Teaching Your Kids About Money Part 2

Let's say your child just came into a big chunk of change. Perhaps he or she received it for graduation, as a holiday gift, in celebration of a major birthday, in recognition of a religious rite of passage, or because their parents or grandparents have decided that it's time to learn how to handle more than a few bucks at a time.

Or, for the sake of simplicity, let's just say it came from their favorite aunt. Dear auntie has decided to give your child, little Susie, a check for $2,000. No, she's not nuts, she just likes litte Susie. (All those "Yes, Ma'ams" and "Thank you, Ma'ams" have finally paid off.)

So, what is your child going to do with that cash? One option is to hit the mall running — spend it on new clothes, electronic games, sports equipment, and more. In short, have a ball.

Two grand can buy a lot of fun. Little Susie could be living large for a couple of months, even longer. This unexpected lump sum is called a windfall, and that's what many people would do with it, spend the cash like it was burning a hole in their pockets.

However, why not consider another strategy for your child's newfound wealth? This is an option that can potentially profit them for a lifetime, not just a few weeks or months.

Put that money to work for little Susie. Think of it as seed money. Let's say you "planted" that money in an investment where it earned a good return.

Let's say it grows at a rate of 6%. This means that, at the end of one year, your child's money would grow from $2,000 to $2,120. That's an extra $120.

Big deal, Susie may think. What's $120? Let's put it in perspective. If little Susie gets an allowance of $10 a week, that's 12 weeks worth of allowance you've generated. Or if your child works a part-time job and earns $30 a week, the "seed" money has earned them a month's worth of income — and he or she didn't have to cut one lawn, flip one burger or put up with one thinks-he-knows-it-all boss. Your child has their your money working for them!

Best of all, even if you took the profit, that $120, and spent it, your kid would still have the initial $2,000. But let's not stop there. Let's further say that you kept all that money working. By the end of year two — assuming the same 6% rate of return — the money would now total $2,247.20. Thanks to compound interest — which earns interest on interest — your child has "earned" nearly $250.

Not bad for just sitting back with your arms crossed. Let it sit for 10 years and it has the potential to nearly double, growing to $3,581.70, generating a profit of $1,581.70. (By the way, if you squeeze out another two percentage points, so your money grows at an average rate of 8%, you will have turned your initial $2,000 into $4,237.89 after 10 years. That's because the higher your rate of return, the larger your initial money grows.)

This, by the way, is how many wealthy people get to be wealthy people. But remember, as with all investments it is possible to lose money as well.

Okay, now let's be realistic. Your child needs to have some fun, right? Accumulating money for its own sake is boring. So, when does little Susie get to spend at least some of her money? Here's one smart-money strategy: Why not take half of your child's profit every year for fun, leaving the rest to work for them? That way, the money has the potential to grow, but your child also get to spend some of it.

For example, take $60 — that's half the first year's profit of $120 — and use it to buy something special, such as holiday gifts for your family or a new gotta-have gizmo for your child. Keep the rest slaving away for you. At the end of the second year, you will have $2,183.60. Once again, if you take half the profit above the original $2,000 gift, that gives you $91.80 to spend. After year three, you will have $108.66 pocket money, and so on.

Keep doing this year after year and... well, you get the picture. So, now you know one good way to build wealth for your kids. Your big challenge now is to just figure out how to get little Susie's aunt to give her that money to get started.

Teaching Your Kids About Money - Part 1

If 14-year-old Damon Williams can become an investor, and accumulate $50,000, so can you. Williams, a member of a junior investment club in Chicago, has been learning about stocks, mutual funds and other investments since he was six. Currently he is featured on an episode of the public television series, MoneyTrack, entitled “Kids and Investing."

He is an excellent example that when it comes to teaching your chidlren about money. Kids are never too young to start learning about the importance of money and how to start saving for their futures.

Talking to your kids about money requires that you explain the concepts in ways that they can understand. When they realize that money decisions determine 90% of the decisions they make in life, such as whether or not they can afford to spend time with their friends; where they buy their clothes; whether they can purchase one music CD this week or two, the concept of saving and having money will become very important.

Here is a simple overview of how to begin the conversation with your kids.

Explain That There Are Two Ways to Make Money
People at work and money at work

• People at work — that's when you work at a part-time job, cut the lawn, earn money. We all do it. Most adults work about 40 hours a week, 50 weeks a year, for 30 or 40 years.

• Money at work — that's when you put aside a portion of every dollar you earn or receive. If you invest it wisely, this money can make money for you.

Kids can start learning about stocks, mutual funds and other investment vehicles, from the following sources:

• Parents

• Talk to your school about setting up an investment club

• Visit Web sites about investing for minors

• Have a goal - Perhaps it is to retire at age 30; to take the pressure off your folks and pay at least a portion of your own college education; or to sock away enough money for your first car. Decide the amount you need and the date you want the money to be available.

Include Your Children in Saving for their Future
You have a number of options

• Develop a system for you and your child to put money aside on a regular basis. Let's say your child has a job and a goal to have $500 for a new _________ (you fill in the blank here) two years from today. That means (ignoring interest your money may earn) you need to set aside just under $4.81 a week (4.81 x 104 weeks = $500.24).

• Figure out where the money will come from. Some minors take a percentage of everything they earn or receive (such as 20%) and put it toward their wealth-building goal. Others talk to their parents or grandparents about "seed" money (an initial amount of money invested to build wealth).

• Select investments that interest your child, whether it is shares of their favorite apparel store at the mall, electronic game manufacturer, computer, etc. When an individual buys ten shares of, say, Dell Computers, explain that this makes your child a part owner in the company. That's also why some minors put companies such as Disney, Nike, The Gap and McDonald's on their stocks-to-study list.

• Stick with quality. That goes back to doing your homework. Remember, the goal is to make money, not lose it. Find a company you and your child likes AND that looks to be a quality investment. Please keep in mind that with any investment, there is the risk of losing money. Steer clear of hunches or companies that simply have names that sound intriguing.

• Get good advice. There are a lot of people who can help you learn and made good decisions. One place to start is with a company like Alero Equities. Together with your parent or grandparent, our representatives can discuss your goals and offer direction and guidance.

Remember This: Money Begets Money
Take advantage of compound interest.

Put the money into a reliable vehicle and let it work for you. Slow but steady won the race between the tortoise and the hare. In other words, don't expect to make a fortune overnight. Successful investing takes time and patience. Forget stories about instant riches. Set up a plan and stick to it. That's the best way to help assure your long-term success.

The bottom line: Now is the time to begin teaching your children about the ins and outs of investing and wealth building. This helps you lay the foundation today for your child's long-term financial security. Contact Alero Equities at 1-866-354-5125 to schedule an appointment to discuss you and your child's investment plan.

Retire in Style

Human beings are distinguished from other species by our ability to think ahead and to plan ahead. However, most of us have great trouble thinking about the long term and preparing for it. We're too caught up in the hectic schedules of our day-to-day lives. Heck, it's difficult enough to plan something just six months ahead, like a summer vacation. How on earth are we supposed to be able to think about something in the distant future -- like retirement?

Thinking in advance, though, and acting on those thoughts, are keys to preparing for the future. The younger you are, the more distant is retirement -- and the more power you have at your fingertips in the form of compounded returns over time. That is why now is the time to start investing in your future so that you can benefit from these compounded returns in your retirement years.

Alero Mack, of Alero Equities, is a specialist in retirement planning, and can lend lend his insight to help us answer the important questions on retirement planning.

• How much will I need for my retirement in order to live comfortably?

• What are my goals?

• When should I start?

• What should I do?
  

• How much can I count on from Social Security?

• What costs might I run into once I've actually retired?

These are the questions that we all need to ask; questions that we often wait too long to ask. However, now is the best time to make these choices to ensure that you and your family are taken care in the years ahead.

Please contact us at 866-354-5125 or by email to discuss your retirement goals in person.

Take a moment to watch these instructional videos on

• "Click Here --> Watch a Video on How to Create Wealth" and

• "Click Here --> Watch a Video on How to Eliminate Debt"