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Customer & Community Connection Newsletter
By Hugh Norton
Parents take their children's financial future seriously, and technology provides an ever-evolving variety of fun and innovative ways to teach kids about money. However, some parents are concerned about limiting their kids' screen time, and others may be looking for more hands-on activities to use to add to their children's financial tool kit. Luckily, there are many off-screen ways to discuss, explore and learn about personal finance.
Have them compare everyday expenses. Regularly discuss how much everyday items, such as groceries, meals out and household supplies, cost. Then have your kids brainstorm ways to save money. Whether they're comparison shopping or coupon hunting, they'll learn what a normal week's expenses might be and practice budgeting in the process.
You can also segue these activities into discussions about wants versus needs, such as the need to eat dinner versus the want to make a spontaneous trip to an expensive restaurant. Or the want for a game that they can't afford unless they make money and save up first. These are good financial habits to instill and remind yourself of at any age.
Practice calculating savings. Looking for ways to save money can also double as a math lesson – good for staying sharp during the summer – and may lead to some surprising discoveries. For example, a sale where you buy one item and get a second of equal value for 50 percent off is equivalent to 25 percent off your purchase. Twenty-five percent off may not sound as enticing to them as 50.
The exercise could help teach them to consider how much they're going to spend rather than how much they'll "save." You can use these sales-related examples to point out that if you weren't planning on making the purchase anyway, buying something because it's on sale isn't really saving at all. I had a college friend that loved to quote his father saying, "never spend a dollar just to save a nickel."
You can also combine financial education with math practice when you dine out by having your children calculate the tip. Reviewing the bill could help them appreciate the true cost of a meal, which may be much higher than the menu price due to tax and tip.
Make saving a regular and physical activity. Creating several savings jars is a common practice among parents who are teaching their kids about money, and it's one worth considering as a precursor to opening an account. The idea is simple: have three jars (piggy banks or other containers) for spending, saving and charity.
Whenever kids get an allowance, money from work, a gift or any other sort of income, you ask them to split it up among the three jars. The split could be done evenly or divided in another way; that's a decision that you can make together.
Having the physical jars can be helpful, especially with younger children, as they can see the money grow over time. Once they're older, you can continue a similar practice by introducing them to checking and savings accounts.
Be honest and open the books. It's up to you to decide how much detail you want to share, but offering examples of how you manage your finances could help your children prepare for the real world. Sharing food and household expenses with them could be a starting point, but you may also want to consider adding other, recurring bills into the mix.
For example, you could go over the monthly utility bill together and discuss how the family's energy-related actions affect the bill and ways you could all help cut costs. Or go over a bank or credit card statement together and examine each transaction and how it played into the family budget or your individual budget.
You may also want to share examples of monthly loan payments to prompt a discussion of interest rates. Reviewing savings or investment account statements can be an opportunity to show how compound interest could help them grow their money.
Lead by example. Working on financial skills with practice, lessons and stories is important but many children also learn good and bad habits by the examples that their parents set. Consider this an opportunity to brush up on your own financial knowledge and then practice the skills you'd like to pass down.
Bottom line: Financially literacy isn't something you can teach in a week or with a single method. You may be able to memorize some practical knowledge, such as how interest works, but it can take time for the more important practices to become regular habits. By utilizing a variety of methods to teach and show your kids how to handle money, you can help them prepare for a healthy financial future.
By Hugh Norton
If you've got a business idea and you couple that with an entrepreneurial itch, you may find yourself tossing and turning at night trying to figure out a plan for moving it forward – dreaming of the day you'll become your own boss.
I've hung my shingle in the past and know from experience that there are ups and downs to starting and owning a business. The initial years can be especially tricky, but the long-term payoff can also be financially and personally rewarding.
If you're up for the challenge and excited by the prospect of becoming a business owner, there are a few steps you can take to help make sure you'll start your new venture on sound financial footing.
1. Create a business plan. Using a written business plan as a guide for your first few years as a business owner can be very helpful. The process of researching and writing your business plan can also teach you more about the industry and may help you better understand the viability of your idea.
A good place to start could be with either the U.S. Small Business Administration (SBA) or the SCORE Association (a non-profit supported by the SBA), who have free resources and training that you can use to help you create a business plan.
Once it's complete, you can use the business plan to attract partners, investors and employees who share your vision for the future of the business.
2. Research your potential start-up costs. You might already be adding up necessary expenses in your head: a website, office or retail space, payroll if you need to hire employees, etc. However, there are also lesser-known expenses that may surprise first-time business owners.
For example, you could have to pay fees and permitting costs to your city, county or state. And depending on the business, you may need to get licensed and purchase insurance, all of which have costs that can add up.
Knowing your actual start-up costs, which should be factored into your business plan, can be important as you look for funding. And whether you're tapping into personal savings, asking friends or family for investments, crowdfunding or applying for a loan, you should stop to consider the potential pros and cons of each approach.
3. Separate your personal and business finances. Even if you're starting as a sole proprietorship and decide not to form a business entity, it's generally a good idea to separate your business and personal expenses.
One way you might consider doing so is by opening a new bank account that you only use for business-related transactions and putting all your business-related purchases on a debit or credit card linked to that account that you don't use for anything else.
Keeping your accounts separate can save you time when you file your tax return or need to review your expenses. If you incorporate your business, separating your personal and financial accounts can also be an essential step in limiting your personal liability.
4. Consult with experienced professionals. Setting your time aside for research and learning can be important, but paying for professional expertise now can help you protect your business later and lead to long-term savings.
5. Track your income and expenses. Knowing where your money comes from and goes can be important when you're trying to decide where to reinvest within your business and where you may be able to cut costs.
You could start with a simple spreadsheet if you don't have a lot of clients or overhead. As you grow, you'll likely want to use more complex software to manage your finances.
There are a variety of inexpensive cloud-based accounting, invoicing and payroll systems for sale that you can use to help with the administrative tasks. Many let you give limited access to a bookkeeper or accountant if you want to outsource some of the work.
6. Start building your business's credit. New business owners may not realize that there's a difference between personal credit and business credit. Your business can have its own credit reports and scores, and you may be able to use your business' credit to secure financing or get more favorable terms from vendors.
You can start building business credit by working with vendors that report your payments to the business credit bureaus (you can ask them or look online for lists). In some cases, using a business credit card could also build your business's credit.
7. Create a business emergency fund. An emergency fund can help you get through a personal or family crisis without worrying about your finances. Consider building a separate emergency fund for your business, which may offer similar benefits in case you hit a slow season or unexpected setback.
Bottom line: When you strike out on your own, money isn't always the most important thing – hopefully you've found something you also love to do – but you want to make sure the numbers add up. Putting in the time to make sure your finances are in order, and creating a plan for how you'll grow your business, can be essential to becoming a successful entrepreneur.