Themint.org Guide to Raising a Money-Smar t Chi ld

Growing $mart Kids f rom diapers to d ip lomas

Raising financially sensible children in today’s world can be complicated. To help bring to light the many ways you can help a child in your family create good lifelong financial habits, Northwestern Mutual has developed Growing $mart Kids. By making smart choices today, you can prepare your child for decades of tomorrows.

Each new stage in your child’s life will bring a new set of circumstances, new pressures and new opportunities to teach your youngster to make good financial decisions. Growing $mart Kids can help you meet these challenges and track your child’s financial growth and development, much like your pediatrician checks physical growth and development. Within each life stage, you’ll find financial milestones as well as age-appropriate topics and tips. You’ll even find steps new parents can take to help their child later on in life.

Whether you are a parent, grandparent, godparent, aunt, uncle, or friend, the information contained in this booklet can help a child you know learn to manage money intelligently – often a daunting task amid the alluring messages of the modern marketplace. We hope to play some small role in the process. We wish you success in your efforts.

Growing by Inches and learning good cents

Uncle Sam can help. A US Savings bond is a great gift for a newborn. You can buy a bond for as little as $50, and over time, bonds grow in value as they accumulate interest. Best of all, the interest rate is guaranteed, and the investment is safe, backed by the US government. Want to know more? Visit www.savingsbond.gov.

Invest long-term. Investigate mutual funds, savings or money market accounts, or other places where money can grow. Investing even as little as $50 a month can add up to surprising sums down the road.

Let grandparents help, too. Grandparents often have the means to contribute to the child’s financial future by investing in funding options to help pay for college. Historically, small investments have grown over 18 years.

Stay protected. Accidents and illnesses happen. As difficult as it is to consider the death of one or both parents, it’s important to explore ways to safeguard your baby’s financial future. Right now you probably plan to give your child as many opportunities as you can. However, music lessons, orthodontia, summer camps, and a college education are expensive. A disabling illness or the death of one or both parents can jeopardize all of your good intentions. Investigate life and disability income insurance to protect your child’s income and the many aspirations you have for him or her.

Time Is on Your Side – use it wisely Birth – Age 2

Open a general savings account. If you’re able, begin a small monthly savings program for your child. Put as little as $25 a month into a savings account for four years, and you might have more than $1,200 by the time your child starts first grade!

Set up a 529 plan. These plans can be started earlier, but if you haven’t established one yet, now may be a good time. Investing after-tax dollars in a plan enables your money to grow income-tax free. The way money is taxed when you withdraw it from the plan depends on how you use it. Since tax laws can change, be sure to check with a financial professional before you act.*

Don’t splurge. Many parents want their little ones to have the best of everything. And frequently, it’s tough to say no to a winsome smile asking for another toy, the latest game, or a new doll. Good parents set limits. Don’t spoil your children. Instead, show them how you – and they – can be happy with “enough.”

Teach smart shopping. Start now to show your child how to stretch a dollar. When you buy, be a smart shopper, and talk about the steps you take to save money. Gradually teach your child to follow your lead. It’s an important life lesson, and your child will thank you for it later.

Is it time for an allowance? It all depends. Allowances should usually begin when your child becomes aware of money and how it’s used. Sometimes that’s as early as age 4. Giving children small amounts for their bank introduces them to the concept of saving and spending.

Looking AheadAges 2 - 6

*Under the tax act’s sunset provision, the tax relief goes away after December 31, 2010.

Pay me, Mom and Dad. How much? While some advocate matching a child’s age in dollars, the size of the allowance also depends on the economic climate of your neighborhood and what the allowance covers. In the early years, the allowance may be used for trinkets and treats. Later on, it will cover pizza, movies, and soccer shoes. The financial responsibilities of your child should grow with age.

Money and work. Teach your child the value of work. While you will probably assign everyday chores – your child’s unpaid contribution to helping run the household – you should pay for larger projects, such as reorganizing the garage or weeding the garden. Paying for work teaches your child about taking initiative and earning.

Money is limited. Don’t give in when your child runs out of money. If you do, you’ll encourage overspending and spoil the financial lesson your child has created. Bad habits are tough to break.

Put earnings to work. Encourage your child to take on odd jobs for friends and neighbors. Your youngster will enjoy using part of the earnings to buy something on his or her wish list. Encourage putting part of the earnings in short-term savings or a CD or other investment. It’s important to teach children to save for the future as well as live in the moment.

The Lessons BeginAges 7 - 13

Try a 401(kids) account. “Matching” programs modeled after employee benefits programs offer strong incentives for saving. Consider matching every dollar your child puts in savings. His or her balance will grow faster, adding to the thrill, and your contributions emphasize the importance of saving.

Money’s for more than spending. Don’t just give an allowance; teach your child how to use it. Build a four-jar bank. For instructions, go to www.themint.org and click on the Tips for Parents tab. This bank will teach your child that money has four uses – saving, spending, investing, and donating – the basics of asset allocation. Children should learn this lesson at an early age and build on it as they grow.

Teens and financial troubles. If your teen is broke and suffering because of it, the discomfort will eventually teach him or her to spend more wisely. Don’t let your teen dip into savings or investments to cover the shortfall.

Credit and consuming. Explain the pros and cons of credit. Most teens don’t know that it’s borrowing. Credit is convenient and can be a wise way to finance purchases. But warn your teen about the costly dangers of debt. Together, read a credit-card statement, and show your teen how purchases can add up over a month.

The Pressures Grow – the high school yearsAges 14 - 18

Kids can test their borrowing brainpower by taking the Credit Card IQ quiz on themint.org. The seven questions help to identify their knowledge of credit and areas for improvement.

Lead by example. Continue to model good spending habits for your child. Pay cash for items or “save up” before you buy. Invite your child to help you research large purchases, compare brands, features, and prices.

Curb the desire to spend. Impressionable and vulnerable, targeted by advertisers and under peer pressure, teens have a tough time. Companies touting snack foods, clothing, movies, video games, and computers will be positioning their product as a “must-have.” Counter these messages with the lessons you started early and have been reinforcing since your child was very young.

Rewards of being financially fit. Yes, remaining financially disciplined is difficult for a teen. But don’t forget to show your child that money in savings can buy enjoyment – a special prom dress or a yearly family vacation. Talk about how these treats are the rewards of leading a financially fit life.

Save for college. This is a time when teens should focus on saving. College expenses are right around the corner. Your child should contribute, even if it’s only to accumulate spending money.

Look into college scholarships/grants. Help your teen identify some of the opportunities for funding college. From academic to athletic scholarships to grants and loans, hundreds of programs are available, but high schoolers have to apply and qualify. Freshman year is the time to start planning.

Coping with independence. Your child is out on his or her own, meeting new people and becoming more of an individual with each passing day. Here’s where your lessons about managing money will be tested for real. Mistakes with money and credit can be big and begin to matter now.

The dangers of credit cards. College freshmen are literally swamped with credit card offers and enticed by sign-up premiums. Students can easily acquire multiple new cards the first week of school. Maxing out one card and simply moving on to the next is easy. Yet a strong credit report is a valuable score to have on a financial resume. That’s why earlier lessons about credit are so important.

Preserve savings. Caution your student about dipping into savings to compensate for overspending. Savings must be respected. The more it is left alone, the more it grows. Regularly using savings to bail out of financial jams will deplete a savings account in a hurry.

Accumulation lessons. Many students work part-time campus jobs. Remind your student to observe the adage “pay yourself first.” He or she should continue to invest and save, even if it’s only minimal amounts. Every little bit adds up over the long haul. Conversely, spending accumulates: Buying too many pizzas and hamburgers adds up as well.

The College Years – earlier lessons put to the test

Ages 19 - 22

Working and learning. Talk to your child about taking work seriously and valuing its importance. However, explain that school and work require scheduling and discipline.

About good and bad debt. Help your child understand the difference. Bad debt is charging $3,000 worth of clothing, eating out too often, or buying the coolest car to bolster one’s prestige. Such debt takes forever to pay off, and that set of wheels will begin to depreciate the minute it’s driven off the lot.

Good debt, on the other hand, uses money to further goals: investing in student loans, medical school, or a good blue suit to wear to interviews. At this point in your student’s life, good debt is the only kind to have.

Maintain asset allocation. Your lessons about asset allocation should come into play as your young adult makes more money at summer jobs.

Healthy growth always requires careful attention. Being a responsible parent means tending to the growth of children, savings, and investments. Seek good guidance. From the very beginning of your child’s life, it’s important that you work with the very best financial professionals to make sure that –

• your child, your family, and your individual needs are taken care of.

• your assets are balanced and well chosen.

• every advantage is used to help you prosper.

Also consider a conversation with a representative from Northwestern Mutual to talk about other ways you can protect your child and your family. We can provide a variety of resources to help you make your dreams come true. To find a representative in your area, visit www.northwesternmutual.com.

We hope you find the pointers in Growing $mart Kids a first step in raising a financially responsible child. To find many more details on this topic, visit www.themint.org. We at Northwestern Mutual are pleased to be able to provide this information. Being financially literate is as important to your child’s future as learning to read, write, add, and subtract. Financial intelligence will shape every stage of your child’s life, from piggy banks to pensions.

Nurturing Growth

Our Family Plan

Ages 14 - 18

Birth – Age 2

Ages 2 - 6

Ages 7 - 13

Ages 19 - 22

Use this space to personalize your plan. Jot down reminders, tips, or issues that are especially important to your family. Record any ideas that have worked well with one child, so you remember to use them with younger children, too. Good luck!

The Northwestern Mutual Life Insurance Company • Milwaukee, WIwww.northwesternmutual.com

19-0317 (0206) (REV 0509)

Launched in 1997, themint.org is a financial literacy Web site developed by the Northwestern Mutual Foundation, the charitable arm of Northwestern Mutual, and the National Council on Economic Education (NCEE). The site provides fun activities, games, challenges, quizzes and tests for students and teens, helpful tips for parents, and entertaining programs and lesson plans for teachers to promote financial literacy.

Always carefully consider the investment objectives, risks, expenses and charges of the investment company before you invest. Your Northwestern Mutual Investment Services Registered Representative can provide you with a contract and a fund prospectus that will contain such information, as well as other important information that you should read carefully before you invest or send money.

Securities offered through Northwestern Mutual Investment Services, LLC (NMIS), 1-866-664-7737, registered investment adviser, member NASD and SIPC.