Let Teens Know There's A Scholarship For That

Today’s fantastic family finance article is:

The 10 Best Sites to Search for Scholarships

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“Oh Dad, scholarships are for math and science whizzes, not for me.”

So what if your kid hates math and science? Is your teen out of luck when it comes to leveraging scholarships to lighten the financial burden of college? Nope.

Does your kid like history? There are scholarship opportunities for that.

Journalism? Yep.

Member of the Methodist Church? Yep. Jewish? Agnostic? Atheist? Yep. Yep. Yep.

Into gardening? Yep.

OK, how about drawing ducks? Kid you not, there’s one for that too. It’s awarded to the top 3 winners of the annual Junior Duck Stamp Contest held by the U.S. Fish & Wildlife Service.

You get the point. No matter what your teen is into, there’s a scholarship awarded for that.

So how does your teen find that special scholarship?

Fortunately, there are a number of online scholarship directories. Check out 10 of them listed in today’s article.

Now tell your teen to get quacking.

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Don't Let Kids Assume Buying Beats Renting

Today’s fantastic family finance article is:

Renting is Throwing Money Away...Right?

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When it comes to housing, renting often gets a bad rap. The conventional wisdom says: “renting is just throwing your money away.”

Why? Because when you rent, you aren’t building up ownership in an asset — like a home — that will grow in value over time. Right?

Well, kinda wrong actually.

Let’s suppose you take all that money you’d have to cough up for the down payment on your new home purchase, and you invest it in the stock market instead. Well, that’s an appreciating asset too. In fact, if you look at the averages over the long haul, the stock market is more likely to outperform the housing market. In fact, historically, home prices have only kept pace with inflation, while the stock market has done much better.

The point is: you have to consider the opportunity cost of passing up an investment in the stock market (or elsewhere) in order to make a down payment on a house.

You also have to consider that when you start out paying your mortgage, just a small fraction of your initial payments goes toward ownership of the house. Most of your monthly payments go toward interest, taxes, and insurance for many, many years.

You also have to consider that you have a lot more expenses when owning versus renting: maintenance, repairs, property taxes, homeowner association dues, additional utility fees, etc. That’s all money you could be investing elsewhere.

You also have to consider that you have more responsibilities and less flexibility when you own your home. You have to fix broken stuff. You can’t just move at the drop of a hat.

OK, so then renting is better than buying, right?

Nope.

The answer is: it depends. You have to consider all the important factors. You have to examine the opportunity costs. You have to do the — gasp — math.

That’s the real point to make with your kids. When you’re considering a big, important purchase, take the time to think through all the key factors. Do. The. Math. The answer just might surprise you.

P.S. If you find yourself doubting that renting can be more economically attractive than buying — or vice versa for that matter — be sure to check out today’s article. Paula walks through the rent vs. buy math in excruciating detail. Don’t be afraid though. Hard to believe, but she actually makes it entertaining!

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Teach Your Teens How To File Taxes. For Free.

Did your teen have a summer or part-time job?

Then it’s the perfect time to teach your teen how to file taxes. Ease into the process while the paperwork is still nice and simple, like a single W-2 income statement from the local fast food joint.

What’s in it for your teen?

Well, aside from picking up a critical life skill (yawn), most likely a refund (cha-ching). Unless, of course, your teen is a withholding wizard. Not likely. Admit it. You don’t know how to fill out a W-4 properly either.

Here’s how you can teach your working teen how to file taxes with minimal effort and no charge:

• Visit the IRS free file site. Make sure your teen meets the income requirements. If not, congratulations for raising the next Mark Zuckerberg.
• Pick one of the free tax prep programs. Turbotax online is excellent. Simple. Clear.
• Walk through the screens together. Let your teen take the wheel and do the data entry while you take the passenger seat and answer questions.
• Snag that refund. Tax prep software like TurboTax will let your teen direct deposit the funds right into a bank account or onto a prepaid card.

Free file. A few simple questions. No taxes owed. A refund. When you’re a teen, taxes are almost, umm, fun.

Oh, to be young again.

P.S. For bonus points, take that refund and plunk it into a Roth IRA for your teen. Offer a matching contribution if you can. That’s called a “Family 401(k)”, and it’s pure genius. Read more here.

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Teach Your Kids These Automated Micro-Saving Tricks

“Little by little does the trick.”

That’s the moral of The Crow and the Pitcher, an Aesop’s fable. A thirsty crow drops pebbles into a near empty pitcher until, little by little, the water raises within beak’s reach.

Teach your kids that little by little can do the trick when it comes to saving money too.

Create a savings jar, a savings account, or a savings card for your child, and then try a few of these tricks:

• Save the spare change. Round up the amount of every purchase to the nearest dollar, and save the difference. Just bought a pack of gum for 59 cents? Save 41 cents.
• Save the remainder. At the end of every week, sweep whatever pocket money your child hasn’t spent into savings. Spent only $5 of a $7 per week allowance? Sweep $2 into savings.
• Save the penalty. Let loose on a swear word? Move $1 from spending to saving.
• Save the luxury tax. Impose a 10% tax on purchases for “wants” and place the proceeds in savings. Bought a candy bar for $1.25? Move 12 cents to savings.
• Save the tip. Reward a wonderful accomplishment or thoughtful deed with a payment to savings. Helped dad unload the car without being asked? Pop 50 cents in savings.

Those are exactly the micro-savings tricks that a new crop of personal finance apps are automating for adults. Apps like Digit, Dyme, Acorns, Qapital, and Tip Yourself. Before you know it, you’ve painlessly stashed away a nice little bundle for emergencies, a vacation, an initial investment, you name it.

Share these “auto-magic” tricks with your kids so they know little by little, they can save a lot too.

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Show Your Kids a System For Not Thinking About Money

“But Dad, I don’t care about money. I just don’t want to think about it.”

Your kids need to understand: if they ignore money, they’ll eventually be thinking about it constantly.

Do I have enough money for rent?
Do I have enough for dinner?
Do I have enough for this?
Do I have enough for that?

No, you simply can’t ignore money in the real world. But there is a way to rarely think about it.

How? Kristin Wong states it succinctly: “If you don’t like to think about money, the best way to make sure you don’t have to is to set up a system for properly managing it.”

What’s a system? It’s a set of rules that reliably translate an input (like income) into a desired output (like savings).

The neat thing about having a system is, once it’s in place, you don’t have to think about it much any more. You feed something appropriate into the top of your system, and the right thing magically pops out the bottom. Again and again. It’s like a gumball machine: drop a coin in the top and a gumball reliably shoots out the bottom.

Start your kids off with a very simple savings system. Whenever income drops into your kid’s system — whether from allowance, chores, odd jobs, a summer job, or a birthday check from grandma — automatically peel 10% off and plunk it into a separate savings bucket. Sweeten the pot with a matching contribution or parent-paid interest if you can.

Simple rules. Simple system. Rinse and repeat. Eventually, your child will have a nice little pile of savings set aside — without even thinking.

Roll the clock forward. Your kids will recognize a very similar system when they get their first jobs: The 401(k). Thanks to you, they’ll know a good savings system when they see it. They’ll opt in. Without thinking twice.

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Are You Discussing "How Much Is Enough" Enough?

“No, we can’t afford that.”

In many cases, that’s not a truthful response to your child’s latest spending request.

Instead, the truth often hinges on your vague definition of “enough.” How much is enough? You know it in your parental gut when you see it. But explaining “enough” to your child can be challenging.

What are reasonable limits on sporting gear, trendy clothes, mobile phones, the latest hot gizmo? What role does your neighborhood play in setting the “enough” bar? Your kid’s peers? Your own upbringing? The media? Your values?

Ron Lieber offers some concrete tips for setting the “enough” bar in his article How Much Money Is Enough? Having kids share some financial skin in the game and slowing down purchase decisions are two great techniques.

The practical guidelines are great, but it’s the conversations that really matter. As Ron says in his book, The Opposite Of Spoiled: “Every conversation about money is also about values.”

So, embrace that next frivolous spending request from your child. It’s a valuable opportunity to slow down and explore the murky nature of “enough.”

“No, we don’t choose to afford that. Let’s talk about why.”

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Share This Amazing Money Secret With Your Kids

Today’s fantastic family finance article is:

Don’t Buy Stuff You Cannot Afford

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It turns out that the key to personal finance is pretty darn simple.

“If you don’t have any money, you should not buy anything.”

That’s the secret message of the one page book “Don’t Buy Stuff You Cannot Afford” from this classic Saturday Night Live skit featuring Steve Martin, Amy Poehler, and Chris Parnell.

Simple, right?

No. It’s downright confusing to Steve Martin. Fortunately, your kids are way smarter than he is.

Get a good chuckle by watching the short skit with your kids here.

After watching Steve, Amy, and Chris, your kids will realize just how ridiculous it is to spend money you don’t have.

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