Browse Tag: balance

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Having “The Talk” About Making Your Money Work Harder: Part 5 – Net Worth

Welcome back to our five part series on making your money work harder! This series is part of a BIG conversation I had with J where we talked about other ways to invest his money beyond the Bank of Mom.

In part 1, we talked about savings accounts, in part 2 savings bonds, in part 3 CDs, in part 4 stocks and today in part 5 we’ll wrap up our discussion with keeping track of your net worth.

Paying attention

It sounds a little pretentious, doesn’t it? Keeping track of your “net worth.” Like something only rich people do.

But think about this. If you go on a diet, do you log your meals and calories? What about if you’re training for a marathon? Would you write down your runs and workouts? And if you want to cut back on social media? Would you track your time?

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Having “The Talk” About Making Your Money Work Harder: Part 1

I’m really excited to start this post today! J and I had some great conversations this weekend that I will write about in a five-part series on Making Your Money Work Harder.

First, we reviewed how we’ve already started making our money work harder by saving.

If you’ve been around for awhile, you know the drill, but just in case you’re new, here’s the skinny:

  • I pay J 3% interest on the money he puts into his savings envelope every month. I give him a paper statement and email him the same statement each month (posterity!). As he records the interest in his register, we review how the month went and look at how he earned more interest than in previous months. (Read one of our recent summaries here.)
  • A few times each year, we take a trip to our local bank and deposit the money. Bank visits are a great time for conversation, and J always enjoys going because the tellers are often really nice to him. They love to see kids!
  • After that, I keep the minimum in the account to avoid a fee and transfer the rest to an online bank that pays a higher interest rate. Read all about that here.

Today we logged in to the local and online bank accounts. We reviewed the amount in each account and noted the current interest rate. The local bank account has a rate of 0.01% — yikes! The online bank account’s rate is 1.20% — not too bad (comparatively speaking).

We discussed wanting a high interest rate when you’re saving (so you earn more). And when you’re borrowing, you want the interest rate to be low (so it doesn’t cost you as much).

Just a side note, we haven’t really talked about borrowing or debt yet. I’m hoping to get the savings and growth lessons underway to have more TIME on our side. After we talk about saving and investing, start the accounts we want to start and look/talk about them monthly, we’ll move on to borrowing and debt.

I told J that there were OTHER ways of putting his money to work, ways that may pay even more. He was excited! He pulled up a chair and said, “Okay, I want to know those things.”

I’ll cover each topic in depth in the subsequent posts, but as an overview, we dived into:

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How Much Does Your Vacation Really Cost?

Back in March, we went on a road trip and J calculated how much we spent. I thought it was great for him to be able to see exactly how much a vacation really costs.

So when we went to Virginia Beach a few weeks ago, I wanted to have him calculate the cost again, with a few tweaks.

During the trip, we collected all receipts in a folder. We didn’t attempt to do any worksheets or calculating while we were away! A few days after we got home, we sat down and filled out our new and improved trip log (once all of the EZ Pass transactions posted).

This time, we divided all of our receipts into categories. We ended up with seven groups: gas, tolls, groceries, eating out/snacks, household items and lodging.

He labeled each green box with the category. Then he used a running total approach with the register. This involves:

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How National Bank of Mom Rewards Savings

By this time, you already know that we subscribe to a three-envelope system (complete with registers) for savings, spending and giving. At times, we also use an additional envelope for short-term savings — when J is saving for a larger purchase a few months in advance.

The first stop in our banking process (and the reason for the name of this blog) centers around the savings envelope.

Every month on the 9th, I pay interest on the total in J’s savings envelope. To make it enough that he can see a tangible result (and earn more than the few cents he would at a bank), I pay 3% monthly.

I create a bank statement, give him a printout and also email him a copy. He writes the interest amount in his savings register to balance the account.

I developed a spreadsheet to calculate the amount and format a nice-looking statement for him. (Download a copy of the spreadsheet.) Fill in the sections in blue on the first sheet. Each month, enter the deposits made in the appropriate section, and the interest and totals will recalculate. Print a copy or save as a PDF and email away.

What is interest?

When borrowing money, interest is the money that you pay on top of what you borrow. Borrow money, pay it back AND extra.

When saving money, interest is the money that you earn. The bank “borrows” money from you and gives you a percentage of that money (for the privilege of using it). Put money in and get that amount back PLUS more.

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National Bank of Mom Savings Envelope with Register

Our Savings Envelope & Register

Up until about six months ago, when my son J would receive money, we’d put it in an old lemonade jar on his dresser. It would sit there until it filled up, at which point we’d head to the bank to deposit it into his savings account.

All was well, but I had this feeling that I could be using this money to teach him some important lessons.

I did some research and came across the Moonjar. The Moonjar is a jar with three compartments — one for saving, one for spending and one for sharing (or giving). I also found the Money Savvy Pig — a piggy bank with four compartments for saving, spending, donating and investing. And for all the crafters out there, there are a TON (and I mean a TON) of DIY posts on blogs and Pinterest about creating your own jars.

These were good ideas, but the idea of lugging around a jar full of money was absurd. Wouldn’t an envelope or wallet be better? You know, like normal people carry? Plus, even more importantly in my mind, I wanted him to know exactly how much was in each “account” at any given point and learn to balance the accounts. (I am one of two people on the planet who actually balances their checkbook. Actually, I found another! Joan on Man vs. Debt!)

With a plan in place, we embarked on our hunt for envelopes and a register.

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