College Bound

What Can You Do To Start Planning For College?


Most likely, your parents have already started saving for your college education. But how have you gotten involved in preparing for college? Working together with your parents to be part of the planning process can be very educational. Although you may not have the same amount of money as your parents do to save for college, there are other ways you can help your family plan for college.

Maintain good study habits which can help you achieve good grades. Academic scholarships are an excellent source of money to help pay for college.

Take college preparatory classes in high school and start thinking about possible career choices. What you want to be when you grow up may strongly influence your choice of college. Most colleges prefer to accept students who have taken more than the basic requires for high school graduation.

Set aside money from part-time jobs to save for college expenses. Tuition is just a part of the cost of going to college. You have to buy books, pay for room and board if you go away to school, travel costs and general living expenses, as well.



Parents: Start talking to your kids about college planning and get them involved with the process. This will help them take ownership of their educational goals. Read “How Can I Save for My Child’s College Education?” to learn more about financial tactics for college planning.


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How Can I Earn That?

So you’ve either earned or been given some money, but what do you intend to do with it? The age-old lesson of need versus want it too often lost in today’s vast world of consumerism. The newest, greatest version of everything is coming at us faster than ever, making it easy for us to get confused about what we really need to spend our money on and what is just too cool to pass up. As soon as my children were old enough to point and ask for a toy or candy bar in the check-out line, I taught them to say “how can I earn that?” rather than “I want that”. This simple little step can completely change how you view all the stuff around you. If it isn’t worth doing an extra chore to get it, then maybe it really isn’t that important to have, after all. And if you choose to put a little skin in the game (earn the money to pay for the purchase) it makes you appreciate the item all the more.

How to knock your parents socks off!  Stop asking your parents to buy you things and starting asking them "How can I earn the things I want?"!

Make a New Years Resolution to Start Saving Now

We’ve talked a lot about savings, but you may not realize how important it is to start saving as soon as you can. One of the first things that you can do is to open a savings account that pays interest. Set aside a little bit from your monthly allowance or money you receive for doing a job. It may not seem like you have very much to save in the beginning, but you’ll be amazed how even a little bit can add up over time. (Review my post about the Rule of 72.)

Say a boy deposits $50 per month into a savings account. At a basic compound interest of 5% in five years he could have $481.15 more than if he had just kept the money in his piggy bank.* If he increases the amount that he saves per month each of those five years, he’ll have even more.

Parents: Read about the advantages of saving early in Save Now or Save Later.

*This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investment. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return involve a higher degree of investment risk. Taxes, inflation, and fees were not considered. Actual results will vary.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

How Do You Decide How to Spend Your Money?

As we move through the holiday season, your parents may be telling you to think about what you want versus what you really need. It can be very confusing to understand how your family spends its money. To determine how to spend money, your parents may have set up a family budget.

Ask them to tell you about the budget, and show you how they allocate their income. They may talk about paying for utilities and other necessities and then how they determine what they have to spend on things that the family wants.

Then think about how you can use that information to set up your own budget with sections for what you earn and what you want to spend and what you might save, invest or donate. If you don’t have enough money to pay for all the things that you want or want to do, think about how you can earn the money.

Parents: A good way to answer children’s questions about how the family budget is determined is to explain where the money goes. Read How Can I Keep My Money from Slipping Away? to learn more.

What Would You Do?

Here's an idea! This Thanksgiving, while you are sitting around the table with all of your family and friends, play this game. Ask everyone at the table, “What would you do with $1?” After everyone has answered, then ask, “What would you do with $100?” Finally, asked everyone, “What would you do with $1 million?” This kind of game can really get you thinking about what is important in your life and in the lives of the people you love. Notice if anyone starts to change their mind about what they would do with the money after they’ve heard ideas from others. Are you surprised or inspired by anyone’s answers? Money is not the end game. It is a tool to help you achieve what you really want to do in life.

This holiday, think about what is most important in your life and be thankful.
Happy Thanksgiving!

What’s the Difference between a Bull Market and a Bear Market?

You may have heard the terms Bull Market and Bull Market and wondered what they mean.

The stock market goes up and down all the time in little amounts and sometimes in big ones, but then it will go in the other direction for awhile. This is why the stock market is considered a risk when investing. Say you buy your bike today but it goes on sale tomorrow. That would be an example of what can happen in the stock market. Of course, you could also buy your bike on sale and pay less than someone who buys a bike a few days later when the sale is over. You can read about how the value of stocks change in our earlier post, How much do stocks cost?

But, sometimes the stock market goes in one direction, either up or down, pretty consistently for a few months. If the stock market goes up by 20% for two or more months, it is said to be a Bull Market. Most investors are excited about Bull Markets because it means that the value of their investments is going up. This is like you buying your bike and being able to sell it to your neighbor later for more than you paid for it.

If the stock market goes down by 20% for two or more months, that is called a Bear Market. The most famous Bear Market was the Great Depression in the 1930s. Most investors believe we are in a Bear Market right now because we are in a recession, and unemployment is high. You may have heard about this on the news or from your parents. Some people like Bear Markets because they can buy things at a low price and then wait for them to go up in a Bull Market.

Doesn’t it make sense to buy something when it is cheaper and then sell it when it is worth more? Things like bikes, tend to go down in value (you will probably have to sell it for less than you paid for it), but some things, like rare baseball cards or other collectible items can go up in value as time goes by. The problem with the stock market is that nobody knows when the value of stocks (or bonds) will go up or down.

This is why it is a risk. The best way to invest in the stock market is to invest for the long-term, for many decades instead of many years. That way you go through a lot of Bear and Bull markets before you sell your stocks.

The market goes up and down for a lot of reasons. We covered some of these in an earlier post. What causes the stock market to go up and down?

There are many theories about why the terms Bear and Bull are used. One of the most popular is that Bears rise up above their prey and come down, while Bulls use their horns to thrust up.

What are the Risks of Investing?

We’ve recently spoken about the importance of saving for the big (and small) things you want and need in life, from a new bike, to a college education. Investments can be one way to grow your savings, but there are a lot of risks that you should be aware of before you begin.

Inflation is the increase in the price of products over time. Inflation rates change every year. Right now inflation rates are low. That means that purchasing power is relatively stable, but there is a lot of fear that that will not continue. You want the return on your savings and investments to be higher than the rate of inflation.

Interest rates also vary over time. When interest rates are low, as they are now, stable investments increase in value, but when interest rates rise, the value of these investments fall.

Parents:   As you help your kids learn about investing, help them be aware of the potential risks.  Read What Investment Risks Should I Know About? to learn more.