On a CNBC TV video segment tonight, they profiled about Paul Rodrigues. Senior and Junior. PR Sr is a comedian. PR Jr is a skateboarder who barely looks 16 or 17. Yet he has endorsement deals with Nike and others that bring him over a million per year - more than dad makes. While that's great for Paul Jr and other talented youngsters like him, it's not realistic for his young fans to think that this WILL happen to them, too. (But it's certainly good if they're motivated.)
Money is such a difficult topic for some couples to discuss, let alone an entire family, but it should be done. An episode of the comedy Reba tonight, in its own humorous way, talked about some of the conflicts that arise from not discussing money.
It's just my opinion, but I think that many divorces, bankruptcies and business failures result from not having a healthy understanding about money. Throw savings, investing, and money management in as well. It's financially fatal to not have at least savings skills. Not just savings, but goals for that money.
My parents instilled a sense of savings in me when I was very young, but said nothing about having a purpose for those savings, about bills and mortgages, etc. Just, "you'll understand the value of a dollar when you're older." Not very helpful.
But I can't blame them now, not at my age. Although, I can't help thinking that a better understanding would have helped me, many times in the past, to not spend everything I'd saved, simply because I didn't know what I was saving for. My money was burning a hole in my pocket because I never had any plan for it. And that's just as bad as not knowing how to save.
Even educating myself about investing didn't help me. I learned enough to almost write my investment broker's exam. On the other hand, my little brother started investing in the stock market since high school because of a course he took. He's worked equally as hard as I have. We're both workaholics. But he has a longer-term understanding about many aspects of money, and as a result has done better for himself despite probably earning less than I have over the years.
So take my advice. Sit your kids down - or your nephews and nieces, or grandkids or whatever - and teach them about what money really means, how it's earned, ways to invest it, and just as importantly, how to save it. And to have a plan for the use of the money. If they don't have a plan, the money will eventually get spent the wrong way.
I once read an article about a set of grandparents who bought their two young grandsons each $1000 worth of shares. They sat the boys down, presented the stock portfolios, and explained what it meant to invest, how the value of their portfolios would increase. As a result the boys gained a healthy respect and understanding for money and the stock market, and later saved money from their paper routes to buy even more stock.
What stocks did the brothers buy? My memory fails me, but they went with companies they were familiar with or whose products they liked. That's called qualitative analysis, and the boys understood it intrinsically. Their grandparents gave them a great gift. Not just the money, but also the knowledge of investing it to multiply their talents, so to speak.
You don't have to give your kids/ grandkids a $1000 portfolio, but starting them off with something, maybe even a small DRiP (Dividend Reinvestment Plan) portfolio - which I'll get into in the future - Would be good. Or even better, start them off with an online savings account. Not only can you teach them to save, but you can also have a chance to talk to them about safe ways of using the Internet.
If you opt for an online savings account, there are a handful on this site already, but Emigrant Direct and Ing Direct are two that have a minimum of conditions and a maximum of flexibility.
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