Growing Smart Kids

William F. Powers III- Financial RepresentativeNorthwestern Mutual Financial Network631-592-4079 Directwilliam.f.powers@nmfn.comwww.nmfn.com/williamfpowers

07/30/2010

Perfectcents™ Tips for Raising Money-Smart Children

Northwestern Mutual Financial Network is the marketing name for the sales and distribution arm of The Northwestern Mutual Life Insurance Company, Milwaukee WI (NM) and its subsidiaries and affiliates. TITLE is an insurance agent of NM.

It makes cents

A. Insist on an Ivy League education

B. Steer them toward higher-paying careers

C. Talk about money early and often

Rule #1 - It’s all about making talking aboutmoney a priority.

But how?Today’s session will… Show you the challenge you’re up against Offer some suggestions to get you started And ultimately, make you really start to

think about getting you and your family’s financial future in place

Are you uncomfortable talking toyour children about money?

You’re NOT alone – money may be more difficult to talk about than sex and drugs. In a survey, parents said they felt more

comfortable discussing sex than savings with their kids.*

* 2008 Parents & Money Survey Findings, Charles Schwab, March 2008

Parents put off or resist talking to their children about money for a number of reasons:1. My habits are bad

2. I never learned it at home

3. Is money good?

4. It’s just too complicated

Nine states require financial literacy testing.1

Only seven states require students to take a personal finance course to graduate.1

1 National Council on Economic Education, 2007

One out of three teens know how to read a bank statement or balance a checkbook.  Only one in five know how to invest. 1

56% of students carry four or more credit cards, with an average balance of $2,864.

U.S. foreclosures were up 75% in 2007 compared to 2006.

1 Charles Schwab Teens and Money, 2007 Survey2 Washington Post, 2007 citing student loan lender

Nellie Mae.3 RealtyTrac.com. 2008

JumpStart Coalition For Personal Financial Literacy

High school seniors still lack fundamental knowledge about money

Scores are dropping Average score was 48.3%, down from 52.4% in

the 2005-06 survey Only 17 percent felt that stocks are likely to

have higher average returns than savings bonds, savings accounts and checking accounts over the next 18 years Never happened over 18 year period in history

Only 40 percent realize that they could lose their health insurance if their parents become unemployed.

Source: JumpStart Coalition for Financial Literacy Survey, April 2008

Show Them the Money

• Money is an important part of life – use it to teach life’s lessons. – Adding and subtracting– Independence and making good

choices– Setting goals; delaying gratification– Empathy and sharing– Interacting with others; social skills

• Determine your valuesabout money; makesure your actionsare consistent.

Show Them the Money

• Create an open dialogue to help instill positive financial attitudes and behaviors.

• Turn everyday experiences into teachable money moments.

Money Doesn’t Grow on Trees

• Start teaching before spending.• Make it a family affair

– Include all members in money discussions and activities, as appropriate for their age.

• They’ll fall…but help them up, and teach– Allow children to make decisions.– Mistakes now with small amounts

of money will helpavoid more costlymissteps later.

Each stage in your child’s life presents new challenges and opportunities for helping them learn to make good financial decisions.

Like measuring growth in inches, start setting goals for your child and track their financial progress.

The Value of Money…Age-Appropriate Lessons

Infants & Toddlers(Birth-2)

• Time is on your side –take advantage!

• Looking to Uncle Sam• Think long-term

– College funding– Investigate long term

saving options– Set up an automatic

savings plan• Help protect their future

Infants & Toddlers(Birth-2)

Activities:

• Lead by example

• As you talk with your child to develop their language skills, incorporate “money talk.”

Preschool Years +(Ages 2-6)

• Making Sure YourFirst Steps are in Place

• Practice putting coinsin a Piggy Bank

• Open a general savings account • Set up a 529 plan• Allowance Ready?

– All depends on you– How much?

• Teach good habits by example

Preschool Years +(Ages 2-6)

Activities:• Turn reading practice into

‘reading and money practice’

• Play grocery store/bankwith play money.

• Talk about how family members work to payfor food and clothes –bring your child to work.

• Talk about products on TVand their costs

The real lessons begin…what you can do: Start with goals; focus on the long

term. Educate about the concepts

of earning, saving, spending,donating and investing.

Foster your child’ssocial responsibility.

Allowances 401 K(ids) –

matching programs.

Allowances: The Issues

When to begin?• It depends on you and your

child – the idea is to start good habits early.

How much?• Some parents match the child’s

age or year in school (50¢ or $1)• Cover their costs• Chores?

Allowances: The Issues

How often?• Younger children –

weekly • Teens – bi-monthly

How long?• When your teen starts to

earn money at a part-time job, begin reducing your financial support.

Allowances: The Issues

Allowances Tied to Chores – controversial

Advantage – Kids learn the connection between money and earning it. An allowanceis earned, not entitled

Disadvantage – If choresaren’t done, there’s nomoney managementlesson. Where do youdraw the linefor chores?

Additional Allowance Tips

• Don’t cave – giving advances will undercut the idea of a budget.

• Pay on time – it teaches your child that commitments have to be kept.

• Be flexible – give an allowance bonus or raise to reward your child for being responsible with their allowance.

401 Kids

• Match your child’s contribution up to a set-level

• Kids can’t access it until agreed upon age (ex: 18, 21)

• Invest money in savings, CDs, otherinvestment options

Younger Tweens

Activities:• Explain how a bank works; track

savings interest.• If you give an allowance, teach your

childhow to use it.

• Compare prices/quality while shopping.

• Discuss wants vs. needs.

Earning Your Pay Assign unpaid tasks to all family

members. Pay for extra household jobs and talk

about expectations for those earnings. Help them find pay for outside work. Show how to keep track of earnings and

expenses for jobs. Pay Yourself First

Learning to Spend Allow your child to buy something you

know they won’t like; talk about making a better choice next time.

Have them help balance the checkbook. Usage of cash vs. credit

The Magic Money Machine Myth

Is that Credit or Debit?

• Kids know ATMs give out money, that’s aboutit – they’re vulnerable.

• Don’t make the leap from savings to credit.

• Cash is the best learning tool. If you do want to give them plastic, start with a pre-paiddebit card.

Saving and Investing

Talk about the amount to be saved andwhat it will be used for.

The power of compound interest.

Exploring investments – whatare they, how they work

It makes cents

Borrowing activities:

Don’t lend more than your child can realistically repay and forgive the loan.

Draw up a contract for anyloan with your child; set uprules for interest.

Talk about how to savefor something insteadof borrowing money.

Help Others Through Donating

Explain that sharing can include time and resources or skills, not just money.

Volunteer together or initiate acommunity project.

During special occasions ortragedies, remind aboutdonating to help thosewho are less fortunate.

High School Years(Ages 14-18)

What you can do:

• Open a checking account; compare options.

• Encourage their entrepreneurial spirit.

• Set up a financial plan to meet short- and long term goals.

• Continue saving for college; match savings

High School Years(Ages 14-18)

Activities:• If they have a job, determine

what they will pay for vs. what you will contribute.

• Increase financial responsibilities (e.g. grocery shopping, planning/budgeting for a family vacation).

• Help them fill out income tax forms.

• Teach how to set and stay within a budget.

High School Years(Ages 14-18)

Activities:• Explain protecting against risk

–life and auto insurance, etc.

• Encourage researching major purchases.

• Talk about safe debt levels.– Calculate how long paying

off a large debt at the minimum payment would take

– Discuss college financing options

The College Years(Ages 19-22)

What you can do:

• Address dangers of credit cards

• Caution about preserving savings

• Encourage to “pay yourself first”

• Explain good and bad debt

• Help with asset allocation

Have you started talkingabout money?

Are you setting a good example?

Have you helped your childset up a plan for saving, spending and sharing?

Is your child involved in discussions about money?

Do you give praise forgood decisions?

Are you letting themmake mistakes?

Have you started acollege fund?

Do you have short- andlong-term goals for teaching yourchild about money?

In need easy to follow-suggestions? www.TheMint.org

It makes cents

Our Children

Our Responsibility

Q A

Women are achieving significant success and wealth but still face a number of financial hurdles.

Did you know…? Based on demographic information alone,

it’s likely women need to be more financially prepared than men. But why?

Women: Live longer than men1

Earn about 25% less than men2

Leave the work force for longer periods and are more likely towork part time3

1 National Center for Health Statistics, 20082 U.S. Census Bureau, 20073 Maternity Leave and Employment Patterns of First-Time

Mothers:, 1961–2003, Feb. 2008

Not getting involved in family finances

Not preparing for life’s changes

Not setting financial goals

Not making investments

Procrastinating savings

Getting into debt

Get involved in family finances and understand your own financial picture.

Help your daughter understand that she will need to plan for her own financial future.

Start a saving sooner, rather than later, is the best way to prepare for life’s changes and longer life spans.

A four-slotted piggy bank can be a helpful tool to teach the basics of asset allocation. Penny the Pig

Helps teach that money has four uses – saving, spending, investing and donating.

Tape a picture of “a want” to the pig to make the connection with setting a goal and saving for it.

Q: Why can’t I…?

Rather than say “we can’t afford it,” or “because I’m the parent,” be specific and explain your reason.

Q: Are we poor or rich?Find out why your child is asking. Use the question to explain how you’re managing your money.

Q: Can I have more money?

Rather than just saying, “no” (which should be part of your answer), discuss what went wrong with their budgeting.

Q: Why does my friend get a bigger allowance?

Rather than giving a raise, talk about your family’s financial goals and overall budget.