases, giving, savings for kids, and investment for retirement and still stays within your income.

I think it is important to do this activity at the start of the year as it sets your expectations and gives you an idea bout how to deal with the coming events over the year. Plus, just remember the 5 Reasons You Should Save Half Your Income!

Tip 1:

Get the whole picture. Start by collecting all checking account and credit card statements for the last year. Hopefully, you will have limited this or, as I have done, stuck to a strict cash or debit card only rule. Note any and all expenses you regularly make. If you keep receipts, this will help you a lot. If not, maybe you should start for recording purposes only.

Tip 2:

Record the whole picture. Use all the stuff you collected to record a ‘picture’ of what you spent last year. This might be depressing or not but this is important to give you a good basis of comparison for the next budget.

Tip 3:

Make sure you don’t double-list items. Check off the lines on your documents as you account for them in a budget item. this way, you also do not forget anything.

Tip 4:

Note your net monthly salary, combined with any extra work you might be doing as well.

Tip 5:

Create a monthly expenses worksheet.

Tip 6:

Create a worksheet for non-monthly expenses like Insurance.

Tip 7:

Include everything you regularly pay cash for in the Cash Budget-Monthly section.

Tip 8:

After you total everything, you may be surprised to discover your expenses are larger than your income. This happens to everyone so do not fret. If you have a larger income figure than your expenses however, place this amount in your savings.

Tip 9:

Review your budget worksheet. Check if you’ve listed expenses accurately then look to see if you are being too excessive with some items. Also check those items you anticipate will increase within the year and make your adjustments.

Tip 10:

Try your best to have an emergency fund that equals around 6 months of your net income. After you’ve saved this amount, you cans start investing anything over.
After doing this you will find that you will be relieved to have a better picture of how your year will play out financially. While this is never a sure thing and while plans ALWAYS deviate in some way, you will probably stick to this basic picture for the next 12 months. You can also use this to plan anything extra you might want to do to earn more or to plan for points in the year when you know you will need to spend.

However you decide to go, let’s make 2011 a better year and the start of a better-budgeted decade.

How are you preparing for the new year? Are you doing anything different financially?