воскресенье, 6 ноября 2016 г.

How to Teach Your Teen to Begin Saving Now to Buy a House at Age 30

How to Teach Your Teen to Begin Saving Now to Buy a House at Age 30


How to Teach Your Teen to Begin Saving Now to Buy a House at Age 30


Now this is pretty awesome! I wonder why people have not commented yet? Do most people think this is unrealistic because the reward is so far off? Not sure. But I have to say that this has sparked a little idea in my mind for our 8 and 5 year olds. Thanks so much for this! Also, do you happen to have the link to the retirement article you mentioned in this post?


I would have to go look for it. It’s been awhile since I saw it and I don’t remember where it was. I will look tomorrow.


I’m not sure if it’s because it’s far off or because they aren’t sure their teens can save this much, but I think it’s totally doable for a motivated teen. No one has given any negative feedback (I’ve had other positive comments in social media). I would love to hear what more people think though.


One question I have is regarding paying for college. As a teen I worked starting at about 15 but I remember putting about 70% of my income away for college. My grandparents contributed some to my college needs but my parents didn’t have good enough jobs to contribute much. When I graduated I owed my grandparents around $10,000 in college/car bills but I went into nursing and easily payed it off in less than a year. I came out with only an emergency fund in savings, but was debt free within a year of graduation which is huge for my generation. How would you recommend trying to swing both? saving for college and a house? or are you assuming that college is going to be paid for another way (family, grants, loans)? We are stable financially even though we’re in the less lucrative career option of teaching overseas, but we want to be able to give our kids the kind of freedom we had of not amassing college debt. I really like the idea of teens saving for after college but can both be done?


Our expectation is that we will help pay for college for Ben. Coupled with whatever scholarships he can procure as well as working to help pay for it, hopefully he can manage both. We’ll also go the cheapest route for college as possible (distance learning, dual credit in high school, etc.).


Actually, I think he’d have a whole lot more if he parked that money in an investment account.


A good strategy might be to put the money in a Roth IRA(although you might have to be 18 to open one). Then you could pull the $40k principal for the house and leave the rest for retirement. Normally, you can’t touch the money in an IRA before 59.5 years without being penalized, but you can pull the principal amount from a Roth, and they have special first-time homebuyer rules to take out money for a down payment.


Great article!


Great idea! Thanks for sharing!


This is a good idea. My goal has always been that my children be able to move from my house to a home of their own that they have purchased (goal age is 21). I have two adult children (ages 27 & 25) that have moved out, struggle financially, and, therefore, are still renting. I have another adult child (age 23) that is struggling financially but doing better now than in the past and still lives at home.


Now, my son got married last year and bought a house this spring (at age 21). He is very financially responsible. My 20 yo daughter is set to buy her house around her 21st birthday. She will be the first to go from my home to a home of her own. It is exciting to watch your children be financially responsible and doing things the right way (many times it is opposite from the way we did it). Seeing them purchase a house that is lower in cost because it is fiscally responsible rather than putting themselves in a debt that could cause a financial hardship should an emergency arise is one think that makes me proud.


The goal age that I have for my children is 21. I would love to see them buy a home before they get married (even my girls). My daughter’s plan is to rent out the other two rooms to friends so that their rent would cover the cost of her mortgage payment. If and when she gets married she will have the option of living in that home with her husband or continue to rent out that home and purchase a home with her husband.


Teaching your children financial responsibility is very important. I don’t feel that children need a lot of spending money. After their dad left, I started a savings plan for each of my children that they had to follow as long as they were still in school. All money that they earned was to be split into four categories: 10% tithe, 50% long term savings, 25% short term savings, 15% spending money. Long term money could not be touched at all unless it was to buy a car or house. Short term money could only be spent with my approval. Spending money was theirs to budget however they wanted. They have to look ahead to events and think about what things they will need money for. Budgeting 10-20 is a more reasonable amount for a teen to try and budget on their own. One time they don’t have money to go out with their friends because they have spent all their spending money is about all it will take for most kids to rethink their spending habits.


Love the idea of saving, but in Surrey British Columbia Canada you can barely buy a one bedroom apartment for $180k. It’s a start though for sure.


One of my goals during Ben’s high school years is to teach him many life skills, including financial responsibility. This is an area in which my husband has always excelled (even as a young, single man), but I have not. I grew up watching my single mom struggling to pay bills and using credit cards to get by, amassing quite a mountain of debt in her younger years. I followed suit, never being taught that credit cards are one powerful way to get poor. I don’t want this for Ben.


Recently, he overheard a conversation between my husband and me, when we were discussing the balance of our mortgage. Remembering that conversation, Ben later asked me how buying a house worked. This began a discussion on the ins and outs of home ownership, including financing such a large purchase. When we came to the part of needing a large sum of money up front as a down payment, his eyes got huge — “How do people save that much money??!!”


So, we sat down and figured out how he could possibly save enough money, beginning now, to have a down payment to purchase a $180,000 house by the time he is 30. I remembered reading an article awhile back that showed a method of retiring with a million dollars in the bank and thought perhaps that method scaled down for a teen might be helpful here.


We began by choosing an amount of money he could earn now with a little effort, just by doing jobs in our neighborhood (mowing lawns, walking dogs, pet sitting, etc.). Our weekly figure in the beginning assumes he can earn about $70/week (giving him $7 to tithe, $30+ to save, and the rest to spend).


The concept is simple — begin with $30/week, and continue increasing the savings amount by $3/week every year on his birthday. The idea is that after one year of saving weekly, another $3/week will not be that noticeable. Also, as he gets older, he will likely have the opportunity to earn more money.


Using this method, that initial $30/week amount will have doubled by the age of 25 when it’s likely he’ll be out of college and working a full-time job. We did discuss how this will likely mean a few lean years in college, a time when money may be short. And that he may need to sacrifice extra spending money in order to continue saving during those years.


This is how it plays out to equal enough money for a nearly $40,000 savings by the time he turns 30 (enough for a 20% down payment on a $180,000 house):


Age 15 @ $30/week = $1560


Age 16 @ $33/week = $1716


Age 17 @ $36/week = $1872


Age 18 @ $39/week = $2028


Age 19 @ $42/week = $2184


Age 20 @ $45/week = $2340


Age 21 @ $48/week = $2496


Age 22 @ $51/week = $2652


Age 23 @ $54/week = $2808


Age 24 @ $57/week = $2964


Age 25 @ $60/week = $3120


Age 26 @ $63/week = $3276


Age 27 @ $66/week = $3432


Age 28 @ $69/week = $3588


Age 29 @ $72/week = $3744


Age 30 Total Saved = $39,780 (20% down payment on a $180,000 house = $36,000, with a cushion for extra costs)


Click on the image below to download this saving schedule as a PDF.


Given that you would likely put this money into a savings account, there would be a small amount of interest earned as well (that might be our next lesson!). Also, bear in mind that house prices vary from state to state, and even within cities and towns within a state. Right now, $180,000 will buy a pretty nice house in Kentucky. Of course, it’s nearly impossible to guess how much the value of houses will change in the next 15 years, but we have owned our home for 13 years and the value has not changed that much, so it’s possible $180,000 will still buy a decent house in 15 years in areas of the U.S. that do not have an outrageous cost of living. If you live somewhere like California or New York, you may want to adjust the chart for your teens to accommodate for this.


Ben was pretty impressed with how quickly the money adds up, and likes the idea of being able to buy his own house at such a young age (much younger than most people are able). In fact he asked me to print out the schedule to hang on his wall to motivate him both to seek out ways to earn money and remember that saving is important for his future goals.


This type of schedule can work for your teens whatever their goals. If they continued this method until retirement age, they would have quite a little nest egg for retirement without investing (ie: risking) a cent. Of course, they would also likely be able to increase the weekly savings amount once they are in their careers earning a higher wage.


Doubling the base savings amount at age 30 to $140/week, and continuing to increase that by the $3 rate on his birthday every year would mean your child could retire at age 65 with over $300,000 in the bank with no investment risk. Even with subtracting out the down payment on the house at age 30, that’s nearly a quarter of a million dollars left in savings by the time he retires.


I wish I had been taught to do this at his age. I would love to have been able to save this kind of money so easily! This method can work for those older than 15 as well, if you can work to catch up to the total savings amount for your age. For example, if you (or your child) is currently 21 years old, if you (or he) began at the savings rate for a 21-year-old ($48/week), you (or he) would have $28,080 by age 30. After just 2 more years of savings, the total savings would quickly rise to $36,036, only delaying the house purchase by 2 years.


This would also be a great method for parents to use to begin saving for college for their children. If you begin at birth, by the time your child is 18, you will have saved over $50,000 to help with college expenses. For someone like me who only has one child, this would have been totally doable had I known how to do it. Of course, for large families, unless your income is quite high, this might not work for each child, but even if you split it among all of your children, it would help. And you can continue saving for the younger kids as your older ones move through college. You can always get your children started saving at a younger age as well.


I want Ben to be able to buy a house by age 30, not drown in debt because we didn’t teach him how to easily save money and use credit responsibly. I think most parents feel that way. Beginning to teach this concepts early will hopefully prevent any financially irresponsible behavior as they enter young adulthood. This is just one way to do that. I’ll be sharing more ideas in the coming months.


How are you teaching your teens financial responsiblity? I’d love to hear your ideas as well. Let’s chat in the comments.


If you found this article helpful, you might also enjoy How to Give More by Being a Strategic Shopper


Original article and pictures take http://benandme.com/2016/03/teach-your-teen-to-begin-saving-now.html site

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