The Simple Dollar
Damien Herrera smiles as customers arrive last week at his lemonade stand as he participates in Lemonade Day Corpus Christi in Corpus Christi, Texas. Hamm suggests encouraging kids to start a summer business in order to teach them about managing money. (Michael Zamora/Corpus Christi Caller-Times/AP/File)
Teach kids personal finance through experience: six tips
One of the most powerful things I’ve learned over the last few years is that older children and teenagers often learn the most powerful life lessons from experiences they can directly relate to.
The problem is that personal finance isn’t often directly relatable to their life. Quite often, parents and teachers rely on lectures and discussions to get the ideas across, but experiences are the things that many older children and teenagers really connect with. You can tell them about personal finance all day long, but without some experience, it often won’t sink in.
Here are some actual experiences your older children and teenagers can engage in to learn some of the basics of personal finance. I’ve been collecting these activities myself in order to help educate my children in personal finance literacy as they grow older.
RECOMMENDED: Can you manage your money? A personal finance quiz.
Give an allowance each week. You can start this effectively with children as young as four. We give our children an allowance of a rate of $0.50 per week per year. So, a seven year old gets $3.50 per week. Out of that allowance, they must donate at least 20% of it, they must invest at least 20% of it, and they must save at least 20% of it for a future goal, rounded up to the nearest quarter. ( Continue… )
Drivers fill up with discounted gasoline at a Costco gas station in Van Nuys, Calif. (Damian Dovarganes/AP/File)
High gas prices? 14 ways to save money on fuel.
Whenever I see advice on saving money on commuting fuel costs, the suggestions often revolve around completely giving up your car.
I’m as guilty of that as anyone else. It’s a great way to drastically trim your finances.
Let’s be honest, though: a lot of people simply aren’t going to give up their car. They have too much emotionally tied into the freedom of having an automobile to take them wherever and whenever they want.
So, with that in mind, here are fourteen pieces of advice that will each help you save on the fuel costs of your commute. Every single one of these tactics will improve either the efficiency of fuel consumption on your commute or will reduce the number of miles you put on your car. ( Continue… )
Homemade sports drinks can quench thirst at a far cheaper price without losing out on any of the tactile or flavor sensations that come with the original product, Hamm writes. (Gene J. Puskar/AP/File)
Sports drinks draining your budget? Make them at home.
I often meet up with a good friend of mine that I’ll call Dave.
You rarely see Dave without his trusty bottle of Powerade at his side. He seems to thrive on the stuff. He’s as thin as a rail and doesn’t seem to eat too much, so I guess he uses it as some kind of special “Dave fuel.”
Anyway, I happened to glance at Dave’s Powerade bottle and I noticed that the label indicated that the flavor was supposed to be “orange,” while the substance inside was a brownish-yellow, as one might expect from a “lemon” flavored iced tea.
“That’s an awfully strange looking orange Powerade there, Dave,” I told him.
RECOMMENDED: Daily deal sites: Beware these five things
“That’s because it’s not Powerade.” ( Continue… )
A for rent sign is seen on the front door of a home in Riverhead, New York. According to Hamm, the equity built through home ownership isn't worthwhile if it buries you in debt you can't afford. (Shannon Stapleton/Reuters/File)
Renting vs owning: When is buying a house worth it?
What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Catch-22 with home loan
2. Haircut value
3. Quality of school matters?
4. Making quadruple batches
5. The value of commute length
6. Uses for vegetable remains
7. Cash for emergency fund
8. Professional dress
9. Returning to the workforce
10. Move first?
I’ve had the privilege this week of eating lunch with a different lunch companion every single day.
This simple act has led to the formulation of a lot of great ideas, a lot of laughs, and a lot of stronger relationships.
Eating lunch with a friend or a person you want to know better doesn’t have to be expensive. Most of my lunches have been leftovers or peanut butter and jelly in a brown paper bag.
Even if it had been expensive, it would have been worth every penny for the great lunchtime conversations.
Q1: Catch-22 with home loan
I’m in a catch-22 position and I can’t figure out what to do. I am due with our first child this summer. Currently, my husband and I both work but I will stop receiving paychecks in August. I’m a teacher, and my ultimate plan is to start an in-home daycare/prechool to supplement our income while I stay home. The problem is, we live in a small apartment and I cannot do the daycare situation there. We need to have a house with space to do this.
( Continue… )
A "Sold" sign is posted outside a home in Indianapolis. Paying even an extra dollar on your mortgage payment earns a steady and safe return over the long haul, Hamm writes. (Michael Conroy/AP/File)
What one more dollar means for your mortgage payment
Let’s look at a “typical” mortgage. Right now, the average American mortgage is $235,000, so let’s use that as our baseline. The Seattle Times reports that, right now, the average 30 year fixed mortgage rate is 3.42%.
So, let’s use those numbers. We’ll look at a 30 year fixed mortgage at 3.42% that borrows $235,000.
Under those conditions, a person will be paying $1,044.79 per month for the next 360 months. That’s assuming they make the minimum payments on that mortgage over the entire term. They end up paying a total of $141,123.93 in interest over the course of the loan.
Now, what if a person adds just $1 as an extra payment each month for the entire loan? Each month, they pay $1,045.79. What changes?
RECOMMENDED: Top 10 places to buy a foreclosed home
Well, the final payment drops to $419.19. By putting in just $1 extra each payment – a total of $359 – you save $626.60 on that last payment. ( Continue… )
A vault in the lower level of a bank in Richmond Va. There’s no excuse not to be saving for retirement, Hamm writes. (Mark Gormus/Richmond Times-Dispatch/AP/File)
Saving for retirement? Learn these five truths.
Let’s get the scary truth out there: CNN estimates that half of all Americans are saving nothing for retirement.
Half of Americans aren’t saving a dime.
Why? There are a lot of reasons, but one big one, according to the study’s findings, is that people don’t know how retirement plans work. Another is the perception is that people can’t afford retirement savings. Still others include some of the statements I see in reader emails, often repeated.
Here are five simple facts about retirement savings. Each one of these hammers down on a myth I often hear about retirement savings. ( Continue… )
Thinking about where you want to be financially a year from today can help you with more near-term financial goals. (Ann Hermes/Staff)
What is your one-year financial plan?
Where do you want to be a year from now?
Would you like to have some debts paid off? Maybe you dream of having finished an art project or a major home improvement project. Perhaps you dream of having a social circle to participate in.
We all have things we’d love to accomplish, things that are a bit more real than a daydream but still far away from reality. I certainly have a long list of those things.
Lately, I’ve been trying a new approach for these types of dreams and I’ve found that it works out really well, at least for me. In fact, I’ve had enough success with it that I feel like sharing it with you.
RECOMMENDED: Five ways to get the most from your credit card
I call it “The Year-Long Plot.” It’s pretty straightforward. All you do is plot out a detailed plan, week by week, of how you’ll move from where you’re at right now to the goal you want to achieve in one year. ( Continue… )
Warren Buffett, chairman and CEO of Berkshire Hathaway, Inc., speaks during the Economic Club of Washington's 25th anniversary celebration dinner in Washington. Buffett's stock market predictions can help guide retirement savings decisions. (Cliff Owen/AP/File)
What Warren Buffett's stock market math means for your retirement
A few weeks ago, I discussed a Bloomberg article about Warren Buffett’s projections for the stock market over the long term. Here’s a refresher on what Buffett said:
“The economy, as measured by gross domestic product, can be expected to grow at an annual rate of about 3 percent over the long term, and inflation of 2 percent would push nominal GDP growth to 5 percent, Buffett said. Stocks will probably rise at about that rate and dividend payments will boost total returns to 6 percent to 7 percent, he said.”
Let’s assume that Buffett is exactly right with his predictions. What does that mean for retirement savings?
First, we have to make a few assumptions. Let’s assume that you’re going to want to be able to withdraw 60% of your salary each year for 25 years out of your retirement savings when you retire, so we’ll use that as a target amount. ( Continue… )
Holiday shoppers walk along 5th Avenue in New York. According to Hamm, removing emotion from your spending decisions will improve your personal finance. (Brendan McDermid/Reuters/File)
Keeping the emotion out of your finances
We are emotional people. We react to situations with a wide range of emotions: joy, fear, anger, mirth.
On the other hand, money is about as non-emotional as you can get. Money is simply a method of exchange between goods and services.
The problem that most of us run into when it comes to personal finance is that we inject emotion into their financial choices.
People spend money on things that make them feel good. When we want something, we’re feeling an emotional pull toward an item.
RECOMMENDED: Can you manage your money? A personal finance quiz.
When we feel that emotional pull, we give the seller the upper hand. They have the power to set the price. We might shop around in some situations, but if it’s something like a house where there are limited options, we’re often carried along for the ride.
The most powerful tool we have for minimizing our spending is to remove emotion and raw impulse from the equation.
How can you do that? There are several techniques you can use, but they all boil down to a few things. ( Continue… )
A woman takes a deposit box out of a compartment in the safe room of an Austrian bank in Vienna. Leverage is a concept that works in business finance but not really in personal finance, Hamm writes. (Heinz-Peter Bader/Reuters/File)
The difference between personal finance and business finance
There are a lot of tactics that work well in both the personal finance world and the business world. Cutting your spending works in both worlds if you do it in an intelligent way. Investing in resources that will last for a long time is a good tactic in both worlds.
However, there are things that work in business finance that don’t really work in personal finance.
The biggest one, from my perspective, is the concept of leverage. Leverage, for those unaware, refers to any technique that can be used to multiply gains – but, if it fails, it also multiplies losses. Examples of leverage include borrowing money and using derivatives.
Here’s an example of what I’m talking about. Let’s say you borrow $1,000 with the intent of putting it in the stock market. You put $1,000 of your own money with it and invest it in stocks. ( Continue… )
Become part of the Monitor community