Your KPI for personal financial success: Net worth

Financial Success

HOW does one measure personal financial success?

Some think it is to do with the balance in your bank account while others use their salary as a guideline.

If you’re one to keep up with the Forbes list of top wealthiest, however, you’ll see that the measure of financial success is neither of these two values.

For example, topping the list is none other than Bill Gates with his net worth valued at a whopping US$79.2bil. Locally, sugar, palm oil, and real estate tycoon Robert Kuok take the spot with his net worth commendably valued at US$9.1bil.

In my previous article, I have outlined how investing with a net worth in mind is far more efficient as compared to only managing your investments with return on investment (ROI) in mind. ROI is in fact merely a single factor of several which affects the end result – your net worth.

What is net worth and why is it important?

Net worth is essentially a monetary value from which is derived after totalling up your total assets – such as the value in all your bank accounts, shares investments, unit trust investment, the current value of your properties, EPF, and so on – and then subtracting the total value of all your outstanding debts such bank loans and taxes.

While net worth is used to gauge your current financial standing, it also serves as an excellent key performance indicator for investing. It quantifies each good and bad financial decision you make thus rendering it one of the best measures of one’s personal wealth. How does this work?

Let’s say you decide to pay more than your monthly mortgage repayment to settle your loan sooner. While you think your wealth has shrunk due to the fact that you have less cash to your name, in the long run, you benefit from lower interest charges, therefore increasing your net worth.

For medium to long-term investments, it makes better sense to take a little risk and invest in a few blue-chip stocks than to take the risk-averse path by keeping any surplus cash in a bank account. The quality and payoff of the decision to invest in blue-chip stocks would be reflected in the growth of your net worth some five to eight years from now.

Having a positive net worth also provides you with financial security.

Let’s say, for some reason tomorrow you lose your job. A person with large savings and zero debt (high net worth) would have a more worry-free time in between jobs, as compared to the next person who had a high paying salary but zero in savings and a large amount of debt (negative net worth).

Similarly, a person with a high net worth has the freedom to pursue his or her life’s dreams and ambition even at the expense of drawing a low starting salary. On reflection, a person with a negative net worth will not have the luxury and freedom to do as such.

From this scenario, you can already see the different dynamics net worth provides as compared to the mere value of your take-home pay or the amount in your bank account.

How does one increase net worth?

To increase your net worth, you’ll need to shift your attention to these four drivers:

The four drivers of net worth growth are savings, ROI, risks, and costs. All these factors work in tandem to influence your net worth as a whole.

To increase your net worth, you’ll need to:

Increase your savings

Savings is the raw material needed for your net worth growth.

To increase your net worth exponentially, you need to invest. And to invest, you’ll need to have capital. Thus the more you save, the more investment capital you have at your disposal.

The good news is that, among all the drivers for net worth, savings is within your control. The amount you end up saving annually is entirely dependent on your discipline and saving habits.

For example, you would have accumulated RM549,143.57 at the end of 20 years if you have saved RM12,000 annually with an 8% return. For additional RM48,000 savings per year, i.e. RM60,000, you would have accumulated RM2,745,717.86 instead. The difference that you have accumulated in your savings could go a long way.

In fact, the more you save, the better it is because it makes you less dependent on the other three factors.

Increase your ROI

The higher the ROI, the faster your net worth will grow.

Naturally, a unit trust giving you a return of 8% annually is preferred over fixed deposits with a 4% return. The investment vehicle with a higher return would grow your net worth faster.

Beware of the risk-return trade-off. It is generally understood that the higher the ROI (more than 12%), the higher the risk. You could lose part, if not all, of your investment capital, an outcome that could be a terrible setback to your net worth.

Contrary to what some people might choose to think, ROI is a driver that is not within anyone’s control.

Decrease your exposure to risk

Risks are also beyond anyone’s control.

While you’re taking active steps to grow your net worth, you’ll need to also take measures to protect yourself against any risks of losing your net worth.

The higher the risks, the higher the potential of your net worth being depleted.

Health-related risks, for example, could deplete the net worth you have spent years to achieve.

Without medical insurance, you may have to fork out a lump sum of RM30,000 during a medical emergency. However, for a small monthly fee, you can transfer this risk to an insurance company, thus preserving your net worth value.

Investment risks should be taken into account as well. The Genevva gold scam and the infamous Madoff investment scandal are two perfect examples of investment fraud. Investors had lost millions, many losing 100% of their money because they were blindsided by the upside and failed to consider the risk of capital loss. Those who suffered the loss of their entire life savings also irrecoverably have their net worth affected.

Therefore, always take the time to do your research and due diligence and study your options before you part with your hard-earned money.

Decrease your costs

Most people may not realise this but the cost can be a factor that will deplete your net worth.

Therefore, one should strive to decrease all unnecessary costs that limit net worth growth.

For example, those who have purchased properties at a higher interest rate should strongly consider revising their interest rate now that the rates have dropped.

A difference between a 20-year housing loan for RM500,000 at an interest rate of 8.6% versus 4.6% is phenomenal – with the former, you’d end up paying RM548,995 in interest, where else with the latter, you’d only fork out RM265,672 in interest payment. A quick revision here could save you money otherwise spent unnecessarily.

Another cost to look out for is the cost of estate administration upon death.

Ironically, many of us spend the majority of our energy and waking hours working in one way or another to grow wealth, but fail to realise the one major cost that could cripple all that we have strived for when we pass on.

Estate administration costs can often reach the leagues of hundreds of thousands of ringgit. Drawing up a comprehensive estate plan for your net worth or inheritance could save you and your loved ones from unnecessary costs incurred (for example, legal fees, administration fees, and fees for court proceedings).

Final thoughts

Getting a snapshot of your overall financial health regularly will give you a measurement of progress over time, motivating you to reach your financial goals. As such, net worth should be measured on a regular basis – at the very minimum once a year.

Growing one’s net worth also involves a multi-dimensional approach.

ROI may play an important role in one’s pursuit of wealth, but it is a means to an end, not an end in itself. To assume such would be just like placing all bets on a singular number in a game of roulette.

Most investors make the rookie mistake of focusing solely on ROI as a means to grow wealth without realising that there are other elements at play.

To increase your overall wealth, it all boils down to the four drivers of net worth growth – savings, ROI, risks and cost, and how effectively you manage them.

Now that you know the four cornerstones of growing net worth, it’s time to put it into practice and steer your way to a financially promising future.

Source: http://www.thestar.com.my/Business/Business-News/2015/09/26/Your-KPI-for-personal-financial-success-Net-worth/?style=biz

The 10 Commandments of Wealth and Happiness

I’m now financially independent. I didn’t get this way overnight, nor did I do it by selling books or advice. I did it the same way you can: one paycheck at a time over many years.

One of my young staffers recently asked if I could condense everything I’ve learned into 10 simple ideas that would serve as a guide to those starting out, starting over, or maybe beginning to realize they’re not where they’d like to be. While certainly a challenge, it’s a worthy one. So here goes: the 10 commandments of achieving financial independence and being happier while you do it.

1. Live like you’re going to die tomorrow, but invest like you’re going to live forever

The ease of making money in stocks, real estate, or other risk-based assets is inversely proportional to your time horizon. In other words, making money over long periods of time is easy – making money overnight is the flip of a coin.

Money is like a tree: Plant it properly, care for it occasionally, but not obsessively, then wait.

Stare at a newly planted tree for 24 hours and you’ll be convinced it’s not growing. Fixate on your investments the same way, and you could miss out on a game-changer.

The biggest winner in my IRA is Apple. I don’t remember exactly when I bought it, but I’m guessing it was in 2002 or 2003. My split-adjusted price is around $1/share: As I write this, Apple’s trading at around $126/share. Had I been listening to CNBC or some other outlet promoting constant trading, I almost certainly wouldn’t still own it.

The lesson? Enjoy your life to the fullest every day – live like you’re going to die tomorrow. But since you’re probably not going to die tomorrow, plant part of your money in quality stocks, real estate, or other investments; then hold onto them. Don’t ignore your investments entirely – sometimes fundamental things change indicating it’s time to move on – but don’t act rashly. Patience pays.

2. Listen to your own voice above all others

My job as a consumer reporter has included listening to countless sad stories about nice people being separated from their money by people who weren’t so nice. While these stories run the gamut from real estate deals to working from home, they all start the same way: with a promise of something that seems too good to be true.

And they all end the same way: It was too good to be true.

If someone promises they can make you 3,000 percent in the stock market, they’re either a fool for sharing that information or a liar. Why would you send money to either one? When you hear someone promising a simple solution to a complex problem, stop listening to them and start listening to your own inner voice. You know there’s no pill that’s going to make you skinny. You know the government’s not handing out free money for your small business. You know you can’t buy a house for $300. Stop listening to infomercials and start listening to yourself.

3. Covet bad economic times

Wealth is realized when the economy is booming, but that’s not when it’s created. Wealth is created when times are bad, unemployment is high, problems are massive, everybody’s freaking out, and there’s nothing but economic misery on the horizon.

Would you rather buy a house for $400,000, or $200,000? Would you rather invest in stocks when the Dow is at 12,000 or 7,000?

Nobody wants their fellow citizens to be out of work. But the cyclical nature of our economy all but assures this will periodically happen. If you still have a job, this is the time you’ve been saving for. Stop listening to all the Chicken Littles in the media: The sky isn’t falling. Get busy – put your cash to work and create some wealth.

4. Work as little as possible

A friend of mine, Liz Pulliam Weston, once wrote a great story called Pretend You Won the Lottery. She asked her Facebook fans to describe what they would do if they won the lottery. From that article:

Most of the responses had a lot in common. People overwhelmingly wanted to:

• Pay off all their debts.
• Help their families.
• Donate more to charity.
• Pursue their passions, including travel.

Note these goals are largely achievable without winning the lottery. And that was her point: Listing what you’d like to do if money is no object puts you in touch with the way you’d really like to spend your life.

My philosophy takes this concept a step further: When it comes to working, you should try to do something that you regard as so fulfilling that you’d do it even if it didn’t pay anything. In other words, the word “work” implies doing something you have to do, not something you want to do. You should never “work.”

If you’re going to spend a huge part of your life working, don’t fill that time with what makes you the most money. Fill it with what makes you the most fulfilled.

5. Don’t create debt

I’m always getting questions about debt. “Should I borrow for this, that, or the other?” “What’s an acceptable debt level?” “Is there such a thing as good debt?”

There’s way too much analysis and mystery around something that isn’t at all mysterious. Paying interest is nothing more than giving someone else your money in exchange for temporarily using theirs. Rule of thumb: To have as much money as possible, avoid giving yours to other people.

Don’t ever borrow money because you want something you can’t afford. Borrow money in only two circumstances: when your back is against the wall, or when what you’re buying will increase in value by more than what you’re paying in interest.

Debt also affects you on a level that can’t be defined in dollars. When you owe money, in a very real way you’re a slave to that lender until you pay it back. When you don’t, you’re much more the master of your own destiny.

There are two ways to achieve financial freedom: Have so much money you can’t possibly spend it all (something exceedingly difficult to do) or don’t owe anybody anything. Granted, since you still have to eat and put a roof over your head, living debt-free doesn’t offer the same level of freedom as having massive money. But living debt-free isn’t a matter of luck or even hard work. It’s a simple choice, available to everyone.

6. Be frugal – but not miserly

The key to accumulating more savings isn’t to spend less – it’s to spend less without sacrificing your quality of life. If going out to dinner with your significant other is something you enjoy, not doing it may create a happier bank balance, but an unhappier you: a trade-off that is neither worthwhile nor sustainable. Eating an appetizer at home, then splitting an entree at the restaurant, however, maintains your quality of life and fattens your bank account.

Finding ways to save is important, but avoiding deprivation is just as important.

Diets suck. Whether they’re food-related or money-related, if they leave you feeling deprived and unhappy, they’re not going to work. But there’s a difference between food diets and dollar diets: It’s hard to lose weight without depriving yourself of the foods you love, but it’s easy to reduce spending without depriving yourself of the things you love.

Cottage cheese isn’t a suitable substitute for steak, but a used car is a perfectly acceptable substitute for a new one. And the list goes on: watching TV online rather than paying for cable, buying generics when they’re just as good as name brands, using house-swapping to get free lodging, downloading books from the library instead of Amazon. No matter what you love, from physical possessions to travel, there are ways to save without reducing your quality of life.

7. Regard possessions not in terms of money, but time

You go to the mall and spend $150 on clothes. But what you spent isn’t just $150. If you earn $150 a day, you just spent a day of your life.

Almost every resource you have, from physical possessions to money, is renewable. The amount of time you have on this planet, however, is finite. Once used, it can never be replaced. So when you spend money – especially if you earned that money by doing something you had to do instead of what you wanted to do – you’re spending your life.

This doesn’t mean you should never spend money. If those clothes are all that important to you, by all means, buy them. But if it’s really not going to make you that much happier, don’t. Think of it this way: If you can live on $150 a day, every time you forgo spending $150, you get one day closer to financial independence.

8. Always consider the opportunity cost

This is related to the commandment above. Opportunity cost is an accounting term that describes the cost of missing out on alternative uses for the money.

For example, when I said above that not spending $150 on clothes puts you $150 closer to independence, that was a gross understatement. Because when you save $150, investing those savings gives you the opportunity to have more savings. If you’re earning 10 percent, $150 invested for 20 years will ultimately make you $1,000 richer. If you can live on $150 a day, ignoring inflation, you can now retire nearly a week sooner, not just a day.

One of the exercises in my book, Life or Debt, is to go around your house and identify things you bought but probably didn’t want or need. A quick way to do this is to find things you haven’t touched in months. These were probably impulse buys. Add up the cost of these things, multiply them by 7, and you’ll arrive at the amount of money you could have had if you’d invested that money at 10 percent for 20 years rather than wasting it.

And when you do this, consider the stuff in your closet, the stuff in your garage, the rooms of your house that you heat and cool but don’t use, the new cars you’ve bought when used would have worked. The truth is that most of us have already blown the opportunity to achieve financial independence much sooner. Maybe now’s the time to stop.

9. Don’t put off till tomorrow what you can save today

Shortly after I began my television career in 1988, I went on set with a pack of smokes, a can of soda, and a candy bar. I explained that these things represented the kind of money most of us throw away every day without thinking about it; at the time, about $5. But compound $5 daily at 10 percent for 30 years, and you’ll end up with about $340,000. That’s why learning to save a few bucks here and there and investing it is so important.

Fortunes are rarely made by investing big bucks, nor are they often made late in life. Wealth most often comes from starting small and early.

There are limited ways to get rich. You can inherit, marry well, build a valuable business, successfully capitalize on exceptional talent, get exceedingly lucky – or spend less than you make, and consistently invest your savings over time. Even if you’re on the road to any of the former, why not do the latter?

10. Envy is your enemy

You can either look rich or be rich, but you probably won’t live long enough to accomplish both. I’ve lived both ways, and trust me: Being rich is way better than using debt to appear rich.

Most of us will admit that when on the verge of making a purchase, we’re often thinking of what our friends will say when they see it. Normal human behavior? Sure, but it’s not in your best interest, or theirs. Making your friends jealous isn’t nice and feeling envy for other people’s possessions is silly. Possessions have never made anyone happy, nor will they.

Decide what really makes you happy, then spend – or not – accordingly. When your friends make an impressive addition to their collection of material possessions, be happy for them.

One of the stupidest expressions ever coined was: “The one who dies with the most toys wins.” When you’re on your death bed, you won’t be thinking about the things you had – you’ll be thinking about the times you had.

Source: http://www.moneytalksnews.com/the-10-commandments-wealth-and-happiness/?all=1

22 Things Money Can and Can’t Buy

1. Money can buy you an expensive house,

Money can’t buy you home sweet home.

2. Money can buy you a comfortable bed,

Money can’t buy you a good night’s sleep.

3. Money can buy you a fast car,

Money can’t buy you safety on the road.

4. Money can get an education for your children,

Money can’t buy knowledge for your children.

5. Money can buy material things for your children,

Money can’t buy appreciation from your children.

6. Money can buy you a grand wedding,

Money can’t buy you a lasting marriage.

7. Money can buy you all the books in the world,

      Money can’t buy you intelligence.

8. Money can buy you healthy food,

      Money can’t buy you a healthy lifestyle.

9. Money can get you credit cards,

Money can’t buy you credibility.

10. Money can get you financial security,

Money can’t buy you peace of mind.

11. Money can get you services,

Money can’t buy you friendship.

12. Money can get people to work for you,

Money can’t buy passion and engagement from the worker.

13. Money can buy you a branded watch,

Money can’t buy you more time.

14. Money can buy you advertisement,

Money can’t buy you a trusted brand.

15. Money can buy you the VIP treatment,

Money can’t buy you respect.

16. Money can buy you a compass,

Money can’t buy you the direction to go in life.

17. Money can buy you delicious food,

Money can’t buy you appetite.

18. Money can buy material wealth,

Money can’t buy contentment.

19. Money can buy you a peaceful county mansion,

Money can’t buy you a cool, calm, and collected mind.  

20. Money can buy you excitement and thrill,

Money can’t buy you lasting happiness.

21. Money can buy a surveillance system in the office,

Money can’t buy the honesty of the staff.

22. Money can buy you an air-conditioner

Money can’t buy you a good feeling about yourself

Readers are encouraged to add more items to this list.

Source: 22 Things Money Can and Can’t Buy

7 Effective Ways to Avoid Poverty

According to the Census Bureau, one in every six Americans is living in poverty. The population of Malaysia is more than 27 million but there are 47.8 million people struggling in America. How do you deal with poverty effectively?

• Professional and technical skills: It is essential to obtain professional expertise such in law, marketing, computer science, and accountancy. If not, you can also acquire technical know-how like plumbing, wiring, and carpentry. The most important thing is to equip yourself with marketable talents that you can apply what you know throughout your life. As long as you are not lazy, you can work, earn, and live a decent life and avoid poverty. It is also prudent to renew what you have learned and keep yourself updated by learning new things relating to your trade. 

• Start early to save: First of all, you develop a saving habit at an early age. Secondly, the sooner you start to save the more you will be able to accumulate over the long haul. The power of compound interest will work wonders for your money.

• Invest wisely: Invest for the long term. .Avoid get-rich-quick schemes which are too good to be true. Growing your wealth is like growing a tree, it takes time and patience.

• Live within your means: Spending less than what you have earned means there is an excess fund to save and invest. It is also a great way to avoid getting into debt by overspending.

• Avoid bad habits: Bad habits like gambling, smoking, and drinking hurt not only financially but your well-being as well. Smoking will affect not only your health but others who are close to you. Drinking can ruin your life when you are involved in a fatal accident after drinking too much. Gambling is the fastest way to incur unmanageable debt.

• Debt-free: Use your credit cards with caution. Use them for convenience only and not to pile up debts. Getting into debt is easy, but getting out of it is difficult. Pay fully and promptly every month to settle credit card bills.

• Less material wants: When you want less, you spend less and you allow your money to grow further when you don’t touch it.


Be knowledgeable, skillful, and avoid bad habits are the ways to be financially independent and avoid poverty.

Source:7 Effective Ways to Avoid Poverty

Tortoise’s Way of Making Money

You must have heard about the story of the race between a hare and a tortoise and eventually the tortoise won the race slowly but steadily. Similarly, you can’t get rich quickly in investment. Making money is for the long-haul:


Long-term investment: As an example, Genting Singapore (G13) is a winning stock (gamblers are generally losers) in gaming. Invest early and keep the shares for the long term. Over time the stock will appreciate in value You will also reap the reward of a bonus issue, rights issue, and regular dividend payments. 

Trusted brands: Invest in shares of companies (if public listed) with trusted brands. What are the trusted brands? Just look at the annual report of Reader’s Digest Trusted Brands. Among the trusted brands voted by consumers in 2010 by the Reader’s Digest, Asia’s Trusted Brands Survey are Acer, Carlsberg, Canon, Great Eastern, Honda, Maybank, Panasonic, Petronas, Prudential, Public Bank, Samsung, Sime Darby, Sony, and Yeo’s 

Dollar-cost average: You invest at regular intervals at an equal amount to take advantage of a lower total average cost for the shares purchased over time. It is because when prices are high you get fewer shares and when prices are low you get more shares.


Prudent investment is a combination of picking trusted brands, investing regularly, and going for the long term.

Source: Tortoise's Way of Making Money

Do You Know Your Net Worth?

Do you know your net worth?
To put it in simple terms it means what you own (assets) less what you owe (liabilities). Let's take a look at the following example:


ASSETS

Cash

Current account 6,000.00
Savings account 500.00
Fixed deposit 15,000.00

Total Cash 21,500.00

Personal Assets

House 100,000.00
Car 40,000.00

Total Personal Assets 140,000.00

Investment

Shares 25,000.00
Unit Trusts 15,000.00

Total Investment 40,000.00


TOTAL ASSETS 201,500.00 


LIABILITIES

Housing loan balance 50,000.00
Car loan balance 15,000.00


TOTAL LIABILITIES 65,000.00 



*NET WORTH 136,500.00

*(201,500.00-65,000.00)


It would be a good idea to check your net worth at the end of every year.
Celebrate when your net worth is better than the previous year. You are richer!

Source: Net Worth

3 Ways to Make Your Kids Millionaires

Eileen and Gerard Connolly had one income and two daughters in private colleges for seven consecutive years. When they were on the home stretch of paying for college tuition, they realized they needed to start catching up on their own retirement savings. But they also wanted to help get their daughters off to a good start.

The Connollys were intrigued by Dividend Reinvestment Plans, or DRIPs, which are stocks that pay dividends that are automatically reinvested to buy more stock, and Eileen had a little experience with that approach. She held three shares in Johnson & Johnson, leftover from a period when she was employed by them, and the value was growing.

So the couple bought one share in four companies for each daughter: Coca-Cola, IBM, Johnson & Johnson, and Kellogg’s. All dividends were automatically reinvested, and when they could, the couple would put in additional money, usually between $10 and $50 at a time. Over time each portfolio grew to include 15 stocks, “all in companies where we knew what they did,” says Eileen.

The couple stopped investing for their daughters when grandchildren started coming along. But the small amounts they invested when they could over a period of seven years now adds up to about $35,000 for each of the girls and continues to grow.

And now the Connollys have bought each of their five grandchildren a share in those same four companies. They stand to accumulate even more than their mothers because their investments will have more time to grow. Contributions to these accounts are now a standard gift from their grandparents. “We decided we’re not buying a lot of toys anymore,” says Eileen. “They have plenty of toys.”

As for those three shares of Johnson & Johnson that Eileen held onto? Thanks to dividend reinvestments and stock split she now has 400 shares worth about $40,000.

1. Start Early, With What You Can

The strategy the Connollys used is simple: Buy a share of a company and add to it regularly, even in small amounts. When dividends are paid, have them automatically reinvested to purchase more stock.

“An investment of $25 a month, in just one company ($300/year), can grow to nearly $1.5 million over the 62 years until (your child or grandchild) reaches retirement age,” explains the DirectInvesting.com website founded by Vita Nelson, who for years published a newsletter that inspired the Connollys to invest in DRIPs. (That example is based on an annual rate of return of 10%, the growth rate–including dividends–of the market in general over the long term, according to Ibbotson Associates, a Chicago-based research firm. )

Another compelling example on her site: Simply invest $2,500 a year for two years for your progeny when they are age five and six. Let the money

continue to grow and, at a 10% annual rate of return, at age 65 the account will be worth almost $1.6 million! You can try DirectInvesting.com’s DRIP Growth Calculator to see how much the amount you can afford to invest can grow over time. Ideally, use it with your kid or grandkids so they can get excited about it as well.

“They can end up being ahead of their parents,” says Nelson, who has also started accounts for her grandchildren, though she invests through her MP 63 Fund (DRIPX), which is a mutual fund based on an index of companies that offer dividend reinvestment plans.

Of course, investors need to understand that even the stock of well-known companies that regularly pay dividends may fluctuate in value. (But that also makes a case for investing regularly: you buy shares when the price is lower as well as when it is rising.)

2. Help Them Develop a Saving Habit

“From my perspective, the No. 1 habit a parent should teach a child related to money is to save,” says Sam X Renick, who develops music and books for kids centered around a character named Sammy Rabbit. “It has several benefits. Here are just a few:

It teaches discipline, delayed gratification and thinking about the long run.

It helps create an asset-building mindset and pattern for kids, placing them on the path to prosperity. It also helps them associate money with something other than spending.

Saving helps with goal-setting, which also helps with building confidence and esteem. If you want to be rich you better learn to set goals.

Saving is something any kid can do — actively participate and have a stake in. Take a portion of that chocolate, chips, churros, soda and french fry money and put it into a savings or investment account.

Saving and investing regularly send a child (or adult) a strong message — they are important; they have a future worth saving and investing in; they have a future worth protecting!

Renick points to a study, ‘Habit Formation and Learning in Young Children’, authored by behavior experts at Cambridge University, that found that kids form financial habits prior to age 7 that will stay with them as adults. And another study, The Thirty Million Word Gap, out of Rice University, indicates the language people use (or don’t use) in their homes is crucial to children’s expectations and outcomes.

“So if a parent doesn’t talk about the importance of saving, investing, asset building, etc., why should a child think it is important or (have) that expectation?” Renick asks.

3. Make Saving & Investing Fun

If the idea of trying to teach your kids to save and invest sounds about as much fun as trying to get them to eat their five servings of vegetables every day, don’t be discouraged. There are more ways than ever to deliver the message without seeing your kids roll their eyes in response.

Take the prospect of getting them started in the stock market, for example. One of the advantages of buying an individual stock, says Nelson, is that you can buy stock in companies that make the things your kids know and love. “Then when they have a choice about which products to buy, they can support those companies as well. They can decide to drink Dr. Pepper or Snapple because they own shares in the Dr. Pepper Snapple Group,” she notes.

In addition, there are lots of books and games you can use to help get important concepts across to your kids, such as the online games Disney’s Great Piggybank Adventure and Planet Orange. You can even buy a tricked-out piggybank designed to teach kids how to save and invest.

My daughter’s attitude toward saving money changed dramatically at around age 4 when she listened to the Sammy Rabbit music CDs and we read the accompanying books together. She’s now a teenager and extremely careful about her spending. (Yes, I love that rabbit!) Free music and workbooks about saving money (including karaoke versions of all songs) are available on the SammySongClub.com website.

And, of course, it’s also a good idea to introduce kids to the concept of credit, particularly building credit, as building and using credit responsibly can save you a lot of money over time. If your kids are under 18, they typically would not have a credit report — so you can show them how you check your credit reports and your credit scores (which you can do for free at Credit.com) and let them know how a good credit standing is part of a healthy financial profile.

Additionally, the Jump$tart Coalition maintains a database of financial education resources, many of which are free. With so many good resources, it’s not a matter of whether you can help teach your kids or grandkids to be financially successful: It’s a matter of how and when you get started.

Now would be a good time.