Encourage Saving

Image via Wikipedia

Matching Contributions When Your GrandKids Save

I am always on the lookout for great ideas that help encourage my gradchildren to start (and keep) saving.  I recently heard about some parents providing a matching contributions to their children’s savings accounts and thought – Brilliance!  As many of you are aware,  part of leading your grandchildren into having great money habits is helping to steward your Grandchild’s saving.

The way this idea works is very simple: YOU provide matching contributions when your grandchildren decide to put money in a savings account.

How Much Should you Match?

At the most basic level, you can match the contribution, dollar for dollar, when they set their money aside for the future.

You may decide to offer a 50% match, so that if the child decides to put $3 in savings, you contribute another $1.50, to bring the total to $4.50.

Another option is to offer a sliding scale. If your grandchild sets aside 20% of his or her income from a job or allowance, you can match it dollar for dollar. If he sets aside 10%, you can reduce it to 0.5o cents on the dollar, and then at 5%, you can match with 0.25 cents on the dollar. This will encourage some children to set more aside.

Why Match?

Just like a contribution to a 401K, with a matching contribution, your grandchildren can see their money add up quicker. This can get them excited about saving, so that they can watch the bank balance grow.

Also, this practice can provide kids with a foundation that will lead them to take advantage of 401k match opportunities in the workplace. Plus, it will help build a nest egg sooner, and you only have to do some of the heavy lifting… think ipad, car, college. What big gift would you give if you could?  Now here is a great way to start contributing and give your grandchild stake in their own future as well.

Any Twists?

Of course you can shape this anyway you want to. On top of providing a matching contribution, you can also have a “vesting” period. With most employer-sponsored retirement account matching programs, there is a vesting period. Before you can consider the money contributed by the employer as truly yours, you have to be an employee for a certain number of years. You can set up a similar program with your grandchildren: they can’t withdraw money from the savings account until at least a certain amount of time has passed.

Requiring a vesting period is a good way to help your child delay withdrawing the money. Plus, if your child gets the matching contribution from you, and then withdraws the money two days later, the purpose of the lesson has been defeated. However, if you are consistent in your efforts, and you provide a reward that your children can see grow, there is a stronger likelihood of the lesson sinking in.

Related articles

• 401(k) Plans (turbotax.intuit.com)
• IRA and 401k – The Basics (myretirementblog.com)
• Teach Your Children To Save Money (heartyparenting.com)

Make A February Financial Resolution

Almost like clockwork, one month into the New Year and many of the resolutions that my husband and I make are often pushed to the wayside as life seems to be ever pushing it’s own agenda on us.  I have therefore resolved this year to try a different tact: a monthly resolution.

I did surprise myself and actually followed through with my January resolution of creating this blog to start a grandparent community that more closely reflects my interests with my grandchildren (spending time, saving and having fun), and I appreciate all of you who have taken the time to read through items that you may find valuable.

February is a whole different ballgame for me, now that taxes are in full swing and I am forced to itemize my income and expenses in detail for the IRS, I am resolving to use this opportunity to create a financial plan for 2012 that will allow me to live my best retired grandparenting days yet.

I am going to take the following steps, one each week, and hopefully you can follow my example, share what works, and doesn’t and we can head into March with a financial fitness plan that will open all kinds of fun doors for us.

Week 1: Setting  top priorities

What do you most want to do with your money this year – pay down debt, save for the grandkids education, take a family vacation, or something else? Put a dollar amount on your priorities, divide by the number of months you have to achieve them (now 11, whoops… maybe I should have started in January!), and make a plan to set aside funds each month.

Week 2: Budget, budget, budget!

Since you have to do it for your taxes, track your monthly expenses – from your mortgage payment to a pack of gum. Now, subtract those expenses from your income. Any surprises? Is there enough left for your goals? If not, it’s time to reevaluate spending or your goals.

Week 3: Create a balance.

Ask yourself some tough questions that will make your life easier: Can you maintain your lifestyle within your current income? Could you cut back on certain spending habits while maintaining a happy and healthy balance? What bad financial habits do you have – and how can you change them?

Week Four: Seek professional help for wealth planning.

Funny, but this is sort of like the doctor going to the doctor for me.  I used to do this ten years ago! But as Mary Poppins delightfully says: A spoon full of sugar helps the medicine go down.  Now that in weeks 1-3 I have taken my medicine, it is time to have some sugar.

Buyer beware, when you seek professional advice: Your financial professional should provide personal solutions and adaptive investing when discussing your lifestyle planning and goals. He or she should have a clear picture of where you want to be with your finances and provide the vehicles to get you there – but always be realistic. Anyone who does otherwise does not deserve your business.

With the economy in a state of uncertainty and volatility, you need to grab the reins and control your own wallet. The first step is getting a clear understanding of where you are, and where you want to be. Onward we go!

Related articles

• Groundhog Day: 7 mistakes retirees make repeatedly (seattletimes.nwsource.com)
• Here Are 37 Ways To Commit To A Better Financial Life That Anyone Can Accomplish (businessinsider.com)
• 4 signs your financial advisor is dangerous (cbsnews.com)
• Financial News Update we 03/02/2012 (wealthifa.wordpress.com)

Ways to Teach Children About Money

Unless you are Puxatony Phil or live in a cooler area like those poor souls from Boston, you are likely to think that Spring is nearly here! In addition to warmer weather, the return of baseball, and gardens blooming, the changing of the seasons will also bring you several opportunities to teach kids about money. It’s never too early (or late!) to put them on the road to lifelong financially savvy decisions, so as you get ready for the end of winter, think about activities you can share that will teach them about money, as well as give you some fun family time. Here are examples to get you started.

Yard Sale

Spring cleaning will help clear the cobwebs out of the house and your brain after a long winter cooped up inside, and it will give you the time to decide what possessions your family no longer needs. Most families can stand to do this more than once a year, and even the most change-averse child will be excited to learn that old toys can be converted into cash at a yard sale.

Between advertising, pricing items, making change, and responsibly spending the spoils, a family yard sale is an excellent teachable moment for your grandchildren. If they are old enough to remember when the no-longer loved toy was new, it will be good for them to see that possessions do not necessarily keep their value. Watching customers haggling with you over prices will provide them with a priceless introduction to the power of negotiation. Even learning that yard sales do not do well on weekdays or rainy days will help children to understand that it’s important to always have a backup plan. Overall, you will clear your house of clutter and teach some valuable lessons on how finances work. It’s a win-win.

Mowing Lawns

It’s a grand tradition for neighborhood teenagers to earn money by doing yard work for others. This spring, why not encourage your tween or teen to canvass the neighbors for lawn-mowing/ house help opportunities? This can help your child to understand that savvy pricing of his services, good advertising (even if it’s just word of mouth) and excellent service will translate to more money in his pocket. By giving him control of his own miniature business (provided he is allowed to borrow the family mower), you will give him a basic understanding of the relationship between money and hard work.

Lemonade Stands

For smaller children, there is no more quintessential summer experience than opening a lemonade stand. While this may be no more elaborate than setting up a card table on the sidewalk in front of your house, you can make the entire experience more memorable and educational through planning. Decide where and when you will set up your lemonade stand. For example, if there is a nearby park, festival or farmer’s market in your neighborhood, choose to put up your stand to take advantage of the foot traffic. (Do make sure that you are allowed to do so ahead of time, however). Include your grandchildren in the shopping for the lemons, sugar and ice so that they can help decide on an appropriate price per glass and estimate how much profit you will make. Determine fun and easy ways to advertise (like posters at nearby intersections) so that they can see the power of advertising to help to bring more customers.

Spring and summer provide you with some unique opportunities to teach your grandchildren about money. By making these lessons fun, you’ll help your kids to see that money is something worth learning about.

Related articles

• 17 Tips for a Successful Yard Sale (changingthesubject.wordpress.com)
• Having a Successful Garage Sale                                                                                         (moneysavingmom.com)
• Perfect Lemonade                                                                                 (simplyrecipes.com)
• Homemade Lemonade                                                                         (familyfun.go.com)