Say Goodbye to Living Paycheck to Paycheck: Creating the Roots

Say Goodbye to Living Paycheck to Paycheck Creating the Roots

This post is part of a series.  To start the series from the beginning, click here.  To browse through the series, click here.

The value of money is something so exciting to your young child.  The smallest amount of money seems so large and can be extremely motivating to them.  Around first grade or six years old, schools begin to teach students all about the value of money.  Children learn about pennies and nickels and dimes and quarters and all kinds of bills.  They also lean about dollar bills, face values, and how to add and subtract with all of their types of money. This new skill comes at a great time to begin teaching children how money is used in real life situations.

In order to create a life of financial stability, the school aged years are prime for teaching, modeling, and interacting with money. In the school ages years, children are very capable of understanding chores and allowances which can be used to show that we work to make money and then we have different options for what we do with the money. Each family should determine their own method for kids to earn money based on what fits best into their daily routines.

Once your family has put a system into effect for how their children will make money, the children need to be taught how to handle their money.  As adults, we all handle our money differently. Some people spend tomorrows money today by using credit, some spend only what they have but spend every penny each paycheck, and some save as much money as they can.  In order to create a lifestyle where living paycheck to paycheck isn’t the way, it is important to teach children how to save their money from the beginning.

To begin teaching saving to a child, you will need something to put the saved money into like a piggy bank or even a savings account, or both depending on the age of the child and how well they understand the value of money.

When the child gets money, let’s say from chores or an allowance, teach them to save by having them put a percentage of money each time into their savings. For example, you could give them $4 per week allowance and have them put $2 in savings and the other two they can spend or use to save up and spend at a later time.

Not only will this teach your child how to save up for something that they want, it will teach them how to save for a later date.   This concept is very important to learn at a young age because as an adult, we should each have a savings account for a rainy day.  For your children, I bet they will be very happy after saving a percentage of their money for years when they decide to buy a car or move out on their own.  Having taught your child to save their money from a very young age will give them a great head start in their young adult years.

Like what you’ve seen so far?
Join the mailing list to be the first to know when a new post is published!

Say Goodbye to Living Paycheck to Paycheck: Building the Foundation

Building the Foundation

This post is part of a series.  To start the series from the beginning, click here.  To browse through the series, click here.

Like most life skills, learning the value of a dollar is an important concept that if not taught at a young age is hard to grasp.  The best time to begin teaching this concept to your child is when they are able to comprehend what you are asking them to do and are able to do the task requested.

I know, you’re probably wondering where I’m going with this because the series is called “Say Goodbye to Living Paycheck to Paycheck” and of course, children this young do not even know what a paycheck is let alone what it means to live paycheck to paycheck.  Through my years teaching all ages and different tasks, I’ve found that I have best learned the topic at hand when I am teaching the topic to someone else.

Many times, as adults, we want to skip to the end solution.  So, instead of looking at what a dollar is, how much it’s worth, how many dollars you need to pay off your credit card and how much work is required to reach that goal, we often look straight to the end goal by trying to find money really quickly by being dishonest or giving up because the goal seems unattainable.  It is important to always take a step back and analyze.

So, from the beginning.  Your child is starting to understand your requests and act them out.  This is a very exciting time for you as a parent and for your child!  I bet you’ve started with teaching your child how to clean up their toys by taking them from the floor and putting them into their toy chest.

So now that your child knows how to do this simple task, why not teach them another like putting food in the dog bowl, watering the flowers, or dusting their bedroom furniture.  Whatever the task is, you need to decide ‘Is this a task something that is expected or is this something extra’.

Here’s where learning the value of the dollar comes in.  If this task is something extra that is not required of your child but they could do it on occasion when they want to, then this task is a great opportunity to teach your child about money.  If you had said that the task is something expected, I suggest not using the task as a way to learn money because it could teach your child that anytime they do what they are supposed to be doing they will get money.  Instead, use something else that’s interactive like maybe playing a learning game together after an expected chore is completed.

Since your child is young, most likely either 2 or 3 years old, you do not use much money to teach the concept.  Let’s say if your child decides to feed the dog, they get a quarter.  They can then put this quarter in their brand new piggy bank.  (Or you can use any type of token or counting toy to avoid the choking risk.  Granted, stay with your child to teach the whole lesson and the quarter will be in the piggy bank long before your child decides it’s best as an afternoon snack.

Here comes the important part.  Your child will need to have a reason to connect with the quarter.  This is something that can be personalized from one family to another, but one way to do this is by explaining to your child that when they get four quarters, they can go to the dollar store and pick out any toy.  Each time they get a new quarter, take out all of the quarters, count the quarters, and explain again that when they get four quarters they can get something from the dollar store.

Of course, nobody wants to be going to the dollar store every other day, so make limits as you see fit.  Maybe you go to the dollar store every Monday and your child can bring their money with them.  Or maybe once they get to 10 quarters you go to the dollar store.  Of course, 10 isn’t easily divisible in dollar terms but the number is great for learning how to count.

As your child grows and learns, you can do fun things like creating a chart to show different values for different tasks.  You can also begin to teach them money skills that they would otherwise be learning in the first grade by simply explaining each step as you go.

Money Chart

Free Download of the Editable Money Chart

Ex:  This is a quarter.  When you have four quarters *Show four quarters and count, 1, 2, 3, 4*, you can get a dollar *Show a dollar bill* and trade the quarters for the bill.

This concept will be harder to understand but it will begin to teach your child the worth of money and will save you from having to get a roll of quarters from the bank.

Remember, the goal here is to begin to learn the value of money, not to complete the tasks to perfection.  Of course, with the dexterity of a toddler, it is likely that dusting will not be effective.  But, the takeaway is that they do the task and get the money which they have to save to get something that they want.

Happy learning!

Like what you’ve seen so far?
Join the mailing list to be the first to know when a new post is published!

Say Goodbye to Living Paycheck to Paycheck: The Basics of Expenses

The Basics of Expenses

 

This post is part of a series.  To start the series from the beginning, click here.  To browse through the series, click here.

Next, we look at are your expenses.  An expense is anything that costs you money during the month.  It can be anything from your phone bill, to rent, to that ice cream cone you just had to have.

It is always a good idea to keep a list of all of your regular expenses and when they need to be paid each month.  Try creating your list starting with the items that get paid first in the month.
 
For example:
Rent – $500 – 1st of the month
Electricity – $75 – 10st of the month
Water – $50 – 15th of the month
Phone – $50 – 15th of the month
Credit Card – $200 – 20th of the month
Internet – $50 – 20th of the month
Total monthly expenses: $925.00

Expenses can get complicated when you take into account any late fees, bank fees, interest, etc.  For now, we will keep it simple.

Now that we know our income and expenses we can figure out two things:

  1. Is it possible to pay all of our bills?
  2. How to make it happen.

For the first question, the employee plans to work her full 80 hours during the next two pay cycles.

$9.37/hour * 80 hours = $749.60 Gross pay = $599.68 Approximate net pay
 
$599.68 per pay cycle * 2 pay cycles = $1199.36
 
Our employee’s income for the next two pay cycles will be around $1200.00.  Since the employee’s expenses will be around $925.00, it looks like yes, it is possible to pay all of the bills.  Income from one month will more than likely need to be saved for the following month.

For the second question, timing is everything.  Let’s say that the employee just got paid on the 30th of the previous month and is expected to get her following paychecks on the 9th and 23rd.  (I mention the previous paycheck because it will be used to pay the rent for this month and there are no other expenses scheduled from the 30th through the 1st.)

Let’s take both the income and expenses and add them into a table with a running total line.  The running total is calculated by taking the previous total and adding the next paycheck or subtracting the next expense.

Description Date Amount Running Total
Paycheck 30th $562.20 $562.20
Rent 1st $500 $62.20
Paycheck 9th $600 $662.20
Electricity 10th $75 $587.20
Water 15th $50 $537.20
Phone 15th $50 $487.20
Credit Card 20th $200 $287.20
Paycheck 23rd $600 $887.20
Internet 20th $50 $837.20

Let’s take this one step further.  The paycheck following the 23rd is scheduled for the 6th of the following month.  Let’s extend this table to make sure there will be enough money to cover all expenses until the next paycheck by repeating our expenses.

Description Date Amount Running Total
$837.20
Rent 1st $500 $337.20
Paycheck 6th $600 $662.20

Everything looks good.  It is estimated that the employee will still have $337.20 after rent and before the next paycheck.

Note: You can make a table like the one above to organize your expenses.

Like what you’ve seen so far?
Join the mailing list to be the first to know when a new post is published!