Read an Excerpt
Simple Money 4 You
An Introduction to Money Matters for All Ages
By Helen Hutcheson Balboa Press
Copyright © 2013 Helen Hutcheson
All rights reserved.
ISBN: 978-1-4525-1039-2
CHAPTER 1
Personality and Money
Your Personality Influences Your Priorities, Your Risk Level and Your Decision-Making Skills
What Type of Person Are You?
Most people favour numbers or words. Which type are you?
Numbers-based people (left-brain thinkers) are linear thinkers. They are, logical, mathematical, and able to make quick decisions. Things are right or wrong, black or white. They don't understand an illogical person's viewpoint.
Word-based people (right-brain thinkers) tend to be more creative, intuitive, and conceptual. They like designing things and can appear illogical to their numerical friends. They often ponder over a decision, weighing up all the pros and cons and can sway between decisions.
Of course, many of us are a little bit of both, but we all favour one side or the other. Understanding what type of person you are can help you make better decisions about money. This also applies to people you associate with. Working with people of the opposite type can help you make balanced decisions. If you need more time to make a decision, don't be pushed around by an impatient numbers person!
Decision Making
Decision making is all about information. If you have the right information at the right time, you can make the right decision for you. However, many people have trouble making decisions.
* Do you watch things happen?
* Do you make things happen?
* Do you wonder what happened?
Which One Are You?
Which One Do You Want To Be?
To improve your decision-making skills, consider:
Knowledge
The more familiar you are with how something works, the better equipped you will be to make a decision. Knowledge is power. Research is critical for any big decision.
Practice Making Decisions
Making a decision is better than sitting on the fence. Practice making decisions—even if they are not spoken—to gain the confidence to make more important decisions.
Don't Be Scared
We all make good and bad decisions so don't worry if you have made a bad decision. Try to learn from the mistake and do not repeat it the next time.
You can reverse many bad decisions.
Learn From Previous Decisions
Review all the decisions you make in the day and identify them as good or bad. Work out why you made that decision—and how you can make a better choice next time.
Make Your Decisions
Do not choose something you do not really want. This does not mean you should not compromise, but ensure you are happy with your decision.
"Whenever you see a successful business, someone once made a courageous decision"
Peter Drucker, Management Consultant
Risks
People have different attitudes when it comes to risks. Knowing your risk factors will help you and financial advisors assess the best options for you and your money.
Examples of Risk
* How much do you spend on lottery tickets, poker machines, gambling, etc.? How much are you prepared to lose without a guaranteed win?
* Do you like to save for big expenses? Do you borrow to pay for them and then repay the debt?
* How do you operate a credit card? Do you pay it off as soon as the statement comes in—or do you pay it off over many months?
Risk is generally linked to trust—which is built over time. Therefore once you trust someone—or trust the outcome will be repeated—you are prepared to do the same thing again.
Comfort Zone
People like to live within their own comfort zones; although they may visit other zones, they will not stay there for very long.
If you dabble in risky areas—where the going is heated—you will toss and turn over the decisions you are making. You will not sleep well at night; however, if you do nothing and let the status quo remain, you will find yourself restricted and unable to sleep. Choose the right temperature for your personality and understand that everyone is different.
Correct Risk Level = Sleeping Well at Night.
Example: Investment
Using the simple test of hot and cold, we can group common investments into risk areas as follows:
Casino winnings very hot
Speculative (unproven) share trading hot
Blue chip (proven) share ownership warm
Property ownership cool
Cash in the bank cold
When dealing with money decisions, you must be happy with your decision—and you must be able to sleep at night. No matter what anyone else say.
You Need to Be Comfortable with Your Decision.
Money is the major cause of stress in many relationships. It can be aggravated because one person sleeps in a hot bed—and the other sleeps in a cold bed. Understanding money management gives you the power and confidence to make financial decisions that you will be happy and comfortable with. It will also help you communicate your decisions with the people around you so they support rather than oppose the decisions.
Help
* Some people seek advice from professionals, books, friends, businesses, banks, accountants, or financial advisers.
* Some people research and work things out themselves. The Internet can assist greatly; however, this process can be slow—and you may draw wrong conclusions.
* Some people don't do anything. They just wait to see what everyone else does—and they copy them.
Timeline of Life
As we go through life, our wants, needs, family requirements, and goals change. The timeline of life is all about the changes that are going on in your life. Many people do not succeed in balancing their goals with the changing times—and having the money to support them.
Why do our goals change?
* Health Status
* Wealth Status
* What you own (Assets)
* Knowledge
* Family Life
If your health is good, the next major hurdle is usually money. Good money decisions at the right times make future decisions easier. When the time comes to change:
* Obtain accurate information.
* Consider the impact on your future.
* Assess your risk factors.
* Make a clear decision rather than sitting on the fence.
Today Is the Start of the Rest of Your Life.
Try to understand and accept change as a means to a better future—and do not be afraid of doing things differently. Change is all around us. Enjoy a new beginning every day. Accept that you have the ability to produce a new ending.
What Will Your Ending Be?
CHAPTER 2
Children and Money
Teaching Children about Money
As children strive to be independent, they need to understand and manage their money in order to help them achieve their goals.
Talk to your children about money, its value, what it can buy, and how to save it. Explain and demonstrate how you use money, (cash, cheques, credit cards, and electronic banking). Discuss how to shop, borrow, and lend money. Show them what a bank statement and a loan document look like. Children who watch their parents will repeat what they learn.
Children do not need real money because their parents are in charge of buying meals, birthday presents, keeping them dressed and interested with toys, sending them to school and taking them on holidays. As they grow older, these things become their responsibilities. How they handle money will depend on what they learned as children.
Below are some general guidelines for teaching children about money. Children are different, and families are unique. Customize the amounts and rewards in this guide to suit your family. Remember to ask the children for suggestions too.
First Steps
Children under the age of 3 do not need to know about money—except that it is not a toy. Do not let them play with real money. If they understand your wallet and your money are important to you, they will value it in the future.
Starting School
Once children start school, they are exposed to a wide range of other children. They see firsthand what they have and don't have. They also start wanting things of their own.
"I want...." may become a child's favourite saying.
Rather than saying "no" to your child, teach them about money, savings, goals and consequences.
Once they understand how useful money can be, they will learn quickly and soon have bargaining down to a fine art!
During early school years (when children are between 5 and 10), parents can start teaching them about money by simply handling the various coins and notes. They will learn how to count at school. These skills can be practiced with real money—adding and subtracting money at shops shows saving and spending. Children can learn how to find out the price of goods, how to pay for goods at the checkout and how to check any change they receive. At this point, for simplicity, it is best to deal in cash only. Lessons must be simple, real and easy to understand. They can be presented as a game to encourage children to participate. Explain the relationship between going to work and earning money. Some children:
Think money grows on trees. Others believe there is a never-ending supply of money in Mum's wallet. Many think parents can just go the ATM to get more money.
Pocket Money
How much pocket money a child receives is not as important as why the child receives money. Parents need to remember that pocket money is about teaching children how to use and the value of money. It should be given as a reward. Each family can set perimeters for the rewards. Involving the children in the tasks and the rewards will help keep them interested.
Some families have jobs that need to be completed without receiving any rewards. These family jobs apply to all members of the family, including Mum and Dad. These include keeping your room clean. Extra jobs such as cleaning the kitchen can be rewarded with money.
Payment for jobs can be given as:
[check] An amount per job completed
[check] A set amount each week
[check] A bonus system for good effort around the house and/ or at school
The system each family agrees to will depend on the individual family. It is not supposed to be a huge task to administer; keep it simple. Be prepared to adjust the system depending on the age and personality of the child.
Earning Money
What can they do with money? There are 2 choices.
Spend Your Money Right Now. Or Save it for Later.
Savings should be rewarded, usually in the form of something bigger than what can be afforded today.
Saving Should to be Fun.
If you use a see-through money box for saving, the child can see the money grow. This will encourage them to save more.
Show children that you support their savings plans. Help them write down their saving goals—and their plan for achieving them. Sometimes it is worth matching your child's saving—dollar for dollar—or creating extra ways they can save for a special item.
Children will learn by watching others, including siblings, parents, extended family and friends. Learning usually involves making mistakes. It is important to make money decisions and mistakes while the amounts of money are relatively small. This allows children to learn and gain experience. Be careful not to penalize your children's mistakes early in life while they learn to manage their money. Instead, clearly explain what would have been a better way to handle their money.
Mistakes can be fixed by parent intervention. Poorly spent money can be replaced, by a parent, for a cuddle or a cup of tea.
Practice Makes Perfect
Many parents forget to stop buying their children things as they grow and become financially independent. It is important for a child to gradually take over the payments of their own expenses. Children should be encouraged to earn money, save money, and pay for goods themselves. This is fundamental to the child's understanding of the value of money decisions. If children receive money for no reason—and never need to buy anything themselves, because they ask Mum or Dad to buy it—the money they earn has no value. There will be no need for them to earn money. Earning money becomes a game; they can play it when they want and not play if they don't want to. Some children say,
"I can always get money from Mum or Dad!" Discourage this behaviour early.
Most children are far less keen to part with money they have earned than they are to spend someone else's money.
Younger Teenagers
This is the age of independence, and understanding money is an important area of all teenagers' lives. Between the ages of 10 and 15, younger teenagers are susceptible to peer pressure. The lessons learnt in earlier years will help them through this next learning phase. At this time, it is important for the younger teenager to be held accountable for their money decisions. Independence comes with responsibility. The money games from earlier years need to be phased out. The value of saving should be continued as they learn to earn money and save for something special—something Mum or Dad won't buy them.
What is Something Special?
Below is a guide to parent purchases and child purchases (something special). The basic rule I have used is:
Necessary items are parent expenses. Luxury items are child expenses.
Parent Purchases and Child Purchases
Food—Parents pay for regular meals and events the whole family joins in. For example, everyone receives Easter eggs at Easter. Children pay for treats, lollies, and desserts.
Clothing—Parents pay for regular clothes, school clothes, and special clothes the whole family receives. If you go on a holiday, everyone receives a new T-shirt. Children pay for special items, such as badges or caps (something only they receive).
Toys—Families will have many ideas about when and how much to spend on toys for their children. In our family, toys are usually only given for birthdays and Christmas. This gives children a large area of special items (toys) to buy, and it makes birthday and Christmas presents more special. Try to remember that toys are not necessities in life. Do not give in to your children by buying gifts all year round.
School Supplies—Parents should buy the necessary purchases for the school year. The first year at school can be quite a large expense. For second and subsequent years, review last year's supplies to see if any can be used for this year (scissors) or need to be replaced (an unused writing book). It is not always necessary to buy all new items each year, although it is a good time to refresh old items. This also encourages recycling. Children pay for the special items, such as fancy pencils.
Activities—It helps to have a general rule (2 activities per week), which can be bent if something special comes along. This will help you budget money and time. The number of activities may depend on the number of children you have. Parents with only one child have more time than a family with 4 children. Use the general rule to ascertain what items within the activity are parent costs and what are paid for by the children. Uniforms and club fees may be parent costs, but a special hat or badge is a child's cost.
Helen's Tip:
Do not underestimate a child's ability to earn and save. Encourage these habits; they are lifelong traits.
Older Teenagers
Older teenagers, (15 to 20 years) are able to apply for jobs, earn money from outside the family, and make decisions about more important expenses.
Parents need to step back and let older teenagers learn the money lessons slowly. Mistakes will be made—and money will be spent and wasted—but it is important that older teenagers learn from their mistakes rather than be criticized. Every person will spend money on different goods; let your older teenager make his or her own decision about what to buy and when to buy it. Encourage them to ask for your advice, but do not force your advice on them. They must make their own decisions and bear the consequences.
(Continues...)
Excerpted from Simple Money 4 You by Helen Hutcheson. Copyright © 2013 Helen Hutcheson. Excerpted by permission of Balboa Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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