MONEY-SMART KIDS


From the Mailbag

Janet Bodnar

Readers respond to recent columns on birthday parties, car financing and teaching kids to save.



Your column called A Birthday Party With Purpose restored my faith in humanity -- and young people. What a great idea, and what a mature 11-year-old to think of making blankets for a homeless shelter and reading aloud to children there.

I also think it's a great idea to plan a family day that incorporates volunteering at a food pantry, cleaning up trash in a community park or spending time with seniors. Just pick an opportunity that suits your family's interests and make it a regular part of your life.

Big-ticket saving

In your response to the new grad who asked you about getting a loan to buy a car, you never addressed the last part of her question. She wanted to know if she should keep saving her money to pay for a car in full. It amazed me that you would not comment on this because it sounded as if the young woman was willing to save for the car if you suggested it.

It seems as if we were all victims of a little editing. In my original column, the last line (which your newspaper probably cut for space) read, "If you have trouble borrowing, seek a less expensive car and keep saving until you have a down payment of at least 20% and preferably more."

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My intention was to give the reader an idea of how difficult it would be to get a first-time car loan. But I might easily have added that saving the entire amount would solve the problem.

Double your money

In your column on tricks you can use to get children to save, you cited the magic of compounding. How about adding the rule of 72?

Be happy to. The rule of 72 works like this: Divide the number 72 by the interest rate you're earning on your savings, and the answer will be the number of years it will take your money to double.

So, for example, if you're earning a paltry 2% in a bank account, your money will double in 36 years. At 4.5%, doubling your money will take 16 years -- a good reason for moving your cash to an online savings account paying 4.5% or more. And at 10% -- the average annual return on the stock market -- your money will double in about seven years, which is a great lesson for kids on why it makes sense to invest in stocks.


Janet Bodnar is deputy editor of Kiplinger's Personal Finance magazine and the author of Raising Money Smart Kids (Kaplan, $17.95). Send your questions and comments to moneypower@kiplinger.com.




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