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The Money Messenger -- Saving and Investing in the Future
March 05, 2010
Welcome to Issue #028 of The Money Messenger!
The Money Messenger brings you the latest on your kids and money.
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March is here - the traditional start to spring - even if that doesn't come until the end of the month. While you might still be working on last month's newsletter topics related to kids' and teens' spring chores or getting a head start on teen summer jobs, you might be ready for something new. That's where this month's articles on saving and investing can help.
Teaching kids of all ages about saving and investing is an important part of their money education. Whether they are just starting with their first savings account or playing the Stock Market Game at school, all kids can benefit from learning about saving and growing money in addition to earning and spending it. It can even be a great way for the family to learn together. And it doesn't need to be overwhelming or overly confusing!
A reader's question on how to make investing fun for all different ages of kids - especially when you have a 5 year old and a 14 year old in the family
Helpful links and resources
What's new and what's next?
Who would have thought that I'd be so happy to hear a forecast of 40 degrees? Wow - it seems like winter has been really long. It probably feels that way for many people. When that sunshine does hit long enough to melt all the snow, everyone wants to head outside. I can't wait.
Until then, you might want to think about whether there are items on your list for 2010 that you wanted to check into for you and your family's financial education. Was one of those to save more or start investing? Saving money is one of the top three resolutions each year. It can be hard - there are always plenty of things waiting to be paid. Putting saving and investing, no matter how small you start, at the top of your list can pay dividends (literally) for years to come. Plus, it gives kids a great head start on their own financial literacy.
The key? Start slowly and focus on one area at a time. Don't try to master CDs, mutual funds, company stocks and corporate bonds all at one time. That will be enough to make your head spin or your eyes glaze over or both. Be sure to check out not only the articles but also this month's resources section for even more ways to get started. You're sure to find one that will work for you and your family.
What Is Investing Anyway?
Talking to Your Kids About Saving and Investing
When you start talking to your kids about saving money, it can be a challenge to try to explain the concept of money personality of a saver, are more inclined to spend the money they earn through chores, an allowance or receive through gifts. The sooner you can start, though, the easier it can be as the amount of money they have to spend - and save - grows.
But what happens after you and the kids have mastered the basics of saving money? It may be time to start thinking about investing. That leads to its own set of challenges.
First, what is investing? Simply put, investing is the process of making your money grow or appreciate over time. Unlike simple savings accounts which usually serve as a way to meet short term goals, investing is a way to meet long-term goals such as college tuition, vacation or retirement. Generally, money that gets invested doesn't need to be touched for at least five years.
Second, why would kids want to invest? It can be easier for adults to understand why investing is a good idea. They are more familiar with longer time frames, and the price tags that come with the major things in life like college and retirement. It's not as easy for kids who can struggle with how far away the end of the school year might seem let alone planning for college. That means that you may need to take a different approach.
Kids and teens want to know what's really in it for them. A great way to do this is by showing them how even a small amount of money can grow over time through investing. The same calculators that can show how compound interest works on basics savings accounts can also show how investing can yield big results. You can find a variety of financial calculators at mycalculators.com including one for savings and investing.
Third, how can you get them started? Once everyone agrees that investing is the right next step, figuring out how to move forward can be almost overwhelming. Here's where some initial studying can help. Learning some investment basics - beyond rates of return - can make a big difference in staying focused and not get weighed down by too much information.
Learning the basics can be done through a number of great books including some in the "Yes, You Can..." series as well as online resources such as the Motley Fool or the website of Kiplinger Personal Finance magazine. While you are doing that, you can also consider starting off slowly with a variety of products that seem more like savings accounts than investments. These include:
Taking that first step can be scary but also very rewarding. Learning about saving and investing in their younger years can help kids and teens get a head start on a lifetime of solid financial footing. That can make taking that leap now a little less frightening.
Easy, Low-Cost Ways to Start Investing
My kids think those E-Trade commercials with that baby are hilarious. They are missing that the ad wants you to believe that E-Trade makes investing so easy a baby could do it; they are in it for the entertainment value. And, hey, that baby is cute and funny.
But is E-Trade a good option for beginners? Are there other options?
If your family is ready to start investing in stocks, bonds or mutual funds, you will likely need a brokerage account. You have several options for doing that, though, so be sure to look at each one and pick one (or two) that seem to fit. Here are the most common:
As you can see, there are plenty of options to start investing on your own. Each of these has their pros and cons. Focus on finding one that matches your style. Don't be afraid to ask questions if you are looking at a website and don't understand how that broker works. They are usually more than willing to help customers (or would-be customers). And if not? That's a good sign that you probably don't want to do business with them anyway.
Here's where I answer your questions. John wants to get his kids and family started on the investing path - or at least the investment education path. Ideally, he'd like to do this as a family so they can all learn together. The issue? The kids are 9 years apart in age with one being 5 and the other 14. How can a family learn investing together with these age differences? Here's the advice:
It's great to have these types of challenges to deal with as a family although it can also be frustrating. Age differences can mean that the younger kids don't understand the things that keep the teens interested. Or, that teens get bored while they watch younger kids learn the simpler skills. Trying to manage these issues can make you want to throw your hands up!
One of the best ways to manage this can be to find activities that have a number of different tasks to be done or skills that are needed. Often, each family member can find a role that they can fill better than someone else. They get to play to their strongest skill while other family members get the chance to do the same. When it comes to investing, this might be a little trickier but it's still doable. Here are some ideas to consider:
As you look through these ideas, you may even come up with a few of your own. Share them with me at firstname.lastname@example.org or through the contact form here.
While money-and-kids.com strives to provide all the information you need to help educate your kids, teens and family on money matters, there are other great resources to help you. This newer section of the newsletter highlights those that I've found that provide solid, understandable and usable information.
Be sure to check out the latest blog posts at the site. With a new post nearly every day, there are lots of quick bits of information that might be just what you need.
April showers bring May flowers...and Financial Literacy Month! Next month's issue will focus on various topics related to financial literacy and what it means to kids, teens and families. If you have questions you'd like to see addressed for that issue, just use the Contact Form or email me at email@example.com.
Talk to you soon!
If you have any comments or suggestions for future newsletters, please let me know. I want to be sure that this newsletter meets your needs. Feel free to provide your comments using this contact form.
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