Comments on: Reader-Submitted Question of the Day – Day 4 http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Sat, 21 Nov 2009 13:00:57 -0800 http://wordpress.org/?v=abc hourly 1 By: Will Perforce http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/comment-page-1/#comment-307667 Will Perforce Mon, 12 May 2008 04:34:55 +0000 http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/#comment-307667 I can't speak on the basis of success, my kids are still too young to know how well the lesson(s) worked. That said, I'm sold on the advice to pay "kid interest" (5%/month), do NOT exercise control over save, spend, give (beyond enforcing house rules), and cross your fingers. See "The First National Bank of Dad: The Best Way to Teach Kids About Money" by David Owen for my source. I can’t speak on the basis of success, my kids are still too young to know how well the lesson(s) worked. That said, I’m sold on the advice to pay “kid interest” (5%/month), do NOT exercise control over save, spend, give (beyond enforcing house rules), and cross your fingers. See “The First National Bank of Dad: The Best Way to Teach Kids About Money” by David Owen for my source.

]]> By: Mark http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/comment-page-1/#comment-305769 Mark Wed, 07 May 2008 12:45:34 +0000 http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/#comment-305769 One of the best foundations for appreciating savings is to make sure your kids appreciate the value of money. My parents were always keen to tie any money they gave me to good grades or helping around the house. It can be very easy for money to become 'just stuff that Dad gets out of the ATM' which I think leads to kids spending it more on frivolous items, since it doesn't feel finite. One of the best foundations for appreciating savings is to make sure your kids appreciate the value of money. My parents were always keen to tie any money they gave me to good grades or helping around the house.

It can be very easy for money to become ‘just stuff that Dad gets out of the ATM’ which I think leads to kids spending it more on frivolous items, since it doesn’t feel finite.

]]> By: NCN http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/comment-page-1/#comment-303888 NCN Mon, 05 May 2008 13:54:42 +0000 http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/#comment-303888 In our house, we do a 10/20/70 split... 10 percent giving 20 percent saving 70 percent spending But, we offer bonuses when the kids choose to save.. like paying half for a nintendo if they save have, etc... Great post, btw.. In our house, we do a 10/20/70 split…
10 percent giving
20 percent saving
70 percent spending

But, we offer bonuses when the kids choose to save.. like paying half for a nintendo if they save have, etc…

Great post, btw..

]]> By: Mike http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/comment-page-1/#comment-303144 Mike Sun, 04 May 2008 18:31:17 +0000 http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/#comment-303144 I agree with the above comments. It would be really cool if you can get her to realize the power of compound interest. :) I agree with the above comments. It would be really cool if you can get her to realize the power of compound interest. :)

]]> By: KC http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/comment-page-1/#comment-301635 KC Fri, 02 May 2008 22:05:57 +0000 http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/#comment-301635 Andrew Tobias in his book the Only Investment Guide You'll Ever Need has an interesting a funny story about teaching kids the value of compound interest. You need to read about this from him cause I don't have the details exact, but.... He tells each of his kids (2 boys) that he will give each of them a dime a day for a month and compound the interest at 10% daily. Basically the first day they get 10 cents, the second days 11 cents (10 cents plus the 10% interest on the saved dime from yesterday), etc. However he throws in a catch. The day they start he holds up a bag of M&Ms and says that which ever one wants it can have it and doesn't have to share, but his interest will not start compounding for 1 week of this 30 day trial. Well of course both kids want the M&Ms cause like you said they can't see past their nose. Somehow he decides which one to give it to. So they start the month long compounding w/o one of the kids getting the benifit of compounded interest on his "banked" dimes for a week. At the end of the month the kids who didn't get the M&Ms earned a lot more money than the one who went for instant gratification (M&Ms). Its a great lesson on the power of compounding interest and delayed gratification. Anyway read the book or get it from your library - its a good read, in addition to having the funny story on teaching your kids about compound interest. Andrew Tobias in his book the Only Investment Guide You’ll Ever Need has an interesting a funny story about teaching kids the value of compound interest. You need to read about this from him cause I don’t have the details exact, but….

He tells each of his kids (2 boys) that he will give each of them a dime a day for a month and compound the interest at 10% daily. Basically the first day they get 10 cents, the second days 11 cents (10 cents plus the 10% interest on the saved dime from yesterday), etc. However he throws in a catch. The day they start he holds up a bag of M&Ms and says that which ever one wants it can have it and doesn’t have to share, but his interest will not start compounding for 1 week of this 30 day trial.

Well of course both kids want the M&Ms cause like you said they can’t see past their nose. Somehow he decides which one to give it to. So they start the month long compounding w/o one of the kids getting the benifit of compounded interest on his “banked” dimes for a week. At the end of the month the kids who didn’t get the M&Ms earned a lot more money than the one who went for instant gratification (M&Ms). Its a great lesson on the power of compounding interest and delayed gratification.

Anyway read the book or get it from your library – its a good read, in addition to having the funny story on teaching your kids about compound interest.

]]> By: Experts on Credit http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/comment-page-1/#comment-301603 Experts on Credit Fri, 02 May 2008 21:29:20 +0000 http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/#comment-301603 My parents started teaching me at an early age. Some summers my brother and I would have garage sales to raise money for school clothes. My parents started teaching me at an early age. Some summers my brother and I would have garage sales to raise money for school clothes.

]]> By: Meg http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/comment-page-1/#comment-301456 Meg Fri, 02 May 2008 17:55:22 +0000 http://allfinancialmatters.com/2008/05/02/reader-submitted-question-of-the-day-day-4/#comment-301456 I agree that matching savings/investments can be a great way to get kids excited about saving. Kids generally have too little money to notice and appreciate the wonders of compound interest, but you could acheive that by offering her 25% on her savings monthly (or some other high rate). Each month let her know how much you're adding to her bank account or piggy bank, explaining that banks pay you for saving (technically lending) in the same way. This way she learns about interest rates and is also motivated to save. And when she chooses to blow her birthday money rather than save it, make a note in your calendar to come back 3-6 months later and tell her how much she would have now if she'd saved it. Ask her if she's glad she bought that long-forgotten toy or if whe wishes she had some of that money back. She'll learn over time. The most important thing you can do is to talk about money matters and get her familiar with concepts such as saving, spending, budgeting, and borrowing. It's amazing how many people get all the way to college (or beyond) without such concpets even crossing their minds. I agree that matching savings/investments can be a great way to get kids excited about saving.

Kids generally have too little money to notice and appreciate the wonders of compound interest, but you could acheive that by offering her 25% on her savings monthly (or some other high rate). Each month let her know how much you’re adding to her bank account or piggy bank, explaining that banks pay you for saving (technically lending) in the same way. This way she learns about interest rates and is also motivated to save.

And when she chooses to blow her birthday money rather than save it, make a note in your calendar to come back 3-6 months later and tell her how much she would have now if she’d saved it. Ask her if she’s glad she bought that long-forgotten toy or if whe wishes she had some of that money back.

She’ll learn over time. The most important thing you can do is to talk about money matters and get her familiar with concepts such as saving, spending, budgeting, and borrowing. It’s amazing how many people get all the way to college (or beyond) without such concpets even crossing their minds.

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