Monday, January 18, 2010

Little Financial Tip:

Some of the following information is from Dave Ramsey's book "More Than Enough".

I found this information and just had to share it with you...Did you know that if you put $2000 in an Roth IRA when your child is 16 and another $2000 in their IRA when they are 17 years old, at a conservative growth of 12% (the average for mutual funds), your child will have over 1.5 million dollars TAX FREE at age 66 for retirement? They don't have to put in one penny more! Isn't it fascinating??? Everyone can be wealthy!!!

Most kids start working around that age, I would highly encourage you to have your child save up $1000 and match it! If you explain to them the impact, I know they will get excited! My son who is almost 9 is already saving for his retirement and we have great fun working the numbers...he's thrilled he will be a millionaire with very modest investments!

Clark Howard also recommends opening up an account in your child's name at Charles Schwab...they have "no load" (means no commissions) mutual funds and they start as low as $100 which is doable for kids and teens.

If you have a 9 or 10 year old, it's time to start discussing saving up for their first set of wheels! Our kiddo's have three pots and they earn money each week doing chores above and beyond their normal ones. Ten percent goes in their "tithe" pot, 40 percent goes in their "save" pot and 50 percent goes in their "spend" pot. They are responsible for buying their own toys in between holidays, ice cream at the ice cream truck, etc, with their "spend" pot.

A couple of days ago Dakota was getting ready to go to a friends birthday party. I said, "Oh my gosh, I've been so sick, I didn't bring you to get a gift!" I yelled to Tim to come take him to the store. That's when Dakota, who is 8, told me he had it taken care of. He explained he had two of an action figure that his friend wanted and that they cost $14.99, he then said that he wrapped it with the gift paper from the closet..."How much did I save on a gift bag?" he asked me. "Well, probably $3..." I replied. He said, "Wow, I saved $17.99!" I was thrilled for him, what a smarty! (I was totally planning on buying the gift for him...when I told him that, he said, no we need to use our money wisely and if he already had a gift that his friend wanted that would be "wasting money")...I guess I'm rubbing off on him :-).

Enjoy the info, I'll be back to post about my gift...