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2012

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Financial Health For The Holidays

’Tis the season to overspend. We know we shouldn’t spend more than we have; yet this is when we indulge our most self-destructive financial behaviors.

During the holidays, Americans will make one-third of their yearly purchases and often spend many months trying to pay off the bills.

Giving to others feels great,, but if we are spending more than we can afford we are not only hurting our financial health, we are modeling poor financial behaviors for our children. If you are at risk of spending too much money over the holidays, try the following:

1. Begin your holiday shopping with a different kind of list.

List all of your beliefs about giving. Our beliefs about money, called “money scripts,” are those unconscious and often self-limiting money-related beliefs we learn early in life (typically from our own parents) that drive our financial behaviors. For example, many who overspend have money scripts like:

“Spend it while you’ve got it.” “I’ll never have enough money, so I might as well have fun now.” “My family deserves to have nice things.” “You show your love for others by buying them gifts.”

Spend some time examining your money beliefs and where you might have received these messages. Knowing what your money scripts are and where they came from can help loosen their grip on your life and enable you to make healthy financial choices. Money scripts get passed down from parent to child, so it is important to identify and change any problematic money beliefs or they will trickle down to our own children.

2. Stop buying on credit. In fact, leave your credit cards at home.

Don’t start a new year on the wrong financial foot by growing your debt several hundreds or thousands of dollars this holiday season. People spend up to 30 percent more when they use credit cards to make purchases. There is an emotional distancing that comes with a swipe of the credit card that doesn’t exist when we spend cash.

3. Make a plan.

Determine what you can spend before you shop. Make a list of people you will give gifts to and how much you will spend on each. Involve your children in the budgeting process for gifts for extended family members and friends. Then go to the bank and withdraw that amount in cash and put it in envelopes to use for all of your holiday purchases. The skills your teens will learn in budgeting for the holidays are the same skills they will need to manage their money throughout the year.

4. Get creative.

If you have a large family, draw names and buy for that person only. Set a price limit and stick to it. You may be surprised how relieved your family members are when they don’t have to buy multiple gifts for everyone. Also, remember the best gifts come from the heart. Encourage your family to add two or three items to their wish lists that don’t cost money. Toys are easily broken and quickly discarded, while memorable experiences can last forever. Whether or not your family is already financially burdened, set a reasonable spending limit to avoid the holiday debt hangover. When the toys are broken and you open your bills in January, you will be happy you did.

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Survey of the States

Students from states where a financial education course was required were more likely to display positive financial behaviors and dispositions

Explore the Survey of the States created by CEE. The online version takes users on a visual, interactive journey, walking them through the cost of financial illiteracy, the current state of financial and economic education, along with its benefits and the challenge of implementing it, and finally, how to take action. With links to CEE’s teacher tools like lesson plans, online games and state resources, the interactive Survey of the States does more than point out the problems: it also offers solutions.

The recent economic downturn has brought nationwide attention to the dangers of a financially illiterate society. The 2011 Survey shows that while there has clearly been progress since the first Survey in 1998, that over the last two years, the trend is slowing and in some cases moving backwards.

The survey can facilitate an important dialogue that must take place between those who recognize that this knowledge is critical for young people and the decision makers that can effect change.

Key Findings
The number of states that now require students to take an economics course as a high school graduation requirement increased from 21 in 2009 to 22 in 2011.

However, only 16 states require the testing of student knowledge in economics, 3 fewer than in 2009.

No improvement has been seen in the area of personal finance. The number of states that require students to take a personal finance course (or personal finance included in an economics course) as a high school graduation requirement remains at 13.

Only 2 more states now require that personal finance content standards be implemented, bringing the total to 36

Funding for the 2011 survey was provided by the Calvin K. Kazanjian Economics Foundation.

3 Tips to Help Parents Talk to Their Kids

1. Tell your teenagers to think before buying.

Advise them to take a few deep breaths and ask: Is this something I really need? How many times will I use this? Can I afford it? Determine if they are trying to fill an emotional need with the purchase. If you think this is the case, talk with them about what’s going on in their life. If they are purchasing to feel better about a bad situation or fill a void, brainstorm with them to identify other ways for dealing with their problems like going for a walk, taking a bike ride, watching a movie or talking to a friend.

2. Encourage your kids not to buy on impulse.

Ask them to put some time between the impulse to buy and their actual purchase. The old saying that “time heals” has merit in the world of personal finance. Sit down with them to talk about a spending plan and help them make sure they can afford it. Encourage your teen to wait a day or a week before making the purchase. It is amazing how frequently we think we “must have” something, only to see that it doesn’t matter to us tomorrow.

3. Model healthy financial behaviors.

Show your teens what it is like to save for a purchase. Decide on something you want to purchase and involve your teenagers in saving for it. For example, you may decide to save $100 a week—or a month — toward the purchase of a new television. Set the money aside in a jar, or note the savings on a ledger your teenagers can see. After all, if your teen only sees you buying without saving, what do you think they will learn?

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Helping Students Understand Money is an Investment in Everyone’s Future.

H&R Block Dollars & Sense has joined in partnership with the Council for Economic Education offer teachers free curriculum during the month of November. All teachers have free access to Gen i Revolution, an online personal finance game, and 650 teachers will receive Learning, Earning, and Investing for a New Generation companion resources. These tools serve to teach students critical money management skills in an intriguing way so they are prepared to open bank accounts, manage their credit and save for a rainy day.

Gen i Revolution is an interactive game created by the Council for Economic Education, allowing teens to compete online against fellow classmates and challenge themselves with 15 interactive money-smart missions. In these missions, students battle a lack of personal finance knowledge rapidly spreading among residents by answering questions and helping people right financial missteps. The movement leader, Monique, briefs players on missions and advises them on knowledgeable operatives from which to gather clues. Based on their detective work, students answer questions, guiding residents on a path to financial literacy, ultimately defeating the Murktide. Teachers can enroll their students and manage their progress through an online ID.

Coupled with the companion guide, Learning, Earning and Investing for a New Generation, students learn to master the concepts of investing, financial planning and the U.S. economy – money lessons they will bank on for a lifetime.

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Don’t Talk to Your Kids About Money

How Do You Talk To Your Kids About Money? Step 1: Don’t Talk!

You recognize the need for your adolescent to learn how to manage money and you are committed to tackling the job. So where do you start? If you want to see your teenager’s eyes glaze over, just sit them down and break into one of your lectures. You could give them some unsolicited advice: “You know what you need to do is…” Or if you want to initiate a yawn and a here-we-go-again-mumble, you can warn them about the dire consequences of financial ignorance “If you are not careful…” If you would rather watch them start nodding off you can start with: “When I was your age…”

While there is a time and place for lectures, advice giving, and warnings, studies have shown that these techniques are not very effective strategies for helping most teenagers learn or change their behaviors (and adults for that matter). As a matter of fact, unsolicited advice is most often met with resistance and a mountain of “yes, buts,” or perhaps even worse “okay” (seeming to comply but with no follow through). This is especially true with teenagers who are developmentally hardwired to question authority.

The ancient Greek philosopher Socrates must have arrived at this conclusion centuries ago. His method of teaching did not involve lecturing at his students. Rather, his technique was to ask them questions to initiate the learning process. The questions, of course, were strategic and designed to facilitate discovery. This method of teaching approaches the learner in a much different way. It has since been termed the Socratic Method, and is used by many effective teachers today. In terms of discussions around money, a great place to start is with The Million Dollar Question or with a question like: “How do you think wealthy people become rich?” This question will elicit your teenager’s core beliefs about money. Whether you are conscious of it or not, you have passed down some of your core money beliefs to your children through your words, your silence, your stories, your actions, and your non-actions. You may be surprised to hear some of your attitudes about money or those of your partner or family come spilling out. Follow-up clarification questions such as “So you believe that all rich people got that way by taking advantage of others?,” or “So most rich people got that way by winning the lottery?” will encourage deeper thought, self-reflection, and discovery.

So don’t talk to your kids about money–at least not right away. Instead, ask them to share with you what they already know. Hold off on giving advice and instructions, and just ask questions, listen, reflect back what you hear them saying, and ask for clarification. If you spend time listening, you are not only modeling good communication skills, which your teenagers may emulate someday, they will also be much more receptive to what you have to say. If you do a good enough job of listening, they may even begin to ask you for the information you wanted to give them in the first place. They may even surprise you with what they already know. So first, listen.

Helping Your Children Fail

You nurture, support, and educate them. You take them to the doctor and the dentist. You buy them clothes, video games, and sports equipment. You drive them to practice, you let them borrow your stuff and you don’t think twice about making sacrifices so you can give them the best experiences possible.

When they hurt, you hurt. When they win, you win. So why do you want to help them lose?

The fact is, we often learn more from losing than from winning. Some of our most valuable understandings and deepest insights are the result of analyzing and coming to terms with a bad decision. Research shows that millionaires experience approximately three major financial setbacks in their lives, while non-millionaires quit after just one. It is much easier to learn by experience than from instruction. Pain can be a powerful motivator if you see it as a message that things aren’t right, believe that you have the power to influence your situation, and are motivated to action. All of these mindsets can be demonstrated and taught to children so they understand how to dust off after failure and keep going.

So how do you help your children fail? The good news is that you won’t have to try too hard. Children tend to be impulsive when making financial decisions. Your job is to create a financial laboratory where they can experiment, make mistakes, and learn from them. This could involve:

Giving them an allowance and allowing them to run out of money and miss out on an important item or experience because they spent thoughtlessly or impulsively.

Having them pick $10,000 worth of stocks online and start tracking them. You can track your progress without actually purchasing the stocks. Watching the market move over a period of days, months and years can be quite revealing.

Loaning them money to make a big purchase or start a business – lawn moving for example – and charging them interest on the loan.

Whatever experiences you help structure, it is the period after the loss or disappointment that is most important. It is essential that you don’t bail them out or the lesson they will learn is “someone will fix it if I fail.” It is also critical that you do not make a financial failure a personal failure, but to examine it objectively and in the spirit of support and encouragement. Help them perform a financial audit where they can examine their decisions and the related emotions, and come up with strategies to do it differently next time. Helping your children fail financially can be the best lesson they ever learn. Better for them to lose early and lose small than to lose later and lose bigger.

3 Money Lessons Dads Should Share With Their Teens

As a dad, you’re a provider, teacher and coach. You look out for your kids, help them navigate the road of life and ultimately prepare them for a future in which they can take care of their own families. For parents of teens, part of preparing them for the future is being a financial mentor and making sure they are ready for the “real world” of personal finances. This Father’s Day, when you’re spending time with your teen, chat about how being financially responsible can benefit their future. To get you started, here are three quick money lessons to share.

1. Enjoy today but save for tomorrow.

In 2005, the average savings rate in America was the lowest it’s been since the Great Depression. While our savings rate is slowly increasing, it is still too low. As a result, the average American is not adequately prepared to buy a car, put a down payment on a home or pay for a vacation. Many Americans will need to delay retirement well into their 70s. To help your kids avoid the same mistakes, teach them how to save and spend. Assure them you don’t want to take away all the fun – having some spending money is key. Do ask them to save half of their summer earnings to teach them the concept of saving for the future. They’ll learn that adequate savings provides financial freedom and allows them to buy things they need and want without stress.

2. Work hard but don’t forget what’s important.

Most dads know work and money go hand in hand. However, many adults assume money brings happiness, which is not necessarily true. Money can provide financial stability and the opportunity to enjoy many things in life, but it isn’t everything. Research shows once a household achieves $75,000 in annual income, there is no correlation between money and happiness. Encourage your teens to achieve an adequate income, but not to sacrifice their health or time with family in pursuit of material things. Reinforce that money can enhance their lives when managed correctly, but it isn’t the sole key to happiness.

3. The Scout’s motto: Be prepared.

Dads want their children to be prepared for an emergency. They remind us to have a flashlight handy, make sure our spare tire has air and to take a jacket in case it gets chilly. Similarly, the financially wise father wants his teen to be prepared in the event of a financial emergency. This includes teaching teens to have an emergency fund to cover at least six months of living expenses. Talk to them about critical components of financial safety for young adults like having car, renters and health insurance. Talk to teens about the peace of mind that comes with being prepared for a financial emergency and help them determine ways they’ll begin to build their own financial safety net. Dads can show how much they care about their teens by talking to them about personal finance. Someday, they’ll thank you!

10 Steps to Increase Your Financial Fitness

Financial health goes beyond dollars and cents. It includes a healthy relationship with money, a lack of money anxiety and a sense of financial fulfillment. Follow these 10 steps to increase your financial fitness.

1. Be honest about where you are.

It’s human nature to avoid pain, but denying a problem will only make it worse. Statistics show that more than one-third of Americans purposely avoid thinking about their damaged financial lives. Until we get honest with ourselves, we are unlikely to improve our financial health. To become financially fit, it’s important to know things like:

  • Your credit score (what is it, what does it mean and how do you get it?)
  • How much you owe and to whom (are you paying rent, insurance, everyday expenses?)
  • How much you have in savings (are you spending every cent you have; how much should you be saving?)
  • How much you have saved for retirement or when to start a retirement account.
  • Where your investments are held and how they are allocated.

Take Dr. Brad’s research-based financial health test for a quick measure of your current financial health.

2. Know where you want to be.

Changing habits can be tough. To stay motivated, keep your eyes on the prize. What would a healthy financial life do for you? How would it make you feel? What would you have? Where would you go? Identify your goals around your career, education, retirement someday, travel, health and family. Where do you want to be in five years? In 10 years? The more specifically you identify what you want, the more energy you will unleash to get yourself there.

3. Beware of your thoughts.

Are you an over spender? Do you neglect saving? If you answered “yes,” you are an average American. Perhaps that helps explain why 80 percent of Americans say money is the No.1 source of stress in their lives. To change bad habits, it is often essential to identify the beliefs that underlie them. Our financial behaviors make sense when we understand our beliefs about money. These beliefs, called money scripts, are typically outside our conscious awareness, but they drive all our financial behaviors. Some problematic money scripts include: “more money or more things will make me happier,” “I can never have what I want, so I might as well get what I can when I can.” When we base our financial lives on erroneous or incomplete beliefs, we set ourselves up for failure.

4. Forgive yourself.

Our feelings and beliefs about money don’t develop in a vacuum. We are taught them or we arrive at them when trying to make sense of confusing situations. As children, we are prone to making incomplete conclusions. For example, if our family is rich and unhappy, we may conclude that money led to our unhappiness, when the discontentment could be better explained by other issues. As adults, we rarely return to our past, identify our money scripts, examine them or change them. As a result, their control over our financial lives can be insidious. So regardless of your current financial situation, have compassion for yourself. Most likely, your behavior toward money is a result of where you came from. The good news is, the more you know about money management the more you are empowered to change.

5. Commit to change (if you are ready).

Change takes time, energy and effort. To change, we must believe it is important to do so. To examine whether you’re ready to change, write down the pros and cons. What are the pros of staying where you are, such as continuing to buy what you want, travel or not have to think about finances (at least for a while)? What are the cons of continuing to do what you are doing, such as spending your money on entertainment instead of being able to pay your car insurance? Or getting into credit card debt so the $40 shirt you bought becomes an $80 shirt due to interest? You will commit to change only when your list of benefits outweighs your list of reasons to stay right where you are. Even if you are not ready to transform your financial life, consider taking step six anyway. When you are ready to commit to improving your financial fitness, you are well on your way.

6. Apply some “financial first aid.”

In health care, first aid is meant to prevent further harm and promote recovery. If someone is bleeding, first aid may involve applying pressure to the wound. Instead of losing blood, over spenders bleed money, and much of it is borrowed. Financial first aid involves putting a stop to over spending and oftentimes halting the use of credit cards. Shop with cash to help avoid impulse buying. It might seem like a small action, but it can be a giant leap toward financial fitness. Studies show we spend 30 percent less when we pay with cash. So take action now to stop the bleeding.

7. Make a plan.

To stay on top of our finances, we need a plan for spending, saving and giving. A spending plan allows for meeting financial obligations and needs while allowing for saving and giving. Your plan may include reducing spending in some areas while setting aside more money in others. Once your plan is in place, track it. You may find some checking and budgeting software helpful. You may choose to save 10-30 percent of your income. You may choose to set up direct deposits to your savings account to ensure you pay yourself first.

8. Take action.

It takes about 30 days of practice before a new behavior becomes a habit. With a plan in place, you can begin tracking your spending, finding ways to save money, and spending money on the things that matter most. Living a life in which your financial behaviors match your values and goals feels good. Being conscious and purposeful about spending can help us appreciate and enjoy life more.

9. Expect challenges.

It is important to know that you may slip back into old habits. For the most important changes, relapse is common and should be expected. The important thing is to not beat yourself up about it. Get back on track as soon as possible. See bumps along the way as learning experiences.

10. Ask for help.

The journey to financial health can be long. There will be setbacks along the way. If you find yourself repeating mistakes or having trouble following through on your plan, seek the help of a parent or another trusted adult.

Don’t Let Ignorance Stop You from Talking to Your Kids about Money

We can all agree that financial education is important for our children. Before they can drive, we require adolescents to take driver’s education courses, pass a written examination, eye test, and road test. However, they need no training to wield a credit card.

When your child goes to college she will be offered a host of free and tantalizing gifts– t-shirts, notebooks, and the like– and all she has to do is fill out a short application for a credit card. Within a matter of days this shiny piece of plastic will land in her hands, very likely without your knowledge. After all, she is trying on her independence and is not going to tell you everything. If you have not already taught her the basics of personal finance, including the healthy use of consumer credit, she may be headed for a hard lesson. In fact, many college students find themselves in trouble with credit card debt, often without their parents’ knowledge.

So how do you keep your children from driving their shiny new credit cards off a cliff? If you are like most Americans you may be hesitant to talk to you kids about money because you have had your own struggles with money. Don’t let ignorance or embarrassment stop you. If you have made financial mistakes in your own life, don’t let this stop you from equipping your children with what they need to do it right. After all, experience is the best teacher and your financial mistakes put you in good company. Most millionaires have had several major financial disasters before they succeeded. To start talking to your kids about money, all you need to know is a little more than they do. Then, you can stay one step ahead of your teenager by cramming before the next lesson. Remember, children learn most by what they see their parents do and not what they say. If your children see you in a search for financial knowledge yourself, it gives them the message that it is an important topic. On a more subtle level, it also shows them the importance of continued education and growth.