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    Money Doesn’t Grow on Trees in 9 Lessons

    If you’re feeling guilty in today’s rocky economic environment because you can’t buy your child that video game system he desperately wants or send him to that trendy summer camp, Eric Tyson has one word for you. Don’t. In fact, he says, now is the perfect time to teach your kids some valuable financial lessons.

    Tyson, author of the book “Let’s Get Real About Money! Profit from the Habits of the Best Personal Finance Managers” (FT Press, $19.99), notes that previous generations were raised with the constant admonishment that “money doesn’t grow on trees!,” but maintains that too many of today’s parents neglect that lesson. And the current economic slowdown provides a great incentive for doing so. To get started, Tyson offers these hints:

    1. Realize that kids learn what they live: If Mom & Dad are modeling unhealthy financial habits, you can’t realistically expect your kids to “do as I say, not as I do.” If your financial habits are poor, overhaul them now. You owe it to your kids.

    2. De-program them: Many credit card companies distribute materials that implicitly and explicitly support carrying consumer debt as a sound way to finance significant purchases and living expenses. Explain to your kids that excessive spending puts a lot of money directly into the pockets of credit card companies, so of course they’re going to offer that advice—but that smart people don’t listen to it.

    3. An allowance is a great teaching tool: A well-implemented allowance program can mimic many money matters that adults face every day throughout their lives.

    4. Start them saving and investing early: After kids start earning an allowance, have them save a significant portion (up to half) of their allowance money toward longer-term goals. As savings become significant over time, you can introduce the concept of investing.

    5. Reduce their exposure to ads: The primary path to reduced exposure to ads is to cut down on TV time. When an ad does sneak under the radar and sets the kids to begging, address it. Explain to your kids that there’s never a good time for frivolous impulse spending—but it’s especially harmful when money is tight.

    6. Find entertaining ways to teach good money habits: For younger kids, age-appropriate books include “The Berenstain Bears Get the Gimmies”; for late-elementary-school-aged kids, “Quest for the Pillars of Wealth” by J.J. Pritchard is a chapter book that teaches the major personal finance concepts through an engaging adventure story. You could also get them a subscription to Zillions, a kids’ magazine from the publishers of Consumer Reports, which covers money and buying topics. Board games, such as Monopoly and Life, offer another great opportunity to teach your kids about personal finance.

    7. Teach them how to shop wisely: Family shopping trips are a great timeto teach your kids lessons about money.

    8. Introduce the right and wrong ways to use credit and debit cards: Teach your kids the difference between a credit and debit card, explaining that debit cards are connected to your checking account and thus prevent you from overspending as you can on a credit card. Explain that credit cards should be used sparingly, and then practice what you preach.

    9. Encourage older kids to get a job: Your child’s initial exposure to the work-for-pay world can start with something as simple as a lemonade stand. Depending on age, he or she might do yard work for neighbors or offer babysitting services. By holding down such jobs, kids can learn about working, earning, saving, and investing money.

    Is There a Silver Lining in the Cloud on Wall Street?

    With household names like Lehman Brothers, Merrill Lynch, AIG, Fannie Mae and Freddie Mac declaring bankruptcy, selling out or being taken over by the federal government, the landscape of American finance has been permanently altered.

    Amid the rising climate of fear among individual investors, AssetBuilder Chief Investment Strategist Scott Burns offers four “silver linings”—reasons why the current crisis is not the end of the world:

    1. Consumers will pay down their debt: Personal borrowing will be paid down because banks will require it from all but their most qualified borrowers—those who don’t need to borrow. Dollars not spent on interest can be spent on goods and services. Expect to see a long decline in consumer borrowing as a percent of income.

    2. The recessionary impact of consumer belt-tightening will be alleviated by our reliance on foreign goods: While economists generally fear that a decline in consumer borrowing inevitably leads to recession, the U.S. imports so much that our recession may be blunted. Much of our woe will be exported to the countries making the goods we won’t be buying.

    3. Americans who can’t afford to own a home will return to renting: The current crisis can be traced to a government policy of the early 1990s that expanded access to home ownership by reducing lending standards. Watch for a resurgence in renting as millions of households consider the real risks of home ownership. Home ownership is a great thing, but it isn’t for everyone.

    4. Individual investors will stop wasting money on Wall Street’s discredited full-service brokers: People are moving their money away from the major brokerage firms. Where did the money go? Fidelity Institutional holds money managed by thousands of independent advisers, and has recently picked up $16.7 billion, while Schwab Institutional added $14.5 billion. According to Burns, this means that investors will be exposed to “less financial garbage” in the future.

    Source: AssetBuilder, a registered investment advisory firm based in Dallas, www.assetbuilder.com.