Here are a few interesting statistics, 75% of parents in America feel they aren’t managing their money effectively. 69% feel less confident about having the talk about money, than they are at having the sex talk with their kids. And about 50% of early college students have overdrawn their accounts.
This vicious cycle of bad money management habits plague our lifestyles today. Today the top two causes of stress are money and job pressure, topping even health and relationships. And money is one of the leading causes why relationships and marriages fail, next to communication and sex.
Safe to say that learning how to manage money and creating good spending and investment habits, would not only make our lives more stress free. It will also allow us to have happier, deeper relationships, and a more self fulfillment lifestyle.
All this being said, it is damn tough to change habits! Let’s think for a second though, what if our parents had instill some of these things into our subconscious when we were growing up? What if someone had that talk with you, showed you the value of saving or shared proper purchasing techniques. How much would you have in your account today? How much more stress free and happier would you be? How many more options would you have?
Today’s post is aimed at one very important objective, empower the generation of tomorrow. And in doing so empower ourselves!
Welcome to The Kid-Vestment strategies, a group of ideas and lifestyle aimed at prepping our kids, in ways that the normal system of education does not. Prepping them for the real world, and sharing concepts that will empower them to be millionaires!
So here are a few things to highlight before we get going. Thousands of millionaires were studied and a few habits were found to be common grounds between them all.
1. Live below your means. You can start by only spending 99% of your income, becoming comfortable as such, then down to 98, 97, 96, etc. Most millionaire today save a minimum of 10% of their income, and the really discipline ones upwards of 30-40%. They then invest their savings into low risk, guaranteed rate of returns such as mutual funds, to allow their money to grow.
1b. Pay yourself first! This means before paying any bills at all, you move that 10% over to your savings. I personally have it direct deposited into a totally different account that I do not have a debit card for. This helps me to keep it out of sight and out of mind.
2. Create budgets and stick to it! If you decide you will only spend $200 on drinks and entertainment. Or $200 a month eating out. Be discipline to not spend a penny more than that.
3. Do not buy things on impulse. Successful people delay big purchases for 10-30 days. This allows them to re-evaluate the decision, see the long term return on their investment, and plan accordingly. Most millionaires never buy expensive items new. Items like cars lose up to 20% of their value the second you drive it off the lot, which is equivalent to owning and driving a car normally for 1 whole year. This means buying a second hand car will retain more value over 3-5 years than buying a new car and owning it for 2-3.
4. Develop a work for yourself mentality. Regardless of who writes your paycheck, Work as if it was your own business. This will not only make you more valuable, it will also make you more comfortable with the idea of managing relationships.
5. Invest into yourself. Wealthy people invest at least 3% of their income into learning more about their field, as well as investments and savings. Invest time and money in becoming more valuable to yourself, piers, family, and business.
Now on to The Kid-Vestment Strategy.
The kid in this scenario is going to be Aaron Taylor. Aaron is a 7 year old boy, and we are getting ready to teach him the values of money management. (At 3 years old the average child can see the value of saving. It’s never too early!)
Aaron is now going to be considered as Aaron Taylor LLC.
AT LLC (for short) will earn 10 “Shares” a week.
The value of each of Aaron’s Shares will start at a value of $1
Now the parent will decide what his “standard” duties are to earn these 10 shares.
For example waking up on time, keeping room clean, maintaining a certain grade level, etc will be his standard duties. Failure to do any of these will result in a subtraction of what that activity is worth.
For easy math if he has 4 standard duties and fails to do one of them he will only earn 7.5 shares that week, which is 3/4 of his total.
Now here is where it gets fun! Any additional activities that Aaron does over his standard duties will increase the value of his companies shares.
For example AT LLC is now at a 1 share to $1 ratio.
At the end of every week, you will settle up the totals and reassign a new value to AT LLC’s shares.
*Since kids are visual oriented, it helps to have a board that shows all current details of AT LLC, values, activities, recent earnings and losses etc.
You can get creative as to how many points activities are worth, but for simplicity let’s say each is worth 1 point. So if Aaron helps dad clean the garage +1, helps mom with laundry +1, does extra credit assignment for school +1, all within 1 week.
His shares earns a total of 3 points. Which now means the value of AT LLC shares have gone up 3 points from $1 to $1.03
You can decide if you want the complexity of compound interest or not, but to keep it simple every point will be worth + 1 cent in share value (increasing as Aaron gets older, and task becomes more time consuming)
Now For losses.
If Aaron “gets into trouble” “have bad grades” etc (things you feel have a negative impact on AT LLC) he will have incur negative points (-1) bringing his overall value down.
For example. Aaron gets into a fight at school and gets suspended, this significant negative event may be valued at -10 points.
So now AT LLC goes from being worth $1.03 to $.93 per share, on top of what ever punishment the parent deems fit to Aaron. This strongly pushes Aaron away from negative events, because he knows it will also cost him money. Which intern as adults is the same result.
Aaron can choose to at any time trade a number of shares in for their Dollar value.
Now that we have basics of earnings and losses down, let’s move on to saving.
At the end of every week Aaron will have the option to put some of his shares into a savings account.
You can choose a matching deposit based on the amount Aaron chooses to deposit. And this can be an actual Savings account at a financial institution.
For example if I am matching up to 50% of Aaron’s savings every time he deposited $10 I will also deposit $5 into his savings account.
Now the catch to this is, that unless it is an emergency, Aaron can not withdraw funds from his savings without a penalty. So if we decide that he will have a 20% penalty. He will only receive $8 dollars for every $10 he withdraws. The 20% penalty is deducted from the amount being withdrew and paid to the parent (who is the one matching his deposits).
Aaron will also have a period of time after each deposit in which he cannot make a withdrawal from his savings account (unless it’s and emergency)for example 10 days. This will prevent him from using the deposit matching as a way of just increasing his over cash. The savings account is meant for long term savings. Whether it’s for a rainy day, or towards a specific goal like a new bike, or school field trip.
This also means that any impulsive desire will have to go through a wait period before he can use his savings to supplement it’s purchase. He can impulsively cash in his shares and spend away at any time, but he cannot impulsive pull out of his savings. He will inherently learn to delay impulse buys with this method.
You can also choose to waive any penalties for saving withdrawals on specific dates, such as birthday, Christmas etc.
It will be strongly recommended that Aaron saves at least 10% of his weekly earnings.
A significant point to this all is that parents need to set aside money matching the current value of AT LLC in the event Aaron wishes to cash in his shares. Good money management starts with you!
So let’s review.
“Aaron you are going to earn shares every week! the value of your shares is based on your behavior. You can also chose to save some of these shares in which I make a matching contribution towards. Any money deposited into your savings will have penalties if withdrawn, and a period of time in which it is not accessible. Unless it is a an emergency or time of year for special purchasing, for example birthdays or Christmas. And Any major impulse purchases should go through a evaluation period.”
No kid is going to give up the opportunity to earn more. Especially if there is no structured way for them to do so now. These habits and practices can be directly evolved into successful money management strategies.
As of now The Kid-Vestment Strategies is just a pool of thoughts based on the research and information gathered by highly successful people such as Brian Tracy, Zig Ziglar and various wealth mentors. However with proper application or usage of variants of these strategies we can empower our youth to have very successful habits. And intern become millionaires! A bi product of this is that your kids will be strongly self motivated to be awesome kids, as it will also reflect on their ability to get the things they want. It is definitely a win win win scenario, in which we can all be a part of!
Until next time friends!
~Born for Greatness, Live to Become Legendary!~