How to Teach Kids About Money

Teaching Children About Personal Finances

First Published: ADawnJournal.com February 16, 2010

When it comes to teaching children about money and personal finances, we all seem to tumble and often it seems like a taboo. Here are some ideas that will help you teach your kids how to become financially responsible and successful in their adult lives.

You should start teaching your children the value of money at a young age. Explain to them the difference between needs and wants and tell them that money does not grow on trees. Money comes from hard work and each of us has responsibilities to our family, community, and the world.

Do not pay kids a straight allowance without guiding them towards what to do with it properly. When you give them an allowance, break it down into categories such as 10% or 15% should go to their savings account, and what other percentages that should be spent to pay for their books, activities, lunch, and so on.

Do not pay kids to do regular household chores that they would normally do. Explain to them what regular chores they are required to do and what chores can be considered special projects they can get paid for – if they are able to complete it successfully. These chores are outside regular ones and you would hire someone else to do it normally. Examples are: mowing the lawn, cleaning the backyard, and so on.

Once kids have a fair idea of what money is, start teaching them how a bank works, what a credit card is and why it charges interest, what a budget is and why it is important. The age range to discuss this would be 7 – 10.

Once kids start earning money, ask them to save 15 – 20 %. Explain to them that it is very important to spend less than what they earn and to save 15 – 20% continuously as they continue working into their adulthood. If they can follow this simple rule, they will be very rich one day.

It’s a very good idea to encourage kids to pursue entrepreneurial and marketable skills. Discuss with your kids what it means to be an entrepreneur and encourage them to use their creativity to find money making ideas or to open a business kids can operate in the surrounding neighbourhoods. Also, explain to them how some skills can pay off for their lifetime and it is worth learning these skills at an early age. Examples are: writing stories, setting up online blog and make money from it, learning graphics designing, learning how to repair a bike, learning how to paint, how to fix a computer, and so on. Don’t pressure kids to learn what you think will be in demand; rather, let them find the stuff they are interested in and wanting to learn.

Explain to your kids that education is very important. Even if they start making tons of money with their business or entrepreneurial skills, it is important to have a 4-year degree. Encourage them to pay their tuition with their own money – as much as possible. This will make them understand the value of each dollar and will teach them to appreciate what they have.

Giving is very important. Teach kids the joy of giving. Explain to them that we live on a small planet called “Earth” and not everyone is as fortunate as we are. We all can help those who need it most by donating, participating in voluntary works, helping charity organizations, and opening ourselves to build a better world.

Teaching kids about money is one of the best things you can ever give to your kids. It will build a solid financial roadmap for them to follow and will help them to secure a better financial future for their lifetime.

A Brief History of An Emerging Giant: China

China: An Emerging Giant

First Published: February 24, 2010 ADawnJournal.com

Many people call China an emerging country that is becoming one of the most powerful on Earth, but it is very important to remember that China is not new, nor newly powerful. In fact, China is one of the oldest civilizations on Earth. For the past 6,000 years, China has been a constant power, and the only country to last this long. For more than 4,000 years, the country used a political system that was based on hereditary monarchies, but that changed in 1911 when the Republic of China was founded. This caused a great deal of problems and the country erupted into civil war. By the 1940s, the country was in shambles and taken over by the Japanese. However, in 1949 the country staged its “Glorious Revolution” and the Republic of China was pushed out of the country so that the communist party could take power. The country is now called The People’s Republic of China.

What is amazing about the country is that while it is communist, in 1978 it introduced a market-based economy and that allowed the country to become the fifth fastest growing economy on Earth and the fastest growing of the top 20 economies in the world. In addition, China exports more goods than any other country and it imports the third most goods.

For most of the 20th century, China was thought of as a place for the poor, with many poor conditions, but the country has worked very hard to reduce its poverty. While the country had a poverty rate of 53 percent in 1981, the industrialization of the country helped to build a large middle class, and the poverty level is now down to eight percent. That is a drop of over 40 percent in only 29 years.

China has also shown itself to be forward thinking in many ways. The country, widely known for its environmental problems, is now becoming a world leader in renewable energy. The country also implemented a one-child policy to stop a rapidly increasing birth rate, well before high populations around the world were even though of as a problem. While the country still has problems with freedom of the press and human rights, it is rapidly changing. It is currently the third largest economy on Earth and is a permanent member of the United Nations Security Council. The country is also a member of the G-20, the World Trade Organization, the Shanghai Cooperation Organization and one of the few countries that have nuclear weapons. While China does have the largest standing army on Earth and the second-largest defence budget after the United States, it has not shown itself as one looking for war.

Many have said that the 21st century is the century for China and they may be right. The 20th century was the American century, the 19th century was the British century, it is time for a new giant and that giant is most likely going to be the country that has existed for 6,000 years and may exist for many more to come.

Mortgage Insurance-Always Read The Small Print

Mortgage Insurance Terms and Conditions

First Published: ADawnJournal.com February 28, 2010

Borrowing to pay for a house is something that can raise the hairs on the back of anyone’s neck. With a likely 25+ years’ term on the loan, there is plenty of scope for anything to go wrong and for the mortgage to end up posing you some real problems. Yet people keep doing it because, short of having substantial savings or a large windfall, there is no other way for most of us to own our own home – even if it belongs at least partly to the bank for the first quarter of a century. At the point where the mortgage is paid off in full, that house is 100% yours – something which a lot of people consider one of their proudest moments.

The twenty five years (or more) between taking out the loan and paying it off, though, is undoubtedly a long time. In that time any number of things can happen, which is why most mortgages come with an insurance package on top of the other options. Insurance works the same on a mortgage as it does with most other personal insurance packages. If death, illness or unemployment leave you struggling to pay off the mortgage, the insurance is there for the purposes of paying off the loan (or meeting monthly payments for a period) and freeing you from the financial burden on top of an already undesirable situation. Depending on the nature of the insurance and the contents of the terms and conditions, you could find that the mortgage is a god-send. The key matter as far as this goes is liability.

There are probably no insurance packages available in the world today that do not come with a list of terms and conditions that apply caveats to the insurance you are offered. If you claim on the insurance, it will pay out on the condition that none of the “small print” terms and conditions are violated. Your insurance package is likely to pay out if you can prove that you could not reasonably have foreseen the set of circumstances that necessitate the claim, and that it wasn’t your fault. In case of death, the insurance company may well ask for a medical report. Cases of suicide, or death from a long standing condition that the mortgage holder kept to themselves, can invalidate the insurance.

If health problems make it difficult or impossible for you to bring in enough money to meet the mortgage payments, it is possible that the insurance will come to your aid. Again, though, it is essential that you read the small print because if you suffered from this condition before you took out the insurance, the policy will not pay out in most cases.

Unemployment is another common reason for claiming on mortgage insurance, but this is perhaps the most laden with stipulations. Did you resign from your job? Insurance won’t cover you. Did you get fired for performance reasons? No cover there either. Were you sacked as a result of participation in industrial action? You’re not covered. The list of reasons for unemployment which actually do qualify is shorter than those which do not. If the insurance company judges you to be liable for the situation that has left you in this mess, they will not pay.

What Is Asset Allocation?

Asset Allocation, Diversification, and Your Portfolio

First Published: ADawnJournal.com March 3, 2010

Asset allocation is an investment strategy which simply entails allocating your assets (your investment portfolio) among different categories of investments, such as stocks, bonds, money market funds, cash etc. Asset allocation helps to minimize risks and maximize gains because it diversifies your portfolio among various types of investment or investment products instead of keeping them in one place.

What Types of Asset Allocation Will Work Best For Me?

Although there are many rules of thumb regarding asset allocation, no one can tell you exactly which one is right or which one is wrong for you – as this is a very personal matter which largely depends on various factors as described below:

·   Time Horizon: Time horizon is how much time you have ahead of you to invest in reaching your financial goals. An investor with a longer time horizon has time on his side and will be able to choose volatile or riskier products for maximum returns – because if markets go down, this investor can wait to ride out the volatility. On the other hand, an investor with shorter time horizon will not be able to afford risky product, as he will not have the luxury to wait for the market to go up if he falls into financial meltdown.

·   Risk Tolerance: Risk tolerance is your ability to take risks for better returns. In the investment world, risk and reward are inextricably entwined. If you are young (like in your 20s or 30s), you may not care that much about losing 35% of your value, as you know you have a long way to go. But when you are in your 40s or 50s, with kids’ education and retirement in mind, a 20% drop in your portfolio may be enough to lose sleep at night.

·   Investing Is An Ongoing Learning Process: In my book Invest Now, I have mentioned that investment is nothing but a discipline, and it has to be orchestrated with great passion and care. Investment is not like going to the shopping mall and buying a few things impulsively – it is a lifelong learning process. Asset allocation or any other investment ideas are not set in stone and these will change as time changes. Always upgrade yourself with financial changes in the broad global perspective and you will have to change your investment strategies to bridge the gap between the present and the future.

·   Individuality Counts: Although you will find there are many rules of thumb or pre-made portfolios when it comes to asset allocation, there is no single allocation or portfolio available that will be right for everyone. Everyone is different and so should be their asset allocation. The onus is on you to find out the best asset allocation that suits your needs.

What Are Some Major Asset Categories?

These days, a wide array of investment products exist to give you a wide range of asset allocation with a broad diversification. However, there are only three major asset categories I will mention here:

·   Equities or Stocks: The word “stock” is interchangeable with “share,” “equity,” “security” and so on. Stocks represent ownership in a company and historically offer the greatest risk and highest returns among other asset groups mentioned here. Stocks should not be used as a short term investment as it can be very volatile to hold for a short period of time.

·   Fixed Income Investments or Bonds: Some other fixed income investment products are government savings bonds, bond mutual funds, etc. These types of products are less volatile than equities and offer modest returns as well. Fixed income products can offer steady flow of income – depending on its objective.

·   Cash Equivalents or Cash: This can be plain cash or products like savings accounts, money market funds, treasury bills, etc. These are considered the safest investments with minimal returns with almost no risks.

Why Asset Allocation Works?

Due to economic and market conditions, no one can predict the best performing assets and it varies year to year. Time has proved that during bad and good economic times, all asset classes do not move in the same direction. By diversifying your assets among various categories, you are minimizing your risks. If one asset class goes down, the other asset class is there to protect you by averaging out. Also, to reach your financial goals, you need to balance your portfolio by keeping both high-return and low-return investment products. If you keep only one type of product in your portfolio, you may never be able to reach your investment objectives – as it will be either too risky or too safe. Asset allocation helps you to diversify and balance your portfolio.

What Are Some Common Asset Allocation Rules of Thumb?

There are so many rules of thumb on this topic that it can be overwhelming. Many consider a neutral asset allocation should be 60% stocks and 40% bonds. Another rule of thumb goes like: subtract your age from 100 and you will get the percentage to hold in stocks. For example, if you are 40, 100-40 = 60% of your portfolio should be in stocks and 40% should be in bonds.

Is Diversification Same As Asset Allocation?

The old saying “Don’t put all your eggs in one basket” was good advice 100 years ago, and it will be good advice forever. Whether you are a first-time or a veteran investor, you always need to spread out your investments to minimize your risks. Diversification refers to the process of spreading investments among various equities. Asset allocation refers to the process of spreading investments beyond multiple equities and over several asset classes such equities, bonds, cash, etc.

Asset Allocation is a diversification strategy that helps you to offset decline in any particular asset classes by gains in other asset classes – thus reducing the fluctuations of performance of a portfolio. It is unlikely that all asset classes will go downhill at the same time.

Do You Have Your Own Asset Allocation Model Portfolio?

Yes, to make investing simple and worry-free, I have invented a model portfolio called “A Dawn Timeless Portfolio” or simply ADTP. You can read more about ADTP here – (I am still working on this project and will add a link once done)

To find many other online asset allocation calculators, do a search by entering these keyword phrases: “asset allocation calculators,” “portfolio asset allocations tools,” etc.

Last Word

Model portfolios and asset allocation tools are to help you understand asset allocation. Do not blindly follow any model portfolios or tools just because it looks cool. You are different than anyone else – make an educated decision based on your time horizon, risk tolerance, financial goals, and your overall financial situation.

Australia Travel Blog: Sydney City Tour | Mrs Macquarie’s Chair

Sydney Travel Blog: Part 5 | Mrs Macquarie’s Chair

2-Day Combo: Sydney City Tour + Sydney Harbour Lunch Cruise and Blue Mountains Day Trip

Sydney Travel Blog: Part 4 | Sydney Downtown

After completing The Rock tour, my tour bus started to pass through some of Sydney’s highlights. Points of interest were St. Mary’s Cathedral, Royal Botanic Gardens, Hyde Park, Sydney Opera House, Darling Harbour, Kings Cross and so on.

I took some pictures and videos from the bus, but the bus was in motion, which made it challenging to take shots.

The next stopover would be Mrs Macquarie’s Chair, also known as Lady Macquarie’s Chair. This is a hand-carved bench made out of rock by convicts in 1810. This place is like a park (near the Botanical Gardens) overlooking Sydney Harbour and this is a point where you have a clear view of the Sydney Opera House and Sydney Harbour Bridge together.

Tourists are always flocking here to get a picture perfect, iconic view of Australia and Sydney. I took some great shots and videos here, although I had to sometimes maneuver to get to the edges of the cliff and sometimes climb a little uphill. But in the end, I was able to capture what I was looking for.

The reason this place is called Mrs Macquarie’s Chair is because Mrs Macquarie was the wife of New South Wales Governor Major-General Lachlan Macquarie and she used to come here and sit on the rock to watch ships coming from Great Britain.

Although it was a hot day, it felt cooler and nice by the ocean and I felt like staying there all day relaxing.  Soon enough, my time was up and I had to return to the tour bus. We will be heading towards the famous Bondi Beach.