It seems obvious doesn’t it that as you get older you should be able to earn more money per hour than when you were young.

As you learn new skills and have more experience you should be able to charge more for your labour, and get it. Alas, this does not apply to many people, certainly not as many people as it could. It is not rocket science and improving skills and knowledge is open to us all.

Are you improving your skills on a regular basis? Are you making a conscious effort to get better at what you do? How many books do you read each year? How many training courses do you attend each year? How much money do you invest in your own personal development each year?

Your answers to these questions will be a true indicator of just how much value you are placing on your labour. If you want your boss to pay you more money, you need to demonstrate to your boss that you are worth more money. Perhaps it’s not your boss who wants to pay you more money but someone else, a competitor of your bosses. Not to mention that the greater your skill level the more you get to pay YOURSELF!

A couple of weeks ago, I gave you a number of habits and ways for kids to make money.   Today, I’d like to continue on from that with habit number 5 – Creating a future income and why it’s important….

As you get older you will inevitably lose your ability to provide your labour as a means to earn an income and you will need to utilise your investments to provide the income you need to maintain your standard of living. If you do not have investments that can provide the income you need you will be reliant on the aged pension which is not designed to provide for many luxuries. It is even less effective if you happen to still be in the property rental cycle. At least if you own your own home you have a decent chance of surviving on the aged pension. So the only real answer to having the money you want in retirement is to have an investment portfolio that provides an income.  And the earlier you do this in life, the better off you’ll be.

Now depending on how old you are, this might seem like such a long way away.  You might also not know how much income you’ll need in retirement cause you’re still living at home with your parents and not even earning an income!  Don’t worry, you may just need to wait a little while until you work it out.  This won’t stop you from starting to save though.

You may not have heard of Scott Adams but you’re probably familiar with his comic character, Dilbert. Mr. Adams has written a very interesting article themed around a central thought; “Forget art, history and calculus. Most students need to learn how to run a business.”

Mr. Adams believes that since the majority of students aren’t academic geniuses, they shouldn’t have to learn calculus, physics and the like, but should instead be taught entrepreneurial skills. The complete article discusses some of the lessons that Mr. Adams learned while in college that brought him to this conclusion. One of the things he does within the article is sum up what should be included in entrepreneurship training. Here are some interesting excerpts from his article:

“Combine Skills: The first thing you should learn in a course on entrepreneurship is how to make yourself valuable. It’s unlikely that any average student can develop a world-class skill in one particular area. But it’s easy to learn how to do several different things fairly well. I succeeded as a cartoonist with negligible art talent, some basic writing skills, an ordinary sense of humor and a bit of experience in the business world…”
“Fail Forward: If you’re taking risks, and you probably should, you can find yourself failing 90% of the time. The trick is to get paid while you’re doing the failing and to use the experience to gain skills that will be useful later… “
“Find the Action: In my senior year of college I asked my adviser how I should pursue my goal of being a banker. He told me to figure out where the most innovation in banking was happening and to move there…Move to where the action is. Distance is your enemy.”
“Attract Luck: You can’t manage luck directly, but you can manage your career in a way that makes it easier for luck to find you…Luck finds the doers.”
“Conquer Fear: Over the years, I’ve given speeches to hundreds of audiences and enjoyed every minute on stage. But this isn’t a plug for Dale Carnegie. The point is that people can be trained to replace fear and shyness with enthusiasm. Every entrepreneur can use that skill.”

“Write Simply: I took a two-day class in business writing that taught me how to write direct sentences and to avoid extra words. Simplicity makes ideas powerful…”
“Learn Persuasion: Students of entrepreneurship should learn the art of persuasion in all its forms, including psychology, sales, marketing, negotiating, statistics and even design…”

Mr. Adams’ realistic approach to career and business life is refreshing. After all, how many times have you been asked about that Monet painting you studied in Art History class? The truth is most of us aren’t going to be rocket scientists or great philosophers, those places are reserved for a select few. Most of us, however, have the ability to learn entrepreneurial ideas and apply them to all areas of life. I don’t know if mainstream academia will be fond of Mr. Adams’s idea but he is definitely onto something.

As your children enter the teen years the financial demands increase. The increasing expenses of being a teenager may have you thinking about ways for kids to make money to alleviate some of the financial burden. Because of the critical nature of this time it is more important than ever to reinforce financial lessons here because your kids are steps away from independence. Here are some of the areas to reinforce:

Spending & Credit – As your child goes throughout their teen years they will be targeted by every type of advertiser and marketer. It’s quite possible your teenager will have started making their own money so more than ever you need to make sure your teens have a plan for their money. If not it’s very possible that all the money they make will end up in the mall, the movie theatre or the local video game store. Putting a financial plan into action is an absolute necessity. Work with your child to help them create a budget and more importantly help them stick to it. Within that budget should be allowances for spending after all they should enjoy the fruits of their labor.

As your child gets older and prepares to go to college they will get exposed to the world of credit. If you haven’t done so you need to really explain the pros and cons of credit. Sometimes the best way to understand credit and interest is to experience it firsthand. You may consider getting them a very low balance secured credit card, maybe $300. I would do this only if they are working. If they’re not working then you may want to explore different ways for kids to make money so this will be a more realistic scenario. Allow them to use the credit card as they see fit. Let them experience how it feels to buy with credit and also let them see what it feels like to have to pay it back. Should your child decide to use their credit card it is very critical that you give guidance and support. Should they get into trouble with their card resist the urge to bail them out. The goal is to teach responsibility so don’t lose this opportunity.

Checking Accounts & Debit Cards – One of the other things that’s handy is helping your children manage their checking account. If you haven’t done so yet make sure you open one up at your local bank. If your child is working see if it’s possible to set up direct deposit with their job. I would also recommend a checking account with a debit card because this way they have a means of paying bills and gaining access to their money if needed. Having to balance a check book and a debit card causes them to pay close attention to their money and if you can get your teen to do that you have accomplished a lot.

The teen years can be expensive and when it comes to teaching your teens about money and responsibility there are a lot of ways. For kids to make money during these years is a great bonus and can alleviate the pressure but make sure you are doing your part and help them avoid some of the pitfalls.

It is advisable to start early when you are teaching your kids new things, particularly when it comes to money skills. This is because at an early age, a child’s personality is still forming and so new lessons can have more of an impact.

In this light and for the benefit of your kids’ future, teach them about effort and reward early on in their lives. It is important for your kids to learn that an income is a direct ‘reward for effort’ for performing tasks. Having your kids do odd jobs around the home and being rewarded for it would be a brilliant method of teaching them important money skills.

There are inexhaustible ways for kids to earn money at home. While they will gain useful life skills, they will also learn to appreciate the concept of effort and discover the value of money. Different kids are good at different things. Identifying what your kid is good at is the first step, look for things that they naturally gravitate to. The following are some odd jobs your kids can do, that allow them to earn and learn at the same tim:

Babysitter
If your son or daughter is good with babies or younger children and there happens to be a toddler in the house, fire your babysitter and let you own child become the babysitter instead. Of course, you will cut down on your expenses and your child will benefit just as much. At the end of it all, reward them and help them to understand they will not get paid if they don’t do what is expected of them. Also, ensure they understand that the reward is directly linked to the effort put in babysitting.

Car washing
This one is among the best ways for kids to earn money. The thing is kids love washing cars because they have watched you do it and kids always want to do what their parents do. Instead of doing it yourself, let your kids wash your car(s). Inspire them to do a great job and pay a bonus for extra attention to detail. By the same token, let them know that they will not get paid if they don’t do a good job in a reasonable time. This way, they will develop a sense of responsibility. They will also learn to be dependable people who perform as per required.

House Helper
There are many chores that need to be done around the house. Instead of hiring a housekeeper, fire up your kids to participate in cleaning and setting things right around the house. Maintain that they will only get paid if it’s done right. Heavy duties should be left to members of the household who can handle them.

Lawn Mowing
This will need supervision for obvious reasons, but is a great way for kids to earn money and learn a skill. Most adults find that mowing the lawn is the last thing they want to do over the weekend. As the become skilled they can expand into This can be coupled with gardening and landscaping. Be sure to pay them on completion of a good job.

There are many other ways for kids to earn money around the house that aren’t listed here. At the end of the day, make sure your kids understand that as they go through life there is no such thing as a free allowance. This way, they will learn that effort attracts reward.

If you’re like most people you have to get up every day and go to work to earn a living. We know what it takes to earn money and as parents we have a responsibility to teach our kids money doesn’t grow on trees. Some children find this hard to process because many times we as parents find it hard to deny giving our children the things they want, especially if we grew up with little. Many times our children will ask us for money and we usually reach in our pocket and give it to them. If you want to give pocket money to your kids, there are a few things to consider before you begin.

A very good lesson we teach our children is the importance of asking for what you want. Usually most kids don’t have a problem asking a parent for money but you can reinforce that it is always good to ask for what you want. I heard of a salesman who went with his manager to do a presentation for a prospective client. The salesman did a wonderful presentation. He hit all of the powerful selling points and the prospective client really brought in to what they had to offer. However, at the end of the presentation they didn’t make the sale. Afterwards he asked his manager what went wrong. His manager said, “you didn’t ask for the sale.” So teach your kids the value of asking. Teach them it’s ok to ask and also teach them to ask specifically for what they want. It will help them for many years to come.

Another thing to think about before you reach in your pocket to give your kids money is that sometimes you don’t always get what you ask for. Now this may seem contradictory but it’s not. It is extremely rare that a child will get everything they ask for and if they do, those children often don’t appreciate what they get. So parents it’s ok to say no every once in a while. Trust me your kids may kick and scream but they will be ok. A word of caution here: Don’t say no so often that you discourage them from asking but just enough so they appreciate what you give them.

The final thing to do is to make them responsible for what you give them. As a parent you work hard to earn the money necessary to support your family. Children not knowing this may look at you as their personal ATM. They need money, they come to you, they spend money, they need more money, they come to you, they spend money, etc. This can be a never ending cycle unless you keep the accountable to what you have given them.

I guess it’s safe to assume that you never thought so much can be going on when you decide to give your kids money. As always when raising your children there are so many valuable teaching moments. Do your best to take advantage of all of them.

Why is financial literacy for kids so important? Well, one of the great Australian dreams is to own our own home. Once upon a time this was sufficient and our parents and grandparents were happy to achieve this in their working life, but it is not so today. In fact, whilst this was a challenge for many people, in the past, life was a lot simpler. Well not so any more. The modern Australian, in fact most of the western world wants more. More assets, more money, more luxuries, more holidays, more education, better health, smarter kids etc, etc, etc. Is there ever enough for all the things we can desire in our lives?  It appears not. With credit more abundant than in the past and a whole stack of mortgage types, it is easier than ever to get into the home buying market.  Not necessarily for the younger generation who are just starting out in their working life, but certainly for those people who have a few years work behind them and a good stable job.  The earlier kids start making their money work for them, the better off they’ll be.

Kids making money habit number 3 is ensuring that their money multiplies.  One way to learn about investing is to source some of the many thousands of books on investing money.

Investments come in four basic types. They are property, equities or shares, government bonds and cash. All other investments are derivatives of one of these four categories. Each of the four categories have their own unique investment criteria. If you want to invest in any of the categories be sure and learn the individual nuances of each. In particular the jargon or language used in each investment category which is different and can at times be confusing. Be sure to learn the relevant jargon as it will make the investment process a lot easier if you are speaking the right language. You might want to Google a dictionary of investment terminology as a possible starting point just to get your feet wet, so to speak. This will also help if you have a basic understanding of the language of investments when you speak with professionals like financial planners, and bankers and lenders and stock brokers etc. Given the diverse language used it will be time well spent.

As you embark on changing your financial situation and have started paying yourself first and taken control of your money, your next step is to make your money multiply. In other words you can start investing your money to earn more money. Just as you go to work for your money you can employ your money to earn money for you.

Making your money work for you is one of the economic theories that we all need to follow. Remember when we are young we trade our labour for money and as we get older we need to have our money earn money to free up our labour. The earlier you start learning how to put your money to work the better. Like all things in life putting money to work and work effectively is a learned skill and is not something that just happens. You need to learn how to employ money for its optimum return and the sooner you start the better. Many people fail to start their basic wealth creation plan of paying themselves first because they do not understand investing. They make this excuse because they think that you need to understand investing to make any money. This is clearly not true.

In fact some of the world’s smartest people when it comes to money actually work for other people and can help you make money too. One name that comes to mind is the world famous investor Mr Warren Buffet. There are thousands of investors big and small who make money from hiring the very capable skills of Mr Buffet. By investing in companies that Mr Buffet manages, they are by default earning money from his personal skills and labour. Accessing Mr Buffet may not be available for us all so there needs to be alternatives and there are.

One way you can put your money to work is to hire the services of a professional financial adviser. I am talking about a person who has the demonstrable skills, knowledge, and proper authority to assist in putting your money to work. These people are experienced in many types of investment products and will be able to advise you on how to use your money to generate income and or capital growth. They will effectively put your money to work for you. Using a licensed financial planner will give you the support and a solid base of knowledge for you to start learning how to manage your money in the most effective way. Licensed financial planners are trained professionals who work for fees to help people like you and me to put our money to work. They are well versed in all forms of investment types and can be relied upon to assist you, even if you have no investment knowledge whatsoever. A professional financial adviser will guide you on your wealth creation journey and as you go along will inevitably teach you what investments are all about. You do not necessarily need to learn at all, but it would be wise to learn as much as you can to be able to make informed investment decisions for yourself. But if you do not have any desire to learn then you should be able to rely on a professional financial adviser to do the job for you.

When teaching kids about money, one lesson they should learn and implement is the “Pay Yourself First” rule.  This rule suggests you immediately deposit 10% of your income earned into a separate savings account before doing anything else.

Living on 10% less income may appear difficult at first, and in many cases it may need a change of life habits. However, ask yourself this question, how much have I amassed in personal wealth during my working life? Have I amassed more than 10% of all that I have earned? If the answer is yes then well done, you are in the minority of working people. If the answer is no then you should not be happy with your answer and you need to change what you are doing. I would suggest that you are not happy with your current situation BECAUSE you have not been paying yourself for all your hard work. You have not been focussed on creating your own wealth. You are letting your retirement slip away from you. Once you start to follow this golden rule you will begin to see that you are getting richer each and every pay day.

In fact, this action is so powerful that you will even want to add more to your self-pay as often as you can. Paying yourself 10% of all you earn is only the starting point. The objective is to increase your self-pay to the highest level you can whilst maintaining the lifestyle you choose to live today. If you can afford to save at a rate greater than 10% of your earnings, say 15% or even 20% or more then do so. The more you save for yourself the greater your wealth will become.