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Yes, You Can…Rai e Financially Aware Kids

Helping Your Kids and GrandkidsAppreciate the Value of a Dollar

This information is for educational purposes only and is not intended as investment advice.ACI-0810-2603

Non-FDIC Insured – May Lose Value – No Bank GuaranteeAmerican Century Investment Services, Inc. – Distributor©2014 American Century Investments Proprietary Holdings, Inc. All rights reserved.

Why Is This Important?

How Can You Raise Financially Aware Kids?– Understanding– Allowance– Money Management

Examples and Illustrations

Agenda

2© 2014 American Century Proprietary Holdings, Inc. All rights reserved.

“It is important that your children learn what they can do with money early in life so they will apply the lessons learned at home as they face the real world in future years.”

- James E. Stowers Jr., Founder of American Century Investments

Why Is This Important?


By the time they are five they will have been hit with 30,000 advertisements

Turning your curious child or grandchild into an insatiable consumer

Children’s influence on the economy:– $188 billion in direct influence– $300 billion of parental spending influence– $25 billion of their own money

Your Children and Grandchildren Are Targets


Whether you know it or not, a survey of high school students revealed that 88% of what they learned about money came from their parents.

What lessons are your financial discussions and behavior teaching your kids/grandkids?

What do your kids/grandkids need to know to be financially successful and strike a financial balance?– Ways to Earn Money– Saving for the Short-Term– Investing for the Long-Term– Spending Wisely

Teach Your Children and Grandchildren Well


Whether you are thrifty or not, a business owner or employee, you are your child’s CFP – Chief Financial Parent

Kids whose parents or grandparents talk to them about money are more likely to be “savers” rather than spenders.

Talking about money and financial behavior is critical to successful financial education.

Your Role as CFP (Chief Financial Parent)


Understanding

Allowance

Money Management

How Can You Raise Financially Aware Kids?


“Money”

Definition: Something generally accepted as a medium of exchange, a measure of value, or a means of payment: as a : officially coined or stamped metal currency. (Merriam-Webster Dictionary)

To your children and grandchildren, “money” is your value system personified through your financial behavior. Are you financially living your values?

Discuss “money” = Important

Demonstrate good “money” behavior = VITAL

Where to Begin - Understanding


Understand your own beliefs about money

What money principles did you learn growing up?– Did you experience hardships or success growing up?– What stories did your parents and grandparents tell you?– What did your parents’ actions show you

about money?– Did it feel as though your parents barely

made ends meet or was there always enough to go around – and then some?



It begins with having – “The Talk”– Talk to your kids/grandkids as early as possible – younger is better– Act casually. – Leave money in its proper place.– Know your audience.

Above all – make it a dialogue, not a lecture.



Ask questions to better understand the child’s perspective

What you think is a want could be a very real need for your child

Avoid judging their priorities

Focus on the value of what they are getting and the potential opportunity cost

Understand a Child’s Needs and Wants

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You may think… Your child may think…Stuffed Animal Toy ComfortDesigner Clothing Cheaper alternatives Peer acceptanceMP3 Player Distraction to homework Safe place to focus

© 2014 American Century Proprietary Holdings, Inc. All rights reserved.

How young is too young?– Kids as young as age 3 can understand some basic concepts Bartering (“I’ll give you this for this.”) Earning (“Put your toys in the box and you can watch your video.”) Saving (“Put one penny on each finger. You have five pennies.”) Investing (“When you have a penny for each finger. I’ll give you one more.”) Currency (Not always money, but can be what is of highest value to a child such

as TV or game time, play time, etc.)

Older kids can handle greater challenges –including an allowance.

Put It Into Practice - Understanding


Kids who receive an allowance tend to save more than those who do not.

Common questions parents ask -– Should I give an allowance?– If so, when should I start?– How much should it be?

Allowances


The allowance experience can provide hands-on training for a financially responsible future.

Three different philosophies …– Allowance without expectations

Unconditional, no requirements– Allowance tied to specific actions

Based on chores completed, grades, behavior– No allowance

Pay as you go to encourage development and control spending

Make it a learning experience … not a power struggle.

Should I Give an Allowance?


Determine your child’s allowance readiness …– Have an interest in wanting an allowance– Should understand the value of money– Count small sums of money– Have a safe place where it won’t be lost– Understand the difference between needs & wants– Willing to practice the discipline of saving

When Should I Start?


Factors to consider:– Child’s age – younger children have less need for money– Why it’s given– if it’s pay-for-work, it could be different each week– Your own income – it needs to work within your budget– What it’s for – what expenses will your child be paying Entertainment School Supplies / Lunches Toys / Gifts Clothes

How Much Should it Be?

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RULE OF THUMB: $1 for each year of age per week ($12 for 12 yr old), unless expected to cover expenses such as school lunches, clothes, gas, etc.


“I need more money!”– Have them keep a monthly journal of spending and/or a budget plan– Review it with them Did they get their money’s worth?

– Are they still enjoying it or is the excitement gone?– Would they rather have the money back?

Did they really need it? Could they have bought it somewhere else for less?

– Listen carefully– Get feedback from other parents– Do what you think is right and supports the money values you want your child to

embrace

Giving a Raise


Involve your children/grandchildren in your finances– Explain Budgets Income Savings / Investing Expenses / Spending Plan

– Discuss How you earn money What you need to do with your money What you want to do with your money How you stay in control of your life

– Show Demonstrate “paying yourself first” through

401(k)s, regular investing, 529 CollegeSavings Plans, etc.

Setting Expectations – Money Management


Having a goal and a plan means personal control

Possible saving goals

Major purchase – car, video game console …

Special event – prom, senior trip …

Personal growth – college, summer camp …

Financial Goal Setting – Money Management


Approach to staying on track

1. What do you want to do?

2. If you could only do one thing, which one would it be?

3. What changes might enable you to achieve your goals? Extra odd jobs? Changing spending habits? Saving more?

4. Make decisions that support your primary goal! Will using my money this way get me closer or further from my goal?

Keeping Goals on Track – Money Management

20

Decisions regarding how you spend your money are easier when you have a plan.


Turn “earning” into “learning” by giving kids the chance to:– Discover their passion and special abilities– Recognize the relationship between time and money– Think creatively and problem solve– Increase their independence

Ways to earn more –– Chores around the house– Helping neighbors– Part-time job after school

Additional Opportunities – Money Management


Four keys to accumulating wealth– Start as early as possible– Save on a regular basis– Begin with the largest sum possible– Reach for the highest rate of return that’s acceptable for you

Compounding– Takes into consideration time and rate-of-return– Nature is a wonderful teacher– Money, properly cared for over time will grow and multiply

Put Your Money to Work – Money Management


Questions to ask before the purchase:– Is this a need or a want?– How many week’s allowance (or hours worked) does this cost?– Have I found the best price?– Am I getting good value for the money?– Can I negotiate a better deal?

Remind them: “You can always spend what you save, but you can never save what you spend.”- James E. Stowers Jr., Founder, American Century Investments

Think Before They Spend – Money Management


Examples and Illustrations


A check for $1 million, or

A penny that doubles in value every day for 30 days?

Which Would You Rather Have?


$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

Valu

e

Days

The Amazing Power of Compounding

Take the Daily Double


The Rule of 72

Rule of 72 is a mathematical formula which calculates approximately how many years it will take for an investment to double with an annual compounding interest rate.

72 ÷ interest rate = years until investment doubles

$500 earning 8% interest could be worth $1,000 in 9 years

72 ÷ 8% interest rate = 9 years

When Could An Investment Double in Value?


Helping Them Understand Why It’s Important

29

1900 2000

Bureau of Census and Bureau of Labor Statistics

In the 20th century, the dollar lost 95% of its value

What a dollar used to buy in 1900, now costs more than $21 today


Educational programs geared toward children and their interests

Clip and share articles from financial magazines

Help your children/grandchildren connect with people they admire

Take your children/grandchildren to work

Encourage them to talk to others – including relatives

Visit YesYouCanOnline.info

Additional Learning


American Century Investments

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You should consider the fund’s investment objectives, risks, and charges and expenses carefully before you invest. The fund’s prospectus, which can be obtained by calling 1-800-345-6488 (or by visiting www.americancentury.com/ipro), contains this and other information about the fund, and should be read carefully before investing or sending money.

American Century Investment Services, Inc., Distributor©2014 American Century Proprietary Holdings, Inc. All rights reserved.The contents of this American Century Investments presentation are protected by applicable copyright and trademark laws. No permission is granted to copy, redistribute, modify, post or frame any text, graphics, images, trademarks, designs or logos.

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