<p>@jym626 , that stock market project was IMO a bad idea. Teach them about buying low-cost index funds, how to determine an asset allocation at different points of their lives and circumstances, teach them the miracle of compounding, etc. The last thing you want to do is to reward the relatively random performance of their picks, or the “rational” approach on this kind of project of swinging for the fences in the hopes of getting the prize – it does not translate to good investing technique for someone over the course of decades rather than a semester.</p>
<p>My kids’ school did the “raise a child” project – it was overall a good idea, but some of the kids would, had it been a real child, been reported to DYFS.</p>
<p>Can’t quite tell if your comments about the stock market experiment are tongue in cheek or not. I agree that there are many components to learning money management. My kids learned the value (I hope) of compounded interest from an early age, but not so sure they (or I for that matter) totally grasp the asset allocation! Then again, one of DS#1’s roommates in college was an Enron employee. Quick, painful, life lesson there! DIvest those savings/investments!!</p>
<p>@jym626, no the comments about the stock market experiment are very much serious. I’m a died-in-the-wool Boglehead (<a href=“http://www.bogleheads.org”>www.bogleheads.org</a> if you’re not familiar with them). The casino mentality promoted by the stock market experiment confuses investing with speculation; thinks ordinary mortals can get an edge based on a brother-in-laws tips, etc., and ultimately does a disservice to everyone who falls under the sway. The worst thing that can happen to someone trying Las Vegas for the first time is that they win – they’ll spend a lifetime trying to replicate the experience. The same goes for the stock market.</p>
<p>Intelligent asset allocation is a topic for another forum (Bogleheads again). Btw, as much as I tout Bogleheads, it’s not a cult John Bogle, the founder of Vanguard, is probably the best friend that the small investor has ever had. It is worthwhile to spend a few hours on their wiki; it has made a big difference in my financial situation.</p>
<p>Am familiar with bogleheads (and their forum). Have tried to get S#2 to read it, as he would benefit from its information. At present both s’s have been learning from dear ol’ dad and the USAA investment folks. </p>
<p>Unless that roommate was an exception, my understanding was most Enron employees were prevented from selling company stock due to company controls until it was too late. That was a basis for their launching a class-action suit to be one of the creditors during the Enron debacle. </p>
<p>In short, said roommate may not have had much control over whether he could sell at the preferred time. </p>
<p>Also, one good example of how an unexpected situation may come up where one may end up being so financially constrained he/she cannot get his/her hands on $2000. </p>
<p>I think it’s important to teach your kids the concept of opportunity cost. We usually made our Ds pay a portion of anything they wanted or wanted to do. They have/had weekly chores that allowed them to make money as well as money made from odd jobs they could do. It made them evaluate how important something really was to them. We offered to pay $xx for a prom dress for our oldest D. She could have any dress she wanted but she would have to pay the balance. Initially the dresses she liked when shopping with her friends were about double what we were willing to spend. The dress she bought was less than our contribution and for about $30 more than what we told her she had new shoes as well. Our youngest daughter dances. She wanted to add a modern dance class. We told her she would have to pay for it as we were paying as much for lessons as we could afford. She arranged to demonstrate for other classes and she gets enough of a deduction from her class fees to pay for the additional class. Gifts requests at birthdays and Christmas were usually quite practicle because it was a way to get the things they needed and wanted without having to dip into their earnings. My oldest D is a freshman in College. She has a savings account, checking account a credit card that she uses and pays off in full each month, and we will need a car for her next fall as she leaves for a co-op. We are intending to purchase a car from a family member at a very reduced rate. We are requiring that she get a loan from her local credit union to make payments on the car to further establish a good credit rating. It won’t be a large loan and we will co-sign if need be (I don’t think we’ll need to). </p>
<p>What is learned in the home I don’t think translates as well into a class room. If someone thinks that getting something merely requires asking then it’s no wonder so many spend more than they make. One can learn the math behind personal finance but until it is felt and internalized it’s just another class. </p>
<p>I think it is extremely difficult for people with very little income to save and be rewarded for it. These are the same people who end up paying more fees and penalties for having checking accounts and savings accounts. It is very difficult for them to keep even the smallest balance in their accounts and not touch it. Without an account they have to pay just to get their checks cashed. The $35 dollar fees for overdrafts kill these people and the banks are set up to grab as much of this as they possibly can.</p>
<p>Will not disclose any info about DS’s roommate or family, and don’t know anything about Enron’s stock plan, but fortunately they (roommate’s family) came out just fine.</p>
<p>Ivvcef,
Love the idea of opportunity cost. Seems similar to their saving and having to pay for part or all of their luxuries out of their own $$.</p>
<p>There have been many stories here and elsewhere about people who manage to put even a few dollars of their income away, even when they earn little. There are many who do not have checking accounts, and work with cash, or perhaps a credit union (or USAA or other service with few or no fees) if they cant afford the bank fees or qualify for a credit card. I have great respect for people who manage to get themselves out of debt, and am equally enamored by people who manage to save when they have a low income. Extremely impressive.</p>
<p>One thing we learned the hard way is that if you don’t keep a detailed record of money-in money-out, and not just rely on the list of charges you get on your bank statements or the $$$ amount in your bank account, it can be really easy to spend more than you make and NOT KNOW IT. Fiance spent WAY more than he was making most months for almost two years, but before things ever got tight he’d get a bonus or a tax refund or a triple pay month or we’d have a lean month, one way or the other the cushion was always replenished and the account never depleted. Until the one time it didn’t work out that way and all hell broke loose. We were totally financially screwed, and had I not had the savings to bail us out that month it would have snowballed. Then he got laid off from his second job which was a quarter of our income. Then every drain in the house backed up and started spewing water all over the house, causing not enough damage to justify an insurance claim but just enough to screw me. When it rains, it pours. I miraculously had enough savings to fix this combined with reducing our expenses drastically. We are now STABLE with 10k in savings 6 months post-crisis, but it was REALLY hard to figure out. We had to be very smart, very creative, and be able to work together well as a team-- which unfortunately are not traits that every household has at their disposal. And it was a lot harder to start out from a position of being screwed than it would have been to have good financial habits from the beginning.</p>
<p>I think it is an easy mistake for a lot of otherwise pretty smart people to make. To assume money in the account means everything is good, and to assume the spouse that usually manages the finances has everything under control. I would guess a lot of financial catastrophes stem from those mistakes, especially the latter one. As much as entitlement comes into play for some people, sometimes it’s just pure lack of the necessary skills to manage money and lack of communication and teamwork in a marriage. There’s a heck of a lot more to money management than crunching numbers.</p>
<p>I have seen the entitlement bit up close and personal, too, though. My sister will tell you her kids DESERVE four sports each and the 6k ballet camp and will say, “it’s just not fair that I can’t do X for them” so she just buys whatever she wants and sticks her head in the sand about the consequences. I feel bad because all of her excessive spending is really on the kids and she thinks she is doing right by them, but she seems incapable of seeing that she isn’t. Some families reach a point where their debt is so far gone they give up on ever being able to pay it, so they just keep going and ignore it. Figuring out how to DIG OUT is such an important skill that too many just don’t have. And then one small hiccup can be all it takes to throw them off the wagon forever. </p>
<p>Emaheevul07: I hope your sister can come to her senses before she is one of the people who feel her kids “deserve” to go to the 60k/yr private university. I actually have come to dislike the way that word (deserve) is often used. I deserve a pay check or vacation time if I have earned it. My children deserve the grades they earn. They occasionally, due to their behavior, deserved to be punished. One does not deserve a particular life style, car, or even a break today!</p>
<p>Excuse me for asking, but did you read the article you linked about the use of cash, sax? I if we are talking about the impact on the “poor”, then I don’t think they are too worried about the “$101 billion in missed tax revenue because of off-the books transactions” (ie line items for taxes ) or
if they do not have a bank account to begin with. They note that “Those who had direct deposit or who received their pay in cash had the lowest fees.” If they have to pay to cash a paycheck at some check cashing place, yes those fees can add up. That said, the article you linked ends with
<p>Rats. Missed the edit time. Meant to finish rewording something to clarify 2 issues- one being the IRS’s lost tax revenue for off the books transactions and separately that using cash and possibly not having a receipt is not likely to be a big concern for those not filing a tax return or not filing line item taxes (ie taking the standard deductions).</p>
<p>THat linked article talks about some of the benefits of cash :
<p>Here’s a change of pace for this thread. The US Mint sometimes goes to shows and they bring some cool stuff. That included a sheet of uncut $100,000 bills. These were used between banks - and have Woodrow Wilson on them. That’s $1.2M. It took a bit of cajoling but we got pictures of us holding $1.2M … that you could literally fold up and put in your wallet. </p>
<p>Imagine going into CVS with a $100,000 bill.</p>
<p>We use Quicken to track our expenses. I can tell you how much we spend on going out to lunch, books, etc. Recommended it to S & DIL, though I don’t think they are using it. Perhaps they have picked up Mint or other online tool, but I’m not asking at this point.</p>
<p>We used “matching funds” with our kids when they were younger. I was willing to spend $X on sneakers; if htey wanted a cooler pair, they’d have to pony up the difference. Funny how the cheap ones became “just fine.” When I said I wouldn’t pay for Pokemon cards, the guys quickly learned to pool their funds and share. S2 in particular has become a good shopper and crows about his good deals. </p>
<p>D1 is a prolific saver, but also note that every dollar she received or worked for was available for savings. Meaning, she didn’t have to buy her own clothes in high school (I had to at that age) or pay for a lot of things many teens are required to pay for. I didn’t buy her extra stuff like phones or gadgets, but we did pay for her phone plan, and we paid for all her college and associated expenses. She chose to work part time, so we encouraged her to save part of her salary. Turns out she saved all of it. When we gave a monthly allowance, she’d live on half and bank the rest, that kind of thing. She gets a stipend, but chooses to live very frugally and bank every available dollar. But she has a car we paid for, and we cover her insurance. So, that factors into her bankroll. But still, I’m impressed with her determination to build that nest egg…she approached DH in her teens to help her invest and grow her savings into more than she could get out of a typical savings account.</p>
<p>She really does remind me of a squirrel, gathering her acorns for the winter, lol. </p>
<p>Lergmom - my son and I recently visited the Federal Reserve Bank museum in Chicago. Full of fascinating stuff, along with all sorts of historical info, old coins, etc., were various piles of cash showing what $1 million looks like. It was interesting to see hundred dollar bills neatly stacked in a small briefcase next a huge pile of dollar bills - both equalling $1 million.</p>
John Bogle, the founder of Vanguard, is probably the best friend that the small investor has ever had. It is worthwhile to spend a few hours on their wiki; it has made a big difference in my financial situation.</p>