Real Estate Financial Myths Exposed

The Federal Reserve Bank of St. Louis has some very useful educational resources for kids in Elementary, Middle and High School at: http://www.stlouisfed.org/education_resources/ 

Browsing through their website, I came across a good article which, at the time, should have been heeded by everyone who got caught up in the real-estate frenzy.  This is good reading material for High School Students.  The article could open up some additional discussions in a sense that some areas in the country are showing signs of house flipping trends once more.

Please consider: Just Sign Here: Bottom-Line Personal Finance Myths

The article goes on to dispel the following 3 Myths:

Myth #1: "All that matters is your monthly payment."
Myth #2: "Rising house prices make us all richer."
Myth #3: "It's always better to buy than to rent."

Reviewing these 3 myths with your children would be a good way to start a discussion on how to improve their financial IQ.  As the table below shows, statistics indicate that US households do a rather poor job at demonstrating basic financial literacy skills.  Hopefully the ongoing discussion with your kids will make an improvement for future statistics.

Resisting The Lure Of “On Sale” Items

We have all been there - Browsing through your favorite store and you see that big red tag:

 
Sometimes you see a huge sign right in front of the store inviting you to come in and “save”

Who wouldn’t want to save money and get some new gadgets at the same time?

As luck would have it, that gizmo you previously looked at with a bit of disdain looks a whole lot better now with the “20% Off Sticker” attached to it.  Isn’t it strange how a “soso”, “just ok”, “maybe yes” item now becomes more like a must have item?  And the only difference being the advertized sale price?

Try the following discussion with your kids - and the mental exercise might do us parents good too:

Understand that the word “savings” is a complete misnomer in the context of advertising.  The only way for you to “save money” is to not spend it.  Put your money in a piggy bank or open a savings account – that is saving.  When you go shopping, you may pay a lower price on a sale item, but you are definitely not saving.

Next, appreciate that prices always change buying behavior, there’s simply no way around it. But instead of letting your impulses give in, ask yourself this:  Would you still buy the this gadget or the new dress if it wasn’t on sale? 

If the answer is yes, then you might have a legitimate reason that the item is something you really need.

If the answer is no, go back home and look around the house to find similar items you bought on sale.  Evaluate for yourself if those items are still as desirable as they once were when you fell prey to that big red sale tag.  Are you still using any of these items today, and would you buy them again at the full retail price?

Resisting the shopping impulse is harder when items are on sale but it is an excellent way of learning how to handle money.  Your kids may come out of a store with an itch but it will be a great lesson on how to save money.

 

As always, comments and suggestions are much appreciated.
For questions, please email: clemens.kownatzki@fxistrategies.com

A Spending Diary

Many of us are familiar with Weight Watchers through commercials or actually having tried one of their weight loss programs.  It's a great concept that works on a simple principle: "Watch what you eat".

How about using the same premise to "Watch what you spend"?

We have an easy one-page work sheet that you can use as a budgeting tool to track where your child's money is going. Your kids are far more likely to save money when they see how fast the small things they buy here and there can add up. 

Click on the image below to see the full-size work sheet...

Your kids might need some help in the beginning. You can practice filling out our worksheet together with your kids the first time through and let them handle it from the 2nd week on.

Help them write down what they spent their money on each day.  They should include everything even the dimes and nickels! After a couple of weeks or so, go over the completed sheets and help them figure out where they can save money by evaluating each expense.

A couple of spot checks each week might help just as reminders...

Depending on your child’s age, using different colors for different categories might make the exercise more fun.  That also helps them see how to use categorization as a budgeting tool.

If you would like a printable version (PDF file) of our work sheet please email: clemens.kownatzki@fxistrategies.com