The New Science Behind Your Spending Addiction

A recent Newsweek article reported that science is jumping on board to study and reveal the issue of how we use our resources.  It’s fairly commonsense that we are going to operate in the mode that we’ve been trained, and for decades we have been exposed to strong messages of immediate gratification.  We are told that we “Need” all kinds of stuff to make our lives normal, happy, even fulfilling.  Humanity is up against a powerful corporate influence that is driving our economy and ultimately creating false realities of consumption.

In our own subtle way, the Money Academy message is busting this reality for young people, setting their brains on a trajectory for wealth building.  The article points out that we have to “rewire the brain to find pleasure in future rewards.”

If our reality from a young age is that money is a tool that we can use in multiple ways (Spending, Earning, Giving), the choices we make with our money dramatically change.  It’s imperative that the brain be wired for this from the start. Probably the most influential conversation about this in Money Academy is when we address the issue of what contribution the kids want to make in the world.  Kids are naturally altruistic and we tap into that emotion, we create an incentive to build wealth.  We ask them what difference or what contribution would they make if they had money to donate.  The conversation for philanthropy is what motivates them.  Building wealth will give them the opportunity to make a difference.  We quote Spiderman:  “With great power (wealth) comes great responsibiltiy”.  They really get it.   And then “saving to invest” makes sense.   And then,of course, making money with money (passive income)  is equally exciting.

The shortfall of most initiatives that want us to save is that there is not motivation.  If you talk to a young person about saving to retire, they have no concept of what that could mean.  In their world, they are never going to be that old.  And they’ll deal with tomorrow when it comes.  The immediate gratification issue is at play.  The best way we have found to shift that thinking is to have them realize that they can start making a difference NOW.   When we do the “Financial Freedom Plan,”  the first thing they do is save for investing, then Charity.   Spending is last on the list after we’ve managed the areas that are critical to our financial stability and to a world that works for everyone.

Create a wealth building mindset in kids while they are young and that will be their roadmap for the rest of their lives.

How to best use allowance to teach kids about money

Probably the most often asked question by parents is “Should I give my kid an allowance?”    There is no simple answer, but giving kids the experience of handling their own money is a great teaching tool.  The problem with allowance is when it is given with no responsibility involved.

Kids who get allowance that is matched to certain spending areas or in exchange for chores do much better with money once they are out on their own.  Read more about what studies are proving…

…By Eileen Ambrose, The Baltimore Sun

The conventional wisdom is that allowances make children responsible money managers as they learn to budget so they don’t run out of cash.

But Lewis Mandell, professor emeritus of finance and former dean of business at the State University of New York in Buffalo, says that’s not always the case. In fact, says Mandell, who has studied financial literacy, certain allowances may even be hurting kids.

According to Mandell, high school students who didn’t get an allowance performed better on a financial literacy test than those who did, especially teens who received stipends with no strings attached. And children receiving unconditional allowances — no chores required — also were less motivated to get a job or go to college, he says.

Read more of the article:    http://bsun.md/y1mb4y

The benefit of letting your kids solve their own problems

As parents, we are making choices daily about how to best utilize our resources, including money, to fulfill the needs of the family.  Let’s begin to share that responsibility with the kids. When they are given the opportunity to make their own choices with money, they will bump up against a problem we’ve all experienced of not having enough money for all the things we want.

One of the best ways to teach kids how to solve this problem is to have them  solve the problem themselves.  The key is to not be too quick to step in and rescue them at the first sign of struggle.  This tends to stop their thinking and can send the message that we don’t have faith in their ability to come up with a solution.

It’s in the struggles and the disequilibrium where real learning takes place and they get to enjoy the sweet success of figuring it out by themselves.  It’s also where they learn that persistence pays off and where real problem-solvers are born.  When kids are given an opportunity to succeed at a difficult task, they begin to take on other more difficult tasks with confidence.

As uncomfortable as it can be to watch them struggle with a problem, rest assured that the lesson they learned is going to stick with them forever.

Holiday Break Camp in Austin

The Holiday Season is right around the corner.    How about giving your kids the gift of a fun week at Money Academy Camp, learning and earning!

Kids come together for the week and create a real business, making and selling a real product, and they get to keep the profits!

Our plans for a Holiday Break Camp are coming together now.  Let us know which week works best for you.  We’re still deciding on the best dates so give us your feedback and we’ll prepare to give your kids the best camp experience ever!  Where else can they go to camp and come home with a check for profits they made during the week?

Vote now:

____December 19-23
____December 26-30

 

When should you start talking about money to your kids?

Another great article from The Economic Times:

Money Academy Camp, CEO for the day leading financial analysis of product

“Teaching kids to count is fine but teaching them what counts is best.”   Bob Talbert, American columnist.

This quote lies at the core of the philosophy behind teaching fiscal responsibility to children.  Parents and teachers focus on math and other artistic skills, with kids as young as four years old being enrolled in esoteric classes to get a head start in life.

But amid all these classes, we forget to impart an important life skill-financial literacy. How many of us realize that when our kids enter the real world, the first thing they confront is money?As a wealth adviser, I have seen that when it comes to money, smart people commit blunders, whether it is in dealing with banks, taking loans or making investments.This is the reason one should begin teaching money management to kids at a very young age.

The best time to do this is between 5 and 12 years, which is not to say that those above 12 years do not appreciate this concept. They do when the content is interesting, but it takes a little more time for them to understand the importance because they have developed deep-rooted habits and have turned into consumers.

As they enter the teenage or beyond the sixth grade, they become hardwired because of peer pressure and external environment. So it becomes difficult to get them to adhere to a financial literacy program. At this stage in their lives, they are keen to buy mobile phones, gadgets, branded clothes and do things that their friends are doing. Telling them to act sensibly and responsibly might be a tall order if you have not inculcated good habits from an early age.  In fact, it is a good idea to introduce financial literacy as a subject in school from Class I itself.

Many of you probably give your children pocket money, but what you don’t realize is that this does not teach them the value of money or how to manage it. Most parents do not take the initiative to teach their children about money. They may touch on the concept of piggy banks and savings early on, but are usually reluctant to discuss money and family finances with their children.

The best way to teach kids about money is to let them deal with money early on for they need to understand its power and the consequences of their decisions.  It’s far better that they commit mistakes at a young age with smaller amounts of money than financial blunders when they grow up.

By starting early, you can give your children a strong competitive edge for their future financial success. The key learning points for kids should include having healthy values about money, setting goals and priorities, making prudent choices, delaying instant gratification and understanding the virtues of hard work.

Also, don’t forget that even though you might not teach your kids directly, they are learning by observing you.

(The author is Financial planner and author of The Art and Science of Teaching Children about Money, Amar Pandit)

Kids are curious about money!

Learning about money is something we are doing from the minute we have the ah-ha moment that there is value and power in money.   All kids have a natural curiosity about money and that interest provides a perfect opportunity for “just in time” learning. Exploring ideas that are of interest to us gives us the most meaningful learning experience. That’s why  in  Money Academy  Camp they can get real-life, real-money experience that helps them sort out the big ideas about money that they are curious about.

The author of this article describes her experience with learning (and not learning) about money when she was young.

Justine Rivero for Financially Fit

If only our earliest encounters with money, like getting a quarter for cleaning our room or a whole dollar from the Tooth Fairy, taught us what we would need to know about personal finance. Instead, we learned the hard way by growing up.

A lightbulb flickered in my head in fifth grade when I realized my $10 weekly lunch allowance didn’t need to be spent on cafeteria pizza. By saving $2 a week for two months, I could buy my first Backstreet Boys CD. It was a moment I’d never forget, for it finally dawned on me exactly what money was worth — anything I wanted.

Over the years, I traded school lunch for CDs, birthday money for movie tickets, and even college textbook money for new boots. The exchange value of money, as I like to call it, grew larger and grander as I moved into my early 20′s. I likely “exchanged” thousands of dollars before I graduated college, yet still hadn’t learned how to manage my finances. By the time I got my first job, I spent more on food and happy hour than on rent and found myself in serious credit card debt. Obviously, I still didn’t have a clue about money management.

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