What’s in your savings account? If you’re a millennial, there’s a decent chance that there’s nothing in your account but IOUs and promises. [Read more…]
Readers, we’ve created an information-packed ebook on how to teach your children about money. It’s a guidebook for parents of kids at all ages.
Please click on the link below to download the ebook. After you’ve read it, please let us know what you think of it in the comments section beneath this post.
At the beginning of the year, my daughter started ballet. Halfway through the semester they have a public showcase which is a time where the families can see what is being accomplished in class and, as well a time for the students to get used to being outside of their studio and on a larger stage with an audience. By the time their annual recital comes around they’re a little more comfortable on a stage and know what to expect.
The showcase is not the full practiced recital with costumes and all. We were excited to see her dance though (parents aren’t allowed in the studio during weekly dance class to encourage independence/the studios aren’t very big) and she was excited to show off her moves. I was a little surprised to find out, that during this less formal performance, that parents would be bringing flowers to their kids. I didn’t know what to do.
For a formal dance recital performance, I understand that parents might bring a flower or small bouquet for a job well done and to congratulate their kids, but for a mid-semester quick showcase I wasn’t so sure. This was my first time so I was very much ‘’going with the flow’’. In the end, I decided that flowers for this day would be a bit much and were unnecessary, that was until I got a text from my sister-in-law.
Her friend has a daughter I the same dance company as ours. He called her to warn her that when they went to their first showcase they were literally the only parents without flowers for their daughter and it was nothing but tears for a few hours following. I didn’t want that to be us. I didn’t want to walk into the dressing room afterwards empty handed and have to explain in a roomful of pre-schoolers and parents that mommy and daddy didn’t bother getting flowers because they were a waste of money for such an event. We didn’t have time so our family made an emergency flower stop and picked up a small bouquet (50% off!).
This was the first time since having my daughter that I really felt like I was doing something to appease other people. Parents mostly. Don’t get me wrong, she was pretty excited to get a few flowers of her own, but I still feel like it was a bit unnecessary for the event in question. Had we not got the call from my sister-in-law, I would have stuck to my instinct and my kid would have been the only one (without flowers) and possibly spent the drive home crying, so in the end I’m glad we avoided that.
I’ve always very much gone to the beat of my own drum, and not cared what other people think about me, my family or any choices we make but I notice more and more that my thought process around my daughter to be more concerning with what other people will think. I think it’s partly because she’s not quite at an age to fully understand things. Sure we could have skipped the flowers and I could have attempted to explain that we only get them for recitals but she wouldn’t have really understood why she didn’t get any while everyone else did.
As she gets older and more understanding I think it will be easier to explain why we may do (or do not) certain things but for now I choose my battles.
Have you ever felt pressure to do something for your kids?
Next week my husband and I are going to our bank and opening an account for our daughter who hasn’t yet turned four. While some may think at three she doesn’t really need her own bank account I argue it’s never too early.
Since she first got her own piggy bank, for her first Christmas, she’s been collecting coins wherever she can find them and placing them in her Cinderella bank. Though they’re mostly small coins, until recently I didn’t realize how many she actually had. It sits on her shelf where she drops the coins in when she finds them. Yesterday I opened it to have a look to realize she’s almost out of room! I explained that soon we will need to work together to roll the coins and take them to the bank. Though she likely only has about $10-$15 it’s something and I want her to understand the importance of saving.
More than the piggy bank, a child has their own set of expenses. For us, its ballet and soccer plus the normal kid stuff like growing in and out of clothes way too fast. Until now we’ve just been providing these things out of our account but I like the idea of her having her own account to pay for all her expenses separately. Rather than us just pay for everything when it comes up, instead we will be putting money into her account to pay for these expenses. It helps us budget better by separating her stuff from ours and is helping her learn the value of money at an early age.
I think having an allowance is important for a child. Though my three year old doesn’t yet understand that we’re essentially giving her a bi-weekly allowance, it’s exactly what we’re doing. Just like adults, there will be required ‘’bills’’ to pay from her account, in her case registration fees and uniforms, but the ‘’extra’’ will be hers. Obviously she isn’t going to walk into her dance studio at four and pay her bill, we will with the money in her account, which we’ve placed there. As she gets older though she will have more say in the account and as well expectation to open a separate strict savings account (on top of the post-secondary savings account we also contribute to).
These are lessons I never had taught to me and I wish I understood the importance of saving early and often sooner than I did. I have vague memories of the local credit union coming in to collect our change in elementary school and balance our account books in the hallway but never really understood why we did what we did. I didn’t realize the foundation it was attempting to lay.
I’m not suggesting that by opening an account at three, our daughter will go through life not making any financial mistakes, there’s no doubt in my mind she will, the difference between her and I though is that she will know the difference when it happens and be able to correct them much sooner which is exactly what I hope to accomplish.
How old were your kids when they opened a bank account?
Money and politics tend to be two topics that people hold tight to the breast. They often don’t like talking about them, which to me is sort of funny. Both of these topics are so, very important and in my opinion you can’t talk about them too early or too much.
I write this post on the eve of Canada’s federal election and the US will elect a new president in a years’ time. Growing up in a democratic country is a blessing that enough of us, unfortunately, don’t realize. I want my children to understand the importance of having at least a basic understanding of our political system, international effects and why they absolutely must make an educated vote, for any election.
I only have my own experiences to draw on, and in terms of politics, I had very little exposure as a child. This probably has something to do with the fact that the voting age in Canada isn’t until 18 years old, when most people have either graduated or are in the process of graduating high school. I’m sure the mentality is that once you move onto post-secondary education systems it will be discussed but that wasn’t the case, for me at least. I wasn’t a political science student. I didn’t study economics or history. I literally had to Google my own politicians and what the parties meant and represented when the first election happened. Unfortunately most young people don’t even bother to do this and thus, don’t vote.
The US system is much simpler in the sense that you have Democrats and Republicans, as well a set election schedule. Canada has multiple parties (bigger ones being Conservatives, Liberals and NDP) as well no set election schedule, we could essentially have the same prime minister for 30 years. Boring.
Teaching Through Involvement
Teaching our children through involvement is crucial regardless of what country you’re from. We’ve already started with our 3.5 year old. When we’re driving we have her point out the different colored signs. She knows which one mommy and daddy prefers and is beginning to engage in questions. The ‘’why’s’’ have started. While I know she doesn’t necessarily understand our answers, the point is that the conversation has been stimulated.
When we vote tomorrow we will bring our daughter with us. I want her to come and experience it. The TV will be on all night until the final results are in, she will watch it with us. I know she doesn’t ‘’get’’ it but it is important to us that she begins to appreciate just how important it is. I have a friend who will actually host an at home voting booth with her young children, this is a brilliant idea to me. Learning through experience is the best way to learn.
Having a good political background is so important, kids shouldn’t be excluded. They should know who stands for what and how they will be effected too. A time will come when they’re granted voting power and they need to have as much information as possible!
Do you/will you involve your children in understanding politics?
Anytime my three year old sees a dog she either asks if she can have that one, or if we can get another dog to live with us. As a fellow animal lover, she comes by wanting it honestly but we simply cannot have a dog for a number of different reasons but this doesn’t stop her from asking.
A pet is a huge responsibility, especially a dog. One of the big reasons I wouldn’t bring a dog into our lives right now is because we have an incredibly stressed out cat who suffers from IBS and I’m sure the stress of any other animal in the house would be enough to set off her IBS bad enough that it kills her. It would be totally unfair for us to do that to her.
I’ve always had pets growing up, cats, fish, hamsters, birds and dogs. We were big into animals but now that I’m a homeowner, mother and pet caretaker I have a totally different perspective on animals and the responsibility that comes with it. We can’t even go away overnight without having our cat looked after since she’s on such a strict feeding schedule.
So many families take on the responsibility of a pet without thinking it through and it doesn’t always end well. There are a few things that need to be considered before you bring any pet into the picture, regardless of your family situation.
Can you afford it?
Pets are expensive. To properly care for an animal they, at the very least, need regular food and exams. Expect extras too, in our case it’s expensive prescription cat food and multiple vet visits per year. All of these expenses need to fit into our budget. The cost of owning a pet goes beyond simply paying the pet store or adoption agency the initial fee.
Does it work for your family lifestyle?
Even before we had kids a pet like a dog wouldn’t work for us. We’re not home enough and for an animal like a dog, which needs to be let out regularly and walked, we simply can’t do it. We also like to travel, even just to see family for a weekend, and a dog wouldn’t work. Consider your day-to-day schedule and see how owning a pet wold impact it. If you can’t make it work fairly for both you and animal it’s not a good time.
Who will care for the animal?
Another huge reason we won’t have a dog anytime soon is because my husband doesn’t have much interest in caring for one. He’s being fair and honest. I would hate for him to push me to have one leading me on to believe he’d help when I know it’s not something he’s interested in right now. With busy careers and a toddler running around I don’t want to be stuck doing everything myself which is precisely how it will be. For years my mom wouldn’t allow my sister to get a hamster because she knew very well she wouldn’t do stuff like clean it’s cage so until she proved herself she didn’t get one.
Pets take up more time and energy than I think most families realize. While I totally sympathize with wanting all things cute and fuzzy, unless you’re prepared to care for the pet on all fronts it may not be the best plan for your family. It can just lead to unnecessary stress.
Money-making schemes come and go, but stalwart money management methods do not have expiration dates. Of course, it is wise to adjust your financial strategy throughout your life, guiding your efforts toward the greatest returns. But some financial tactics simply never fall out of favor.
Ongoing financial success builds off of solid fundamentals, so instead of focusing on passing fancy, the most disciplined money managers stick to the basics. Building and protecting credit, saving, and living a life you can afford are chief principles of effective money management, so these cornerstones are worth a closer look.
Live Within Your Means
Though it may seem like an obvious point, maintaining an affordable lifestyle is essential for anyone wanting to stay solvent. With a steady income and fixed expenses, cash flow is easily managed from month-to-month. Freelancers and self-employed workers may face greater challenges reconciling irregular income and spending, but even entrepreneurs find ways to balance their books.
It is difficult to manage finances on-the-fly, so the best way to account for your expenses is to track spending, and then create a budget. Treat your personal cash flow just like a business would, staying atop deposit income as well as outgoing payables.
To create a workable budget: First, divide your customary buys into manageable categories, to illustrate exactly where your money goes. Next, fill-in payments and other spending to create a sample snapshot of your finances. Use at least one month’s worth of data, but try to accumulate budget information for a full quarter (three months).
Once you’ve determined where your money goes, it is easy to reel-in savings. Though fixed expenses, like mortgages and other recurring payments may leave little room for cutbacks, discretionary buys like entertainment, travel, food, and fashion can be pared for positive financial gains.
Strive to Save
It is easier said than done for many well-meaning families, who make ends meet with little room for savings. Even small sums go a long way; however, as money set-aside mixes with time to produce positive long-term gains. Whenever possible, designate a monthly sum to add to your savings, perhaps taken aside from your paycheck. As savings grows, the dividends it earns also appreciates, compounding its value again and again.
Savings accounts have not been terribly profitable in recent years, with returns sometimes failing to beat the rate of inflation. And to make any progress at all, deposits must be held in fixed-rate accounts for a particular span of time, before gains set-in. To make the most of your savings, consider investments with greater upside potential, like stocks and other holdings.
Protect Your Assets
The recent mortgage meltdown shed light on personal financial security, as hundreds of thousands of borrowers faced foreclosure and default. Many lost everything they had worked hard to acquire. To increase your financial security, your debt-to-income ratio must be preserved within reasonable limits.
Insurance cover is another essential feature of your comprehensive financial plan. Without adequate home and car cover, your assets are at risk. And additional policies may be required to cover mortgages, unemployment, and even disability.
Plan for the Worst – Hope for the Best
Sage advice for personal money managers includes a contingency plan. While you hope never to call on your emergency scheme, having one in-place protects you from financial disaster. An emergency fund, for example, covering 3-6 months’ worth of fixed expenses, hedges against income lapses and ensures your bills are paid until conditions normalize.
In addition to cash reserves, keeping credit lines available further enhances your ability to endure temporary financial hardship. When credit accounts are pushed to their limits, on the other hand, interest pressure adds to your problems and the safety-net disappears.
Wills and other documents carry-on financial responsibility in the event of your demise. Maintaining the proper documentation protects your family members and ensures your financial resources remain available to them.
Financial security is a lifelong pursuit, requiring commitment and discipline. While each situation is unique, time-tested principles bring success to dedicated money managers. To ensure the best outcomes for yourself and family, maintain an affordable lifestyle and protect your assets. Savings and backup plans add extra comfort, preparing you to fend off unexpected financial difficulties.
In the past people have given money to our daughter. Sometimes there was explicit direction given with the money, like deposit it in her savings account, and other times there I have been told to spend it on whatever she wants or needs and so my husband and I have gone out and done just that. Usually putting the money towards a need more than a want, she’s only 2.5, she doesn’t have many wants.
Now that she’s getting older though I will be allowing her to make some decision about how her money is designated. While I fully expect the first few times to be about buying the latest toy, it won’t stop me from explain the importance of saving some money too. If she does, great, if she doesn’t- it is her money.
Money to Be Saved
As she gets older I will stress the importance of saving more, but with some exceptions. Any income earned, like if she gets a babysitting job or part-time work doing something fun, I will fully expect that she contributes to her savings account and help save for something larger she may want or need, however I have no problem with allowing gift money to be spent however she wants.
Money to Be Enjoyed
Most money given as a present is expected to be enjoyed. While I would like if she saved some or all of it I have no problem if she decided to blow it all on clothes, toys or whatever else she wanted as she gets older. AS long as it is an informed decision.
If she empties her cash in a mall food court and couldn’t tell me where the money went, I’d have a problem but it would be 100% her mistake to make. If she convinced me she really wants something, and was given the money to buy something, I will totally allow it. At the same time if I notice after some time it’s something she isn’t using or was wasted money, depending on what it was, I would encourage her to sell it and regain some of the lost money.
It’s easy for me as a personal finance blogger to get all too excited about saving and keeping all money tight to the vest but I can’t forget that money is meant to be enjoyed. For a three year old, long-term savings isn’t quite as fun as the newest Elsa doll or Olivia book and I get that, as long as she is really enjoys it isn’t money wasted in my eyes.
I fully expect my children to make mistakes with their money. Mistakes made are often the best learning opportunities. I just hope most of the mistakes are made in the comfort of our family home before she moves out and has a full plate of financial responsibilities. Financial peace is about balancing wants, needs and responsibility as long as I can instill this, she should be just fine.
How do you decide how gift money given to your kids is ”spent”?
In the last few months my husband and I are coming closer and closer to the conclusion that we will likely have another baby. Not for a few more years but if we have any control over the situation we would like to have another. More for the fact that we want our daughter to have a sibling. Both my husband and I are very close to our sisters and we want our daughter to have that relationship too. Though not the only reason, a big reason we’re choosing to wait to have more kids though is that kids aren’t cheap!
I really don’t think kids have to be as expensive as some would make them out to be but they’re still far from free. The two biggest expenses we need to consider is me being on maternity leave for upwards of a year (and losing some of my income) and daycare.
Preparing the Monthly Budget
Ideally we have another child at the same time our older daughter is preparing to start school. Once our daughter is in school she will no longer need full-time care and likely just a few hours in the afternoon until my husband and I are off work. This will save us hundreds of dollars a month for her current daycare cost. Having an older child in school while the younger is in daycare will definitely be the cheapest option in terms of saving on daycare costs initially.
As we come closer to preparing for me to be on maternity leave our monthly budget will look much better as we will have a significant amount of debt paid off as well. The peace of mind that comes with not having additional debt payments while on a reduced income will be great!
Saving on Baby Stuff
Most of the toys and baby items we bought and received as gifts for our daughter were very gender neutral which will save on upfront costs (and even if they’re not I have no issue with my potential son playing with his older sisters pink toys). There are very few baby ‘’items’’ we would need if we have another child. If we have a son we would need some clothes (most second-hand) as our daughter’s wardrobe is very girly and I draw the line at riding her pink motorcycle.
If possible, I will breastfeed again saving on formula and because we already own a pump and storage bags I wouldn’t need to re-purchase these.
Other than things like new savings account for post-secondary which will come with any future child, the other costs will be very limited. We will eventually need a second bed for him or her and some clothes, but because we have chosen to keep all of our current child’s things there is very little we actually need. Paying off our debt will also ensure I have a stress free maternity leave!
Did you spend less on your second baby than you did buying things for your first child?
Regulations imposed by the Financial Conduct Authority (FCA) have been responsible for culling many payday lenders that are unwilling, or unable, to abide by the tough new rules. The mass exodus of payday lenders from the market in the last few months is the result of the FCA’s strict regulatory regime, with a third of the UK’s 210 payday lenders failing to apply for permission to operate. This is in addition to the 30 or more payday lenders that had their licences revoked by the Office of Fair Trading (OFT) before the FCA took the helm.
The result is a cleaner, fairer industry. But could there be a risk that the lack of competition resulting from this cull is starting to have adetrimental effect on the priceof payday loans?
Competition and Markets Authority investigation
As a result of the perceived lack of competition, the Competition and Markets Authority (CMA) recently launched an investigation to discover what benefits, if any, consumers would experience if steps were taken to encourage alternatives to payday lenders likeWonga. While the full report will not be completed until later this year, the CMA has already released a snapshot of the problems it has uncovered to date.
One of the biggest problems facing the industry is the tendency for prospective borrowers to make their lending decision based on the speed they can access the cash, rather than the overall cost. This is causing typical payday loan customers to pay over the odds by between £5 and £10 per loan.
Recommendations for change
To solve this problem and make it easier for consumers to make a decision based on price, the watchdog has proposed the creation of an independent price comparison website. This will help consumers to quickly and clearly establish a picture of the overall cost of a loan that has been tailored to meet their specific needs.
The CMA also believes consumers will benefit from a clear breakdown of the costs, along with periodic statements of their debt, if they fail to repay their loan by the agreed time. Another measure proposed at this early stage includes the clamping down on payday loan ‘middlemen’ or brokers, who generate leads before selling them to the highest bidder. In such cases, many consumers are often unaware they are dealing with a lead generator.
The demand for payday loans
One fact the investigation cannot fail to recognise is the demand for payday loans, which is certainly here to stay. The payday loan sector has enjoyed considerable growth in the last few years, so much so that these small changes alone could result in a consumer saving of £45million per year.
A spokesperson for the Competition and Markets Authority, said: “Short-term loans like these meet a very clear need for around 1.8million customers a year. This level of demand isn’t going to go away so it’s important to ensure this market works better for customers.”
A dearth of viable alternatives
Much of the demand for payday loans is thought to be driven by a lack of viable alternatives. However, in a recent poll of its customers by payday lender Wonga, 77 percent of respondents said they would rather take out a payday loan than use short-term credit sources such as credit cards or overdrafts.
Consumer organisations such as Citizens Advice believe the best way to increase competition is to breathe new life into the industry with affordable alternatives such as ‘micro loans’ from banks. However, it is unlikely the banks would be able to compete with the speed and convenience with which payday loans can be sourced.
The CMA investigation is ongoing. In the meantime, further clampdowns on the sector are being introduced by the Financial Conduct Authority (FCA), which is responsible for regulating the industry and ensuring consumers’ interests are put first. This hands-on approach is certainly having the desired effect, with only those payday lenders willing to abide by its higher consumer protection standards still operating in the industry.
Author Bio: James Williamson is a finance writer, food lover and compulsive coffee drinker who fights the good fight to protect consumer rights.
Do you believe payday loans are overpriced if they are used as a short-term option? Would you be able to source short-term credit elsewhere if payday lenders were not in operation? We’d love to hear from you, so please leave your thoughts in the comments section below.