Category Archives: Kids

Frugal Idea: How I Take Money From My Kids!

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Taking Money from my kids

Taking Money from my kids

I’ve mentioned in the past how my kids get a weekly allowance based on their ages (son, age 9 = $9, daughter, age 6 = $6).  It’s been an inconvenience getting their allowance money to the bank.  It’s never been a fun task (unlike counting the money in their piggy banks!). 

So now I’ve decided just to take their money, and then transfer money from my personal bank to their UTMA brokerage accounts.  UTMA stand for (Uniform Transfers To Minors Act), and it’s a mechanism that will allow a minor to have an account in their name, but controlled by an adult.

 

I have a Schwab brokerage account, and two Schwab UTMA brokerage accounts (one for each child).  I also have my primary bank link to my brokerage account so I can do transfers between my bank and my Schwab account. 

Since starting my Lunch Experiment, I have reduce my spending by typically over $40 a week!  I no longer have to withdrawal as much money from my bank!!!  Now I take their allowance money, and then transfer the exact amount of allowance money out of my bank account to my Schwab account, then to their UTMA accounts (whew!). 

I know what you are thinking… This sounds like a hassle, and well if I did it weekly, it would be.  However, I only do this once every 3 to 4 months.  This makes the task very bearable!

Now for the green icing on the cake! :

  • I no longer drive to the my son and daughter’s banks to deposit their allowance money!!
  • I don’t withdrawal money out of my banks as much, since I just take their money.
  • This was a chore that use to take over an hour, but now only takes 5 minutes!
  • I’ve effectively reduced my carbon footprint, by cutting out the “out of the way” drive!
  • My kids get a better rate of return, since I invest their money in a diverisified portfolio of stocks.
  • I feel like I’ve created an opportunity for them to make more money this way… It’s a good feeling!

Little things like this add up, and in this case, in multiple way!  This is another win-win for us! 

Do you have any small but clever ideas that make your life better or enable you to save a little money, that you’d like to share?

 

 

 

 

UPDATE:  A reader asked me how difficult it was to setup the Schwab UTMA accounts for my kids, because they didn’t see any UTMA reference on the account types.  Well that’s because it’s called a “Custodial Account” at the Schwab website and semi-hidden under the category “College Savings”.   Below are the steps that I followed to get to the Custodial Account application:

  • Go to www.schwab.com (Open a browser and type that text in).
  • Click on “Open an Account” in the brownish? bar.
  • Next click the white tab that is labeled “See all Account types“
  • Next under College Saving (I’m not sure why the have it there…), on the right click “Custodial Accounts“
  • Under the “Apply Now” text, choose one of the 2 options.
  • I think it’s best to click the mail the application to you (This is a good way to do it!, after all what’s the rush?)
  • If you choose to “Download the Application“, then…
  • If you read the form, it states that this account doesn’t necessarily have to be used for educational purposes.
  • Fill out as much of the form as you feel comfortable with (I choose not to  fill out any of it, I printed it out in first, then filled it out for security reasons, but I a wee bit paranoid).
  • Mail it to the address that was on the screen.  And then wait a week or so…
  • Okay, so it was a bit more complex than I remember.  Once it up and attached correctly, it’s sweet!

Income Loss From My Wife Being a Stay at Home Mom

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After posting “How I Have Lost Over Half A Million Dollars Having Kids, So Far!”, I started thinking about how many of my family and friend’s spouses work.

Let me start with our parents… Both sets of parents work.  All the people I know at work, their spouse works.  My boss who makes at least twice as much as I do, spouse works.  Where I live, only one other neighbor’s spouse doesn’t work, the rest do.  My college-educated sister and brother-in-law (great people), both work.  My sister is having a baby in Feb. 2010, and she claims she’s going back to work a few weeks after the baby is born.  They already make more than me…

So, I decided to go out to the website:  money.com to use their calculator for net worth and see what the median (the median, mind you) net worth would be for someone in our conservatively theoretical income range!  The number came out to be $644,100.

Missed Income

Missed Income

And that is the median!  Both my wife and I are very frugal and based on our frugality habits, I recalculated the number…  I figured for us it would be somewhere in the $800,000 to $900,000 range, Grrrr!

Who is to blame for this?  Well, unfortunately, me!  My wife and I discussed whether she would work or stay home raising the kids years before we had our first child.  I told her once I make over a certain amount, she could stay home.  Ironically, I accomplished that number more quickly then I imagined, and so she stayed at home after my son was born. In hindsight, I don’t think this was the most prudent move on our part.  It especially hits home seeing my 20 something sister start to pass me already with respect to net worth, did I mention that both she and my brother-in-law are both studying for their MBAs?  In a future post, I’ll have to tell the story about how my sister won a free house. So now that I know I’m behind compared to our theoretical income group’s class, what can I do?  I’m thinking it’s time to start some side hustling (frugaldad.com’s coined-phrase).

How do I feel about my discovery?

Sad, but not too disappointed.  My kids are doing very well in all aspects of their development.  It’s a hefty price to pay though, especially when we’re practically the only ones doing it these days in a world of the two-income earner households.  Shoot, If we had that money now, I could go into a semi-retirement state if I wanted to (I’m not old enough to think about that now though)… Oh well, the moral of the story is, think twice before and your significant other decide to quit work to raise your kids.

A Stock Market "What If" from My Youth

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From the time I was 5 years old to about age 18, I had an uncle that would buy me shares of stocks every year for birthdays and Christmas.

DuPont Stock Certificate

 

He was pretty good at it.  By the time of the start of my junior year, the portfolio was worth about $15,000. Unfortunately, I was short on cash for my final college years, so I cashed in most the stocks so that I could paid for my remaining years of college. I still had some money left over, so I put the remaining cash in a savings account that I would mostly use up for rent.

Lately, I’ve been wondering how much that money would be worth if I just left it alone.  By my calculations, it should have worth more than $30,000, and maybe even close to $40,000.

Even though the money went to good use, it was nice know that I had that money.  Some days, I play devil’s advocate and regret using it, always asking “what if”…

I think it was great of my uncle to be so generous and wise.  I’ve taken my uncle’s lead and investing small amounts of money in the stock market for my kids and a 529 program. Hopefully, they will be more wise with their money than I was.

– D

Kids Allowance Amount

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I decided to start a weekly allowance for both of my kids after they had their 5th birthday.  I basically decided to keep it simple.  I just give them $1 for each year of age ($5 for my 5-year-old, $9 for my 9-year-old).

Depending on how well I’m doing financially on down the road, I might increase the amounts for both kids once they reach a certain age.  Maybe something like this:

Age Allowance
1 thru 9 $1 for every age year
10 thru 16 $1 per age + $5
16 thru 18/21 $1 per age + $10

So: if my son were 12, then he would get $17 weekly.
if he were 17, then he would get $27 weekly.

I marked “18/21” in the table above, because I haven’t decided yet when to stop providing an allowance to my kids. I might also increase it to $50 once they start college. I’m not sure, It’s still up in the air on that one too.

Update:  My son is now 11 years old as of 2012, but I forgot about the extra five dollars I was going to give him.  Quite honestly though, money has been tight for me lately, so I might delay that increase until he is 13, 14 or 15.  At Age 16, I will make sure he gets the extra $5 plus his age.

Hope you enjoyed my model,

-MR