The How’s and Why’s of Taxing Your Child’s Allowance Money

Trent Hamm Founder of The Simple Dollar Last Updated: December 15, 2020

A few years ago, when I was using TurboTax to prepare our family’s income tax return, my youngest child hopped up on my lap. He had the insatiable curiosity that only a five-year-old can possess, and thus he immediately began peppering me with questions. What are you doing? What are income taxes? Why do you have to pay that money?

As I explained to him the basics of income taxes, I realized that the best way to teach the lesson of taxes to him was to run a little experiment on his allowance, along with his older siblings. What could I actually teach them about taxes that would feel like a learning experience and not like punishment?

This is a question many parents ask themselves when teaching their children about money basics. Giving a child an allowance is a pretty standard financial teaching tool, but how do taxes fit into this?

.Lost and Found

Dennis Friedman April 14, 2020

Sometimes, when we’re doing our estate planning, we get so involved with the financial side that we lose track of other things that might have special meaning for our loved ones.

WHEN MY FATHER died in 2012, my mother gave me his wedding ring as a keepsake—but I lost it. I turned my house upside down trying to find it. When my mother was alive, I prayed she wouldn’t ask to see the ring, because I didn’t know what I’d tell her.

I felt terrible that I had lost something that meant so much to my father, and I was upset with myself for not taking better care of it. I know that I’m terrible when it comes to protecting my valuables. Like a dog that hides his bone, I hide things in my house—but forget where.

.He Gets, She Gets

James McGlynn Humble Dollar December 15, 2020

IF YOU DESIGNATE beneficiaries for your retirement accounts, that’s usually a surefire way to pass those assets directly to your desired heirs without going through probate—but not always.

Because those beneficiary designations are so important, you should verify your choices every year in case there’s a change due to, say, marriage, birth, divorce or death. Especially marriage and divorce. Which brings me to a crucial issue: When dealing with IRA and 401(k) beneficiary designations, there’s a key difference when it comes to your spouse.

In general, a spouse who hasn’t been named beneficiary of an IRA isn’t entitled to inherit it. Unlike 401(k) plans, IRAs aren’t governed by ERISA—the Employee Retirement Income Security Act—so these accounts don’t have the same protections for spouses.

.Help Today’s Self

Adam M. Grossman December 13, 2020

SO MUCH OF PERSONAL finance is focused on our future self—and that’s a challenge. Think about the standard prescriptions: Open an IRA. Maximize your 401(k). Save for college. Save for retirement. Build an estate plan.

These are all about the future—often the very distant future. An enormous amount of time and energy is spent planning for “someday.” But it’s equally important to focus on things that can be done to benefit you today. As we head into year-end, it’s a good time to conduct some financial housekeeping along those lines. Here are eight recommendations:

1. Organization. Over the course of a career, it’s not uncommon to wind up with a collection of financial accounts, including multiple IRAs and 401(k)s from old jobs. Often these can be combined, making your finances simpler to monitor and manage. But this doesn’t always happen—and not just because folks are deterred by the paperwork involved. Another reason: Many people don’t even realize it’s possible. Fortunately, the IRS provides this handy chart showing exactly which accounts can and can’t be merged together.

.Long Time Coming

By Jonathan Clements – Humble Dollar December 12, 2020

IF MONEY ISSUES had the urgency of a broken air-conditioning system on a 100-degree day, we’d all be in great financial shape.

But all too often, financial troubles are years in the making. We bumble along, vaguely aware that things aren’t quite right. Sure enough, one day, the red lights are flashing and the alarm bells are ringing. But by then, it’s usually way too late to fix the problem—because the fix required taking action years earlier. Consider seven examples:

1. Living precariously. This may not be an issue for HumbleDollar readers, but it’s a big issue for most Americans. All too many families live paycheck to paycheck, with little or no financial safety net. We’re talking about folks such as the 37% of Americans who can’t handle a $400 financial emergency. One result: When the economy shut down earlier this year and unemployment spiked to 14.7%, millions of Americans immediately found themselves in dire financial straits.

.New Year Resolutions – Five Strategies That Work

December 12, 2020 Personal Development

New Year's resolutions

When it comes to New Year resolutions, so many people fail at keeping them that it’s a surprise that anyone still bothers to make them in the first place. According to research, 80% of people give up on their New Year resolutions by February. That’s right, four out of five people will drop their grand aspirations for a better life just 30 days into the year.

What’s even more striking is the fact that only 8% of people end up accomplishing the goals they’ve set out for themselves in January. Depressing stats, aren’t they? Almost worse than the odds of England ever winning the World Cup again.

But what if there was a better way? A way to improve the odds of actually getting to the finish line? To break out of the vicious cycle of “set-fail-give-up” that seems to hound most people? And to actually have fun along the journey instead of feeling like a total loser? As it turns out, there is. And surprisingly, the primary component in the secret sauce is actually taking it easier on yourself. So if you are looking to make 2021 the year when you finally buck the trend, read on.

.Teach Your Kids About Money with the Bank of Mom and Dad

By The Physician Philosopher 12-12-20

Editor: Have you taught about money yet? It can be a bit confusing where to start. Leif gives you all of the steps that you need to know to teach your kids what they need to know. Keep on reading to learn how to show your kids the ways of money. This post was originally published on Physician on FIRE.

Teach Your Kids About Money with the Bank of Mom and Dad

How do you teach your kids about money?

It’s a great question. We all want the best for our children, and that includes not making the same money mistakes we’ve made in our own lives. I don’t have all the answers, but I feel we’re doing a few things right. We’ve been parents for eleven years now, and we’ve got about nine years left with at least one child at home with us. I can’t believe these years are more than halfway over. I’d like to share some of the tactics we’ve used to teach our kids about money, and that includes “The Bank of Mom and Dad.” We use the term in a different way than most, and it’s been an effective tool in our household.

.9 Things More Important Than Money

By Jim Rohn Building Wealth, Personal Development

We all know the value of having plenty of money, especially as entrepreneurs. But we also know there are people who started enterprises with no money, who went on to make fortunes. So how did they do it? Jim Rohn believes there are nine things that are more valuable than capital, things that can lead straight to your success:

1. Time

Time is a treasure—the time you set aside not to be wasted, not to be given away. The time you set aside to be invested in something that brings value to the marketplace with the hope of making a profit, that’s capital time.

How valuable is time? Time properly invested is worth a fortune; time wasted can be devastation. Time invested can perform miracles—so invest yours.

.31 Dumb Things That Are Keeping You From Becoming Wealthy

By Barb Nefer November 25, 2020

These small financial mistakes chip away at your wealth.

Everyone would like to know how to become rich, yet many people make financial mistakes every day that keep them from becoming wealthy — or at least from building up a nice nest egg. What are the dumb things that get between you and wealth? These warnings from experts will help you correct your financial mistakes and watch your bank account grow.

Not Having a Planned Budget

Budgeting is a no-brainer. But failing to create a budget is one of the most common financial mistakes people make. It sounds simple, but people play fast and loose with their money, then wonder why they never discover the secret of how to become rich. “Without a budget, it’s impossible to have control over your money and know where you are spending the majority of it,” said finance expert Kelan Kline of The Savvy Couple. “Without a budget, your money has no plan and will prevent you from building your finances up indefinitely.”

.5 Money Principles You Need to Know

by Jim Rohn

Although finances shouldn’t be the highest priority in our lives, I will say money plays a major role and we need to see it for what it is: a tool. As my good friend Zig Ziglar says, “Money isn’t everything, but it ranks right up there with oxygen!”

Money is a tool that, depending on how we use it, can bring much joy to our lives or it can bring destruction. We need to be aware of all the possibilities it offers as well as the pitfalls. Some of the most amazing things have been done because people had the financial resources to fund them—businesses have been built, schools started and philanthropic charities founded that have accomplished much good. On the other hand, friendships have been ruined, illicit gains profited and lives destroyed—all over money.