Tag: Family

Reading list for young people and their families

References to books and online materials are sorted by age groups from pre-schoolers to grandparents.  URL links are printed in blue letters to provide quick access to a website. Click the computer’s mouse on those letters.

Pre-Schoolers

books

  • Dollars, by Mary Hill. Welcome Books (™): Money Matters. Danbury, 2005. Teaches children to recognize and count money. 
  • Spending and Saving, by Mary Hill. Welcome Books (™): Money Matters. Danbury, 2005. Examples of good ways to use money. 

internet reading

internet videos

Pre-Teens

books

  • The Kids’ Money Book. Earning, Saving, Spending, Investing, Donating. by Jamie Kyle McGillian, Sterling Children’s Books, New York, 2016. Author encourages children to earn and use money wisely.
  • Money $ense for Kids. by Hollis Page Harmon, Barrons, Hauppauge, 2005. An age-appropriate explanation of investing.
  • Investing Money. by Helen Thompson, Mason Crest, Broomall, 2011. A thorough and useful explanation of investing.  
  • Personal Management. Boy Scouts of America Merit Badge Series.  Brent A. Neiser, et al. 1996, 2012. A brief guide to personal finance.  

internet reading

internet videos

Teens

books

  • The Teenage Investor. How to Start Early, Invest Often, and Build Wealth. Tim Olson, McGraw-Hill, New York, 2003. This teenage author gives a complete explanation of the methods, risks, and rewards of investing in financial markets.  
  • A Gift to My Children. A Father’s Lesson for Life and Investing.  Jim Rogers. Random House, 2009. A successful investor’s good advice to teens.  
  • Dollars & Sense. A Kid’s Guide to Using- not Losing- Money. by Elaine Scott and David Clark, Charlesbridge, Watertown, 1916. A practical explanation of our financial system.  
  • Neale S. Godfrey’s Ultimate Kids’ Money Book. by Neale S. Godfrey and Randy Versogstraete. Simon & Schuster, New York, 1998. An illustrated introduction to personal finance. 
  • The New Totally Awesome Money Book for Kids. by Arthur Bochner, Rose Bochner, and Adriane Berg, Newmarket Press, 2009. For pre-teen and teenage entrepeneurs.
  • TeenVe$tor. The Practical Investment Guide for Teens and Their Parents. by Emmanuel Modu and Andrea Walker. teenvestor.com. Guidance on ways of earning an investment return.   
  • Street Wise. A Guide for Teen Investors. Janet Bamford, Bloomberg Press, Princeton, 2000. A narrow view of investing, focused on the time consuming of investing in stocks.
  • Exploring Business and Economics. Investing Your Money. Fred Barbash, Chelsea House Publishers, Philadelphia, 2001.
  • Confessions of a Scholarship Winner.  Kristina Ellis, Worthy Publishing, Brentwood, 2013. An inspiring story of a teenager’s quest for earning $50,000 in scholarships.  

internet reading

internet videos

Young Adults

books

  • The Index Card.  Why Personal Finance Doesn’t Have to be Complicated. Helaine Olen, Harold Pollack. Penguin Publishing, New York, 2013. Read my book review in http://wp.me/p1LlDo-KQ.
  • The Little Book of Common Sense Investing. John C. Bogle, John Wiley & Sons, Inc. Hoboken, 2007.  The scope of this book concerns investing wisely and cheaply in the U.S. stock market. See book review in http://wp.me/p1LlDo-qI.  
  • All About Index Funds, second edition.  Richard A. Ferri, CFA. McGraw Hill, 2007. Author describes the market indices, high-risk index funds, and low risk index funds.
  • Investing Made Simple.  Anthony L Loviscek & Randy I Anderson, Broadway Books, New York, 1992, 2003, 2004. An excellent description of investment choices accompanied by the advantages and disadvantages of those investments.  
  • Stocks for the Long Run, 3rd Ed. Jeremy J. Siegel, McGraw-Hill, New York, 2002. An authoritative textbook on investing in stocks.  
  • Investing in REITs, Real Estate Investment Trusts. 4th Edition.  Ralph L. Block, Bloomberg Press, Hoboken, 2012. A thorough explanation of the risks and returns from REITs.  
  • How to make your money last.  The Indispensable Retirement Guide. Jane Bryant Quinn, 2016, Simon & Shuster, New York. 366 pages. The author is an acclaimed financial journalist who advises people about financing and reinventing life after leaving the workforce. Here’s a link to my book review, http://wp.me/p1LlDo-JE. 

internet reading

internet videos

  • short term savings: https://youtu.be/zer96OhQdxg . Creative ways of saving for current needs during periods of fluctuating monthly income (‘income inequality’).

Parents and Teachers

books

  • Dollars & Sense for Kids, by Janet Bodnar. Kiplinger Books, Washington D.C., 1999. Advice on teaching the value and use of money to children and young adults.
  • How millennials manage money.  https://www.navient.com/assets/about/who-we-are/April_2018-Money-Under-35-Managing-Money-report.pdf . This 2017 survey offers a profile of the financial behavior of young-adult Americans.
  • The Money Tree Myth: A Parents’ Guide to Helping Kids Unravel The Mysteries of Money. Gail Vaz-Oxlade, Stoddart Publishing, Toronto, 1996. A thorough volume of advice to parents on teaching their pre-school, pre-teen, and teenage  children to manage money for a lifetime.  
  • Kids and Money. Giving Them the Savvy to Succeed Financially.  Jayne A. Pearl. Bloomberg Press, Princeton, 1999. Author interviewed parents, used experience with own child, and sought advice of consultants to write this book for parents. 
  • Smart Money Smart Kids. Raising the Next Generation to Win with Money.  Dave Ramsey and Rachel Cruze.  Lampo Press, 2014, Brentwood. Author speaks with experience about recovering from catastrophic debt and teaching children how to avoid debt.  
  • Make Your Kid a Money Genius (even if you’re not). Beth Kobliner, Simon & Schuster, New York, 2017. See my book review in the following web site, http://wp.me/p1LlDo-P8.
  • Happy Money, The Science of Smarter Spending. Elizabeth Dunn and Michael Norton. Simon & Schuster, New York, 2013. Includes good ways and benefits of sharing money, illustrated by video in https://youtu.be/c39wUIKUSk0 .
  • Earn It, Learn It. Teach Your Child the Value of Money, Work, and Time Well Spent.  Alisa T. Weinstein, Sourcebooks, Naperville, 2011. The pre-teen child earns money from their parent by choosing a task from a career profile and completing it in a timely fashion.
  • Paying for School. How to Cover Education Costs from K to Ph.D.  Robert Brokamp, The Motley Fool, Inc. 2003. Discusses ways to finance the costs of attending private schools, colleges, and graduate schools.
  • Paying for College Without Going Broke.  2018 Edition. Kalman A. Chany with Geoff Martz. Penguin Random House. The Princeton Review, 2017. Authors offer strategies for selecting colleges and paying the cost. 
  • The Financial Diaries. How American Families Cope in a World of Uncertainty.  Jonathon Morduch and Rachel Schneider. 2017, 233 pages, Princeton University Press.  Authors describe the coping mechanisms of families trapped in conditions of financial insecurity.  
  • Can the Poor Save? Saving & Asset Building in Individual Development Accounts.  Mark Schreiner & Michael Sherraden.  Transaction Publishers, 2007. Low-income persons might benefit from an individual development account (IDA). 

internet reading

internet videos

Grandparents & Third parties

internet SITES

Copyright © 2019 Douglas R. Knight 

Overview

Education and Investing are the best ways for young people to develop their future. Their success is measured in terms of personal security for a lifetime rather than in millions of dollars. Investing starts with learning how to save for future wants and needs despite many distractions. Family teamwork is an invaluable aid. This Overview is aimed at helping families inspire and train their young people to make investing a lifetime habit.

Teamwork

Journalists and educators agree that children learn about spending, saving, and sharing money very early in life. Whether their money habits become useful or futile depends on the examples and coaching of trusted adults. Financial education starts at home where family traditions of money management set the standard. If there is no family tradition, then start one. Young investors need a team of parents and trusted adults to provide,

  • guidance
  • inspiration
  • experience
  • funding

Money Management

Money management is essential to investing and protecting financial assets such as stocks, bonds, and savings. Building good habits can be a family tradition or a new family experience. Either way, children start forming money habits early, before entering school. Many families teach the wise management of money by encouraging their pre-schoolers to store money in jars (chart 1). Any container would work -envelops, cartons, bowls, socks, etc.- but transparent jars are the favorites.

RaisingYoungInvestors.003
chart 1, money jars

  • Spending Jar teaches decision-making and accountability. Children love money and never have enough to pay for everything they want. They should learn to spend wisely, track their expenses and accept the consequences of their choices. Learning to spend wisely can help them avoid future financial insecurity due to fluctuating income and overwhelming debt.
  • Saving Jar teaches investing. Saving leads to investing and the funding of financial goals. Start by helping children save for short term goals, then encourage them to gradually save larger amounts over longer time periods. Introduce them to the stock market by explaining that their favorite businesses sell shares of ownership. Consider helping them buy stock in their favorite company.
  • Sharing Jar helps build relationships. Expose children to the needs of their community. Community engagement will cultivate relationships and humane values.
Resources:

Dreams

Dreams are gateways to an exciting and prosperous life. Teamwork can help turn those dreams into financial plans for earning and protecting money. The earlier your child’s team begins the process, the better the chance of success.

Dreams can become realistic financial goals. Younger children dream of becoming grown-ups. For example, they wonder what adults do for a living and how parents earn incomes. Older children are inspired by classmates, role models, field trips, activities, etc.

childhood dreams
chart 2, dreams

Chart 2 shows examples of goal-starters:

  • teenagers want expensive things like cars and computers; they should save for it!
  • young adults think about weddings and buying a home; they should invest in it!
  • children dream of becoming millionaires; they could invest in a retirement account!

– My granddaughter read a story in The American Girl magazine about saving to become a millionaire. She was ‘hooked’. I discussed the article with her and asked her mother (my daughter) if I could provide some seed money to open an investment account. A year or so later, my granddaughter started earning money as a tutor and used her earnings to open a Roth IRA. She enjoys reading her financial statements and watching her investments grow in value. –

Starting a Roth IRA:  www.irakids.com

Earned Income

Chart 3 outlines the sources of income for children.

childhood income
chart 3, income

  • Unpaid chores are work assignments needed to run an efficient household.
  • Allowance is a regular gift of money that ‘allows’ young children to practice spending, saving, sharing, and budgeting money.
  • Jobs are types of labor performed by older children to earn money without a work permit. Not only do jobs enhance wealth but they also improve social skills and help children make decisions about future vocations.
  • Those who chose to turn a job into their own business are called Entrepreneurs. A successful business matches the skills of the child with the type of job; it also requires planning, organization, perserverence, and reinvestment.
  • Employment for wages in a regulated business requires children to have a work permit issued by the State.
Job suggestions:
50 small business ideas: https://smallbiztrends.com/2016/11/business-ideas-for-kids.html

Saving

Investments are a good way to save money for future use. Children have a BIG OPPORTUNITY to create wealth by reinvesting stock returns that will multiply the value of their investment. Chart 4 shows the future value of $1 invested in the stock market when all dividends and capital gains are reinvested in stocks. This mechanism of growth is called “compound interest”.

Compounding Interest
chart 4, growth of compounded stock returns

Dividends and capital gains are types of interest called “stock returns”.  The colored dots in chart 4 represent values of compounded returns at selected time intervals. One application of a growth curve is the use of time intervals to help plan big projects.  For example, childhood goals of saving for college and retirement fit into uniquely different time intervals:

  • The growth of $1 to $3 in 18 years is a realistic expectation of saving for college.
  • The growth of $1 to $30-$114 in 50-70 years is a nice investment for retirement.
More information:

‘Minor’ Requirements (‘red tape’)

Young investors need trustworthy adults to help navigate the red tape of opening a banking or investment account (chart 5). Minors (those youth under the age of 18 or 21 years depending on the state where they live) are unable to open the account without the written consent of an adult parent, guardian, or acceptable attorney. Full control of the account reverts to the young person at the age of majority (age 81 or 21 depending on the state).

family teamwork
chart 5, requirements

Big Projects

Big projects require saving thousands of dollars.

  • Short term projects include saving for a computer, car, vacation, or wedding.
  • Long term projects include saving for college, a house, or retirement.

Planning a big project requires setting the goal, estimating the deposits of money, overriding the obstacles, and occasionally reviewing the plan. A simple Retirement plan might be the following:

  • goal, save a million dollars [this may change later]
  • deposit 10% of earned income [this will change later]
  • override obstacles with frugal investing (chart 6) and other protections (chart 8)
  • review the plan when there are substantial changes of income, expenses, or personal life.

Frugal Investing

Brokerage firms charge fees for professional advice, trading services, accountants, and safekeeping of securities. The fees are inescapable, but they can be minimized by frugal investing (chart 6).

RaisingYoungInvestors.007
chart 6, frugal investing

  • Automatic reinvestment: Ask your broker to automatically reinvest cash payments from stocks and investment funds.
  • Infrequent trading: Otherwise, frequent trading (especially small amounts of money on a daily or weekly basis) will dilute investment returns.
  • Low trading fees: Consult online ratings and reviews of brokerage firms to assess their trading fees.
  • Dollar cost averaging: The best way of compensating for fluctuations of market prices is to make monthly contributions to the investment account which will then purchase varying numbers of investment units (i.e., shares) depending on the market price. Dollar cost averaging requires a dependable source of money (e.g., payroll deduction, bank account) and a receptive account (e.g., direct deposit plan, 401-K, brokerage).
  • Taxes reduce the profits from investing. Here are several ways of protecting the profits from taxes:
    • The Kiddie tax defers some of a child’s investment returns from taxes.
    • Tax-efficient investments reduce the capital gains & dividends taxes (e.g., growth stocks) or state taxes on bond interest (e.g., muni-bonds).
    • Federal taxes are not charged on the profits from Roth retirement and Education Savings accounts.
  • Long term investing: stock prices rise and fall frequently during the short term, but in general the price of a stock will gradually rise in the long term. The young investor can expect a rise in stock price over 30-70 years.
  • Diversified investments: Some stocks fail to earn returns for the investor. Consequently, it’s a good idea to own several different kinds of stocks to protect the total investment.

“College” is a Big Project

“College” is defined as any 2-year, 4-year, or career school after high school graduation. College prep is a family enterprise that prepares the high school student to negotiate their admission to college. Negotiation is the bargaining process that occurs between the student who wants to attend a desirable college and the college who wants to admit desirable students. The student’s ideal financial goal is to balance the cost of college with family savings and scholarships. Financial aid is only used if needed (chart 7).

RaisingYoungInvestors.011
chart 7, college prep

TIMELINE FOR COLLEGE PREP

  1. Family starts saving for college 15-18 years early with a “529 Plan” or “Coverdell account” owned by the parents. Grandparents can help fund the plan.
  2. Family has early discussions about college and the opportunities offered by a college education.
  3. Student starts seeking scholarships during the freshman year of high school. Start with the school guidance counselor and librarian. The family can help with the research, proof-readings, practice interviews, travel costs, etc.
  4. Student reduces the cost of attending college by earning college credit during high school.
  5. Family applies for financial aid during the senior year of high school.
    • FAFSA (Free Application for Federal Student Aid) is required by all colleges.
    • CSS Profile (College Scholarship Service Profile) is required by colleges that award non-federal aid
  6. Student negotiates the terms of college admission.
Quick references:

Protect them

In the event of a catastrophe, every household should have an emergency fund to sustain their budget for at least 3 months, preferably 6-9 months.

protect
chart 8, protect

More information:

In closing:

conclusions

 

Copyright © 2018 Douglas R. Knight