Mistakes Is Good

There may be no better teacher than a good, old-fashioned mistake.  For a time, my five-year-old daughter had been sinking all of her money into her Save jar after success with goal setting and managing her allowance effectively enough to buy a scooter, shoes and mini pottery wheel (long-term saving for a youngin').  Daddy was happy.  The lessons were working and it made good blog fodder.  But then, suddenly, she started plunking her allowance dollars into her Spend Smart jar.  What was this?!  Regression?  A big mistake?

Whatever it was, it was her choice and it remains to be seen whether she is making mistakes by shifting her focus from saving to spending.  What it certainly means is that Daddy has to heed his own advice to her - allow her to control her own money.  The purpose of the allowance is to teach her about money and making mistakes is part of that process.  We'll see what she does.  And after all, if she does slip up it's ok because, you know, mistakes is good.

-John

Graddad's Wisdom - Waiting Compounds the Problem

My grandfather, who grow up in the depression, tells me he doesn't recall a time when he wasn't saving money.  His advice when I headed into the adult world was "live below your means and understand the power of compound interest."   I wish I hadn't waited so long to heed his advice. 

Jason Alderman of Visa posted a very simple explanation of compound interest on the Practical Money Skills for Life site this week.  Here's an excerpt:

"What is compounding? Basically, it's where you put aside money – whether in savings, a retirement account or the stock market – and then essentially leave it alone. As your account earns interest or dividends, you continually reinvest those profits, generating (compounding) additional earnings at an accelerated rate."    

Although compound interest is not an easy concept to grasp, it's not a bad idea to get the concept into your child's head early.  The earlier they get it, the better off they'll be.

Click on the title link to read the entire article.

-John

Parental Reality - It's Up To Us

Parents,

To put it simply, financial literacy is up to us.  Don't believe me?  Take a look:

-80% of us think that schools provide classes on money management and budgeting to 

students.

-In reality, only 12% of Americans graduate from high school having learned anything about money at all.

And consider...

-71% of teens say they learn money management from us.

-And only 26% of us with children 5 or under feel prepared to teach their kid about basic personal finance.

Award-winning college professor and Jump$tart Coalition Board of Directors member, John Clow, says it best, "A financial literacy 'buck' is being passed from parents to teachers and back to parents again.  Parents assume that schools are teaching financial literacy, but schools, by and large, are not teaching it.  Teachers, like parents, don't feel comfortable." (The last point was a fact confirmed by Suze Orman on a recent Oprah episode.)

It's numbers like these that led us to create "The Money Mammals" to help not only engage, entertain and enrich kids' lives.  We've discovered, though, that by distilling the message down to its roots (needs vs. wants, making choices, spending smart and other basics) it really helps parents increase their own comfort level and carry forward the lessons from the show into their kids' lives.

We have a duty to teach our kids about the value of money.  Start today.  There really has never been a better time.

-John

Sources:  McCormick and Godstead, Learning Your Monetary ABC's (2006); FoxNews.com (2006); Fleet Boston Survey (2003)