Brett Ellen: Kids Finance Coach

Your Playbook to Money-Smart Decision Making

It is never too early to start learning about the value of a dollar and how to spend that dollar wisely. Six Taking a look at the history of currency and where money actually comes from is fascinating and fun. This website will also show you how money can grow into more money and it will teach some basic defintions about the economy and investing. As you become a fiscally savy kid, you will learn how to budget your money in a responsible fashion, especially when you are spending your own money, not your parents. It is important to plan how you wish o spend and save. Therefore you will need to make decisions about Where DoesThethe things you  WANT and what you of CurrencyBank Earnreally NEED.

Coach Brett has served the financial services industry for nearly 25 years. His company, American Financial Network works with both individuals and companies to help make sure they have a strong plan for saving and managing their money. As part of their game plan, Brett tries to make sure that his clients allocate the right amount of money for the things they need and want. It is also important for individuals to set their short, medium and long-term goals, so Coach Brett works to create a budget and a financial plan that illustrates how they can meet all of their goals.

COVERING YOUR BASES  -  A GAME WINNING STRATEGY

It is important to remember that before you can invest money, you must make sure you are saving enough money to meet your daily, weekly and monthly expenses.  You need to consider how much you will put into the following 4 categories: SAVE – SPEND – DONATE – INVEST* Before you spend , you must save.  You  must spend on your budgeted items before you donate.  With excess money, you can then invest for the future.

Then it’s time to save some more!

THE HISTORY OF CURRENCY

A long time ago people traded with one another, exchanging Goods for Services.  This was called bartering and it worked well if the goods and services traded were of equal value. But as commerce grew merchants often became over-loaded with too much of one type of traded item. A better way of doing business was eventually needed. Commodities such as barley, beans or cattle became  an early form of currency as it had value to both  merchants and farmers.  But these commodities as a currency also created a problem, as they could spoil or die.  Throughout history other types of items were adapted as forms of money as long as traders could all agree on the value of the items used. Such currencies included pebbles or Cowie Shells. The Chinese used shells as money about 3500 years ago and Cowie Shells were still being used in Nigeria as late as 1935.  In fact, the term “shelling out” money refers back to this type of currency. In 1620 the Dutch used wampum (purple shells made into beads) in trade with people from New Amsterdam (modern day New York) By 1627 wampum was introduced to the Pilgrims of Plymouth who traded it for furs. Fourteen years later when the Massachusetts made wampum legal tender, the exchange rate was 3 purple beads equaled 1 Penny. Skin and furs also were used in commodity trading. This practice gave birth to the word “buck”, derived from buckskin and slang for one dollar Precious metals such as gold and silver became accepted as valuable in the times of the ancient Greeks, but there was a shortage of  gold and silver coins in the American  colonies in 1600 and 1700 hundreds.  Thus there was a need for some type of  paper currency.

The dollar was first born in the region that is now the Czech Republic in 1519.  A silver coin minted because known as a Joachimsthaler, later shortened to thaler.   From thaler, came the name dollar. This was well known in the United States so that when the U.S. government started
its own system of money n the late 1700’s, it chose the name dollar as the basic unit.

WHERE DOES MONEY COME FROM?

Countries, like the United States make their own money.  In the US,  The Bureau of Engraving and Printing makes our paper money at two locations, Washington, DC and Fort Worth, TX.  Our metal coins are made by the United States Bureau of the
Mint. In addition to coins for commerce (buying and selling), the United States Mint also makes other coins and medals for collectors. There are several locations where U.S. coins are made. The first mint was opened in Philadelpia. Philadelphia, PA - Opened in 1792, Makes circulating coins, commemorative coins, coin dies, and uncirculated coin sets.

Fort Knox, KY -  Opened in 1937,  Safeguards gold & other U.S.
treasuries, Currently makes no coins San Francisco, CA - Opened in 1854, Makes circulating coins, coin dies, proof and silver proof coins Denver, CO - Opened in 1860, Makes circulated gold & silver coins West Point, NY - Opened in 1938, Currently makes American Eagle proof and uncirculated bullion coins in gold, silver, & platinum The Federal Reserve (the Fed)  is in charge of deciding how much money to print and when coins are made. You can learn more about the United States Mint at www.usmint.gov/kids

The Life-Cycle of a Dollar

The bureau of engraving and printing produces additional paper money that is damaged or worn out. The life-span of money varies from item to item.
$1 - 18 months
$5 - 15 months
$10 - 18 months
$20 - 2 years
$50 - 5 years
$100 - 8 1/2 years
Coins - 25 years

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HOW DOES A BANK EARN MONEY?

Banks and Savings & Loans make money by combining the money from all their depositors and lending that month to other people or other companies. The customers of the bank who borrow money, are people who need capital for cars, houses, or college, or local businesses who want to expand. When a bank lends money, they charge Interest on the principal (the original amount ) of the loan. The interest rates are set by the Federal Reserve. A Mortgage is a loan made to a borrower for the purpose of buying a home or real estate.

The Rule of 72

A formula that tells you how long it takes to double your money.  It is based on the concept of compounding interest
where you not only earn interest on your original investment principal, you keep earning further interest on the inter-
est added to the principal as well.

The Formula:

72 Divided By Interest Rate = Number of Years to Double Your Money. For example if you deposit $100 at a 6% interest rate, your money will double in twelve years.  In other words, you would have $200 at the end of twelve years. 72 / 6  = 12 Years
If you are earning an 8% interest rate, your money would double in 9 years. 72 / 8  =  9 Years

READING A ONE DOLLAR BILL

Business Ideas to Help You Earn

Babysitting Bike Repair Birthday Party Planning Errand Service Garage Cleaning Garage Sale Pet Grooming Pet Sitting Plant Watering

Birthday Clown or Entertainer Car Washing Carpet Cleaning Gift Wrapping Golf Caddy Housecleaning Odd-Jobs Service Raking Leaves Selling Used Books

Curb Address Painting Dog Walking Driveway Sweeping Lawn Mowing Lemonade Stand Packing Service Painting Tutoring Typing Window Washing

Setting Your Goals ( click for full size )

Allocating Your Money ( click for full size )

Six Simple Steps to a Savings Plan

Build from the ground up with solid foundation!

STEP SIX - Review Your Progress

Are you on track to reach your goals?   How long will it take?    Do you need to make any adjustments?

STEP FIVE - Identify Your Earnings Plan

Will you be getting an allowance?   Would you like to get a job?   What other income can you expect?

STEP FOUR - Establish a Savings Vehicle

Do you want to save your money at home?   Do you want to open a bank account?   Do you want to start a collection?

STEP THREE - Set Up a Budget

How will you earn money?  How much money will you need to reach your goals?   How will you divide your money if you are saving for 2

budget items?

STEP TWO Set Your Goals

What are your financial goals?  What to you WANT and what do you really NEED?   What do you need now and what can wait a few months or a

even a year?

STEP ONE Get Educated

Where doe money come from?   How does a bank earn money?   How can you make your money grow in value?   What is compound Interest?

Tips for Parents

At what age can a child grasp the concept of a money and budgets? Usually by 2nd or 3rd grade a child  will become inquisitive about money and where it comes from.They can also begin to comprehend the importance of saving money for the things they wish to buy.  By 4th or 5th grade a child will begin to understand financial matters in more detail while taking a look at the components of the  economy and how they work together.  As you discuss savings concepts with children, make sure the subject is matter is age-appropriate. What is the best way to get a child started on a savings plan?
1. STEP ONE - Teach your child the Basic Building Blocks of Finance
Establish a Foundation of Financial Concepts beginning first with more general definitions and models about our  economy.  Early topics would include
simple theories of  “Exchanging Goods for Services”, “The Difference between Needs & Wants”,  “Budgets & Savings” “Credit and Debt” and “The Rule
of 72”.  More advanced discussions would include “Stocks & Bonds, “Interest Rates,” “Real Estate” & “Taxes”.
2. STEP TWO Help them Set Goals
Work with the child to set short, medium and long-term goals.  Use illustrations they can relate to.  For example, a yunger child might want to save for a
toy, while a pre-teen might want an electronic game or clothes.
Click here for a Worksheet.  (Link)
3. STEP THREE - Prepare a Budget and Allocation Plan
Help your kids develop a plan for achieving their goals. Discuss the following questions:  What things would you be willing to fund in part and what will
your child need to contribute themselves?  How will they divide savings between short=term and long-term goals?  How much will they need to save
altogether to meet their goals. How long will it take?
4. STEP FOUR - Establish a Savings Vehicle
For the younger child, a piggy bank may be sufficient.  For kids that are a bit older, a Passbook account established in the  child’s name is more excit-
ing.  Most banks offer special savings products with no minimum balance, no fee acounts designed for the young saver.
5. STEP FIVE - Incorporate an Allowance
Determine a reasonable amount and make clear if there are chores associated with receiving the allowance.  It has been suggested that a weekly pay-
ment of $1 per year is an appropriate amount. (a child 10 years old would receive $10 dollars per week)  If a child has a out of the house job such as
babysitting or delivery person,  a parent may make a match contribution for each deposit  made by there child.
6. STEP SIX - Review Progress
Review bank statements and discuss with your child if they are reaching their goals. Make adjustments if needed.

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Filed under: AFN Financial Planning for Kids, Financially Fit