Category Archives: Kids

Skipping the Inheritance, Creating Income Streams For My Kids

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Money Smart Kid

Learning Finances

Creating An Income Stream

Life is complex and we never know what will happen from one day to the next.  So I thought a long time ago that instead of saving money for a future inheritance for my kids, I would create them an income stream and educate them on how to keep it flowing.

The income stream that I create won’t make them rich unless they contribute to it and make an effort to manage it wisely.  I know the value in having a person hustle to make a living and challenge themselves.  Just giving money to your kids or an income stream in my case, could limit them in their efforts to make money in the future.  Kids need to learn what it takes to get ahead, and if money is just given to them that defeats the lesson.  Besides money earned is much more rewarding than money received by other means.

 

The First Money Stream

At this early stage, the income stream I created for them is basically of the Stock Appreciation and Dividends type.  It has done well considering how little I contributed to it and the dramatic volatility in the stock market, but since this isn’t money needed to survive and kind of hidden from view, I can let all the chips ride or wait out downturns with no effect whatsoever!  My kids don’t even know that they have this money, and I don’t plan on telling the until them are 21.

After investing in more risky stocks and basically breaking even, I decided that the extra risk isn’t necessary for them.  After all, they won’t need the money until they are adults.  So I’m now investing in energy stocks and low beta stocks that have a decent dividend yield.  It’s a delicate balance though, I don’t want the kiddie  taxes kicking in, so I don’t want the dividends total to be over $900 a year.

Actually up to $1,800 wouldn’t be too bad either, my kids don’t work, so the additional $900 above the first $900 is only taxes at 5% (so far).

 

Why Create Income Streams?

Uncertainty!  Who knows what tomorrow will bring, so why not create a base to build upon?  This income stream won’t make them financial independent from a job or entrepreneurial pursuit.  But it will teach them about investment and put a little spare change in their pocket when they are an adult (if they want to use the stream for that purpose).

I’m actually hoping that they continue to build on the small base that I have created for them.  Hopefully they can become wealthy and financial independent with some smart, hard work on their parts!

-MR

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SAHM versus Daycare

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I recently posted an article called “Why We Didn’t Buy The Most House We Could Afford ” in which I stated that the real reason we went this route was so that we wouldn’t be house rich and cash poor.  As an example, I stated that one of the primary reasons that we went this route was so that my wife could be a SAHM (Stay at Home Mom).  This is something that she wanted to do, and luckily, we were in a position to do it.

Interestingly, most of the comments were steered toward the example (my wife being a SAHM) instead of the real reason “being house rich and cash poor” part.  So with this article, I decided to step out of my warm fuzzy financial realm and think a bit further about the Daycare option versus the SAHM option.

Let me say that I’ve just deleted 500 words on the 2 options, and now I’m starting over again.  Why?  Because of the variability within each of the 2 options!  There are both bad SAHMs and bad Daycare facilities and great SAHM and decent Daycare facilities.  For each case, it really does depend on the SAHM and the Daycare options, parameters and individual variables…

So instead I decided to talk about what my wife did…

First, my wife breast-fed both of our kids.  This was advantageous from both a cost and health perspective.  For a great writeup on the benefits both from a health and cost perspective, check out this article –> (How Much Money Can You Save By Breastfeeding? ).  If you read that article, breastfeeding/breast milk is a superior option.

Before my kids started school, I was always surprised when coming home to see what the day’s project was, sometimes it be playdoh creations, paintings, or whatever the latest bug that were caught for analysis.

My kids have been involved with swimming lessons, soccer, gymnastics,, t-ball, baseball, basketball, storytime at the library, lego club, science club, girl scouts, etc… ever since they were practically old enough to walk.

Both of my kids could read and do basic math before the started school, and both currently (although my daughter didn’t at first) enjoy school very much.

I’m just touching the tip of the iceberg on why being a SAHM for my wife was a better option for us.

I have to admit, I was on the fence about having my wife be a SAHM.  She made good money as an Accountant, and after looking at a few online calculators, we would be quite a bit more wealthy (although we are still above average for our income class).

So, in the end, I have to go with a Charlie Brown answer and say that it really does depend on the parent when deciding to go either the SAHM or Daycare route for anyone else other than my wife.  But I can definitely say that for our kids, the SAHM route was the best for us…

I admit it really doesn’t matter whether a child is raised during the workdays by a SAHM or a Daycare facility, at least if the parent isn’t totally passionate about the task of being a SAHM to begin with.  After all, I’m not a SAHM child and look how wonderful I turned out (Ack).

Cat

I'm Okay

 

Care to share?  Please add to the conversation, I’d really like to hear your thoughts and experiences!

-MR

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Enjoy Time With Your Kids

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Do you take advantage of situations to enjoy time with your kids?

Father and Son

Hanging with my Son

Every Tuesday, my daughter has gymnastic classes, where my wife picks up my daughter right when school lets out and drives her to a different city for her class.  While my wife is going through this routine, my son rides the bus home, while I race from work to beat him to the house.

Once my son arrives home, we originally would wait until my wife called to determine what to do about dinner.  My daughter’s class would not let out until 6:30pm.  So, during the 2 1/2 hour that my son and I would be at home alone together, he would do his homework.  If he didn’t have any homework, he would veg out watching TV, or occasionally we would play video games (this is of course cool too).  This was our routine for a few weeks…

In the past, I would enjoy time with my kids by taking them out for special occasions.  For example, my daughter and I would occasionally have a Daddy and Daughter Day

Then recently, it hit me as I thought to myself: “Why am I letting this alone time with my son go to waste?“.  So last week, we went up to Toys-r-us to check out bikes, then we went out to eat at a Chinese restaurant.

Ironically, earlier I had decided to create a spending budget where I would make sure I spend money on things for myself.  While I missed my goal a little bit with this activity (since it’s for my son too) it’s close enough to my initial goal.  Plus, it will enable us to bond more closely and do some cool things in the process!

Some of my favorite memories of my grandfather were the times when only he and I would go to some of his “Greasy Spoon” restaurants (as my grandmother would call them), and just talk and hang out.   Back then, I was my son’s age (or perhaps a year younger), and I still fondly remember those times together.

So anyhow, I determined that this will be a great way to enjoy time with my son… at least until something disrupts this pattern.

So what did we do today?

Since last week we went to my favorite Chinese restaurant, I let my son choose the restaurant.  The restaurant he picked: “Steak and Shake”, is a cool hamburger joint that’s actually tries to look like one of those “Greasy Spoon” type places that my grandfather would take me to.  How’s that for an irony?

After our quick meal, I know we still had time to burn, so we went to Best Buy, but just to see what is new and exciting…  While there we looked at Apple iPhones, android phone, Apple iPad, laptops, TVs and of course Nintendo DS games.  The 3D TVs were much cooler than either of us expected.  We also learned that the 3D TV can be switch to a 2D mode (I think they called it that) so the TV was just like any regular HDTV.  The iPads were very cool, much lighter than I imagined!

All in all we had a great time, and it was a great “Enjoy Time with your Kids” moment!

If you have kids, do you slice out time to “Enjoy Time With Your Kids” too?  We had a great day and will be doing similar activities every Tuesday from now on…

-MR

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Paying A Kid’s Allowance With Dividends From Stocks

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First, I made a mistake!  I now wish I would have put the money I’ve been saving for my kids into a stocks that yield a dividend instead of a UMGA account for them once they turn 21! 

Then continue to invest money into a dividend stock ($125 a month) or dividend paying mutual fund, while using the dividend to pay for my kid’s allowances!  See the crude table I created below:
Dividend Pay % 4.00%






Weekly
Age
 Contribution Dividend Total Savings
Allowance
1 1500 $30.00 $1,560.00
$1.15
2 1500 $92.40 $3,122.40
$1.20
3 1500 $154.90 $4,747.30
$2.40
4 1500 $219.89 $6,437.19
$3.65
5 1500 $287.49 $8,194.68
$4.95
6 1500 $357.79 $10,022.46
$6.30
7 1500 $430.90 $11,923.36
$7.71
8 1500 $506.93 $13,900.30
$9.17
9 1500 $586.01 $15,956.31
$10.69
10 1500 $668.25 $18,094.56
$12.27

The advantages of such a system would be as follows:

  • It could be used as a stealth emergency fund(s).  So if I were to lose my job, we would still be able to eat…
  • I would still have control over the money instead of my kids once they become the age 21 (or 18 depending on the state), like they do with their UGMA accounts.
  • Someday, when my kids are  looking to buy a house, I could give the money to them for help with the down payment.
  • Or I could use the money to help pay for college costs.
  • I could even be cruel and decided to keep the money for myself.  Look out Hawaii, here I come!!!

The points above are excellent reasons why just buying stock with dividend in my own name is better than their names!

After some reasonable success with my Lunch Experiment, I’ve been wanting to create new stock dividend fund anyway!

The key to such a “Kid’s Allowance” stock dividend fund would be to start saving for the fund very early.  Perhaps even before the child is born!  And of course to continue to keep putting money into the investment each year!

What say you?  If you were newly married, would you consider creating such a fund now?  Perhaps buying a great monthly dividend stock like Realty One “O”…

-MR