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Teaching kids about money
March 29, 2013
Hello to all my frugal friends:

I can hardly believe it, I'm creating another monthly newsletter. That's two in a row...I'm on a roll. Perhaps I can make this a habit. I sure hope so.

Same format as last time:

1) a little about the site

2) a little money talk

3) featured article

Let's dive in...


Site Highlights

Being frugal doesn't only involve making money, saving money, spending it wisely and having a tight fist on the piggy bank. Sometimes it means creating marketplace alternatives that help us shave off the cost of living. In many ways, these can be an investment in our future. Sometimes, these investments can help bring us a source of revenue as well. Such is the case with my passion for raising chickens for eggs.

If you've never considered raising chickens, then you might find the following pages of interest. I raise chickens primarily for eggs, but when the hen's productive time comes to an end, she winds up in the stew pot. They enjoy a good life at my Squat and Drop egg production facility, but in the end (no pun intended) they're there to feed me.

When chickens provide me with food, I shave money off of the grocery bill. I'll paraphrase what a man said recently, creating your own food is like printing your own money. It's true.

If you're ever wondered about chicken behavior, wonder no more. This article contains some interesting insights about how chickens behave.

And, if you're interested in facts about chickens, I have a few of them as well. They have a rich and colorful history, and there are bound to be a few things in this article that you never thought were true...but they are.


Money Talk - The Perverse Economic Reality

As we watch the financial meltdown occurring all around us, a few of the perverse consequences of financial irresponsibility can't help but come to mind. It's a real shame, and quite a dark cloud over us, but we can't put our head in the sand. Understanding things better now can help us formulate plans for success as this perversion will affect us all. Let me make a few observations in this arena.

Those will high levels of debt can be successful as we continue into a period of higher inflation. It seems odd, but those with high levels of debt will fare well because they'll be able to pay off their debt with inflated dollars (assuming no variable interest rates and they keep a job that keeps pace with inflation). That doesn't seem fair, but that's how it works. We've seen this before in history, the currency is devalued because of an over-abundance, and that pulls the rug out from under creditors. Oddly enough, debtors become winners. Nevertheless, I don't endorse getting into debt.

Perhaps the most sad aspect of our financial meltdown is that those who diligently saved money and acted responsibly will be hurt as they see their savings erode due to inflation. This is especially true if their savings is in the form of dollars. Often, this will be individuals in their retirement years, and they're the ones least capable of rebuilding wealth that is stolen away by inflation. Again, it's odd, but big savers can wind up being losers. That's the reason I endorse investing your money in something that makes you money...like your own business.

Those who don't respond well will likely lose. I am reminded of older residents who are often set in their ways and unwilling to relocate. The neighborhood changes, people move away, businesses move away, owners simply abandon their homes and businesses, and those who refuse to budge are left holding the bag. It's happening all over the country, but most visible in places like Detroit (my former hometown) where they have seen people leaving the city for decades. As of today, there are well over 100,000 homes and businesses that have simply been abandoned in place because they're essentially worthless. Those who lose in these situations are those who can't see the writing on the wall, haven't shined up their crystal ball, or refuse to see what's going on around them. Sometimes all it takes is the ability to pay attention and respond in a reasonable manner.

Jobs are a key to success. Whether it's steady income, healthy savings, a strong tax base, or living in a neighborhood of achievement-oriented people, it all takes jobs. Our current political climate is hostile towards businesses and employers, so I don't see things getting better in the near term. Again, I go back to the idea of self-employment as a means of making sure that you're alright. After all, you're the only one who can provide any level of assurance that your future will be bright.

I think the financial troubles we're in now will continue to unfold and worsen over the next decade or so before they start to get better. Those who will fare the best are those who make good decisions based on where they think we're headed. My suggestion is to keep your eyes open, consider multiple perspectives from those in the know, and then take reasonable measures to prepare yourself. A friend of mine is fond of calling our financial mess an "alleged financial collapse." I hope he's right, but I just don't see that as a reasonable assessment of (collectively) where we're at and where we're headed. The key is to disconnect yourself from the collective and act in your best interest for you and your family.


Featured Article

In many ways, your children are your financial future, whether you're going to pass on your wealth to them or have them assist you in your advanced years. In any event, teaching kids about money is a good investment for yourself and it's one of the best ways to arm your children with skills and knowledge that will serve them very well over their lifetime. Here is the featured article for this month's newsletter.

Teaching Kids About Money

by Clair A. Schwan

I can’t say that I have a lot of experience with kids, but I have a lot of experience with money, and part of my childhood involved what I thought was a good training program about the value of money and how it might best be handled. I had four of the best teachers I could possibly ask for – two grandparents who were young adults in the Great Depression, and two parents who grew up in it and struggled through the challenging economic times surrounding World War II.

My grandmother spoke of the family going on “relief” so they could have food, and my grandfather had to steal corn out of farmers’ fields to have something to eat. My mother spoke of a doll that was repainted and fitted with a new dress each Christmas – that was her gift each year for many Christmases in a row. My father recalled eating canned goods with a burnt flavor as they had been purchased at a fire sale. My grandparents lived in a one room shack, and added onto it over the years until it became a regular home. My father remembers digging out the basement by hand, one wheel barrow full of dirt at a time.

If you can’t learn the value of money from a family that went through such tough times, then you’re just not paying attention. I paid attention because their life wasn’t anything that I wanted to repeat. Here are some of the basics that I learned about money and children from these four living lessons in personal finance.

Start a Savings Account – I can’t remember when I started contributing to my first savings account, but it was before the age of 10, and I can remember making small deposits of my allowance, and larger deposits from yard work and odd jobs that I performed around the neighborhood. I didn’t know what all my savings would be used for, but I was encouraged to continue saving my money for something worthwhile. I used my savings to put myself through college and make a down payment on my first home. I’m still savings oriented today.

Encourage Regular Employment – as odd as this might seem, regular employment to some isn’t a big concern when children are out of school for the summer. To the financially responsible, we know that regular employment – especially self employment – is a key to financial freedom and whatever sense of financial security we hope to establish. Having children work during the summer and after school, even on a part-time basis, builds a pattern of industry that carries over into adulthood.

Be Goal Oriented – help your children establish reasonable and achievable goals, including short-term objectives and longer term goals that contribute to lasting success in life. Education should be one of those goals, and it’s as good a reason as any for earning money and saving it. Most individuals who aren’t successful and find themselves in trouble with the law share a common trait – they are aimless in their approach to life. In other words, they have few if any meaningful goals. Teach the habit of being goal oriented, for it serves as a motivator and helps us focus our efforts on achievement.

Provide the Basics – you can’t have your children whining about not having food, clothing, shelter and other basics, but you can have them whining about not having a cell phone, blackberry, portable DVD player or the latest fashions. Your job is to provide the basics, and their job should be to earn money so they can have the unnecessary fluff that makes their life complete. And, it will quickly begin to look like fluff to them when they have to pay for it.

Set Good Examples – no matter how much your children might be against your generation and your ways, they pick up on your habits – good and bad. As an associate of mine said, “I have become my father.” So, if you expect your children to be financially successful, you have to lead by example. If they see you carefully making financial decisions, then they’ll be likely to do the same. Many of us never sit down with our kids and give them a formal education in personal finance, but whatever we practice most certainly rubs off of them.

Use Credit Sparingly – my neighbor and good friend told me that he bought a car on credit once and nearly lost it because he was having trouble making the payments. It was such a terrible feeling that he vowed to pay cash for all regular purchases from that day forward. Well, that can work fine today if you have a big pile of it somewhere, but often, using a credit card is very convenient and safer than paying with cash. Teach your kids that credit cards are a way of making a transaction, they’re not a way to give yourself a personal loan.

Look Into the Future – from a very pragmatic standpoint, your children will most likely become one of three things, according to how you’ve trained them. They’ll be: 1)neutral with respect to your personal finances because they’ve been taught to be self-reliant; 2)a lifelong financial burden that you just can’t get rid of; or, 3)a resource to help you manage your affairs when you get older and need help. Imagine you’re in your “golden years” and ask yourself what kind of child you’d like to have helping you. If you’re like me, you’ll want a smart one who can handle personal financial matters.

Explain Where Things Come From – if we teach our children to equate their comfort, convenience and security to income and good financial management, they’ll likely be interested in building skills in those areas. Of course, we can’t buy love, happiness, integrity, peace and many other things with money, but much of what we need and want hinges on our ability to effectively manage our personal finances. Take opportunities to show that the house, the car, the food on the table, the cottage at the lake, the summer vacation, and other items and resources for their care, comfort and enjoyment are directly tied to personal finance skills. Don’t make them “get it” later in life as they look back on events and start piecing things together. Instead, get it out in the open so they’re introduced to what will necessarily become their responsibility one day – providing for themselves.

Don’t Shield Them from Reality – sometimes life hands us a bruise, bump or slap upside the head. If we shield our children from such things, we’re reducing the number and variety of learning experiences that will help them be better life managers. Perhaps it’s a worthless product they purchased, loose change they misplaced, or a bet they lost and had to pay. Seize the opportunity to find the lesson in it, and see if you might use the lesson to help cement beliefs about being more careful about making, spending and safeguarding money. The reality of life will hit them sooner or later. If it hits them sooner, then you’ll be there to help them through it, and use the experience to help them mature in the area of managing personal financial matters.

Raising children is your opportunity to make them the best person possible, based on your know-how. There’s every reason under the sun to include education and training in personal finances as part of the process of shaping your children for a lifetime of success.


Wrapping it Up

Chickens and children and financial meltdown, oh my! It's a mixed bag, but that's life. I hope you're enjoying the variety of information and opinion I'm trying to offer in these newsletters.

Thanks for being along for the ride, and I hope your adventure in frugal living is going along as you'd like it to. I wish you all the best,

Clair

P.S. If you are receiving this in text format, the links to the new pages might not be complete. You'll have to copy and paste the link into your browser in order for it to take you to the correct page.

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