Wisdom of Rich Dad

Almost everywhere you go, you can hear parents say: “I want to start teaching my kids about money while they’re young, so that maybe they’ll grow up and avoid making the same mistakes I did, maybe they’ll be both wealthy and grateful.” It makes sense that teaching kids about money is on almost every parent’s mind.

There are several money gurus for adults (Robert Kiyosaki – “Rich Dad, Poor Dad,” David Ramsey – “Total Money Makeover”, David Bach – “Automatic Millionaire,” to name a few). Of course, most parents with young children who are learning from these gurus eventually get around to wanting to impart this new-found wisdom to their children while they’re still young.

Also, there’s the huge number of conscientious parents who are in debt and who are on a path of getting rid of their debt. And then, there’s the self-aware parents who have become introduced to, and may be continuing on the path of, replacing a poverty-focused mentality with an abundance mentality (e.g. The Secret, Law of Attraction, and various faith-based and secular abundance teachings).

Of course, America is very well-poised to finally leave the poverty mentality of The Great Depression, as the third or fourth generation is being born now. Finally, Americans are extricating themselves, bit by bit, piece by piece, of the deeply embedded beliefs and language of The Great Depression, which are negative and counter-productive to building financial wealth.

Maybe you read “Rich Dad, Poor Dad,” and a light bulb went off about how you look at money, and now you are at a loss of how to teach your children about money. Maybe you don’t yet know how money works or what ROI means, and don’t have the time to go through a long learning curve, but want to capture the opportunity to teach your kids about money now while they’re young.

Here are 7 key points that you must know when teaching your kids about money:

1. Financial Wealth is created when your money makes money (rather than you making money).

2. ROI means Return On Investment. It is your Return On Investment – that is, the money that your invested money makes for you – that defines your wealth (rather than your earnings or your capital gains). For more teaching on this topic, read or listen to “Rich Dad, Poor Dad,” and/or play “Cash Flow 101,” to learn about getting off of the Rat Race.

3. Thinking that you’ll get out of debt and become wealthy when you work harder, get a raise, make more money, have greater commissions, or make some landmark profits in your stock trading account, are just lies that the 20st Century American society has created. Wealthy parents know differently. Wealth is created by ROI, which comes from having your money make more money for you.

4. Giving is part of gaining. When you have Returns On Investments, it’s important to keep the flow of money circulating – by more investments, more spending and more donating (charitable giving).

5. Good children’s banks have 4 parts – Investing, Donating, Spending, Long-term Savings (to buy Christmas/holiday gifts, birthday gifts, Father’s/Mother’s Day gifts, etc.), and properly take care of money (rather than scrunching up bills and jamming them into a tiny slot). Why 4 parts and not 3? Try dividing up Grandma’s $20 bill birthday gift to little Jimmy by 3.

6. Allowance only works if you have a complete plan to teach wealth habits to your children. Allowance alone, without more, won’t do it. Allowance and chores are a dangerous combination. Gratitude in children doesn’t depend on whether kids have to do chores in order to get an allowance – it depends on a lot of important things, but not that.

7. Children actually ignore you when you start talking to them about money (a.k.a. trying to teach them). Children learn by doing. Children get strong wealth habits by doing the same thing over and over and over – in an interesting and creative way.

If your family’s plan for teaching your children about money is lacking in any of these 7 areas, fear not. There are lots of resources on the web and in bookstores to help you get your children on a good financial wealth path.

Find the one that works for you, with your style and where you’re at in life. Now you’re armed with these 7 essential points to evaluate which tools will be best for you to teach wealth habits to your children, even if you’re not (yet) wealthy.

Theresa A. Markham, Esq. is the author of The Kids’ Bank Book: How to Teach Wise Money Management to Your Children with Fun, Ease, Smiles and Laughter, and offers the Book and other info about raising wealthy kids at www.KidsBankBook.com. She donates 10% of The Kids’ Bank Book net profits to Champ House.

It’s a late weekday afternoon and best-selling author Sharon Lechter is once again giving financial advice.

Today, her target audience is quite different from the adults who purchased the “Rich Dad Poor Dad” books she co-authored with fellow Valley resident Robert Kiyosaki.

This group consists of a half-dozen young teenagers at a Phoenix branch of the Boys & Girls Clubs, and the audience is one Lechter hopes to appeal to with YOUTHpreneur, part of her new business that teaches children how to be entrepreneurs.

“I have a passion for financial literacy for families and children,” said Lechter, who left the Rich Dad Company in 2007 after disagreements with Kiyosaki and now runs Pay Your Family First. “What is happening with today’s kids is they don’t understand delayed gratification. . . . Kids want it before they even think about working for it.”

Lechter’s focus on children comes at a time when national studies show high-school and college students are plunging themselves into deep credit-card debt and having easier access to credit. Meanwhile, President Barack Obama last week threw his support behind a consumer-friendly credit-card law that eliminates tricky fine print, sudden rate increases and late fees.

The YOUTHpreneur program teaches children how to make money through gumball sales, and she’s teamed with local branches of the Boys & Girls Clubs and Fry’s Food Stores. Through the program, children learn about sales and profits by operating a candy machine at a Fry’s store.

“It was a good experience. We learned about business,” said Michael Clark, a 14-year-old from Greenway Middle School in Phoenix. “We had fun doing it, and we made some money for the Boys & Girls Club. So, it was all good.”

Lechter, of Paradise Valley, has taught the YOUTHpreneur program to about 70 children at six different Boys & Girls Clubs branches during the past year, and she’s selling the program on her Web site, youthpreneur.net.

She said working with kids brought her career full circle as the certified public accountant began focusing on financial education when her oldest son, Phillip, went off to college.

She said she thought she had taught her son to manage money, but as a freshman at Arizona State University, he quickly dug himself into a $2,500 credit-card debt.

“I was so upset, but I was more angry at myself than him,” Lechter said. “We didn’t bail him out. It took him about five years to get himself on track.”

The lesson apparently stuck because Phillip Lechter now is president of her new company, and he said the business would focus on entrepreneurship, financial education and money tips for teens and parents.

Sharon Lechter said it’s important for parents to teach their kids about financial management because college students are racking up thousands of dollars of credit-card debt and even some high-school students are using credit cards.

Sallie Mae Inc., which manages student loans, released a study this month that said nearly one-third of college students put tuition on their credit cards and the average balance for a student was $3,173.

College seniors are graduating with an average credit-card debt of $4,100, up from about $2,900 in 2004, according to the study. The median credit-card debt for freshmen nearly tripled to $939 since 2004.

Meanwhile, a 2008 nationwide survey of high-school students by Jump$tart, a financial literacy organization, found that nearly 35 percent of students had a credit card, up slightly from the nearly 32 percent in 2002.

Steve Beekman, area director for the Boys & Girls Clubs of Metropolitan Phoenix, said Lechter provided important skills to the children. He said a donor provided the gumballs and machines, while the children, who were between 11 and 15, donated the few hundred dollars in profits back to the Boys & Girls Clubs.

“It has gotten them exposed on how to run a business, and it has opened their eyes to the real world in how to make money and not go out and spend it all,” Beekman said.

Along with running YOUTHpreneur, Lechter also has co-authored “Three Feet From Gold,” which interviews successful entrepreneurs like the founders of Chick-fil-A restaurant and Mrs. Fields Cookies.

She said the book, a partnership with the Napoleon Hill Foundation, is scheduled to be released in October.

By Janet Bodnar

It’s a challenge for adults to create a financial Web site for kids that offers age-appropriate information and is entertaining enough to hold their attention. To mark National Financial Literacy Month, I’d like to mention a few that are worth a look.

For elementary-age kids. Meet the “Centsables” (www.centsables.com). They’re six super-hero friends — named, fittingly, Franklin, Jackson, Grant, Hamilton, Penny and Suzie B. — who live in Centsinnati and can “grow to gargantuan height, run like the wind, and control the elements.” And they do it all in the service of giving kids super money-management skills. Mark DiPippa, president of Norm Hill Entertainment and creator of the project, has ambitious plans to produce it as an animated TV series.

For now, kids can enjoy the Centsables online in a series of games and comic books. The target audience — children ages 6 to 11 — can probably handle the activity pages and comic books on their own. Younger children may need a hand from parents to navigate the lessons, which include “How kids earn money” and “Taking stock of the market.”

For middle- and high-school students. CareerForward is a free, innovative online program developed by the Michigan Department of Education, Michigan Virtual University and Microsoft’s Partners in Learning unit.

The curriculum is designed to take about 20 hours to complete and may be directed by a teacher (Michigan requires all students to have at least one online learning experience before they graduate), a volunteer or an interested parent.

CareerForward isn’t focused exclusively on financial education. But there’s a unit on managing money, including lessons in budgeting and a salary calculator for future jobs.

What I like about the program is that it gets kids thinking about what they’d like to do beyond high school — the education and skills they’ll need to earn a living in the global workplace. And that, after all, will determine how much money they’ll have to manage and what their standard of living will be.

For college students. Though not an interactive Web site per se, the “Playbook for Life” guide may be downloaded or ordered at www.playbook.thehartford.com. Originally developed by The Hartford insurance company in conjunction with the NCAA, the idea was to educate student athletes about the importance of financial planning.

But the lessons are equally valuable for all college students and young adults, with sections on purchasing a house, buying (and maintaining) a car, saving for retirement, buying insurance and paying taxes.

And when your kids are ready to go out on their own, there’s a lot of useful information at Kiplinger.com in the Starting Out section.

WOONSOCKET – The Woonsocket school district and the Light Foundation last week debuted the partnership’s most ambitious initiative yet, a first-of-its-kind course in the district created to develop financially streetwise city students before they even hit high school.

The week-long course, taught by Light Foundation Executive Director John Keuffer and colleague Richard Carey, took a bold and unconventional approach in teaching Woonsocket Middle School students how to, in a word, be smart and get rich, even if they never score a high-paying job.

“Some of these kids are feeling the effects of the down economy pretty badly,” said Keuffer. “We want to show them to look at money differently, that even someone who makes a lesser income can be financially free.”

Examples are many, he told students, of people making less money who end up saving millions of dollars over a lifetime.

“If you’re smart with your money, you can lead a frugal, yet enjoyable, life,” he said.

Keuffer and representatives from the foundation established by New England Patriots All-Pro Tackle Matt Light plan to be back next April for another round of high-energy classes, but then it might be up to someone in Woonsocket to keep the initiative alive.

“I’d love to see it part of the math curriculum here,” said Keuffer, midway through the week, on one of his dreams for the course.

Jessie Butash, a WMS teacher and liaison between the school and the Light Foundation, agreed with Keuffer that keeping in-depth financial training as part of the curriculum is a great goal.

“Teachers were all on board with the program and would love to see more kids be able to take advantage of the opportunity,” she said.

In round one of the course, about 20 WMS students agreed to take part in financial literacy training, receiving both school credit and some basic skills they need to be successful.

Speaking of his most memorable lesson from the week, 7th-grader Dario Rodriguez said it was his instructors’ examples of how quickly even a cash amount of $1 million can disappear.

“They taught us how fast it can go down the drain, with a house, cars, the things people like to buy,” said Rodriguez. “We need to be careful about money and keep the flow of it going.”

“It’s about having options, that’s what it comes down to,” Keuffer told students over lunch in the WMS cafeteria.

The Light Foundation’s relationship with Woonsocket Middle School students began earlier this year when four local youths were selected to be part of a long-term pilot project designed to keep them on the straight and narrow path with mentoring from Light and others.

The teens traveled to camp in the Midwest where they were part of a documentary film called “Stands Alone Warrior” with four Cheyenne Indian youth, a coming-of-age story about eight teens who overcame fears of the unknown.

Last week’s course on financial literacy covered parts of four books, “Rich Dad Poor Dad,” by Robert Kiyosaki, “The Richest Man in Babylon,” by George Clason, “The Magic Story,” by Frederick Van Renssalaer, and “Dare to Fail: Strive to Succeed,” by Keuffer.

“In my house my dad never talked about money,” said Keuffer, who grew up in a low-income household. “In rich people’s homes they do talk about money.”

The financial literacy course is a program designed to instill smart thinking on such age-old foundational ideas as saving and not spending more than you earn, and more “adult” issues like building assets and businesses, taking on smart loans, and dealing with a mortgage. In their teaching, Keuffer and Carey use such common examples as the teenager who starts cutting grass as a business.

“We show them how they could turn that business into a contract for 10 homes, then maybe you get a buddy to cut the grass and you’re free to go get 10 more yards,” said Keuffer. Keuffer and Carey have been teaching their financial literacy course in schools throughout the Northeast and Midwest where the Light Foundation is based since the year 2000. Both said they were pleasantly surprised at how receptive Woonsocket students were to their message, as many times it takes a day or two to penetrate walls of resistance.

An early action to teach your kid about money and savings are a good idea to give better money management ideas when they grow. Using simple methods depends on there age, you can easily bring them getting good understanding on money and can grow a habit of savings.

Below are some practical methods a parent can use to teach there kid about money and savings. Have a look:

Age group 1 to 7 – Give her a piggy bank and let her collect and deposit coins to that box. Regularly give coins to your kid for her piggy bank. This approach build a habit of small savings in the early ages.

When the piggy bank is full, open a savings bank account in parents name and deposit the amount to that account. Small drops can form a sea in the future.

Someone in my place starts this habit at the age of 2 and still he following at his present age of 43. The account his father opens for him still alive with enormous amount from his small deposits for long term and now he planned to teach this habit to his daughter and present this account to her.

Age group 7 to 10 – Give her awareness about savings bank account, how adding and removing money from savings accounts, how the money growing in it with interests etc… teaching her about interest calculations will do magic at this stage.

Take her to bank with you and let her learn how dealings are happening there. Give ideas to know more about bank transactions.

Age group 10 to 15 – Start a recurring deposit. Instruct to add a small fixed amount in each month. She can easily collect this amount from her pocket money and gifts. You can also give small amounts as gifts on there good work like well study, helping mother and father, cleaning house, gardening etc. Let her build very good awareness about systematic savings well as the hardworking nature to get awarded promptly.

Teach her on compound interest and the magic of compounding. It is very good in this age to know how compound interest works and how the amount increasing by its power.

Give practical knowledge on banking services like using ATM, cheque book, internet banking facilities etc.

Age group 15 to 18 – Give directions to get knowledge on various investment instruments available in the market. Teach her about mutual funds and how it is working, fixed deposits etc. Let her get awareness about various investment products and the difference of returns from these products and different risk levels related to each products.
 

~ Marcus De La O

There was something missing from the $700 billion taxpayer funded bailout that was signed into law. It seems impossible, I know. Congress spent several days making sure nothing was left out, including money for Puerto Rican rum makers, race track owners, wooden arrow manufacturers, and of course, the always under-funded wool researchers.

It was painful to see the very people who caused the mess taking charge of fixing it. If it made you mad, it should have. The bailout amounts to over $2,300 from every American’s pocket, and there are no guarantees that it will work. Most of us would have preferred to stick it to the man and let those greedy Wall Street villains go bankrupt.

If you watch TV or read the paper, you’ve heard that the problem was caused by our government loosening lending standards. This is a symptom of a larger problem, one that needs to be fixed now. The real cause of this disaster is not on Wall Street. It is much closer to home.

Imagine if our children were forced to take money management classes starting in the third grade. Forced! Forced to take classes in money management? Why not? They are forced to take algebra. How many of us use that in the average day? They are forced to take biology, foreign language, health, and geometry. Sex education may soon be forced upon our children as well. Money management, however, is not even an elective.

When offered an amazing loan to buy a house with little or none of your own money, a properly educated young adult might say “no thank you.” When tempted to run up the VISA debt to get that new plasma screen, the ghost from classroom past would say “No.” Every year a new batch high school graduates take to the street with no financial education. This is the real cause of the financial crisis.
Instead of a couple thousand regulators teaching banks how to lend, let’s teach a couple hundred million Americans how to borrow. Rather than showing us how to spend our money, our government should show us how to save it. Our children need to come out of high school knowing that managing their money is just as important as earning it.

Our government has let us down in this area for a long time and missed another chance. Financial education should be required in all public and private schools. Over the past few weeks, we did not hear one of our leaders speak about the importance of teaching money management to our children. Not Bush, Obama, McCain, Pelosi, Cox, Bernanke, Dodd, or Frank. None of them. Yet what is on every adult’s mind every day? How to manage your money.

For the government, a financially literate public is a dangerous thing. Americans would have no use for bailouts, and fewer of us would need welfare or Social Security. Unfortunately, our government prefers that we remain reliant on them for as much as possible. Unless we insist that our schools offer financial education, it will never happen.

Since this is not likely to happen, there are some fun and educational books you and your children can read. “The Richest Man in Babylon” by George Clason is fun and easy for kids to read. “Rich Dad, Poor Dad” by Robert T. Kiyosaki is great for teenagers and adults. Let’s teach our kids money management from an early age. This is how we can all “stick it to the man.”