Question: My 21-year-old daughter makes $80,000 a year working at a large firm. She has very low expenses, so I’d like to see her sock away a huge amount of money. I told her that if you get used to spending a lot each month on “fun” stuff, it will be much harder to save down the road. I’d also like to see her bypass the high-end investment firms in favor of less expensive alternatives. What do you suggest? –Tom F., Chatham, Illinois
Answer: I’m with you, Dad. I think it’s a great idea to encourage the habit of saving regularly early in one’s career (or life, for that matter) so that it becomes almost second nature.
But let’s not overdo it. As Cyndi Lauper once famously put it, girls just wanna have fun. (Boys too, I might add.) Nor does having a good time necessarily make you some sort of financial reprobate.
I’m not sure how much you have in mind when you say you want your daughter to sock away a “huge” amount of money, but you don’t want her setting a goal that’s so high that saving becomes a privation and unsustainable. She would be making the same mistake as people looking to control their weight who go on a crash diet.
Your aim here, therefore, should be to get your daughter to think of saving as a natural part of life, a regular expense you must budget for just like any other (which, in fact, it is, as I explained in a column about how to live within your means and lead a financially responsible life.
So, how can one inculcate the savings habit in a way that avoids dealing with firms that charge onerous commissions and fees?
Well, the first thing you can do is to encourage your daughter to sign up for her 401(k) plan, assuming her company offers one (as most large firms do). You might suggest that she contribute at least enough to get the full employer match. If doing that doesn’t bring the combined contribution from her and her company to 10% of her salary, then she should kick in whatever it takes to hit that goal, which is a decent starting point for someone her age.
I can’t guarantee that her 401(k) plan’s expenses will be lower than those she’ll encounter at outside investment firms. But unless your daughter finds that, after evaluating her 401(k) plan, it is truly horrendous, it’s highly unlikely that she would be better off forgoing the tax savings, convenience and other benefits of a 401(k) to save outside the plan.
In addition to her retirement savings, your daughter should also have about three months’ worth of living expenses in a bank money-market account or savings account that pays competitive yields.
The idea isn’t to earn big bucks on this money; that’s not going to happen in today’s environment. Rather the aim is to have a safe stash that she can draw on in the event of a financial setback or emergency so she doesn’t have to tap her 401(k) or other retirement savings and possibly incur taxes and penalties for early withdrawal. She should be able to build this emergency fund while contributing to her 401(k).
Once she’s built up an emergency fund, your daughter can either divert the regular savings that was going to that fund to her 401(k), thus boosting her contribution rate there. Or she could put the money into a Roth IRA that would complement her 401(k). By funding her Roth with low-cost mutual funds like those on our Money 70 roster of recommended funds, your daughter can avoid bloated fees that act as a drag on growth.
One final note: What may seem straightforward to someone who’s well versed in financial affairs may be daunting to a neophyte. The last thing you want to do is overwhelm your daughter with so much information and so many choices that you paralyze her into inaction.
So break this process down and, without being overbearing, help her put the pieces into place one at a time. Help her get signed up for the 401(k), then open the emergency account, then consider the Roth.
She can always fine-tune her choices later. The most important thing is to instill the habit of saving so that it becomes routine. If your daughter manages to do that, she’ll improve her chances of having fun not just at 21 but for the rest of her life as well.
Go here to see the original:
Learning good saving habits early in your career
It’s a late weekday afternoon and best-selling author Sharon Lechter is once again giving financial advice.
Today, her target audience is quite different from the adults who purchased the “Rich Dad Poor Dad” books she co-authored with fellow Valley resident Robert Kiyosaki.
This group consists of a half-dozen young teenagers at a Phoenix branch of the Boys & Girls Clubs, and the audience is one Lechter hopes to appeal to with YOUTHpreneur, part of her new business that teaches children how to be entrepreneurs.
“I have a passion for financial literacy for families and children,” said Lechter, who left the Rich Dad Company in 2007 after disagreements with Kiyosaki and now runs Pay Your Family First. “What is happening with today’s kids is they don’t understand delayed gratification. . . . Kids want it before they even think about working for it.”
Lechter’s focus on children comes at a time when national studies show high-school and college students are plunging themselves into deep credit-card debt and having easier access to credit. Meanwhile, President Barack Obama last week threw his support behind a consumer-friendly credit-card law that eliminates tricky fine print, sudden rate increases and late fees.
The YOUTHpreneur program teaches children how to make money through gumball sales, and she’s teamed with local branches of the Boys & Girls Clubs and Fry’s Food Stores. Through the program, children learn about sales and profits by operating a candy machine at a Fry’s store.
“It was a good experience. We learned about business,” said Michael Clark, a 14-year-old from Greenway Middle School in Phoenix. “We had fun doing it, and we made some money for the Boys & Girls Club. So, it was all good.”
Lechter, of Paradise Valley, has taught the YOUTHpreneur program to about 70 children at six different Boys & Girls Clubs branches during the past year, and she’s selling the program on her Web site, youthpreneur.net.
She said working with kids brought her career full circle as the certified public accountant began focusing on financial education when her oldest son, Phillip, went off to college.
She said she thought she had taught her son to manage money, but as a freshman at Arizona State University, he quickly dug himself into a $2,500 credit-card debt.
“I was so upset, but I was more angry at myself than him,” Lechter said. “We didn’t bail him out. It took him about five years to get himself on track.”
The lesson apparently stuck because Phillip Lechter now is president of her new company, and he said the business would focus on entrepreneurship, financial education and money tips for teens and parents.
Sharon Lechter said it’s important for parents to teach their kids about financial management because college students are racking up thousands of dollars of credit-card debt and even some high-school students are using credit cards.
Sallie Mae Inc., which manages student loans, released a study this month that said nearly one-third of college students put tuition on their credit cards and the average balance for a student was $3,173.
College seniors are graduating with an average credit-card debt of $4,100, up from about $2,900 in 2004, according to the study. The median credit-card debt for freshmen nearly tripled to $939 since 2004.
Meanwhile, a 2008 nationwide survey of high-school students by Jump$tart, a financial literacy organization, found that nearly 35 percent of students had a credit card, up slightly from the nearly 32 percent in 2002.
Steve Beekman, area director for the Boys & Girls Clubs of Metropolitan Phoenix, said Lechter provided important skills to the children. He said a donor provided the gumballs and machines, while the children, who were between 11 and 15, donated the few hundred dollars in profits back to the Boys & Girls Clubs.
“It has gotten them exposed on how to run a business, and it has opened their eyes to the real world in how to make money and not go out and spend it all,” Beekman said.
Along with running YOUTHpreneur, Lechter also has co-authored “Three Feet From Gold,” which interviews successful entrepreneurs like the founders of Chick-fil-A restaurant and Mrs. Fields Cookies.
She said the book, a partnership with the Napoleon Hill Foundation, is scheduled to be released in October.
Excerpt from:
Program helps kids manage money, debt
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The #1 skill of an entrepreneur….
… is the ability to sell.
Watch as Robert Kiyosaki speaks with Sara Nelson of Publishers Weekly about the importance of learning how to sell.
He talks about how he does not consider himself an author, but an entrepreneur whose responsibility it is to sell his books.
Read the rest here:
The #1 Skill of an Entrepreneur
Part 2 of Rob Minton’s Presentation “How to Teach Your Children to Become Finanacially Independent”.
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Here is the original:
Video: Teach Your Children to Become Financially Independent (Part II)
Rob Minton recently gave a presentation titled “How to Teach Your Children to Become Financially Independent.” The research that he performed to prepare for this presentation unconvered some information that was down right scary.
Here it is in a nutshell…
Your kids will not accumulate any significant wealth in their adulthood.
Do you want your kids to struggle from week to week over money? I don’t. Â
Well, if we don’t do something about it right now, they are going to have money problems.
Read more here:
Video: Teach Your Children to Become Financially Independent (Part I)
