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21 May 2012

Good Habits for Kids

Filed under: Kids and Money - Tags: , - @ 9:46 am

Good Habits for Kids

Financial literacy for kids is something that Lucas Remmerswaal is very passionate about. A New Zealander, Lucas has written a series of books for children, based on the financial principles used by one of America’s most successful investors, Warren Buffett.

In 2011, Buffett was ranked the third wealthiest person in the world with assets of around $47 billion and this year, Time magazine named him as one of the most influential people in the world. Buffett is a self-made man, having started accruing his fortune early in life through selling chewing gum, Coca Cola and magazines door to door. He bought his first shares at the age of eleven and went on to invest in numerous businesses throughout his life. He is now the primary shareholder, Chairman and CEO of Berkshire Hathaway, a multinational conglomerate holding company based in Omaha, Nebraska.

After seeing a large proportion of New Zealanders lose their retirement savings during the Global Financial Crisis, Lucas Remmerswaal decided to become a crusader for financial literacy in schools and to teach children the importance of being financially smart. Over the last two years, he has developed three children’s books that set out, with beautiful illustrations, the principles that made Warren Buffett successful. These books are The Tale of Tortoise Buffett, 13 Habits – Standing on the Shoulders of Giants and The A-Z of 13 Habits. A fourth book, 13 Habits That Made Me Billions is due out soon. Early in 2012, Lucas embarked on a bicycle trip covering the length of New Zealand, visiting schools along the way to spread his message. Integrity, Intelligence, Frugality and Gratitude are some of the 13 Habits that Lucas believes anyone can use to create extraordinary results in their lives. Click here for more information on Lucas and free downloads of his books.

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21 February 2011

Money for Students

Filed under: Kids and Money - Tags: , - @ 1:35 am

Money for Students

The start of the university year sees thousands of eager school leavers leaving the safety and comfort of the family home and beginning their journey towards independent living. For parents and students alike, the dilemma of how to fund academic pursuits is not an easy one to resolve. Taking on debt is something that most prudent money managers avoid. There are, however, two categories of debt; ‘good debt’ and ‘bad debt’. The question is, in which category do student loans belong?

Putting it simply, bad debt is debt which is usually incurred to buy things that do not produce an investment return such as cars and holidays. Good debt is money which is borrowed to buy assets which produce a return such as an investment property or a business. Whether student debt is good or bad depends on how the money is used. Study is an investment that provides a future return. The best return will be gained from a qualification that will lead to higher levels of future income. The lowest return will be gained from qualifications with poor employment prospects or from having a great time partying but failing to get a qualification at all.

Student loans are repaid by way of an additional deduction from income once the student starts working. In effect, a student loan is simply an obligation to pay a higher rate of tax for a period of time and in that way is different from a personal loan.

What should parents do? Leave your money in the bank for as long as your child’s loan is interest free. Encourage your children to live as frugally as possible to keep borrowing to a minimum and to take courses of study that will lead to better income prospects. That way, only good debt will be incurred.

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19 December 2010

Money for Christmas

Filed under: Kids and Money - Tags: , - @ 9:04 am

Money for Christmas

Giving money to kids for Christmas might seem like an easy escape from choosing a gift but in fact it can be a great way to teach kids important lessons about money and life.

If your kids receive money from you or from others at Christmas encourage them to make a wish list before they spend it. Against each item on the wish list, write the approximate cost and add up the total cost. The first lesson for kids to learn is that you can’t have everything you want with the money you have available and it is necessary to decide on the most important priorities.

The next discussion to have is about money and time. There are two important lessons on this topic. Firstly, kids need to understand that money can only be spent once; either now or later.  Budgeting to have money available over a period of time is a key financial skill. Secondly, if you choose to spend your money later, you can earn interest on it in the mean time and have more to spend. Teach your kids about the power of compound interest, to show them how much their money can grow the longer it is invested.

As well as spending and saving there are other options for your kids to learn about. Investing in a business can be a great way to multiply your money, or lose it depending on how well the business does. Encourage your kids to think about how they could use their money to set up simple business – perhaps buying unwanted gifts and selling them for a profit! Last, but not least, talk to your kids about the importance of helping others who are less fortunate. Giving to others is a great way to realize just how wealthy you really are.

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