Let's change the mindset: Parts I and II

We believe that the answer to our economic problems is capitalism. We believe that starting businesses creates jobs, increases the flow of money which in turn helps our economy. Business owners are more likely to be homeowners, which creates an upturn in the housing market. By starting earlier the chances you fall behind decrease dramatically due to compound interest. Imagine if you had a business when you were ten or started saving when you were eight. How much would you have at sixteen? How much when you retire at 30?

What happens to the average person? They go to school for 13-20 years, they have a structured day with things to do homework, and extra curricular activities. There is more pressure on them to learn things faster. They don’t get a chance to experience the real world. They don’t really get to experience the world of finances, unless it is taught by the parents. So when they find themselves out of the system and into the real world it is no wonder they build up debt. Let’s look at a child and what happens to him at age 16-25. Let’s call him Jacob.

   When Jacob reaches 16 he can officially have a “job.” He wants a car, clothes to impress Michaela. He then gets a burger joint job and begins to create income so he can get the car. He gets his first junker and he is in heaven. He did the right thing saved his money and bought his first car. His parents were relieved because they had no money to pay for a car as they had been living pay check to paycheck for years. Now Jacob needs insurance, plates and registration. He has started a cycle and doesn’t even know it. He has started a cycle of monthly bills. “I can afford this” he says. Jacob picks up more hours at work with basketweaving and homework it takes a lot out of him, but he says it’s worth it.

Jacob turns 18, finally graduation! “What should I do now,” he asks. His burger joint job won’t cut it with Micheala forever. She is going to want home, kids and all the things that go along with life. So he decides to go to college. I’ll study hard, and get a good paying job. Jacob finds out how much money that is going to cost and he gets discouraged the burger joint job won’t pay for that either. Then at the college he runs into the credit card booth and “financial aid.” Wow, I can get money now and just pay it back later…that’s great the answer to my problems. He quickly applies for the card and the student loan. Later, with an approval for both Jacob is off and running. He thinks to himself I can pick up some more hours at work, I can afford it Jacob says.

Jacobs’s car then breaks down. It’s the engine and will cost a great deal of money to fix it. “That is more than this piece of junk is worth” Jacob says. Jacob then sees on TV that he can get a new car for no money down and only $200 a month. Since he needs the car to go to work, he quickly goes to the car lot and signs for the loan. I can get a second job I can afford it and besides I need it right now. Money is tight but Jacob is a nice kid and people like him so he lands another job. The pay isn’t that good but it has potential.

Jacob and Micheala are growing closer. He thinks about marrying her, but is upset because he has no home for them. Michaela wants to marry him too and money isn’t everything. She points out that if they do get married they can combine their incomes and buy a house. So Jacob goes to the local Jewelry store and looks for a ring for his sweetie. Wow these are all too high for me to afford. The clerk tells him about an “easy payment plan” and how they will take care of the ring forever. He gets excited once again and accepts the offer.

He wants to take Michaela out to a fancy restaurant to “pop the question” so he takes out his credit card once again. His monthly payments are catching up to him but with Michaela’s income it would straighten out. The evening comes and she says yes! He is happier than he’s ever been, but at the same time has this sinking feeling about his financial situation. He could afford it, right?

Trying to hold down two jobs and going to school seems to be too much as Michaela had been telling him that they spend no time together. He decided that the money that he could make if he was not in school could fix the problem temporarily; he could always go back to school. The move temporarily brings relief to his stressful existence. Michaela and Jacob decide to have a nice big wedding the kind every girl dreams of. He wanted to do that for her. Her parent’s had been divorced and her mom lived on government assistance. There was no way to pay for the wedding. Michaela had built up really good credit paying her car loan on time and being current with her credit cards so she went to her local credit union and received a signature loan for the expensive event.

The wedding would be grand but they did not have a Honeymoon planned, and they did not have a house to move into. They combined their incomes and bills. They both went to the bank to get a loan for a cute little two bedroom house. It was a baby blue house with white shudders. The banker told them that they qualified for more money than the house was worth. It was a true blessing; they would have a honeymoon after all.

Do you see where the happy couple is headed? This is not too far from the truth in many of our lives. The question is why do we let this happen? Why do we set up these precious children to fail? You see commercials for saving the children that are starving (which we support whole heartedly). I submit that we save our own children too. Save them from being behind before they ever really start.

First, we followed Jacob and caught a glimpse of his life. We saw how his decisions based on his circumstances affected his financial future. In part two with the help of Kid$ Ca$h Connection let us see what Faith does.

Faith is an everyday normal child. She does pretty well in school, enjoys extra curricular activities and is enrolled in Kid$ Ca$h Connection classes. Let’s take what Faith is learning and how she applies it.

Faith is 10 years old and having a semi-normal life. She hears about Kids Cash and is curious about what the buzz is all about so she asks her Dad about it.  Her Dad agrees to sign her up for the classes and away she goes. Life is about to change for her as she embarks on the ride of her life.

Faith learns about money, budgeting, credit, loans investing and more. She then learns about Entrepreneurship or creating your own business. Based on what she likes and the talents she has she selects the business that is right for her.

Now remember Jacob and his life from age 16-25. Bills and life overwhelmed him and he was ill prepared to handle them. Let’s see how Faith progresses through her life. The big difference is she is starting out at age 10.

At age 10 Faith with the help of a mentor, lays out a plan for her next 5 years. Lists goals she wants to accomplish and creates a money map. She starts with a little money and begins to invest in supplies for her business. She already knows how much each one of her products cost to make and how much she will charge to create her income cycle. Faith has chosen to make bracelets and sell them. She starts a little local business called Faiths awesome products.

For every dollar Faith gets she splits it four ways, 25% goes to her Business Growth Fund. This fund allows her to purchase supplies, marketing and the expansion of her line. The next 25% goes into her Asset Account. This can be a new business or investment that in turn will create ore income. The third 25% portion goes to her Savings Fund. This is a fund that is for specific short term reasonable goals. The fourth fund is Personal Spending. The last 25% is for her to spend. This is the money that she can be irresponsible with. This helps Faith to cope with the urge to spend. The urge to spend is there with her to but every time she wants something, she creates the cash to get it. We set it as a goal and with patience and a little work she achieves the goal and continues her progression toward her future. Faith has been taught about margin and about retail and wholesale. She knows that if she puts a little money into her business she will get more out. This program teaches Faith to save, budget and look ahead financially. It also teaches her about creating money instead of borrowing, paying cash instead of credit and the creation of passive income.

Faith is now 11 and her business is going well. She just made one of her short term goals and purchased a Nintendo DS. She used cash so she will never owe anything on it. She has accumulated quite a bit of money in her Asset Account and she has increased her line of products to include toe rings, necklaces and glow in the dark bracelets. She has acquired books on making new types of jewelry. She has also got enough money for a baby sitting class. This is the next step in her 5 year plan. She has researched a baby sitting club and will start that up at age 12 according to her money map. Faith will now work on the automation of the bracelet business as she builds her website and puts her products on the web for people to purchase. This will enable her to work on the marketing and creation of her second business. She will also be creating some passive income. At this point her little business makes about $300 per month and is growing.

At age 12 Faith starts her baby sitting business. It is very successful. She has taken the customer service lessons from her bracelet business and put them into practice with her new endeavor. She has also learned to be a leader and to invest in education. Her resume is pretty impressive for a 12 year old and parents trust her. She gets many clients and has two streams of income.  Her income goes up as she now makes over $600 a month. She becomes so successful that she has to begin turning people down because of school and other time restrictions she could not take on any more clients. Faith, however, was not taught to trade hours for dollars so she creates her babysitters club and decides on a membership fee of $10 a month. She takes on the extra clients and gives them to the members of her club. Faith is totally customer service orientated and cares about the customers she serves. Everyone is required to go through the baby sitting class and CPR training before they can accept any jobs. Faith goes to all her clients and arranges a price for the service she lists everything her service offers and what is to be expected of the babysitters as well as the parents. Faith adopts rules to protect her members. This is very profitable faith then goes to the automation stage of her business and takes on no clients of her own. She will make money on the membership fees and the difference between the negotiated price of the parents and the price paid to the member. Faith is turning 13 and has two streams of income. The money in her Asset Account has really grown she is now ready with the help of her parents to set up an investment portfolio.

Faith is on her way to great things. Can you see the difference in the two children’s lives? What does the future hold for your child? How can we as a community of concerned parents make a difference in this next generation?