Why don’t​ children learn about money skills and investing?

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Have you ever wondered why financial education doesn’t come into play until life smacks you in the face with it? Why is it not being taught in schools as part of the required curriculum assay, the Food Pyramid?

Which would rather have knowledge of while growing up, The Food Pyramid, or How to make a budget or The Basics of Investing and the effects of Compound Interest?  I would much rather have the knowledge of managing money.

If you think about it honestly, how often do you utilize the Food Pyramid? I’m going to say, nearly, NEVER! And yet it was required and beat into our brains during multiple different years throughout our schooling. This is because it’s not something that is used every day. The reason being, that the Food Pyramid is only in place because large agriculture, milk, dairy, and beef companies paid off and integrated in the U.S Government. Now, I’m not bashing them. Times were different. But now the general population is more aware that vegetables should be consumed more than meat and dairy products. I’m not changing the subject, I’ll get to my point just hang with me.

If money management and wealth building were integrated into the study curriculum, being that we utilize money daily, it would be grasped more effectively. It can be utilized. But for some reason, this information is not taught in the public school system. Again, which would you rather learn in school? Which would you find more useful today, or even worse, which would you have found more useful when you were just starting out on your own?

Some money principals and financial management are taught in the private school systems. Usually the US Christian Private Schools. This is greatly due to Dave Ramsey and his biblical financial principals. You can find more information about his debt free way of life at daveramsey.com He has a book(s) that you can utilize and even a program called Financial Peace University. Now I don’t necessarily agree with everything he says, but as I have said before, his founding principals are solid. But even Dave Ramsey doesn’t go very far into wealth building, he merely markets Mutual Funds for your investing future. This isn’t sufficient enough for me and this is difficult to explain to children, especially with all the different mutual funds out there with varying degrees of fees and “reliability” of continued future performance.

I have found some fun videos that you can utilize for teaching investing and money skills to children.

 

I say this about children being taught money principals, however, their parent rarely knows solid money principles. And in this I would say, yes, go and seek out Dave Ramsey’s Financial Peace University, I just wouldn’t go with his investment choices. But Dave has sort of a caveat there when it comes to investing. It’s not that the 12% return will or won’t happen that will determine if you’re successful. Its the fact that if you don’t invest, you have a 100% chance, of retiring broke- This, he happens to be solid on.  Don’t think too much about that side, looking for guarantees of return, I promise, you won’t find them.

Get your money straight. Teach it to behave, don’t go with the flow. Manage your money! And that starts with a budget. Heres my budget example. It is a spreadsheet you can utilize.Budget Example

 

Work-Life​ Balance

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Trying to balance work and a personal life can be difficult. I have been learning this fact more and more. If you are like me; a busy young professional trying to balance a personal life with a pregnant wife, a preteen child and graduate school, I have a few tricks to share.

The main thing I can say, that has helped me, is time management. Not the cliche’ type of time management you may hear from some motivational video. Real-time management. I have personalized my calendar in time blocks.

There are a few time block studies out there, all you really have to do is google time blocking, but the theme here is to give every hour a job. It’s important to take into account your energy levels throughout the day before you go blocking in items every 30 minutes. You may end up overbooking yourself.

I suggest you first start with your hours available in the day. My hours total are from 4:15AM through 10:00PM. I know that my mind is still foggy the first 30 minutes or so when I wake up, so I block off this first hour(ish) time slot from 4:15AM-5:00AM for a shower, to make a fresh pot of french pressed coffee, to water and walk the dogs and download my emails for the day. This takes care of the things so I can really start my day. Don’t want the dogs to mess in the house, I need my coffee to operate and I need to be fresh of course. From 5:00AM-6:00AM, I am prepping the kid for school, pulling up reports for work to guide my work day. I pull up my banking information/investments and so on and then I pick up a book and read to get my mind moving.

Those are my first two time blocks for the day, and I do them without fail. The rest of my day is blocked according to my work needs, travel needs, and family needs. When I am not traveling for work, I block off time for my family from 6:00PM through 10:00PM, and then I do it all over again. During the weekends, I complete my school work and again, further family time.

You may not think that I have enough family time blocked off, or that my working block being 12 hours a day, to be too much. But it is enough for me. I think it’s better to let my family know I am working hard and to show my children that working hard is important. To really work, to be productive. This is a valuable lesson in life I don’t want to just tell them, I want them to see it in action.

This balance of work and personal time is what fits me. And that’s the main thing here. What balance fits you? What are you comfortable with? Do you want more family time? Could you reduce your working hours and still meet your families needs so you can have more time away from work? If not, then how can you arrive at that goal? Instead of just saying you can’t do it, or complaining that your work is killing you, get up and figure out how to change your situation.

Next, I will tell you, os that I have gradually reduced the hours I need to sleep. This has added a few hours to my day. My up and operating time is longer because I don’t require as much sleep. Six hours is about all an adult really needs. We hear all the time that “I need my eight” but in reality, we really don’t. It’s just we are lazy. To be honest. I didn’t adjust my time all at once, I did it over the course of a few weeks. In doing this, I have added a great deal of time to my waking hours. About 1,095 hours each year. That’s 45 days- FULL 24 hour days to my awake time. (I may not be as handsome with a few fewer hours of sleep, but its worth it.)

What would you do, with an extra month of time? Could you learn a new language? Could you take a few education courses? Could you get into shape? What about maybe just meditating? Volunteer in a project? With 1,095 hours, what would you do?

The Couch Potato Portfolio

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The Couch Potato Portfolio- is a simple, automatic investment strategy. Notice the two terms- Investments & Strategy. Investments are for the long term, holding through the good and the bad. This brings me into -Strategy. A strategy is a plan, keeping the emotion factor out of the mix. Believe me, emotion WILL play a role if you don’t have a game plan to deal with it.

Let’s talk about setting up a fund. What type do you use? There are many options and I use two different types, both utilizing the same setup, set it and forget it strategy. The first one is a ROTH I.R.A (if your in the US) and the second one being a traditional brokerage account. The ROTH I.R.A. – Is like a retirement account, a personal 401K if you will. There are rules with this type of account. Once you place money into the fund, you need to be careful if you are attempting to withdraw the money out of it if you aren’t within the specific age range, or you will incur a penalty/tax. But if you set this account up and fund it each year (limit of $5,500 annually) it will provide you with tax-free wealth when you reach the age of retirement. (Assuming you invested it into the proper funds.) The second type of account is simply an investing account. Think of it like a bank account that allows you to hold stocks, bonds, funds, and cash. There is no limit to the amount you fund into this account each year, but it doesn’t have the same tax benefits as a ROTH I.R.A. does. If you must choose between the two, because maybe you don’t have the funds to fill up the ROTH and still invest into a regular brokerage accounts and selected funds, choose the ROTH, because you investing for your future, not an emergency.

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So now on to the different types of Investment funds. Just opening a brokerage account or ROTH account at a brokerage firm, is not investing. That would just be a glorified bank account. Once the money is in there, you must invest it (buy a fund/stock/bond/index) in order for your money to be “invested.” A lot of funds have minimums to be able to invest in them, to begin with. Some don’t. Some funds are bought and sold just like stocks are and those are known as ETF’s (exchange-traded funds.) ETF’s are just fine, but not easily set up for the set it and forget it, model of investing. My suggestion, or at least what I have done, is funded my account, with each paycheck until I was able to reach the minimum to buy into a particular fund.

As I said earlier, watch for fees and the best way to do that, is to avoid them all together. Mutual funds charge a percentage annually ranging from 1%-4%. Think if you will, your fund earned 11% for that year, which is great, but then the fund manager pulls 3% of your earnings out, now you’re left with 8%. This is still good, but what if your year wasn’t that great and you only brought in 7% in earnings, now after they pull their 3% – Your year earnings was really only 4%. That’s not very good now, is it? The funds still get to boast that they averaged 11% or 7% for the year. Doesn’t seem right now, does it? This is why I go with funds known as Index Funds. Index funds attempt to match the market such as the S & P 500, and they charge for a fee less than 1/2 of a percent. That’s 0.05%. Which means let’s say, I earn 9.5% average over the year. When they deduct their percentage, I’ve still earned 9% (This is a simplified explanation, but the result is the same.)

Since the Great Depression, the S&P 500, has averaged 10%. Some years being 20% followed by -5% then by 15%, so on and so on. But its the law of averages over time, utilizing compound interest over that time, that builds the wealth. Let me give you an example: Let’s say you invested 25$ a month into an index fund, that averaged 10%. You did this for your child as soon as they were born, you never had to invest anything else but 25$ each month. When your child was 50 years old, they would be worth over a million dollars. OVER a million dollars. That’s the power of compound interest. Your total investment cost is $15,000 but the payout is massive in comparison. Don’t you think it wise to invest for your child? What if you could teach your child to invest even more than $25 a month? Especially when they are a working adult. Think of even when your old and wrinkled, and your children have their own adult life and family, your still taking care of them and their future even long after your dead and gone.

There is a lot more to dig into, such as what would it take for you to retire? Do you really need as much as they say you will? Will it really take as long? How much do you need to sacrifice? How do I find the right fund for me? Can I afford it? (If you can put $25 a month away, even for yourself, then yes you can afford to invest in your future.)

I will also try to add in an excel spreadsheet tool to show you in a visual way how to achieve the success you want. (I love this tool, can’t wait to add it.)

If you get anything from this post: I hope you’ve at least gotten a small sense of knowing, that you really can change your future in a big way! Just by having the same knowledge the 1% has about consistent investing and time. You need both to build wealth, otherwise your gambling.

As promised, please click the link to get a great investment calculator. Net-worth-calculator. Play around with the calculator and see what it would take you to retire the way, and when you like. Also utilize it to see just maybe, if you can begin investing for your own young ones.