by Elisabeth Donati | May 27, 2010 | Financial Literacy, Latest News, Uncategorized
Financial Education: Fact or Fiction
In 2001, a young woman started questioning her lack of financial education as she looked around and saw so many WITH money but even more WITHOUT.
She didn’t understand how she’d gotten mostly A’s in high school and college, knew how to grow freezers and pantries full of food, take care of horses, build houses and come up with practical, logical solutions to almost anything but didn’t understand how to have more than enough money than she needed to live on each month.
She started asking, Why? She started looking around at the world, wondering what she had missed. And then, upon the pages of a book that was given to her by a friend, she found the answer…and the answer was simple. She didn’t understand money because no one had ever taught her about money.
Now, truth be told, she still doesn’t ‘understand’ money any more than the next guy because money is one of the most nebulous substances in the galaxy, but she has learned how to make it, save it, invest it so that it multiples, create passive income streams and more. But the best part of this story is that in the process of teaching herself what she never learned as a kid, she created a way to teach kids and adults about money in the most amazingly sticky, effective, relevant way…with a game bearing the name of the nebulous stuff itself…The Money Game.
Right or Privilege
Financial Education: Right or Privilege
If a child decides he or she wants to learn how to swim, or play the flute or become the best pitcher around, that child’s parent, if they have the financial resources to do so, goes in search of a coach or teacher for the child. This coach or teacher generally charges a fee for providing his or her expertise and the parent agrees to pay the fee in exchange for the coach or teacher to impart their knowledge and skill upon said child.
Now let’s change the topic of consideration to money. When it comes to teaching our children about money, helping them gain the skills necessary to be good at handling their financial affairs as an adult, many parents, and most of America, thinks this should be provided free.
Again, this woman (not so young anymore) asks, Why? Why is it perfectly acceptable to expect to pay for flute or swimming lessons but not money lessons? Why is it OK that for-profit companies make millions of dollars a year by selling textbooks and curriculums to school on math and science and reading but when it comes to getting the highest quality financial literacy curriculum into the schools, a for-profit company is looked down upon because it’s not a nonprofit organization?
What the heck is wrong with this situation? Why on earth is it not OK for a for-profit company to teach financial education but OK for a for-profit company to provide math or reading or science programs?
The reasons behind this go deeper than you’d ever care to consider and deeper than I am able to communicate and put into words at this point. It’s along the same lines as the spam filters who have been trained to mark emails and subject lines containing the terms money and f.ree (like THAT works to get past them…NOT:-) as spam and make it undeliverable.
Is there a plot? Maybe. I, being the women in the story above, have always questioned whether the government REALLY wants us educated in financial matters. It’s so much easier to slide things by us, make things seem like they make sense financially, keep society as a whole making decisions from a context of greed, need, deprivation or desire instead of financial security, common sense and genuine desire if we just don’t understand money.
Here’s an interesting quote by Emma Goldman: The most violent element in society is ignorance.
I couldn’t agree more. And ergo my question about whether financial education is a human being’s right or if it’s only a privilege to those who’s parents are aware enough to make sure they learn about money or eventually grow up and teach themself.
If you thought I’d have an answer to this dilemma, I’m afraid at present I don’t. But I did want you to think on it and share those thought with me for further discussion…and I believe it warrants a lot more discussion.
Just something else to think about…
by Elisabeth Donati | May 11, 2010 | Financial Literacy, Latest News, Media Attention, Uncategorized
So, here we are, a financial education company who’s mission it is to teach basic, but immensely critical, financial principles to kids, teens and adults, primarily focusing on women.
We send out emails and such about our programs and most of them contain the words ‘wealth’ or ‘money’ or ‘financial’ and you know what? A lot of what we send out ends up in people’s spam folders.
Search Engines Hate Money
Why? Because regular people who have poor financial beliefs and think that emails shouldn’t contain anything to do with MONEY, have decided FOR US, the general public, that we don’t have enough sense or ability to filter our own emails.
One of the aspects of money that Creative Wealth teaches is how our core money beliefs, our financial foundation as I call it, dictate our wealth potential. If you think that money is bad in any way, shape or form, you do whatever it takes, usually subconsciously, to get rid of it.
Our societal financial beliefs are one of the most amazing things I have ever studied and wondered about in my life. They are reflected back to us in almost everything we do and the fact that we, as a company, can’t even send out legitimate emails about our financial education programs just shows you how pervasive the belief that if it has anything to do with money or wealth, it must be a bad thing.
Just a little something to think about…
by Elisabeth Donati | May 10, 2010 | Financial Literacy, Latest News, Uncategorized
Most people probably don’t know that my educational background, and first love, is health, fitness and nutrition. I delight in using the knowledge that I know to create an environment INSIDE of my skin that provides me with the most optimum living experience I can create.
My fitness background includes the usual aspects: aerobics, weights and stretching. I taught all of these activities in my ‘former’ life, but when I started skipping down the path of “financial literacy for kids”, I bowed out of the physical fitness industry in favor of financial fitness. I turned my focus to better equipping kids and teens to handle their money.
As I have traveled along this path, I discovered the beauty of another ‘fitness’ activity that not only reconnected me to my first love but has provided me with invaluable financial lessons in the process. The activity is yoga.
With the introduction of yoga into my life, and in particular, a class I take here in Santa Barbara with Eddi Ellner of Yoga Soup, my eyes have opened wider to the financial metaphors available to us through the practice of yoga.
Let me explain…
Yoga is referred to as a practice because there IS no getting it RIGHT (because there IS no right). Yoga practice has us remember to breathe into all things…essentially all of the beautiful shapes our bodies can rest or move into and out of.
With yoga, you are constantly adjusting yourself…again, not because there is any RIGHT to adjust into but more the experience of being in the moment; breathing, moving your should blades slightly down, breathing, shifting the weight onto the outside of your foot, breathing…you get the picture. And all the while you’re noticing things that you might not have noticed if you hadn’t slowed down to concentrate on breathing and making adjustments.
FINANCIAL ADJUSTMENTS
During my foray into financial education and coaching over the years, what I notice most when working with adults, is their money habits…the habits they do and the habits they don’t do.
I remember hearing this wonderful distinction at one of Peak Potential’s great seminars. Harv Eker told us we have two types of habits…habits we do and habits we don’t do and that we’re in the habit of not doing the habits that might actually move us forward financially.
Let’s explore the idea of financial adjustments to see how they relate to our often unsupportive and unguided financial habits. Here’s what I want you to do…
The Latte Factor
Identify a habit that you normally do with money. This could be a physical behavior habit like spending money on coffee every morning (that you could have made at home a lot cheaper) or a limiting thought habit thinking you’ll never have more than enough money to live on. Whatever it is, see if you can imagine yourself in that habit. Feel what you feel in the midst of it. Identify the thoughts that go with it.
Next, take a few deep breaths and consider how you might ‘adjust’ this physical behavior or thought habit to better serve you. If this exercise is becoming a little confusing, stay with me anyway. I’ll walk you through the examples.
BEHAVIOR ADJUSTMENT
Let’s say you adjust the number of days you buy coffee from every morning to three times a week. At $3 a shot (no pun intended), you went from spending $60 a month on coffee to $36 a month…you save $24 a month.
Now, for people who haven’t learned how to look at the time value of money, $24 may not seem like a lot of moolah. But that’s $288 per year! If you invested that $24 a month for 30 years at even a measly interest rate/return of 5%, you’d have $19,974.21 in your financial cup instead of nothing which is what you’ll have if you keep buying coffee every day.
Imagine if eventually you adjusted to two days a week and then one day a week as a treat. Imagine the money you’d have by investing that money instead.
Financial Thoughts
THOUGHT ADJUSTMENT
Now let’s look at how to adjust that unsupportive thought you are in the habit of thinking…the one that convinces you daily (perhaps even hourly) that you’ll never be able to really have the money you want for yourself (or whatever your particular thought habit is).
The thing that would be helpful, once you’ve put yourself into that head space, is to inquire into where and when you first started thinking that thought. I promise you it’s not YOUR original thought so just know that it came from someone else or something that happened to you earlier in life that you misinterpreted.
If you can nail down exactly where it came from, great. If you can’t, no biggy. You can still adjust this thought and here’s how:
First, state the thought out loud.
Next, write it down.
Now, write the positive version of it. In this case, I have more than enough money to live on.
Next, turn that positive statement into a question like this: “WHY do I have more than enough money to live on?” This is called an AFFORMATION and is a question form of an affirmation that many people are already familiar with. This process was created by dear friend, Noah St. John. Click here to learn all about this powerful form of mind transformation and manifestation.
Finally, write this question down, print it on sticky notes and put it in several places around your home and ask yourself this question as often as possible.
End Result: You slowly move from habitually having a nonsupportive thought to habitually having an empowering thought which, by the way, often brings you the very thing you were blocking out in the first place. Try it!
When you begin to see how making small adjustments in your financial habits have a huge impact on the direction you’re traveling and where you end up, you can begin to look for possible adjustments in everything you do.
Financial Adjustments
THE MOST TRICKY FINANCIAL ADJUSTMENT
For most people, the most challenging adjustment to make concerns a core belief and that’s the belief that there’s actually something we must do, be, have or go to ‘in order to’ be happy, successful, rich, free, loved, etc. ad nauseum.
The whole point of yoga (or so it seems) is to learn to love and accept what is. Be in the here and now and make it all OK. Just as the Buddha taught that peace is in the now and that nonattachment is what relieved humans from suffering, practicing the ability to let your financial situation be perfectly OK where it is AND with each adjustment you make in the future, is the ultimate financial adjustment.
FINANCIAL ADJUSTMENT AND CHIROPRACTIC
You might be asking yourself why I didn’t relate financial adjustments to chiropractic adjustments. This is why…
Chiropractic adjustments, for the most part, are forced on you by someone else that you’ve empowered to be the expert over your body. What I’M talking about are adjustments that start on the inside, initiated by YOUR wants and desires to be in a different financial situation, do more than you’re currently doing financially, have more experiences in life that require money and create life the way you dream it can be.
By looking at the millions upon millions of possible financial adjustments that can positively support your life, AND breathing into and loving exactly what is right now, you take control over your experience of life. And as I am prone to saying, THIS is what financial freedom is all about!
For more information on teaching your children and yourself about money, please visit our website at www.innerwealthpublishing.com.
by Elisabeth Donati | Apr 15, 2010 | Financial Literacy, Latest News, Uncategorized, What you can do
From what parents tell me, sometimes it’s just plain challenging to talk to your children and teens about money. Heck, sometimes it’s even hard to talk to your adult children about money. We understand.
For whatever reason, as parents, sometimes the words just don’t come naturally. Add to that our own insecurities around money and wealth and well, sometimes it’s just messy.
In my book, The Ultimate Allowance, I give you pointers on how to talk to your children when they find themselves in different, and often difficult, financial situations:
- When they make a great choice with their money.
- When they make a poor choice (pun intended) with their money.
- When they ask you to pay for something when they have their own money.
- When they rebel or complain about having to be financially responsible.
- When they run out of money (as they invariably will).
Helping Your Kids Fly High With Money
So, for your reading pleasure today, I’m giving you the section in The Ultimate Allowance entitled, What To Say When.
What To Say When…
They make a great choice…
This is the best time of all! Sarah Singer-Nourie, in the book she coauthored on accelerated learning called Quantum Teaching, likes to say, “If it’s worth learning, it’s worth celebrating.”
A pat on the back and a rousing, “Great job!” is the first place to start when it comes to making children feel great about themselves and their choices. They learn to associate great money choices with positive reactions from you and others, but best of all, they associate these great choices with positive feelings within themselves.
In addition to celebrating a really big win with them when they make a great choice, you might reward your child with the following:
• A special night out for dinner, a movie, ice cream, concert, or some other activity they enjoy.
• A bonus to put into their FREEDOM Jar: cash, shares of stock in their name, etc.
• Something they love, like a new book, art supplies, etc.
A couple of points: I’d refrain from celebrating with the purchase of piddlyjunk because the message there is, “Spend money when you feel good,” and that’s not the message you want them to take into adulthood. I’d also suggest that they invite a friend to help them celebrate, thereby setting a great example for the friend as well.
Again, save the special celebrating for times when they’ve had a really great success or win, not every time, or they’ll learn to save and invest because they are being externally rewarded. We want them to be motivated internally for life so they’ll manage their money wisely just because they should and they learned it’s how you become financially secure.
They make a poor choice (i.e., a mistake)…
I truly believe that, for the most part, kids don’t get up in the morning and ask themselves, “I wonder how I can mess up my life (or my parent’s life) today?” Mistakes are just their way (and our way) of learning about the world. Kids generally want to do their best, just like us. Remember, we are generally all doing our best with the information we have at the time.
When kids do make mistakes, we have a choice in how we respond. Some responses tend to make kids defensive—causing them to hold back or lie to you—while other responses help create kids who easily and happily learn from their mistakes.
Kids who fear punishment, or the loss of love, in response to their mistakes, learn to hide their mistakes. These children live in two different places: one where they have the love and support of their parents, and another where they feel that if their mistakes were discovered, they would be undeserving of that love. It’s hard for these kids to fully accept their parents’ love and support even when it is expressed. It’s also difficult for these kids to set high standards for themselves, because they tend to be afraid of failing.
In life, there really are no failures, only learning opportunities, so please be careful with your words. One of my favorite sayings is that the only real failure in life is the failure to participate. I love this philosophy. What if kids were encouraged to try all sorts of different things and make mistakes in order to learn? What if we intentionally set them up for success every day? What a difference that would make in our society!
From my experience working with adults, many of them are so afraid of failing that they often won’t even try new things; they don’t feel good enough or worthy of success because of the way they were treated as kids.
Here are some suggestions if you are committed to raising kids who can learn from their mistakes, and you’re not afraid of making a few of your own:
• Accept the idea that your kids are doing their best, and embrace the idea that they’ll learn faster from their mistakes if they are in an environment that accepts mistakes. This means that you must set the example by not getting upset when you, yourself, make a poor choice. Let your children hear you say out loud, “Wow, that decision/choice didn’t lead me in the direction I wanted to go. I wonder what I can learn from this?”
• If you’re having difficulty (frustration or impatience) with your child’s mistakes, understand that this may be a reflection of your difficulty in dealing with your own mistakes. Be aware of this connection and deal with your own issues first. Your frustration may also have to do with your ‘expectations’ of your child’s behavior. I heard a wonderful saying once, ”Expectations are resentments under construction.” I think that says it all.
Remember that our children aren’t in this world to do as WE please. They are here to grow up and be their own unique person.
• Learn to recognize the negative shaming messages that we can easily give to our kids without realizing it. These messages can do a lot of damage and make them feel unworthy. Here’s a few of them:
“You should be ashamed of yourself.”
“How could you have done that?”
“You don’t listen to me!”
“That was a dumb question.”
“What were you thinking?”
“How you could be so stupid?”
“You can do better than that!”
“What’s the matter with you?”
“Why can’t you be like your sister or brother?”
• Continually provide your kids with learning experiences, and at the same time, structure their environment so they can’t make too many mistakes. For example, consider providing their allowance once a week if they have been getting it once a month, rather than giving them a whole months’ worth of money to deal with at once if they seem to be struggling.
• Again, provide a great role model for your children by the way you react when you make your own mistakes. Do you get defensive and stretch the truth, or do you “own” the mistake and learn something from it? Create an environment at home that’s based on learning from mistakes.
There are plenty of daily opportunities to show our kids the patience, acceptance and discipline it takes to allow us all to learn from our mistakes. Give your kids the room they need and deserve so that they can learn organically; in other words, let them learn by doing and experiencing. Sometimes, it’s not just the choices you make, but what you make of the choices.
Some things you can say to your child are:
“It’s perfectly OK to make a poor choice. It’s how I have learned some of my biggest lessons in life. I remember one time when I __________________ (fill in the blank . . . give him a personal example to relate to).”
Then ask, “So, what did you learn from this choice?”
Don’t make what they chose or did wrong (notice the word ‘poor’ in the sentence above) and don’t give them more lesson than they are ready for. One good lesson learned per mistake is about all kids can handle. (It’s about all adults can handle, too.)
Another option:
“Hey, I make mistakes myself. Everyone I know makes mistakes. Big deal. Fact is, no one who is great ever got great without making a lot of mistakes. It’s how we learn.”
“Would you like to talk about some other options you might be able to choose next time?”
And yet another:
“I know how you feel. I remember when I used to do ____________________ when I was your age. Boy, what a bummer. I can totally relate.”
Really get on their level and help them feel like you really do relate to their experience (and mean it). Let them know it’s OK, no one is perfect, and tell them there’s a reason the front windshield in a car is bigger than the rear view mirror: we need to spend most of our time looking forward, not backward. A couple of fun sayings to instill are:
“Live and learn,” and, “Correct and continue.”
A note about the power of words: It is my personal belief that words are powerful. I also believe they can mean nothing and everything, all at the same time; it just depends on what you make them mean. Because we do tend to make them mean more than they usually mean, do your best to refrain from using the word ‘mistake.’ Frame your children’s actions and behaviors as a choice that didn’t lead toward a desired goal or use the terms supportive and nonsupportive.
Some of this information was found at: www.markbrandenburg.com
They ask you to pay for something…
This situation is bound to happen. Remember Conclusion Number Two: children would rather spend your money than theirs. If they think there’s a good chance that you’ll buy something for them that they haven’t saved for, they are liable to ask you to do it over and over and over again.
While there’s nothing wrong with occasionally buying something extra for your child, just remember your intention for this program: preparing your child for financial self-reliance. If you continually buy things for your children, they are not learning how to be self-reliant.
When you DO decide to buy something for your child:
1) Don’t do it when they are begging; and,
2) Work out a cooperative plan with your child. For instance, you could agree to pay for a portion of the purchase and they save up for the rest, or they agree on some other type of exchange for helping them purchase something they want.
NEVER, I repeat NEVER agree to loan your child an advance on their allowance, unless, of course, you charge them interest!
Let there be lessons in it all. If you loan them money without charging them interest, you are teaching them how to use credit cards without the card. If you want to go one step further, have them sign a promissory note, as well. My Mom always did this with me and you can imagine how official it always felt. There was NO way I would have ever missed a payment or not paid her back. And, I might add, that she never hesitated loaning me money!
I also think it’s fine to buy kids something special if you’re away on a trip or you just see something that you know they would love. We all love surprises.
They rebel or complain…
As I’ve said, occasionally there is a child, typically a Money Monk or an Avoider in the making, who just doesn’t want to deal with the whole issue of money. It’s usually a matter of not wanting the responsibility that comes along with it or their being so busy or focused elsewhere that they don’t want to deal with it. If this is the case with your child, there are some things you can do.
First, do what you can to uncover the root of the problem. Even children have the beginnings of deep-seated beliefs about money, and although most children crave independence, many of them are scared to death of the idea of taking care of themselves. (This is also one of the reasons adult children move back in with their parents, or never leave in the first place.)
A couple of questions to consider:
1) Is your child responsible for too many things in his life already?
2) Is he involved in too many activities and can’t deal with the idea of one more thing to handle?
3) Has she watched you or someone else express negative emotions or anger in regard to the responsibilities around money and financial matters?
The answers to these questions may give you some insights into your child’s unwillingness or inability to embrace the idea of taking care of his own money needs.
When approaching a child who just flat out doesn’t want to deal with money, some well thought out questions leading to a nonemotional conversation (on your side) might just tip the scales in your favor. Ask him what money means to him. Ask him what his life would be without money. Ask him who is going to handle the money when he gets older, and other questions like these. If you still don’t get anywhere with your child, elicit the help of one of your child’s adult friends; an uncle, aunt, friend or teacher. You never know who may have access to the inner workings of your child’s mind and heart.
Again, do your best to uncover the why. Then you’ll know how to help him through the challenge and gently ease him into a life of financial responsibility. Keep in mind this isn’t a life or death issue (at this point) so take your time and gradually you’ll find the answers. The most important thing to remember is to create a safe place where the child can talk and express his thoughts and feelings about money and taking care of his own financial needs.
They run out of money…
It’s bound to happen; children make poor choices just like we do. A great way to handle this situation is to ask questions:
1) How do you feel about choosing to spend your money that way?
2) How does it feel to not have enough money left over to pay for the things you need to pay for?
3) What are the consequences of this choice?
4) Didn’t you make an agreement to budget your money so you could pay for the things we agreed you’d pay for?
5) What do you think I should do to help you?
6) Is there something that influenced the decision that led to this situation?
7) How can I support you in the future so this doesn’t happen again?
8) What did you learn from this choice?
9) Would you like to make a new agreement?
10) So, what are you going to do now?
And so forth. Unless it’s an emergency, my advice is: don’t bail him out. You must let him experience the consequences of making a poor financial choice or the lesson will be lost. One of the belief systems you don’t want to foster is that someone is always going to be there to rescue him. This is a common belief that parents instill in their children by the responses they make when their children make poor financial choices. It does not serve your children to rescue them. Our number one principle in all of our programs is:
Please don’t chastise or criticize him either. He knows he made a poor choice (the words poor choice hold less judgment than bad choice). As I keep saying, we all make mistakes, and we stress in our all of our camps and programs that financial freedom is your responsibility and it’s all simply a matter of making choices. These times are the perfect times for your kids to start really paying attention to all of the financial choices they make, big and small.
If you’re lucky, the idea of life being the sum of their choices will transfer to other areas of their lives; relationships, attitudes, school, fitness, health and more. This is how we create responsible adults instead of victims.
So, there you have it. Ways to encourage and support your child along their own path to financial responsibility and wisdom. Take every opportunity you can to encourage learning through their experiences and yours. I promise this WILL pay big rewards later.
Just something else to think about.
by Elisabeth Donati | Mar 25, 2010 | Financial Literacy, Financial Literacy Principles, Media Attention, Uncategorized
“Save a portion of your money for later,” you beg them, knowing better than they, that later comes sooner than we can ever dream. They look at you with that, “Ah, mom, enough with the save for later thing!”
You take a deep breath and release a heavy sigh, not knowing how to get your children to save money. As parents, we know all too well the ramifications of not saving…we’ve all been in situations where we wished we’d saved a little more or invested a little wiser. We know that our children must learn how to save their money, and a whole lot more, if they are going to ever create the life they want for themselves. One of the most common questions I get from parents who want to teach their kids about money is simply, “How DO I teach my children to save?”
There are some great answers to this question…but let’s look at the basic concept of SAVING first.
Saving Is An Unnatural Act
Saving only happens naturally when you realize there is a profound REASON to save…when you begin to understand the idea of anticipation, which is the expectation of something happening in the future. For children, they have difficulty with this concept…they are brilliant ‘in the moment’ and not very good at ‘in a minute.’
The other thing about saving is that we’re hard-wired NOT to save. We’re actually hard-wired for instant gratification and if you look back at when we were cavemen and cavewomen, it makes a lot of sense.
Imagine, there you are, spear in hand. You’ve gone out with ‘the guys’ to kill a buffalo. Just then, a big one walks by…you whisper to your hunting partner, “let’s wait for the next one.” He looks at you and says, “What are you, nuts? What next one?”
You see, back then, we needed to get the deer and pick the berries right then and there because our survival depended on it. And our brains evolved in such a way as to provide us with powerful chemicals that lead to positive, happy feelings when we ‘get it now’ instead of waiting until later.
For a great read on this subject, do a search for Time Magazine’s article, “Why Johnny can’t save for retirement.” You’ll begin to understand why marketing most products and services to us human beings is so easy.
Why Save Anyway?
It’s been well established that in order to teach people anything, they must believe the information is relevant to them somehow. Saving is one of those topics.
In order to get children to listen when it comes time to teach them to save, it’s important that they understand why it’s relevant to them. Let me tell you a little story…
Years ago there was a young man, about 15 years old. His name was Larry. Larry, being the bright, resourceful young man that he was, got himself a little job during the summer between 10th and 11th grades. He was so proud of himself…he got his first paycheck of $100 and showed it to his mom. He told her about all of the stuff he was excited to go buy with his first paycheck.
His mother, doing the best that she could, instructed, “Now Larry…you need to save some of your money for later when you’re older and want to retire. Every time you get a paycheck, just put $50 away. That’s all you need to do.”
Larry was old enough to understand the idea of retirement ~ after all, his grandparents were all retired, living what he had been told was “the good life.” Larry did some quick math in his head…
OK, $50 times twelve months is $600. $600 times ten years is $6000. Hum, times twenty years is $12,000. That’s not much money, he thought to himself. He decided, based on those quick calculations, to wait until he was making ‘real’ money to save for retirement. And off he went to spend his hard earned cash.
What Larry’s mother neglected to show him was how compound growth (not just compound interest) causes the value of money to grow exponentially over time, especially when you begin investing early. Larry might have been more interested if she’d shown him how $3000 a year invested for eight years from age 19 to 26 could grow to close to a million dollars (invested at 10%) by the time he was 60!
What Larry’s mother left out was the WHY! And kids, just like adults, need to see and understand the WHY behind what we ask them to do, or, as you already know, they will rarely do it…unless you make them. Wouldn’t it be sweeter to inspire them to save on their own because they understand the WHY behind it? Absolutely.
Understanding There IS A Later
So how do we teach children there is a “later” to save for? One way is to sit down and help them develop a life timeline and talk about how much money they might need during each stage.
Start by drawing a line on paper ~ put the word ‘birth’ on the left and ‘death’ on the right. Put 50 years old in the middle.
Birth — high school — college — get married — have kids —— work ————— retire ——- Death
0 age 50 ?
Then talk about the different phases they might go through during life…start with high school, the possibility of college, the working years, marriage, child-rearing, empty-nesting, retirement. Explain that this is just one idea of what life might look like for them and that their life will develop based on their choices and decisions they make as they go through life.
Ask them how old they’d like to be when they stop working for a living. Put this age on the time line as well and then figure backwards to start introducing the WHY of saving and investing to them. (This is a great exercise for you, as well.
Let’s say your son or daughter is ten years old. Let’s say they want to retire or be financially free by age 45. This means they have 35 years to prepare for retirement. Remember, this is THEIR timeline so if they want to stop working when they’re 45, it’s perfectly OK. Just figure the numbers so they can see how much money it will actually take for them to be financially free at 45.
Now ask them to figure out how much money it’s going to take to live the way they want to live when they’re 45 years old. Again, a great exercise for you to do at the same time. Let’s say they come up with a lifestyle that requires $5000 a month. Next, based on the standard model of financial planning, you need to help them figure out how much money they must have invested with a 6% return in order to receive that $5000 a month.
Though they may be too young to understand, this is a great time to introduce inflation and taxes. You don’t necessarily need to work these two figures into the equation but just mention that over time the price of things goes up and that they’ll probably have to pay taxes on the money they make each month before they end up with $5000. Bottom line…the five grand is their monthly net income.
OK, here’s the simple calculation for this scenario. They will need at least $1,000,000 invested with a steady rate of return of 6% (interest rate or growth rate) to yield approximately $5000 per month to live on.
Now comes the fun part. Take the $1,000,000 and divide it by the 35 years they have until they want to retire. You get roughly $29,000! Ask them if they think they can save $29,000 each year for 35 years (remember, they’re 10!).
You probably have their attention now.
Explain The Why
What’s next? This is the WHY you’ve been waiting for them to ask about. WHY they should start saving and investing early? This is when you bring out compound interest charts and explore how money grows over time and that the earlier they start, the better.
I’ve attached three pages from our Financial Freedom Playbook that you can download and chat with your kids about. Oh, and there are tons of investment calculators on the web where you and your children can explore how different amounts of money invested at different rates of return for different lengths of time multiplies.
Click here to download the Magic of Compound Interest worksheet. (The answers are $756,000 for 10% and 1,700,000 for 12%, respectfully.)
Click here to download a Compound Interest Table to play with different lengths of time and rates of return.
Click here to download the Test of Time to see the real power of saving early.
Show Children The Unpleasant Alternatives To Being Financially Free
I’ve heard it said that people change for one of two reasons; to move AWAY from pain or move TOWARDS pleasure. Studies show that people are far more motivated to move AWAY from pain.
One of the things that many parents do (that isn’t always the wisest in the long run), is protect their children from the real world…the world where people are sick, dying, living in terrible conditions, don’t have enough to eat.
It’s a good idea to expose your children, in safe doses, to things that most of us would label as undesirable for ourselves and the ones we love. These types of experiences can have a profound effect on what a child chooses for him or herself and can help influence a child’s choices later.
Similar to the effect that taking a might-be juvenile delinquent into a jail cell (or, better yet, letting him sleep in one over night) might have on him, so might taking your children into a very poor, run down part of town have an impact on their financial choices and habits.
When my son was 12-years-old, I had the opportunity to take him through Tijuana, Mexico with two big strong men as our escorts. We drove for quite a long time with him looking out the window in disbelief, his soul not understanding what his eyes were showing him.
We talked later about this trip on many occasions and I believe to this day that it was a good experience for him as he had grown up under the wings of safety and good times in a little Oregon town until that moment. Sometimes seeing the REAL thing makes it more believable than when you see it on TV.
Expose Them To People Who Made, And Didn’t Make, Wise Financial Choices
We all know retired people who live well, having saved and invested for this time in their lives and are grateful to have the freedom to enjoy retirement the way they wish.
We also know a whole lot more who didn’t save and invest wisely and are now paying the price, still working part or full-time and continually feeling exhausted and financially stressed.
Find willing souls in both camps and ask these people to spend time with your children, and do this in the context of learning from others who have been there. You might be surprised at what motivates your son or daughter to make certain types of financial decisions later on. Some of my most memorable moments as a child were when I had the opportunity to ask my parents’ friends questions about their own lives.
Provide Saving And Investing Systems And Strategies For Them
Once you have your child’s attention and he begins to see the WHY behind saving and investing for his future, you’ll need to help guide him, giving him systems and strategies to use to be financially successful as an adult.
Many of you know The Money Jar system that we teach in our programs. It’s a way to allocate the money that comes into and goes out of our lives. It involves recognizing the many jobs that money actually has in our lives.
The Jar System is a great place for anyone to start wanting to develop great money habits. Click here to download our ebook, The Money Jars: Your Magical Money Management System.
Pay Them To Learn About Money
First, if you haven’t purchased The Ultimate Allowance book yet, please do yourself a favor and order your copy now. There’s a wealth of information in this book that will help you financially educate your child like a pro. The book shows you how to use the money you already spend ON your child to give them the practice they need to develop financial skills that will empower them forever.
Second, I actually do mean pay them to learn about money. Check out the list of financial books at www.innerwealthpublishing.com/booksgame.php. Order a few of them from Amazon and pay your son or daughter $10-$25 to read each one. Before you pay them, have them give you a book report and have a conversation with you about how they will use the information in each book.
I promise this may be the very best investment you ever make in your child’s education! After all, you do want them to move out and STAY out, right?
The Ball Is Now In Your Court
So, in summary, yes, teaching and inspiring our children to save and invest their money for a future they can’t even imagine yet, can be tricky and can take some parental creativity. But with a little planning on your part, and reading on their part, you might find that the process really isn’t as daunting as you think.
Feel free to give us a call or shoot us an email with questions. And please leave your comments here on the blog for others to read, enjoy and learn from as well.
And as always…this is just something else to think about…
by Elisabeth Donati | Mar 18, 2010 | Coaches Corner, Financial Literacy, Financial Literacy Principles, Latest News, Uncategorized
One of the things I tell the folks who attend our life-altering Creative Wealth Train-the-Trainer workshop is that I need them not to put me on a pedestal. It might seem like a strange thing to say right off the bat, but here’s why I say it…
I want them to know that we all make mistakes and it’s OK to make them. That I am no different and I am the person I am because of those mistakes and what I’ve learned from them.
I want them to know that their best work will come from mistakes they have made and lessons they have learned.
I want them to know that they will become better teachers when they learn to teach from a profound place of authenticity and honesty…no matter what the topic.
I want them to know my background, that I’m not perfect, that I’m still learning and that that’s all there really is in life…learning and growing (well, in addition to love and chocolate, of course).
Harv Eker, the author of Secrets of the Millionaire Mind and creator of the Peak Potentials seminar called The Millionaire Mind Intensive, has a saying that I love…Every Master Was Once A Disaster.
I couldn’t agree with him more! After all, how do you think we all get good at what we’re good at? We had to learn, just like the next guy and we were prompted to learn by mistakes, lack of education, missing pieces, emotional or physical pain, and a whole host of other motivators that move us to take on the challenges we take on.
Life Lessons you can’t afford to ignore
So I was sitting here pondering what to share with you today and what came bubbling to the surface were the many lessons I have learned, and am STILL learning, about money, and especially, business. So if you’ll humor me…here goes.
Lesson #1: Never, never, never fall in love with your idea.
It WILL morph many times and what ends up working may not look at all like what you started out with.
Lesson #2: Get advice.
Get LOTS of advice. And then get MORE advice after that.
Lesson #3: STOP with the too many projects thing!
This is one of my biggest challenges. I am delighted and fascinated by so many things and the thing that I am best at and love the most is creating. My mind never stops thinking up new ways to do things and the projects that are on my ‘back burner’ could fill up the ARK!
I am challenged by this almost every day and it is difficult to put my creative juices ‘on hold’ simply because I need to focus on marketing the amazing programs and products that already exist.
What I do to force myself to focus now is to remember that unless millions of people and children experience our unique brand of financial education, I can’t make the difference I truly want to make in the world.
Oh, and I have developed a ‘to do’ list system that keeps me focused. I guess that’s lesson 3A:-)!
Lesson #4: Finish what you start.
Need I say more?
Lesson #5: You can never do enough planning.
Budgetary planning, marketing planning, PR planning, packing for camp planning, future planning! Even though I teach children and adults about setting goals, and know they are important for many most, it’s important to understand yourself in relationship to goals in general.
I set goals often for myself (I do practice what I preach:-) but the idea (and ability) of setting LONG term goals has always alluded me. I’m great at setting short term goals deadlines and completing projects on time; I just don’t ‘get’ the long term thing. Never have…never will.
What I want to share with you about goals is this…what has helped me is learning a long time ago that some people are goal-oriented and others are process-oriented. I am a pure process-oriented person and once I understood and accepted that, I was able to joyfully wrinkle my nose at the idea of setting long term goals. I’d invite you to do the same if you are a process-oriented human. Your life will instantly become more enjoyable.
Note: There’s a great book called Goal Free Living that you might enjoy. It brought me peace and sanity!
Lesson #6: Make sure you ALWAYS and forever listen to your gut.
In the beginning, when I started the first Money Camp for Kids program in 2002, I chose to go the nonprofit route. And I always had this sensation that something just didn’t jive for me there. After all, here I was teaching kids to start businesses, be little (and BIG) entrepreneurs, be their own BOSSes, create passive income vehicles and there I was, writing grants (which I never did very well because I could barley stomach the idea) and doing programs for less than they were worth. I had fallen into what I call the “Non-profit Myth”…that’s the myth that because something is considered ‘doing good’ in the world, it somehow should be given away and not paid for. YUK.
Two years ago I switched gears to build an empire for ME because after all, I was teaching kids to be responsible for themselves and being one of the most responsible people on the planet, I wasn’t able to do that for myself with the nonprofit. My gut feels much better now running it as a for profit corporation. I will make it or fail as a result of my own doing…it’s not dependent on anyone giving me funding for this or for that. I prefer it this way.
Note: the nonprofit does still exist, however, as we use it to collect scholarships for low-income families. This is how it SHOULD have been used from the beginning. (Hidden lesson:-)
Lesson #7: Outsource MWA’s (minimum wage activities).
Oh, how I wish I’d learned this earlier. I’m one of those who knows how to do it all so…I do it all! Stupido beyond belief. Don’t do that. There are so many people around the world willing and wanting to do all myriad of tasks for you for very little so you (I) can do what we should be doing: working ON the business and not IN the business. I’m praying I didn’t learn this lesson too late.
Lesson #8: Don’t put all your financial eggs into one basket, or your business.
I teach this. I practice it with my retirement accounts. I’ve learned many financial lessons over the past several years the hard way. Lessons like:
Don’t buy real estate in Arizona when the market is high (I was naive and didn’t know what questions to ask…I was trying to do what I was taught…real estate is a great investment, right?) and especially don’t buy it when your best friend says, “You know, there’s something about this deal…”
Don’t assume your financial advisor WILL get you out of the market on time. He didn’t. I took all my money back and invested it in stocks that I knew and understood (I’m an Apple girl…what can I say:-). What he lost in a heart beat I have made back in a year. I like being in charge of my own investments.
It’s important to pay yourself something out of your business and know how long you can go on how little before you find yourself looking for ‘work’ in order to keep the business going. When the business needs cash to grow, like Creative Wealth does now, it’s important to understand your own limits. I’m examining them now. We should all examine our own limits on a regular basis.
Lesson #9: It’s perfectly perfect to enroll those who have come to your programs, loved them and taken away value to help you with projects in the future.
My best friend and partner, Steve Gordon (the impetus behind our new coloring book) has told me for years to ask previous attendees to help volunteer at events, help with marketing and more. And I’m happy to say that I have learned this lesson well and that many of you show up and help regularly. Thank you for that. And thank you Steve for continuing to suggest it until I ‘got it’!
Lesson #10: Know when to quit.
You know the saying “Winners never quit and quitters never win”? Well, I’ve been pondering this saying for a long time now, and I’ve even talked about it before in articles. I think it’s ‘bullpucky’ as they say and here’s why…
Winners–people who accomplish things they set out to accomplish–quit all the time. However, there’s a big difference between quitting because you just don’t want to work hard anymore and choosing to quit because you realize an idea just isn’t going to work and to continue pursuing it would be financial, emotional, spiritual and mental suicide.
Quitting can be the exact right thing to do.
One of my favorite passions (I have so many of them…see Lesson #3) is to invite people to ‘think differently’ about things. To ask them to question WHY they believe what they believe and to inquire within themselves as to how a particular belief serves…or rather DOESN’T serve…them. More often than not, the context through and by which we live our lives isn’t a context we’ve consciously choosen for ourselves. We’ve inherited this context from our parents, our friends, the media, our teachers, our culture and more.
So what have I REALLY learned since starting down this path to teach myself, as others, about money, personal finance and wealth?
- That when you do something that helps other people, it’s hard to call it work and at the same time, that work can take over your life and is not necessarily the best thing for you in the end.
- That the only thing that really matters is that we consciously, with full awareness, learn to choose how to SPEND our days here on earth. How are you SPENDING yours?
- That it’s OK to ask for help when you need it.
I’m going to end this with a reminder that as I am just a girl who had an idea and acted upon it and has learned lots of lessons and continues to do so. And YOU are just a guy or girl in the exact same place. I enjoy it. I hope you do as well.
Just something to think about…
