Friday, December 31, 2010

Birthday Gifts that Give and Get

Down with "Junk" Spending
What is the first thing that comes to mind when your kid gets an invitation to a birthday party? If you are like me, then it's the gift. And, if you really are like me, nine times out of ten you don't know much about the birthday boy or girl and can't count on your child for any direction whatsoever.

So, shopping for the right twenty-dollar present usually costs ten dollars in gas and an hour or two of your life that I'm quite sure is not being well-spent. Really, I'm feeling quite done with this whole ritual, the spending for no-good-reason ritual. And yes, I know that we just finished Christmas and that I'm perhaps hyper-tuned in to "junk" spending, but hear me out. I have a great idea that could revolutionize the birthday party as we know it.

Now, those of you who read about my attempt to kibosh chocolates in my daughter's advent calendar are probably cringing at what's about to follow. But I assure you that while I am certainly not a candidate for mother of the year, my daughter has actually found some pleasure in her money-conscious mom's newest crazy idea.

Ten Dollars, Please
For better or worse, my daughter's birthday is just a few days before Christmas and every year we do a big party with between twenty and thirty guests. That means at the end of every party my daughter has a mountain, literally a mountain, of gifts to unwrap. For six years I have allowed her to enjoy the madness. But for her seventh birthday, I wanted to do things differently.

In October, over her mountainous haul of Halloween candy, I suggested that she do a fundraiser for her birthday. She was aghast at the idea so I left it alone for a few weeks and then broached the subject again, this time while we were planning the theme for her party: pets. I suggested that we ask her guests to bring a cash donation, half of which could go to the local animal shelter and half of which she could keep.

She was still reluctant (mountains of presents loomed large in her imagination) until we crunched the numbers: 30 guests times $10 equals $300, of which she could keep $150. Plus, she could buy whatever she wanted with her part of the money. And, when we talked about the not-really-her-thing presents she had received at past parties, the deal was done.

Then it was my time to worry. How would parents react to our request for cold, hard, impersonal cash instead of some lovely toy wrapped in those familiar ribbons and bows? What if some of them still brought gifts?

Getting and Giving
As it turns out, I was worrying about nothing. Many parents appreciated not having to do the gift runaround. Others liked putting ten dollars in a card because it gave them a chance to talk to their kids about what a donation is and why it's important to share your money.

As for my daughter, she was happy too. We had twenty-four generous guests who gave a total of $305, $155 of which my daughter logged, tallied, put in an envelope and delivered to the animal shelter. She was very pleased to find out that the money will go toward paying vet bills for some sick cats.

As for her portion, she is saving $120 and spending $30 (on what yet, I'm not sure). And I should mention that someone from the animal shelter came to the party and did a twenty-minute dog safety program with the kids that was informative and enjoyed by all. This was so much better that the mountain of gifts and my hope is that other families in our circle of friends and classmates will adopt this new ritual of blending giving with getting.


Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission please contact money@agentstory.net.

Friday, December 17, 2010

Happy-Meal Toy Angst & MCD Share Price

The Evil Happy Meal Toy
With the hustle and bustle of Christmas making busy parents even busier, the odds are high that at least once during the holidays we will opt for a fast-food dinner. For many of us that means the purchase of a Happy Meal or two.

Yesterday, I read in the National Post that a Sacramento mom of two is suing McDonald's for using Happy-Meal toys to "lure" children into their restaurants.

The mom has teamed up with an organization that is connected with the American "food justice" movement called The Center for Science in the Public Interest (CSPI) to argue that McDonald's is using unfair marketing practices that violate California's consumer protection law.

This lawsuit is part of a bigger movement that's afoot in San Fransisco to ban restaurants from giving out toys with "low-nutrition" kids' meals. Back in November, when I first started following this story I asked my daughter, a McDonald's shareholder, what she thinks about the idea of banning the Happy Meal toy. She said, "Why are they punishing the kids?" Our discussion has since turned to whether or not the proposed ordinance, and now lawsuit, will influence the stock price and punish her as a shareholder, too.

Are MCD Shareholders Being Punished?
One of the first steps I took when introducing my daughter to the idea of "growing your money" was asking her to name her favourite companies. McDonald's, Tim Horton's and The Children's Place were at the top of her list. We took a look at each company's ten-year stock chart and decided, easily, that McDonald's had the best looking one, a steady climb upward, plus they pay a modest dividend.

MCD 10-Year Share Price - From MSN Money
But will that steady upward climb continue over the next ten years? My daughter and I have been watching the price of McDonald's shares, especially during those weeks when there has been bad press around kids and marketing. So far so good, though the share price has been tracking downward steadily since December 8th, falling from an all-time high of $80.94 USD to today's price of $76.79 USD. That's a bit of a worry as the main US market indexes have been tracking upward during this same period.

However, it's interesting to note that while McDonald's is getting flack from North American consumer groups like the CSPI, the company is expanding rapidly in China and announced on December 15th that the number of restaurants there will double by 2013. It has been fascinating watching this push and pull on the share price and talking about these influences with my daughter, who has decided (rightly, I think) to keep her shares despite the Happy-Meal toy issue.

McDonald's Commitment to the Well-Being of Their Customers
She has faith that the company will be able to adapt to our ever-evolving North American culture as well as to Chinese culture, plus she really enjoys being a shareholder. Our hope is that the company will continue to be profitable and pay her a decent dividend while she realizes some capital gains in the long run.

And healthy or not, she likes that Mom (from time to time) is an McDonald's consumer. As she told me this morning, "I'm still going to have a Happy Meal even if there's no toy." She does love those fries.


Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

Wednesday, December 8, 2010

Use an Advent Calendar to Teach Your Kids About Money

Money is NOT Sweeter Than Chocolate
The last evening of November is a big deal at our house. That's the night the advent calendar goes up on the wall. And this year I decided to do things a little differently.

On the morning of December 1st my six-year-old shuffled bleary-eyed, bladder-full into the living room completely focused on one thing: getting the day's sugar fix, and nothing more.

Imagine her surprise when she reached her fingers into that soft felt pocket and pulled out a Loonie. She was not happy. In fact, she looked quite miffed. Now imagine my surprise.

My daughter has been enjoying the fruits of her savings account, stocks and income fund for a few months now. Since she started investing this fall, she has marveled at the fact that her money is growing and paying her every month, and that she doesn't have to do anything other than watch and grow richer.

The monthly inventories of her portfolio's holdings that we record in a lined exercise book left over from grade one have inspired her to habitually save a large chunk of any money that comes her way. Silly me. I thought this money-wise kid would love my new Loonies-in-the-Advent-calendar idea. No chance. "There's no candy, Mom!" is what I got for my creativity plus a sour face all the way to school. It was like I had somehow ripped her off. How ironic.

A Loonie a Day for 24 Days
Sour face aside, I've stuck with my plan: a Loonie a day for twenty-four days, with one little adjustment. I have put a Hershey's kiss in each pouch along with the coin. I have to admit that I was hoping to move away from the chocolates altogether, but I see this as a first step.

It's the eighth day of Advent today and this morning, my money-wise girl reached her fingers into that soft felt pocket and exclaimed, with a bleary-eyed smile, "Hey! Another Loonie!" She ate the Kiss, of course, but it doesn't seem to be the highlight anymore.

Today was also her day to record her portfolio earnings to see how much she has made since last month. She said (and I'm such a proud mom) that she is going to deposit her Advent Loonies in her savings account. She's thinking about buying more stocks.

Maybe money is sweeter than chocolate after all.


Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact Laura at money@agentstory.net.

Friday, November 19, 2010

Teaching Kids the How & Why of Advertising

I'm just about finished shooting the footage for episode seven of Money&Me with Agent Story and I have to say that it's been the most difficult video to make so far. Writing catchy poems and silly stories about money words like job, stock, sales tax, donation, credit card, and entrepreneur has been easy. Writing about the word "advertisement" has been more of a challenge.

How do you make a compelling ad? What are the components of an effective commercial? What is some of the important marketing lingo that goes along with the word "advertisement"? How do companies make sure that advertisements are worthwhile? Unlike the other concepts I've tackled so far in my show, I didn't know much about advertising when I sat down to write the script.

But, after more than a little online research, I can now answer all of those questions and more. And, to put it all together for the kids who watch Money&Me, I not only wrote a poem explaining the how and why of advertising, I also made my very first commercial. It's for my CD, Agent Story: Tales from the Briefcase. And, it's going to be part of the episode.

You know, I made my CD way back in 2009. It's a collection of the most popular stories and poems from my live shows. Funny how I never thought to make a commercial for it until I started telling stories about money. Isn't financial literacy a powerful thing?

And, by the way, this is a real commercial. I do have a two-for-one sale on now until Christmas day. Click here to get yours.

video


Copyright 2010. Laura Thomas. All Rights Reserved.

Wednesday, November 17, 2010

Fearless! Robert Herjavec on Talking to Kids About Money

Meet a Fearless Dragon
He's a self-made millionaire. He's a reality TV star north and south of the border. He's a best-selling author and marathon runner. He has more than one mansion and has chatted with Oprah about fiscal responsibility while giving her a ride in his golf cart. But what really impressed me during our brief phone call last week is that he is absolutely fearless when it comes to financial literacy, both his own and that of his three kids.

Do you come from a family in which talking about money can get you expelled from the dinner table? Robert does. Add that to the fact that he didn't take business courses in high school and that eight months into university he dropped out of Commerce to take English and Political Science and you have to wonder how he has become so fluent in the language of money. As Robert told me, it comes down to this: 

There is no such thing as a dumb question. But once you have asked the question, you have to listen and learn.

Robert has taught himself just about everything he knows about money and, apparently, it's a never-ending journey. Just before we spoke he was having lunch with an important investor who mentioned a financial term that Robert was unfamiliar with. Instead of skipping over it and muddling through (like I have done way too many times at the bank), he stopped the conversation and unabashedly asked that scary and often avoided question: what does that mean?

I was actually quite surprised that he told me this story knowing that I would probably put it in my article. Clearly his pursuit of financial knowledge trumps any sense of embarrassment he may have at exposing the limits of his understanding. It's about learning the facts, not about protecting your ego which, as we all know, can really get in the way when it comes to talking about what we know (and don't know) about money. After all, money is not a taboo subject anymore. Or is it?

"Money Just Is"
Growing up, Robert learned that it's rude to talk about money. But he doesn't buy that line of thinking anymore. "Money is not a bad word," he said. "It's a resource. Money just is." And so when his teenage son said that he would like to study whales for a living and wanted to know how much marine biologists make, Robert did some research and found out that they make about forty thousand dollars a year.

Armed with this information, Robert told his son the facts: you can study whales or you can live in a mansion, but you probably can't do both. "The choices we make in life have a price." What a great three-part lesson:
  1. When you don't know something about money ask.
  2. Sometimes the truth about money is not always what you want to hear but you still need to hear it.
  3. Our choices come with a price tag.
Now that's what I call giving your kids a healthy appreciation for the undeniably important role that money plays in our lives. And speaking of kids (and not just Robert's but all Canadian kids) I could not let him get away without asking what he thinks about the role of schools and government in financial literacy.

A Helping Hand for Capitalism
These are exciting times. Flaherty's Task Force on Financial Literacy is due to release its recommendations next month. In Manitoba and Ontario, curriculum writers are hunched over their computers furiously writing brand new financial literacy lesson plans that will be introduced in September 2011. When I asked Robert what he thinks about all this he brought up an interesting point: capitalism sometimes needs a helping hand.

Robert believes that our governments do a good job supporting capitalism by funding initiatives that build our economy. He mentioned the new Business Plan Competition that is on right now at Queen's University. The federal government will provide three $150,000 interest free loans to students, or faculty, who start a business. "This is a great use of public resources," he said.

Robert also thinks that including financial education in schools is another good use of public resources and he has a wish-list for the new curriculum that includes teaching kids about spending wisely and about entrepreneurship. He hopes that kids will learn that "when you spend a dollar on this, you can't spend it on that." He also hopes that kids will be introduced to the possibility of earning a living as an entrepreneur because, as he's read, eighty percent of entrepreneurs have a family member that is already an entrepreneur.

Robert's father was a factory worker. His mother was a secretary. "It's tough to take a chance when you don't see others doing it." Wow. Imagine an education system that teaches kids (every kid, not just the ones who take high school business courses) the difference between being an employee and an entrepreneur? That would be a great use of public funds. But enough wishful thinking...back to Robert.

A Fearless Learner
Robert is immensely successful in business and in life but what struck me the most during our short conversation is how much he cares about financial literacy. He is completely open and honest about money with his kids. He doesn't shut down or "fake it" when the limits of his financial knowledge are reached. He is fearless when it comes to learning the language of money. Isn't that just as impressive as owning mansions and knowing Oprah? I think so.

Not only am I going to keep talking to my daughter about money, I am going to talk to her about all the stuff I don't know about money. That way we can explore and acquire the language together. And, the next time I'm at the bank, I'm going to speak up when I don't know what a word means. I mean, seriously, if Robert Herjavec can admit when he doesn't know something about money, so can I.


Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission please contact Laura at money@agentstory.net.

Wednesday, November 10, 2010

Wants, Needs & Parenting for Fulfillment

Wants & Needs
How often do you find yourself buying stuff that your kids want but don't need? I was doing it all the time, quite unconsicously, I confess. But ever since my lively discussion with investment counselor and father of two, Al Tynan, I have found myself saying "no" to my daughter's wants more often. This has not only been good for my family's bottom line, it's been great for my daughter's self-esteem and sense of fulfillment. But let me introduce you to Al first.

A former national-level rugby player and UBC Human Kinetics major and Commerce minor, Al joked about the fact the he was the only person in HK with a subscription to the National Post. Currently, Al holds a Chartered Financial Analyst designation and is an investment counselor at RBC Phillips, Hager & North. His clients have to have at least a million free and clear to invest before they can sit down and pick his brain. Not to mention his office is on the twentieth floor of a stunning waterfront building in downtown Vancouver. From the conference room window, I could just about touch Grouse Mountain's snow-bare ski runs.

So what was I doing in that multimillion-dollar setting talking to a rugby player turned financial advisor who deals in the millions of dollars? Well, I wasn't there on investment business. No, I dropped by to find out what a guy like Al teaches his kids about money. A lot of useful things, it turns out, and it all hinges on this idea:
Our job as parents is to take care of all of our kids' needs but not all of their wants.
Al learned this lesson early. His father, a lawyer, retired when he was just 40 years old. As it turns out, he had saved a portion of his employment earnings and had invested in stocks. Essentially, the family of five lived on the dividend income generated by those stocks. In his early years, there were months where Al and his brothers had their needs taken care of but not all of their wants. Al was okay with that because he saw that while finances weren't always easy for his parents, they truly enjoyed family life.

The other powerful lesson that came out of his family's unique financial situation was what Al calls the "get rich slowly scheme" or the power of owning stocks that pay dividends. As early as he can remember, Al got a nine-dollar dividend cheque in the mail every three months from Imperial Oil. This is something his father set up for him and something that Al would like to set up for his kids too but, these days, companies don't send dividend cheques in the mail. For a kid, looking at numbers on a computer screen just isn't the same thing as getting a cheque with your name on it in the mail.

Fulfillment 101
As much as getting a dividend cheque in the mail is a thing of the past, Al worries that the concept of working hard for what you get is going that way too. He brought up the point that when parents constantly buy full-priced "stuff" for their kids, such as pricey electronics and other luxury consumer goods, they run the risk of hurting their kids' satisfaction down the road. That made me think.

What if my daughter decides to pursue a noble job that only pays a modest income? What if she wants to be a pre-school teacher...or even a children's storyteller? If I buy her every expensive gadget that she asks for while she's living at home, this could lead to a decreased sense of satisfaction when she leaves the nest and starts living on a pre-school teacher's (or storyteller's) salary. I was impressed by Al's insight and asked him how he teaches his girls (ages six and eight) about the difference between needs and wants.

When Al's eight-year-old wants a new luxury gadget, he explains to her that it's not a "need" and therefore that it's not his job to buy it for her. He then encourages her to earn money to cover half the cost (he will pay the other half). When she has saved up the money, Al suggests that they shop around for the best sale price or even check Craig's List for a used one. That way she can save and grow some of the money that she has worked so hard to earn.

This is a practical idea that holds three great life and money lessons for our kids:
  1. Wants and needs are not the same thing.
  2. Needs are more important than wants.
  3. Getting everything you want won't necessarily make you happy.
After all, when it comes to money, isn't happiness and fulfillment what we want for our kids? What I learned through  my chat with Al is that helping our kids make the effort to earn money to take care of their own wants while they are living at home will go a long way toward helping them become financially independent and satisfied with their lives regardless of how much money they make.


Fulfillment. That's the word that I'm going to stand on the next time I say, "Sorry, sweet-pea, I'm not buying you that pink Nintendo DS-I. If you want it, you'll have to pay for it yourself. Let me show you how."


Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission please contact Laura at money@agentstory.net

Thursday, November 4, 2010

Dragons' Den & Our Unofficial National Financial Literacy Grade

Ever since I started pouring my writing and storytelling skills into the world of financial literacy I have been wondering how I might find out how financially literate we are as a country. I haven't found an official statistic on this yet, but I may have an unofficial one.

I had the opportunity last week to chat by email with Sean Wise, Assistant Professor of Entrepreneurship and Innovation at Ryerson's School of Management and industry consultant to Dragons' Den. I couldn't resist asking Professor Wise what grade he would give Dragons' Den pitchers when it comes to their ability to talk money.

Professor Wise said, "I would give a C to most going into the Den, while they often know basic financial matters, that isn't enough when it comes to investment." 

His comment inspired me to do a little research so as I watched last night's episode I made a list of all the financial and/or business vocabulary used in the Den. I noted who used that vocabulary and what the outcome was for the pitcher. And then, just for fun, I gave each of the pitchers a financial literacy letter grade.

Elite Living International
Ask: $100,000 for 10% of their business
Number of financial/business words used by pitchers: 7
Number of financial/business words used by Dragons: 11
Outcome: No deal
Financial Literacy grade: C+

Innovative Solutions Handy Tray
Ask: $100,000 for 1.5% royalty on tray sales
Pitcher: 17 words
Dragons: 17 words
Outcome: $100,000 deal with Brett for 50% of his business
Financial Literacy grade: A+

AgriConnect Farm-sitting Web Site
Ask: $72,000 for 40% of their business
Pitchers: 8 words
Dragons: 12 words
Outcome: No deal
Financial Literacy grade: C

Professional Weight Loss Services
Ask: $250,000 for 25% of their business
Pitchers: 3 words
Dragons: 9 words
Outcome: No deal
Financial Literacy grade: F

Beba Bean Designs Baby Clothes
$315,000 for 15% of their business
Pitchers: 10 words
Dragons: 11 words
Outcome: $315,000 deal with Arlene and Robert for 40% of their business
Financial Literacy grade: A

What this says about us...
My sofa-side research pretty much confirms Professor Wise's C grade for the pitchers. So what does this mean for my quest to find out our national literacy score?

Think about the fact that Dragons' Den is one of the most-watched TV shows in the country. According to the show's marketing fact sheet: Dragons' Den is the number one reality show in Canada; the show's website had over three million hits in 2009; and it's the most popular show in its time slot. Match these stats with the fact that as of this moment the show's Facebook page has 35,455 fans. These are big numbers in our small country. Do you see where I'm going with this?
Canada's "Unofficial" Financial Literacy grade: C

You can find out more about these pitchers and watch the show by visiting the Dragons' Den CBC website.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission please email Laura at money@agentstory.net

Thursday, October 28, 2010

Meet a Money-Savvy Dad & Soulful "Inventor-preneur"

Kevin Royes at CBC after his success on Dragons' Den
Image from MSN Money.com
I first heard about Kevin Royes, and his Debbie Travis-endorsed Kelvin.23 super tool, on Dragons' Den. Inventor and president of his own Vancouver-based company, Kelvin Tools, Kevin pitched in the Den earlier this year and walked away with a hefty amount of money to expand his tool company. This week, I was fortunate to spend an hour on Skype with this busy, forty-something dad and talk to him about entrepreneurship, financial literacy and what we should teach our kids about money.

Though he has money now, that wasn't always the case for Kevin. He grew up in a rough area of Toronto in a single parent family (something I can relate to as a sole parent). Financial literacy was not part of his upbringing during his elementary school years, but his inventor's spirit was alive and well.

When I asked him what he wanted to be when he grew up, he told me about the first time he saw a motor home in his neighbourhood. "I was nine or ten years old. I couldn't believe that someone thought of making a house on wheels and actually had it built." His desire to become an "inventor-preneur," as he likes to call himself, was piqued. But without guidance his dreams and passions were largely dormant until he met George Prez.

Early in Kevin's grade eleven year at a Mississauga high school, Prez visited both his marketing and accounting classes to deliver a fifteen-minute presentation about Junior Achievement of Canada, an entrepreneurial program that provides hands-on business training for students. Hearing Prez's spiel, not once but twice, hooked him.

Kevin eagerly participated in the Junior Achievement Program and by age 20 he had invented a locking device for snowboards that two years later was picked up by Burton, a major snowboard manufacturer. This allowed him to quit his mail room job at Kimberly Clark and go into business. I'm pretty sure that he has never looked back.

"I never really was a good employee," he told me with a smile. And when I asked him what the main difference is between being an employee and an entrepreneur, he said, "As an entrepreneur you get to follow your dream. As an employee you have to follow a dream that belongs to someone else." What could I say to that? I nodded my head and we moved on to talk about his teen boys, ages 13 and 15, and how he is getting them ready to deal with money.

At first, Kevin was pretty sure that he didn't have anything useful to share with me on the topic of kids and money. But as we got talking, he spilled this little gem of parenting wisdom. As his boys are getting older, he is consciously pulling back on the amount of stuff he buys for them. That way the kids will have to figure out how to earn money themselves and then manage it so that they can afford buy the things that Dad won't buy them any more. And that wasn't the only little gem that came out of our conversation.

When I asked him the same question that I had asked the Dragons' Den stars--If you had just three things that you could teach a Canadian five-year old about money what would they be?--Kevin said:
  1. Follow your soul and money will follow.
  2. Make as much money as you can "before you die" (a nod to Kevin O'Leary's response) because it allows you to express yourself in the world.
  3. Enjoy it.
I wrapped up the interview by asking Kevin what he thinks about the absence of financial education in Canada's elementary schools. He stated bluntly, "It's a shame because everything we do puts us in contact with money." He added, "The sooner we learn to use money and integrate it into our way of thinking the more natural it becomes."

The idea of money feeling "natural" resonates with me. My approach to financial literacy in Money&Me, my You Tube show, is to teach young children personal finance and business vocabulary one word at a time. It's about fluency and confidence for me. It's about naturalness for Kevin. But we're really talking about the same thing: literacy or "the ability to understand and use information in daily activities at home and work and in the community" (UNESCO). To echo what Kevin said, money is part of just about everything we do and the younger we are when we learn the language of money the easier it is to become fluent in it.

Consider these other bits of wisdom that Kevin shared during our talk: "the more I tried to squeeze money, the more it would squeeze through my fingers;" and "there is no soul or satisfaction in the pursuit of money." This is powerful stuff coming from a powerful guy who, ironically, in the first minute of our conversation told me that he is not a role model for kids when it comes to money. Not true.

Photo by Michael Kalus
It may be that Kevin does not see himself as a financial role model because he is so entirely engrossed in the process of creation--creating useful products, creating a business, creating jobs--that he does not focus on wealth itself. Instead, Kevin seems to focus on joyfully expressing himself through the process of creating things that create wealth. As he told me, "There is soul in what I do." That was evident during the interview, from hello to good-bye.

It's not surprising that just as we were to end our Skype call, Kevin shared yet another creative and soulful idea with me: the idea that I am a "soul" parent, and not just a "sole" parent. Wow! Not a role model? Not money-savvy? I don't think so.

Copyright 2010. Laura Thomas. All rights reserved.
For reprint permission please contact money@agentstory.net

Tuesday, October 26, 2010

Asset & Liability: Take these Words to the Toy Store

Last night, after the "tucking in," I put my feet up on the sofa and read Robert Kiyosaki's 2004 financial  literacy book Rich Dad, Poor Dad for Teens. It's an easy read, an hour or two tops, and worth going through with your kids even though it was written for an American audience. And be prepared. The book will inspire some lively debate with your kids about the stuff in your lives: what is an asset and what is not.

 Assets & Liabilities
As Kiyosaki points out in his book, the difference between an asset and a liability is this: an asset puts money in your pocket, while a liability takes money out of it. It's all about balance, or should I say imbalance. Ideally, we want to have way more assets than liabilities and getting there starts with understanding the difference between the two words.

What is an asset?
An asset puts money in your pocket. It pays you to own it. For example, your investment portfolio should be an asset that pays you income in the form of interest, capital gains or dividends (and if it's not an asset, get help!). A rental property is an asset when the renters pay their rent. And, your home can be an asset too, assuming that you don't lose money when you sell it. Collector's items and artwork can be can assets if their value goes up. Assets pay you. They generate income.

I have pointed out to my six-year old that "silly bands" (the latest trading craze for kids) are not, by definition an asset unless she saves them until she's my age and they become collector's items. I'm not optimistic that silly bands will be worth anything in 2046, but she, who owns 78 of these cheap rubber bands that sell at the insane price of 24 for $4.99, disagrees. "They're NOT a liability, MOM!" she told me while headfirst in a bin of silly bands at Toys R Us madly searching for a Western-themed package to go with her Halloween cowgirl costume.

What is a liability?
A liability is something that takes money out of  your pocket. The truth is, almost all the stuff that we own is a liability.  For example, my computer, my new TV, my car, my clothes, my books, my kitchen appliances, my daughter's Littlest Pet Shop collection and those silly bands, of course, none of these things can be sold today for a profit (not even on Craig's List). Debt is a liability too, although like your home it can be an asset if that money is being saved and invested to build wealth such as in an RRSP. But, in general, any money you own is a liability. And don't forget taxes. Talk about a personal liability; the 12% HST is killing me.

Getting back to Kiyosaki's Rich Dad Poor Dad, the bottom line is imbalance. You want to have more assets than liabilities in your financial life. I also appreciate his observation that the rich and poor speak differently about money. Kiyosaki says that the "rich dad" mentor in his early years taught him to spend his money on assets, while his real "poor dad" seemed to unconsciously focus on acquiring liabilities and then complain about them. It was "rich dad" who spoke about and taught him the difference between an asset and a liability. That is powerful vocabulary to pass on to our kids.

So while I'm not happy about my daughter squandering her pocket money on silly bands, I am happy that she is beginning to understand the difference between an asset and a liability. In the end, all I want her to learn from these early spending experiences is the vocabulary, this powerful, life-shaping vocabulary.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Thursday, October 21, 2010

Valuation, Dragons' Den & The Wealthy Barber Returns

Though I write a blog about money and do a children's You Tube show about money, and though I'm self-employed and entrepreneurial, what I really am is a writer, an artsy-fartsy writer. But as a writer who, these days, is equally passionate about money and manuscripts, I seem to be making some strange connections between the economic arts and the literary ones.

Like this one.

Is creating a company similar to creating a piece of writing? I think it might be and I write this with Dave Chilton, author of The Wealthy Barber, in mind. But more about Dave in a moment.

I taught four writing classes this week. And, whether I was working with adults or kids, teaching live or in my virtual classroom, I wanted my students to be super clear about one thing: the writing process and at what stage they should be asking for feedback.

When should a writer go begging for someone to read and evaluate his manuscript? The answer is: absolutely not until he has draft number one finished. As I said to my students over and over this week, "How can you possibly evaluate any part of a story, poem or article until you get to the end? You need to make your lump of clay before you can decide how to sculpt it!"

Could there be a connection between writing a manuscript and starting a company? How can you evaluate or assign value to a business that is not finished, that is not yet a lump of clay? It was last night's episode of Dragons' Den that helped me make this connection between evaluating a piece of writing and valuing a company.

Two pitchers from a company called Flu Goo (hand sanitizers for kids) came on the show asking for $113,000 in exchange for 40% of their company, which was strange because they had not sold one bottle of their product. Not one. The Dragons pointed out that there is huge difference between saying you need $113,000 to finish building your company and saying that your company is worth $282,500 ($113,000 x 2.5) even though it's not "finished" because it has no sales.

Without sales, a company is incomplete and of no value to anyone; the same is true of a manuscript that has no ending. You have to have all the parts of something before you can assign value to it. Which brings me back to Dave Chilton who is at this moment sequestered in his office and madly typing away at the long-awaited sequel to The Wealthy Barber, The Wealthy Barber Returns. I have some advice but it may be too late for him to take it: don't release any excerpts or early chapters until the first draft of your manuscript is done; make your lump of clay before you send it out into the world for evaluation.

But my advice may be too late. On the homepage of his website, Dave writes, "I'm hoping a number of published excerpts and the book's Introduction, below, will whet your appetite." I can only hope that unlike the Flu Goo people and their still-to-be-done sales, that Dave already has all of his chapters written, including the last one, which is always the hardest one to write, especially because you know that when it's done you are going to have to go back to the beginning and truly evaluate your creation...and get out the sharp tools. Sales are the same.

It's easier to do just about everything than get out there and make cold calls. But without sales, as the Flu Goo pitchers learned in the Den, you don't have a lump of clay that can be valued.  A start-up company with no sales is like a manuscript with no ending, assigning value is impossible. There is still a lot of hard work to be done.

By the way, the Flu Goo people don't even have a website. I know that I'm just an artsy-fartsy writer, but it seems like the stuff that shakes loose and the focusing that happens during the process of creating a website is an essential part of building a new company, right up there with sales and making your business "manuscript" complete and ready for e-valuation.


Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Wednesday, October 13, 2010

Savings Accounts for Kids: A Ranking of the Big 5 Banks

Before I suggest where you might open an account for your kids, take a look at what the Big 5 banks offer:

#1 CIBC Advantage for Youth
0.50% interest
Almost no transaction fees

#2 TD Bank Youth Account
0.05% interest / 0.25% on balances $5,000+
Almost no transaction fees 

#3 Bank of Nova Scotia Getting There Savings Program for Youth
0.05% interest  / 0.10% on balances $500+
Some transaction fees

#4 RBC Leo's Young Savers Account
0.01% interest rate
Some transaction fees 

#5 Bank of Montreal - does not have an account for kids

Interest rates that don't crack a full percent and no bonus for signing up? I'm surprised at how little interest (no pun intended) the Big 5 banks have in courting the next generation of consumers. So are there any banks in Canada that do want to have our kids as future borrowers and investors? Yes. There's one, that I know of, and that's INGDirect.

2.0% interest
$25 bonus when you sign up with a $100 balance
No transaction fees

That 2% interest rate is not a typo, nor is the bonus. "How can that be?" you might ask.

I had the opportunity of interviewing Meena Sandhu, the Regional Retail Manager at the downtown Vancouver ING Cafe, about their stand-out children's savings account. Essentially, she informed me by phone, this account is driven by two areas of the company: marketing, of course, but also their philanthropy mandate.

This savings program for kids helps ING meet its mission statement of improving financial literacy through education and tools. "ING," said Sandhu, "is a very hands on bank." She went on to add that it's important for Canada's economic future that we "empower through knowledge." The ING children's account,  hand-in-hand with their online financial literacy website for young children called Planet Orange, helps the bank meet their philanthropic goals.

Philanthropy aside, I love the bottom line in this story. My daughter will earn 2% interest plus be rewarded with that $25 bonus for opening her first bank account. Correction, she has earned and has already been rewarded. Thank you ING, see you later Big 5.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Sunday, October 10, 2010

Money-Talk: How Fluent Are You?

I woke up this morning with a thought, a curious thought, about the situation of some of the pitchers on the popular CBC reality show Dragons' Den. My thought was: Is it fair that financially illiterate pitchers end up giving away chunks of their businesses (and chunks of future profits) to Dragons who are fluent in the language of business and finance?

I love the show, but I don't think it's ethical (and I wonder that it is even legal in Canada) to enter into a contract with someone who does not fully understand the language the agreement is written in. Like I said, a curious thought to wake up with on the Sunday morning of Thanksgiving weekend. However, it has prompted me to investigate further and I will blog the fruits of that research in the coming weeks.

As for today, I posted a survey on my blog (top right corner), which I hope that you will participate in. And I decided to throw out some of the vocabulary that makes up "money-talk" and see what you can do with it. Take a look at this list and see how many of these ten words you completely understand:

annual percentage rate
bond
compound interest
dividend
inflation
ETF or exchange traded fund
gross income
liquidity
portfolio
return

So how did you do? Are you fluent in money-talk or is it Greek to you? Either way, here are a couple of my favourite online financial dictionaries: The Money Belt by the Financial Consumer Agency of Canada and Investopedia. If you find some of other good ones, please post a link in the comment box below.

If money-talk is truly foreign and uncomfortable, remember that no matter what your financial fluency is today, it can be better tomorrow. Learning just one word a day could translate into real money gains in the future.


Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Saturday, October 9, 2010

Waiting for the Next Crash: Why "Meltdown" Episode 4 Freaked Me Out

REVIEW

Meltdown: A Four-Part Investigation of the Global Financial Crash
Episode 4: After the Fall
Written & Directed by Terence McKenna

CBC Documentary
My rating $$$$.5

Images of empty, never-meant-to-be-occupied, skyscrapers in Dubai in the pre-meltdown boom and China's eerily similar urban skyline of today are vividly stored in my memory. McKenna has created in me a visual reminder that all is not well with the financial world and that I really need to step up my game if I want to ride out the next 50+ years of earning, spending, growing and protecting my money with any kind of grace.

What follows are just a few of the documentary's comments and conclusions that have renewed my commitment to not only being financially literate but 100-percent fluent in money-speak and to keep up with its ever-evolving dialects.

Here are some of the key words phrases that were used describe the behaviour of the bankers, traders, real estate moguls, executives, and even nations (like Dubai) who are seen as responsible for the meltdown: fraud, corruption, false rumours, secrets, drugs, sexism, immoral, criminal, insider trading, state-run pyramid scheme, flipping real estate "like they are playing musical chairs."

According to the documentary, the money guys "found suckers to invest" and "convinced people" to invest more money in bad deals and deliberately sold investment products "to unsophisticated investors...orphans and widows I met at the airport."

This episode is all about accountability. Governments have been trying to make sense of the real estate bubble and financial crisis. They desperately want to know what caused it so they can put public policies in place that will help prevent or at least minimize the effect of future meltdowns...which, it seems, are just around the corner.

With the help of that empty-skyscraper imagery, you will come away with a deeper understanding of our global situation: while western countries are envisioning a kinder, gentler, less risky capitalism, China and India are embracing the current more brutal model. Because the global economy has never been so complex and interconnected we are going to have another crisis.

But better to face it, freak out and then get on with building your financial literacy so that you can ride the next meltdown with more grace. Make episode 4, if not all four parts, part of that exercise.

Copyright 2010. Laura Thomas. All Rights Reserved.
To reprint contact Laura at money@agentstory.net

Tuesday, October 5, 2010

What the Dragons' Den Stars Think We Should Teach Little Kids About Money

Kevin O'Leary
It began with a simple comment that Kevin O'Leary made on one of my favourite financial news shows, The Lang & O'Leary Exchange. In a heated discussion about government pensions and taking personal responsibility for our "old and crusty" years, Kevin said, "Fiscal responsibility-we should be teaching this to kids that are five years old."

I could not believe that a Dragons' Den star and all-round Canadian icon of entrepreneurship was talking my language: financial literacy for little kids.

I emailed the show with this question for Kevin: If you had just three things that you could teach a Canadian five-year-old kid about money, what would they be? The producer, Matt Fairley, asked me to go to CBC Vancouver to tape my question. I did.


Then I had to wait for my answer because it was G20-time in Toronto. But on July 6th the answer came and it has influenced my work as storyteller and entrepreneur, as well as lit a fire in my belly to become the best financial literacy educator in the country.

Here are the three things that Kevin thinks we should teach Canadian kids about money and he said it on national television:
  1. Nothing matters more than money.
  2. Make as much money as you can before you die.
  3. See number 1.
My six-year-old daughter and I were watching Lang & O'Leary when it aired and, boy, did we have a good laugh...until we started to think about it.

My daughter and I are big Dragons' Den fans. What I love about the show is that it allows Canadians who are not business people or entrepreneurs to boost their understanding of how business works, plus learn some cool new vocabulary along the way. Words like "valuation" and "equity" were familiar but not comfortable for me before I started watching the show, which is why I started encouraging my daughter to watch with me. So what does this have to do with my question and Kevin's answer?

Inspired by Kevin's radical opinion, we set out to find out what the rest of the Dragons would say if asked the same question. We got replies from three and a half out of five (Brett Wilson gave me a half-answer), not bad for a storyteller and her six-year-old side kick, neither of whom have any connections whatsoever in Dragon-type circles.

Here's what Kevin's co-stars said...

Arlene Dickinson
I contacted Arlene by email through her Calgary-based marketing company Venture Communications. She responded within a day with a very polite and encouraging email. These are the three things that Arlene thinks we should teach little kids about money as she wrote them in her email to me:
  1. Money does not buy you happiness. It's an old saying but it's true.
  2. Money is good for freedom. It will give you the freedom to do what you want, when you want and help who you want.
  3. Money is important, but not as important as doing what you love. I believe that if you do what you love you will be satisfied with the money and lifestyle that it provides you with.
Robert Herjavec
I tried contacting Robert by email through The Herjavec Group, his tech company, but I didn't hear anything back. I took a chance and  tweeted my question to him and I happened catch him while he was online and he gave me this reply in Twitter-lingo almost immediately:
  1. $ is not the key to happiness
  2. u need $ to take care of those u luv
  3. the more u luv what u do, the more $ u make
Brett Wilson
I also caught Brett Wilson on Twitter and, when I asked him what three things we should teach kids about money, he referred me to a series of six Mastermind YouTube videos to hunt for the answers. I found the videos and an hour later came up with this:
  1. Wealth is not the true measure of success (from video 1 of 6).
  2. People matter more than money (from video 3 of 6). Brett's priorities are health, family, friends, life-long learning, and community.
  3. Follow your passion and talk to kids about the possibility of earning a living as an entrepreneur (from video 4 of 6).
I emailed Jim Treliving through the Boston Pizza Foundation, but to date have not had a reply.

I do hope to hear back from both Brett and Jim because I do believe that each of the Dragons are at this point in history (and more than any finance minister) the public face of money and all it means in Canada. They are playing an important role in getting teachers, parents and even little Canadians like my daughter excited and curious about learning about money. And while Kevin says that nothing matters more than money, these Dragons' views on money and financial literacy matter a great deal, maybe even more than money.

With its sixth season well underway I say hang in there with those long, dark twelve-hour taping days in the Den and keep teaching us about money.


Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Tuesday, September 28, 2010

Not an Entrepreneur? You Should Read this Dragon's New Book

REVIEW

Driven: How to Succeed in Business and in Life
By Robert Herjavec
50 chapters
295 pages
$32.99 CAN / $19.49 at Costco
$$$$ out of $$$$$


When auditions for Dragons' Den came to Vancouver earlier this year more than a few close friends and family members suggested that I apply to be on the show. That was weird, I thought.

I'm a self-employed writer and storyteller. I don't have a boss. I am a ball of creative fire that has the ability to make contests, courses, workshops and stories go from idea to profitable reality in a relatively short period of time. I have sacrificed security for a risky, chaotic work-style that I would not trade for any amount of cash. The thought of settling for a job makes me want to cry.  But I am not an entrepreneur. That word does not apply to me. Or so I thought until I read this book and had a classic "aha" moment.

It's funny how things converge when you work really hard at what you love. And a bunch of random stuff has happened in the last four months that has lead me to this "aha" moment.

That random stuff consists of: taking my storytelling skills into the arena of financial literacy with my new YouTube show, Money & Me; a brief appearance on the Lang & O'Leary financial news show; talking on the phone with David Chilton, author of The Wealthy Barber, about kids and gold coins; launching this blog; being invited to speak at the upcoming BC Business Educators Conference on the topic of using social media to develop financial literacy; and now reading and reviewing this book. Aha! I am an entrepreneur and a business woman...not just a writer and storyteller.

And what's so cool about this revelation is that it drives home the truth that language shapes who we imagine ourselves to be and how we imagine ourselves operating in the world. I don't come from an entrepreneurial family and I didn't take business courses in high school or university, so entrepreneurship, and all the business vocabulary that goes with it, had never really penetrated my imagination until I could put this convergence of random stuff in my work-life within the context of entrepreneurship as Herjavec describes it in this book.

And speaking of convergence, as I have been reading and reviewing Driven, I have also been writing a story for episode six of Money and Me which is all about teaching kids what an entrepreneur is. After all, getting a job (see episode one of Money and Me) isn't the only option when it comes to making a living and we should talk about that with our kids. But it's hard to do that when you don't know the language, which is why this book is such a powerful financial literacy tool for parents who might not be entrepreneurs themselves.

For parents who are entrepreneurs (like me, I'm happy to know), there is lots of great advice for taking your business to the next level no matter where you happen to be on your never-ending journey toward that hypothetical and highly subjective finish line we call success.

Indeed, whether or not you are chasing Dragon-like success, Driven is well worth the full jacket price when it comes to exposing your imagination, and that of your kids, to the language of entrepreneurship.


Copyright 2010. Laura Thomas. All Rights Reserved.
To reprint contact Laura at money@agentstory.net

Saturday, September 25, 2010

Is Oliver Stone's New Wall Street Movie Worth the Price of a Sitter?

REVIEW

Wall Street: Money Never Sleeps
This title does not fit the story.
Twentieth Century Fox 
They spent $50 million on this sequel to the 1987 classic, Wall Street.
2 hours 16 minutes 
Way too long!
PG for strong language 
And you need to know at least some financial jargon or a little bit about the 2008 crash.
Stars Michael Douglas 
He isn't in the film enough.
Written by Stephen Schiff and Stanley Weiser & Allan Loeb 
Two writers who are not fluent in finance and a stock broker who can't write.
Directed by Oliver Stone 
In 2007 he wasn't interested in directing the movie, but after the 2008 crash he changed his mind, a big mistake.

My rating $$ out of $$$$$

It's probably not fair to the producers that I went to the movie hoping for two things: one, that I would be entertained by an enthralling story and powerful characters; two, that I would improve my financial literacy a little bit by learning something new about high finance and the workings of Wall Street. Well...as the Beach Boys sang, "Help me, Rhonda! Help, help me, Rhonda!" It was a grueling 133 minutes of my life that I'm never getting back again. Never mind the waste of money.

Which got me wondering, how much did Twentieth Century Fox spend making this film? The final total: $50 million. That's not expensive as movies go and I suppose one could argue that it was money well spent as it employed hundreds of actors and production folk for a couple of years. But is the film worth spending your money on: $75+ for two tickets, snacks, gas, parking plus three hours of babysitting?

No way. Save your cash. Wait until it comes out on video. If you're hungry to see bankers freak out during the 2008 Wall Street crash, you can watch the Meltdown documentary series on CBC (see my reviews below). Put that extra $75+ in your savings account and move on.

On a side note, if you haven't already, rent the original Wall Street movie and watch it with your teens. It's meets my requirements of being both educational and entertaining, a $$$$ out of $$$$$.


Copyright 2010. Laura Thomas. All Rights Reserved.
To reprint contact Laura at money@agentstory.net

Thursday, September 23, 2010

What They Heard About Kids & Money: Canada's Task Force on Financial Literacy Releases Summary Report

In the wake of the financial crisis a light bulb went off in someone's head on Parliament Hill. "Duh...maybe there is a connection between financial illiteracy and the economy." And, ta-da! a task force was born.

In June 2009, our Finance Minister, Jim Flaherty, appointed 13 brave souls (including bankers, financial consultants, publishers, a journalist, and professor) to the Task Force for Financial Literacy and asked them to figure out how the government can "formulate a national strategy to strengthen the financial literacy of Canadians."

Yesterday, after months of zero activity on Twitter (FinLitTaskForce) and Facebook, they finally released a summary of what they heard from the public. They called it "What We Heard." Let's take a listen to the parts that relate to teaching our kids about money...

What is the Task Force's definition of financial literacy?
Having the knowledge, skills and confidence to make responsible financial decisions.

What did the Task Force hear from people about existing educational efforts?
That many outside groups (credit unions, curriculum developers, volunteers, some government agencies) are having some success bringing financial training to our schools. On the issue of turning financial literacy education over to the schools, concern was expressed for teachers "who are often overburdened with existing teaching requirements and who may feel uncomfortable teaching in this subject area, especially if they themselves are lacking in financial expertise" (p. 10).

What fundamentals do current educational efforts consist of?
Budgeting, consumer education, borrowing and, to a lesser extent, compound interest.

What did the Task Force hear about "when" financial literacy should be delivered?
"There was wide agreement that financial literacy should be offered throughout the elementary and high school years" (p. 11-12).

What did they hear about "how" it should be delivered?
Apparently there were conflicting opinions especially over whether financial literacy should be a stand-alone subject area or integrated into math, economics, social studies or home economics.

About "who" should deliver it?
Again their was conflict over whether or not it should just be teachers or teachers with the help of financial sector volunteers.

Overall, what did they hear?
That there should be more financial literacy education in the school system and that even though education is not the jurisdiction of the national government that Ottawa should nonetheless "lead or support the national effort to introduce financial education in the provincial and territorial school systems by identifying core, age-appropriate financial literacy topics" (p. 13).

It's hard to imagine what this is all going to translate to in the end when it comes to educating our kids about money. A national program in the context of our federal system seems to be a recipe for wasting tax payer dollars. A better idea might be an ad campaign aimed at families, something fun and provocative that gets us talking about money in the course of our daily activities. Or what about creating a Kids CBC show that builds financial literacy one word and concept at a time...hmmm...I wonder if Agent Story is available?



Copyright 2010. Laura Thomas. All Rights Reserved.

Tuesday, September 21, 2010

Episode 2 of Meltdown was a Let Down: Except for the Idea of Global Financial Interconnectedness

REVIEW

This will be brief because there really isn't a ton of financial literacy knowledge that we can wring out of part two of Terence McKenna's documentary series The Secret History of the Global Financial Collapse: "A Global Tsunami." In fact part two is largely a rehash of the first episode, minus some of the cool graphics.

From the trailer at the end of the first episode, I thought that episode two would focus on unemployment and homelessness. But in fact the bulk of the hour is spent reviewing the "tsunami" allegedly created by US Treasury Secretary Hank Paulson when he decided on September 17, 2008 to let Lehman Brothers fail. McKenna's tsunami story almost entirely focuses on the reactions of financial districts, CEOs and finance ministers, not on that of regular people, as promised. Like I said, it was a rehash of part one.

That said, there was one thing that seeped up through the sometimes slide show-like documentary: the idea of global financial interconnectedness. Foreclosing homes in California led to Britain putting Icelandic banks on their list of terrorists (a list which includes Al-Qaeda) and to fifteen million factory workers in China suddenly becoming unemployed. Our money is seriously, profoundly connected with all the other money in the world. And that is something our kids need to know.

Global financial interconnectedness is an important concept. It's something that we need to talk about openly while were standing in line at the bank. I think it's critical that our kids understand that diversification is not a guarantee when comes to recessions and that we need to be picky when deciding which financial institution to do business with. Just ask all  those people in multiple countries who lost their jobs or their savings in the meltdown.

And I do hope that in episode three McKenna will indeed bring us down from the lofty heights of Wall Street to the front lines where the rest of us are. I will tune in for sure, even if "Meltdown" episode three is another let down.

Copyright 2010. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net

Friday, September 17, 2010

Can Compound Interest Make Me a Millionaire?

I am a good saver, make that a great saver, but I am not great at growing my money and I really want that to change. Indeed, the four pillars of my curriculum as a financial literacy storyteller are: earning money, spending money, sharing money...and growing money. How great it would be if I could say at the end of my show, "By the way, I'm a moderately successful storyteller and a millionaire."

To that end (growing my savings to the million-dollar mark) I have been learning about compound interest, the interest you can earn over time on your savings + the interest on your savings. But being an "arts major" as my friends like to remind me, I'm not a math whiz so it's hard for me to visualize how compound interest works. So I am going to work through the math and see if I can answer my own question: can compound interests make me a millionaire?

Laura, age 41, hypothetical amount to invest $100,000, goal one million dollars

Let's say, I hear about a monthly income fund (a mutual fund that that pays you a set amount every month and may also, hopefully, grow in value over time) that costs 5 dollars per unit and pays 6 cents per unit every month for a total of 72 cents per unit every year (12 x 6 cents = 72 cents) or 14.4% annual interest.

With $100,000, I can buy 20,000 units. Over 12 months I am paid monthly to a total of $14,400 per year (20,000 units x .72 cents = $14,400). At the end of 12 months my investment is now worth $14,400 + $100,000 = $114,400.

Now even if I don't buy more units with "fresh" money and I just let the $114,440 buy more units, this is how long it will take me to be a millionaire. I am assuming that the value of each unit stays at $5 and that the monthly payment stays at 6 cents (this of course can change at any time and you need to stay on top of it).

Initial Investment $100,000 / 20,000 units
All earnings are reinvested to buy more units
No additional outside cash is added to the original $100,000
In year 1, I earn $14,400 and buy 2880 units for a total of $114,400
In year 2, I earn $16,473 and buy 3296 units for a total of $130,873
In year 3, I earn $18,846 and buy 3769 units for a total of $149,719
In year 4, I earn $21,560 and buy 4312 units for a total of $171,279
In year 5, I earn $24,665 and buy 4933 units for a total of $195,944
In year 6, I earn $28,216 and buy 5643 units for a total of $224,160s
In year 7, I earn $32,279 and buy 6455 units for a total of $256,439
In year 8, I earn $36,927 and buy 7385 units for a total of $293,366
In year 9, I earn $42,244 and buy 8448 units for a total of $335,610
In year 10, I earn $48,327 and buy 9665 units for a total of $383,937
In year 11, I earn $55,285 and buy 11,057 units for a total of $439,222
In year 12, I earn $63,246 and buy 12,649 units for a total of $502,468
In year 13, I earn $72,354 and buy 14,470 units for a total of $574,822
In year 14, I earn $82,772 and buy 16,554 units for a total of $657,654
In year 15, I earn $94,691 and buy 18,938 units for a total of $752,345
In year 16, I earn $108,327 and buy 21,665 units for a total of $860,672
In year 17, I earn $123,926 and buy 24,785 units for a total of $984,598

By this time my investment is paying me about $12,000 per month so in February of year 18, I will reach my goal of being a millionaire. And, I'll only be 59 plus my money will be making about $140,000 a year for me. Awesome and totally worth saving for. I wonder if I'll still be telling stories then.

That was a lot of math, but a good lesson, especially for an arts major. If you want to play with some numbers without the carpel tunnel, plus take into account the rate of inflation, check out the Bank of Canada website. They have easy-to-understand interest rate calculators. Have fun and don't forget to share the fun with your kids. If anyone has the time to compound their way to a million bucks, it's them!

Copyright 2010. Laura Thomas. All Rights Reserved.

Wednesday, September 15, 2010

Growing Your Money: How, Where and When to Buy Gold Coins

Beyond having a small part of my portfolio in a precious metals mutual fund, I had never, until recently, thought about buying gold itself, as in a gold coin. But on September 3, 2010, the phone rang and I learned something.

The day before, I had the following investment question answered on the Lang & O'Leary Exchange (go to the last 3 minutes of the show): "How should a six-year-old invest the money she has in her savings account?" My question was answered by guest host David Chilton, author of the Canadian bestseller, The Wealthy Barber.

Chilton did not mention gold on the show but the next day he called me and suggested that my daughter consider buying a one-quarter ounce maple leaf 99% pure gold coin. I had to ask him where to buy one and he told me that Scotiabank under the name ScotiaMocatta sells them. So I called our local Scotiabank branch to get the scoop and here are the steps we are going to have to take to purchase a gold coin.

First, in order to buy a gold coin in her name, my daughter has to have photo ID (such as a passport) plus a social insurance number. Then we have to go to the branch between 9 a.m. and 1 p.m. (for those of us on Pacific Time) on a weekday while the markets are open. What happens is that when you arrive at the reception desk, they have to call in and get you a quote based on the current price of gold. Then you pay (cash only if you are not a Scotiabank customer) and place your order. The coin is shipped, at your expense, to the bank branch and you have to pick it up.

My daughter has not picked up her gold coin for two reasons. First, the price of gold is at an all time high (check the live charts here). Second, we have been toying with the idea of shopping around to get the best deal on the commission or service fees that you have to pay when you buy a gold coin.

Some friends have recommended certain coin dealers but I'm not overly confident about those. I think that in the end we probably will buy from the bank but when...I don't know.

Do we wait a few weeks and see if stocks go up and gold goes down? Or are investors really freaking out about the instability in the market and will the price of gold just keep going higher? It is possible that yesterday's high of $1276.50 USD (the price is always quoted in USD) will seem like a bargain a year from now.

Anyway...whether she buys her coin today, tomorrow or next year, the main thing is that my daughter is learning how to watch prices and read charts and to understand the instability and risk that comes along with growing your money.

Copyright 2010. Laura Thomas. All Rights Reserved.

Episode 5 Money & Me: Credit Cards

Sunday, September 12, 2010

Is "Meltdown" Documentary Series Worth Watching?

Last week, the first episode of a new, four-part documentary series by Canadian writer and director Terence McKenna aired on CBC. The series title is Meltdown: The Secret History of the Global Financial Collapse. Episode one is "The Men Who Crashed the World." And it was about men, powerful men. (Where the women were is a question that I will tackle in a future post.) But it wasn't the names and faces of CEO's and government financial leaders that held my interest, it was the time line that I found fascinating and truly educational.

And it wasn't just the time line, which ran from the boom-days of 2004 through September 2008, that I found instructive. I really liked how McKenna takes viewers around the world documenting the journey of toxic (likely to default) American mortgages from the U.S. to the rest of the world. From Iceland to Dubai to Paris and London and back to New York, the documentary makes it clear that it was a global inability to value those toxic mortgage products (called "mortgage-backed securities" or "securitized debt") that caused banks to start bleeding cash when the real estate bubble popped.

There are tons of interesting facts, and a few shocks, to be had in this first episode and I look forward to watching episode two, which promises to turn the camera away from the money men to the fallout: unemployment, homelessness and the global financial tsunami that hit the world in September of 2008.

This is not a documentary that I would watch with young children. There is a lot of advanced financial vocabulary and the story unfolds at a rapid pace. However, I would feel very comfortable watching this with a high school student but I suggest recording it so that you can pause and explain at any time.

Note that Canada is not really a player in this story with one exception. Jim Flaherty (our Finance Minister) is interviewed briefly about a panicky phone call he received from Hank Paulson, the US Treasury Secretary under George Bush, in 2006. Paulson, apparently, was worried about the real estate boom and sub-prime mortgages (costly loans made to people with very poor credit).

Though we Canadians, are thankfully, not part of this story, I highly recommend that you check your CBC listings, watch a rerun of this episode and tune in for episode two.

Copyright 2010. Laura Thomas. All Rights Reserved.

Friday, September 10, 2010

Is Canada a "Tweet" Behind the U.S. on Financial Literacy Initiatives?

I have been following someone or something on Twitter called "Fiscal Literacy." It's American, that I know, and every day there are half-a-dozen tweets with links to news about the activities of the Treasury Department's Financial Literacy and Education Commission. From what I have read, and not read, the U.S. seems to be leaving Canada more than a few tweets behind when it comes to financial literacy.

One thing that caught my eye recently was a call from the Treasury for public input on determining the core competencies that Americans should have when it comes to personal finances. The public has until September 12th to email or call in with their suggestions. Very cool--if you are American! (To get the details, you can read a good summary article in the Washington Post that ran a few days ago.) But back to our federal government and financial literacy. What are we doing to build financial literacy in Canada? And are we even talking about it?

As part of the Economic Action Plan, Jim Flaherty (our Finance Minister) created a Task Force on Financial Literacy. So, this spring, a small group of Canadian professionals set out on a cross-country journey to find out what Canadians don't know and need to know about money. They wrapped up their consultations in May and are set to report to Flaherty at the end of the year....and there hasn't been much news since.

I subscribe to the Task Force newsletter (and follow them on FB and Twitter) and during the entire summer I only received one update which is a link to the consultation document, an online appendix of all the letters that the Task Force received from business, educators and individuals. That was a month ago and, by the way, their last tweet was May 11th (FinLitTaskForce) and last Facebook wall post was May 13 (Financial Literacy Task Force).  Not good. If the Task Force leaders aren't excited about tweeting and posting on this topic then I think we are in trouble.

With our ability to move through the recession with at least a little grace, and our position as a world leader in banking regulation, Canada shouldn't be a single tweet behind any nation when it comes to financial literacy or using social media to educate and spread the word. To our credit, our Task Force has more posts on its FB page than the U.S. Commission does, and our Task Force is on Twitter, while the U.S. Commission is not. But social networking only works if you network.

Are we behind the U.S. when it comes to financial literacy initiatives? It seems so. Then again, if the Task Force would send us a tweet once in a while...we might be pleasantly surprised.

P.S. I just sent the Task Force a note on FB and Twitter saying that I'd love to have an update. I'll let you know what happens!

Copyright 2010. Laura Thomas. All rights reserved.