Today I thought that I would take a few minutes and talk about the use of insurance to fund you children’s education, and why would you do that. There a several reasons but lets get the touchy one out of the way first, Life Insurance is not for the dead it is left for the living and I know that when my children grew up I did not have any life insurance on them and never wanted to think about what would my wife and myself do it one of the kids died.

I did  have a young girl that I took to Daddy daughter dates, taught her to drive, and she showed up to our home every Friday night to babysitter our kids. I was her surrogate dad because her father had died one day at work.

 One day she was at girls camp by the river where she went to get water, she slipped in the water it was icy and swift  there was a waterfall just down stream and Shirley died. There was no money to take care of funeral  arrangements so a collection was taken. No plan was made for her death or education.

If Shirley had not slipped in the river and died she would have wanted to get and education but she did not have the grades or physical skills to get scholarships, and her mom had no money.

An inexpensive answer to this would of been a cash value life insurance policy

The reason is self explanatory for death but why for education? The government has a IRS code called 529 and it is a plan where we can put money away for our family to pay for college education. The good points of the 529 is that it is and grows tax deductible, the problem is that if you use it it needs to be with an accredited school, what happens if your child wants to go to a trade school and you have the money in the 529 but it is not accredited you can not use it with out being taxed, oops.

If you use cash value life insurance and start at a very young age of investing your children could have a large college tuition fund by the time they go to school, the money in the insurance policy grows tax free and when you borrow from it the money is tax free as long as the policy is in force. When the kids graduate and are adults they can keep the insurance coverage on themselves and protect their family from having funeral bills when they pass away.

This is not really complicated but their is more to it. I suggest that if you have children and you are concerned about your children’s wealth it is important for you to talk to a financial advisor who has an insurance license or work with an insurance agent  and ask about the benefits I have addressed in this article.

Please do not take this as legal advice you should check with an attorney and your accountant for any changes in the laws.

It is Sunday morning and it is Mothers Day, I had to leave home and come to my office because our internet was not working today.

Scince it is Mothers Day and I would like to spend it with my wife and see my mom I would just like to tell all the Mothers to have a wonderfull Mothers Day.

I saw this motivational video and had to ask myself, will our children finish strong? Will you? How will you keep getting up?

Since I made the statement of I am going to make this so children can understand it I need to Qualify just a bit I teach this to Children 14 years old and above. I usually have a diagram of a bucket to demonstrate putting the money in, so here goes. We will be doing this for a 6 month period of time.

Dollar cost averaging done easy, let’s say you have a favorite soda pop and you will spend $100.00 a month to buy stock in the soda company. The soda stock is selling for $10.00 a share and you have $100.00 to buy the stocks how many shares can you buy. That’s right 10 shares the 1^st month.

The2nd month the stock is selling for $5.00 a share how many shares can you buy that’s right 20 shares.

 The 3^rd month the stock is selling for $1.00 a share how many shares can you buy that’s right 100 shares.

The 4^th month the stock is still selling for $1.00 a share and you  buy another 100 shares.

The 5^th month the stock goes back to $5.00 a share and you buy 20 more shares.

The 6^th month the stock goes back to $10.00 a share and you buy 10 shares.

Over the six months you have spent $600.00 on soda stock and you have bought;

10 shares

20 shares

100 shares

100 shares

20 shares

10 shares

Total amount of shares is 260

Now that you have 260 shares and they are worth $10.00 a share you now have $2600.00 worth of stock.

You see when you go from $10.00 to $1.00 it is a 90% loss but when you go from $1.00 to $10.00 it is a 1000% gain.

Now hopefully I have explained Dollar cost Averaging so children can understand it.

Please help me with your comments to make sure I did a good job. Thanks

I was eight years old when my dad who was a Dentist decided that by brother and I were old enough to be the custodians at his office. With carpeted offices and saliva vacuums no big deal right?

When I was eight the dental office had asbestos tile floors and spit sinks, our job every night was to go in the office and empty garbage’s, clean bathrooms, sweep floors, clean the chrome on the base of the dental chairs and clean the spit sinks along with making sure the outside was swept and weeds pulled.

 On Wed nights we had to buff the floors with a commercial size buffer and make sure you could see the shining waves in the floor wax. We had to be exact or in the morning dad would call and get us back to the office before school to get it done right.

Saturdays were the best we would take all the furniture out and strip the wax off the floor and re wax the complete office.

Dad was a big spender he paid us each $12.00 a month.  The spending money that my brother and I earned over the years taught us how to conserve our money. At 8 and 9 years old we had credit where we bought a TV on payments and a reel to reel tape recorder.

When I was young I had friends who worked on Ranches, and Farms every morning and evening they had chores to do. They had to feed the animals or clean stalls; milk cows all kinds of fun things.

What was your first paying job?

How old were you?

What did you learn?

If you have children what are you teaching them about work and money?

A number of comments asked where did the extra money come from,to be able to do debt stacking.

When I sit down with clients in their homes and go over their budget, they usually say they are paying extra on each card, because they know, they need and want to pay their ballances down.

My question to them is do you always add the extra payment or just every once in a while?

The numbers I used in the previous post are the most common numbers that my client would give me, who paid extra each month, they were the clients that were trying to get the credit balance down but nothing was happening. They were frustrated. 

That is why debit stacking is so powerful it is not costing you any more, than you are already putting out but it pays the balances off faster and gets you out of debt.

The client who we saved all the interest and had her out of debt quickly, she after 6 months of following the program decided to buy her son a Harley and ended up filling BK. She could not say no to charging and did not have the discipline to stay with the program.

As some have commented it is a discipline and a behavior and I can teach all the best ways of getting out of debt but if you continue to charge, or cut down how much you are paying you lose.

I have a friend who would love to do debt stacking, his wife grew up with parents who always live off the credit cards and she is not willing to change, he is always worried about making minimum payments on lots of cards. Guess what they are teaching their children.

One of the reasons I started Children’s Wealth, is because of all the people who I have helped but did not have the learned disciplines and behaviors needed to deal with money. I believe that we (I) owe our children a fighting chance with learning how money works. If we teach those disciplines and behaviors now along with their parents we are on the right track.

Whenever I  do a class I always invite the parents to join, they are given the same work book as the kids so when they go home they do not have to ask the kids what was that we were taught.

Over the years I have taught families the concept of debt stacking. One of my clients was $200,000 in credit card debt owed $100,000 on vehicles’ and had a mortgage of around $300,000. We put the client in a product that took care of debt stacking for them. The results were we got them out of debt including paying off their home in just over 7 years, and saved them $595,ooo.oo in interest charges.

How to debt stack.

Let’s act like we all live in California and we are all in debt. The numbers I will be using were fairly common when I worked with clients. Debt stacking is taught in different ways but I prefer to start with the lowest balance, pay it off and go to the next.

                        Starting Balance             Monthly Pmt                     Actual Pmt                Extra Pmt

Home                  $200,000                   1,200 @6% int                     1200.00                        0

Car                           40,000                      607 @2.99 int 6 yrs            607.00                         0

Car                            15,000                       312 @0% int 6 yrs              312.00                          0

Discover card          9,500                         190                                        300.00                     110.00

Visa                            7,000                         140                                       200.00                        60.00

Master card              5,000                         100                                        150.00                         50.00

Master card               2,500                           50                                        100.00                         50.00

Home Depot              2,000                          40                                         100.00                         60.00

________________________________________________________________________

                              $281,000.00                  $2,639.00                          $2969.00                    $330.00

Let’s start off by adding the $330 extra payment just to the $40 Home Depot and pay $370 to the Home Depot.  $2,000 divided by  $370 = 5.4 months and Home Depot is paid off.

Now take the $370 and the $50 payments to Master Card payment now pay $420.00.

Divide $2,500 by $420 = 5.95 months and the first Master card is paid off.

Following these same steps you can be completely out of debt in approximately 12 years.

Debts stacking only work if you pay extra each month on your accounts and continually do it. Some people teach you to take the largest balance and highest interest and pay it off first. That works also but we like to see results so paying the lower balance first gets us to feel that we have accomplished something.

While you are debt stacking the interest still is added and with what I have shown you it does not take that into the equation, it might take a few months longer to pay things off.

If you charge more on your cards or buy a new car or home, it can be added in but it will lengthen the time until you are debt free.

1. New laws are out and the credit card companies are required to let you know how long it takes to pay off your card when you make the minimum payment. Remember they are telling you how long for that statement you get each month. Each time you use your credit card the minimum payment goes up and the time of pay off lengthens.

2. Rob brought the point that a credit card is like the casinos giving you chips instead of cash. Why is that? People do not look at the chips and see real money even though it is. It works the same with credit cards.

3. Soyna stated that when she took her step kids shopping and said we are done the kids said there is a ATM let us go and get some more money. Kids think that an ATM is free money.

4. Lisa stated that she had friends that were in debt $10,000 to $30,000 in credit card debt. In Northern California 5 years ago the average person owed $28,000 in credit card debt.

I would have not believed it if I had not sat down with many many couples and the number was dead on. On my next post I will share with you some of the ways to get out of credit card debt and even paying off your home if you want to. That is another post.

4. Robert stated that credit cards are for convenience.

 That is how they are supposed to be used, but we are I want it now society. I have notice that lay away is coming back. Lay away for you younger ones is you go to the store and pick out an item you want then you make payments on it until it is paid for then you get to take it home.

When we finished dinner the hostess came by with our bill, it was $82.00 which was not bad we had dinner, entertainment and good company. I pulled out my wallet and gave her my credit card, when she returned with the receipt I added a tip of $15.00, for the evening it was $97.00.

What is my point.

My point is not to tell you about dinner or even how much it cost, my point is that I put the meal on a Credit Card.

That increased my debt on that credit card. I allways pay off my credit card balances each month, but not everybody does that.

So what I put the meal on a credit card, every one does that. Yes the do, that is not the problem, the problem comes in when you get the credit card bill and it says minimum payment of $20.00 and that’s all you pay.

Wrong

If you do not pay the full amount you have finance charges, they add up fast.

You continue to pay the minimum payment  and you are paying for that meal for months and also have paid as much as double for it. The meal did not cost $97.00 it cost a whole lot more than that.

Where I really want to go with this is how the fast food companies accept  credit cards at the window and how people charge their hamburger, taco, or what ever you get on the card. If our children get a credit card in High School and charge their lunch and are not taught how important it is to only charge what you can pay off each month. Then their is no such thing a Childrenswealth but Childrensdebt and that is a whole different subject.

My question for you is how and what are you teaching your children about the use of credit cards, do you pay the minimum or do you pay them off?  Are you in debit with your credit cards? How can you use this article as a lesson for you and your children, about credit card use and debt?