Will the U.S. run out of money?

Intro to Money DVD

Recently, I was teaching 6th, 7th and 8th graders about money at The Benjamin School, a well respected private school in Palm Beach County, Florida.   One of the students asked me, “Will the U.S. run out of money?”  In light of the recent bailouts and huge amounts of money being spent by our government, I thought it was a very insightful question.  The U.S. government is only able to spend these billions and now trillions of dollars by borrowing money and by printing money.  So, even though it’s not likely that the U.S. would ever run out of money, it is possible that if we accumulate too much debt, no one else (countries, investment funds, companies, and individuals) will want to lend us any more money.  They might be less confident that we will be able to pay the money back.  If this happens, the U.S. government will be forced to print lots of additional dollars which will sharply devalue the dollar relative to other countries’ currencies.  A loaf of bread that costs $3 today, could cost $12 if that happens.  Hopefully, this won’t happen, but most people including politicians are not able to fully comprehend the magnitude of the money our government is borrowing and spending.

While I was teaching students about the Madoff Scandal, I wanted them to get an understanding of how much money was lost.  Some of the media has reported that as much as $65 billion was lost by Madoff and related feeder funds, but the real number is probably closer to $10-20 billion of actual losses.  I asked the students how many of them would like to buy their parents a new $40,000 car?  How many would like to buy all of their friends and family members a $40,000 car?  I then asked them how many of those cars did they think they could buy with $10 billion.  There were lots of guesses, but no one came close.  250,000 $40,000 cars could be bought with $10 billion dollars!  So multiply that number by 10 if you had $100 billion to spend.  Now, multiply that number by 100 if you had $1 trillion to spend.  So, 25 million new cars that each cost $40,000 could be bought with $1 trillion dollars.

Now, you know why that middle school student asked the question.

To invite me to speak at your school or organization, visit Money Lessons for Life and to order our new DVD, check out Intro to Money

Stimulus Package for Your Family

Over the last several months, you’ve probably read and seen a lot of news stories about recently adopted and proposed government stimulus packages.  First, what is a stimulus package?  An economic stimulus package is an attempt by the government to stimulate or grow their country’s economy with government spending, lending or tax incentives.   Some refer to it as “priming the pump”.

This blog entry is not about discussing the pros and cons of the currently proposed stimulus package.  It is to encourage you  to stimulate your family’s economy.  Here are just a few ways you and your family can strengthen your financial health.

Family members can increase family income with part time jobs or small businesses.  Even $50 a week adds up to over $2,500 a year!

Offer incentives to family members when they think of ways to save money for the family.  Make sure that incentives are tied to the actual execution of these ideas.  Example:  If you help your family save $25 a week on groceries, 20% of those savings is “paid as a finder’s fee” in the form of a savings account or other savings vehicle.

Buy less.   When you or a family member says that they “need something”.  Make sure it’s really necessary.  First check the closets, attic or basement to see how much you currently have already.  Maybe you’ll find something that you forgot you had and is even better than buying something you may find in a store or on a web site.

Learn about personal finance and the economy.  Improve your and your children’s financial literacy by (here it comes…a shameless plug) watching a Money Lessons for Life DVD or by reading a personal finance book, magazine, or financial section of a newspaper.

Money Lessons for Life  teaches about money in fun and meaningful ways.  Participants learn to make informed money decisions that will affect their lives now and in the future.  Even complex financial concepts are explained so that they are easy to understand and remember.

Bailout anyone? Or, bailout everyone…

NOTE:  This post puts all politics aside and discusses our current economic crisis.

I don’t know about you, but most people wouldn’t mind being bailed out everytime they made a bad financial decision that ended up costing a lot of money.  Most don’t have a “Bailout ATM” in their house.  Unfortunately, some large banks, insurance companies, automobile companies and others need our government to survive these difficult times.  Without some form of assistance, some will go out of business which would mean tens of thousands of people would loose their jobs and without their jobs, they would be forced to spend a lot less money.  And, the companies that go out of business would crush their suppliers causing them to shrink or also go out of business.  Now, you get the general idea of a downward economic spiral.

How these bailouts or rescue plans are implemented is key, because just throwing good money after bad is a recipe for disaster.  The focus should be on how to get back on track and how to prevent these situations from happening in the future.

Everyone including governments need to be smarter about how they spend their money.  If our political leaders, corporate leaders, and everyday citizens were taught about money when they were young, we’d be in much better overall financial shape today.

Instead of making excuses, we need to be more competitive in the global markets.  We need to produce more, distribute more and market & sell more of what we have to offer to other countries and their citizens.  Bailouts will only help the short term, but for long term prosperity, we need to grow our economy otherwise, bandaids and bailouts will become a regular occurance and our government will need to print a lot more money which will lead to hyperinflation.  Can you say $10 for a gallon of gas or a loaf of bread?

If you haven’t already done so, you should sit down and speak with your children about the current economy and what’s going on with your family’s finances.  They see and hear more than you think and it’s better to educate them so they don’t get the wrong messages.

To help protect our country’s financial future, we need to teach our children about money.  Visit Money Lessons for Life  to learn more about money and to teach your children and teens about money.

Bad Economy = Good Time to Teach Your Children About Money

The last 12 months we’ve experienced:

·        Huge decreases in home prices

·        Huge increases in oil and gasoline prices (now oil prices are much lower than a few months ago, but still way above historical price levels)

·       A huge credit crunch (very hard for people and companies to borrow money)

·        Huge stock market declines (U.S. and worldwide)

 

These are very difficult economic times.  So, why is this a good time to start teaching your children about money?  And, where do you start?

 

Whether your children are preteens, teens, college students or adults, they are exposed in some way to the current economic conditions and they deserve to understand what’s going on and how they can prepare for economic surprises in their future. 

 

Let’s start with SAVING as it is truly the key to surviving tough financial times.  The most important money lesson that your children and you need to learn is no matter how much you are saving it’s not enough!  Repeat after me, and then write this down and repeat it once a day or once a week until it really sticks in your head:

·        Save Early

·        Save Often

·        Save as much as you can and then,

·        Save some more

 

But, why?  Why should your children (and you) save your money?

There are several reasons, but let’s focus on one for now.  You’ve probably heard that you should save your money for a rainy day or you should have 3 or 6 months of salary saved in case you unexpectedly loose your job.

• Our current economic situation is living proof that people who have enough money saved in their “Rainy Day Fund” will be able to weather the current economic storm.
• For those that have really done a good job saving, they can even take advantage of opportunities such as buying stocks, real estate and other investments at drastically reduced prices!
• Even if you haven’t saved as much money as you should have, you can take this opportunity to make sure that your children learn the importance of saving to prepare for their future. 

Most Americans spend, spend, spend and then, IF there is any money left over, they may save it.  But, more often than not, without blinking an eye, when it comes to saving versus spending, we use one of our favorite excuses such as:

1.  This is a bad month (car repairs, home repairs, medical bills)

2.  You only live once, so go ahead and splurge on that flat screen TV, designer clothing or shoes, high tech cell phone, or even a new car.

3.  I don’t make enough money to save any money

4.  I hate being cheap or having other people think I am being cheap.

 

Do any of these sound familiar to you?  Of course they do.  It’s part of our culture to spend, spend, spend.  That philosophy is reinforced every day with advertising all around us.  You have to be very strong and determined in order to start changing your habits when it comes to money.  NO MORE EXCUSES!  🙂

 

Your “homework” until we meet again is to sit down with your children and review how much they are spending and saving.  You may want to share some household expenses that you pay and how much money you are saving everything month.  Then, together you can make suggestions about how to save more and spend less.  Write your answers down and make a monthly goal, so that you can measure your progress over the next 6 months.

 

For more money education, visit http://www.moneylessonsforlife.com  Money Lessons for Life teaches children, teens and adults about money with School Assemblies, Classroom Workshops, Money Field Trips, DVDs and Individual Money Coaching.