photo credit: killrbeez

You just found out you’re pregnant and you can’t wait to start building a family and loving new room for your baby. You might be thinking about putting together a baby registry at Babies R Us, Target, Walmart or another department store so friends and family can help celebrate your new baby. Thoughts of the many outfits you need for a newborn, crib, and changing table might give you images of excitement as you imaging caring for little junior. Maybe you’ve helped a friend shop before and the thought of picking out everything from newborn bottles to a new car seat make you lie awake at night with excitement. Have you thought to add a savings account or stock investment to your baby registry?

Picking out newborn outfits and infant bottles can be exciting for new parents, but so is the prospect of starting your child off with a solid financial footing. Wouldn’t it be nice if you could simply sign-up for an investment account the same way you purchase baby clothes or baby toys? Well, it basically is that simple. Many companies like Sharebuilder offer the ability to start an investment account for your child. You can open up a custodial account for your child in a few minutes and get them started investing earlier than you did.

The baby registry is a way for friends and family to celebrate the birth of your new baby. Parents, grandparents, and friends review your baby registry and buy items that will help you build a secure and safe environment for your little one. It’s been a few years, but here’s some of the items I remember from our baby registry:

1. Car Seat
2. Changing table
3. Crib
4. Baby bottles
5. Newborn clothes
6. Diaper champ
7. Diapers
8. Baby monitor
9. Blankets
10. Baby toys

I’ve probably missed at least 20 items, but thought I would highlight some of the most important above. All of these items are so important for a baby to prosper and thrive, so shouldn’t we also consider adding a savings account to the gift list? Imagine what this passive income opportunity could do for your new child.

With the help of my parents, I opened a 529 college saving account within a few months of my first child’s birth. Number two took a few years later, although I have since made up for delay and added additional funds. Any future cash gifts can be added directly to the 529 accounts. Having your bank account information added to your 529 account can also make the process so much easier. Automate your investments and you’ll find one less excuse to start investing as it will allow you to focus your efforts on building wealth and playing with your family.

If you don’t have the funds available to invest in stocks, consider opening up a savings account for your child so friends and family can help them save money. You might be surprised to find out that grandparents, aunts and uncles, and even friends would be interested in helping your baby start a savings account. Even an ING savings account will allow compound interest to grow over time. Imagine how much money your child could earn if you opened a new savings account within the first few months of birth. The point is to get started early and help them save money on a regular basis. Once your child’s savings account is established you can deposit any future birthday checks into the account and watch them get excited with they see the earnings grow.

What was your favorite gift from your baby registry?

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photo credit: °Florian

Rolling coins with your kids is a great way to deposit loose change into your savings account and it can be an opportunity to teach kids about managing money. Take the time to involve your children in this simple process and discuss what money represents and how it can be used to build savings. If you are looking for a great rainy day project, you can bring out a coin jar and get the entire family working together for a common savings goal. Many families have “vacation jars”, “pizza jars”, “clothes jar”, or even an “new furnace jar” for long term savings goals. Next time you have some loose change, get a jar and start a savings fund with your family. Once the coins are spilling over the jar, roll the coins and deposit them at your local bank branch.

Some reasons rolling coins can be valuable for yourself and your family:

1. Saving the 10% fee that Coinstar charges is another huge incentive. I made the mistake once of using a Coinstar at Safeway and the machine stopped working. I estimated I had deposited over $50 in coins and Safeway wanted me to prove that amount. How do I prove that the machine ate my coins? I had to deal with 2 managers before I was finally given credit.

2. Teach your kids to sort and count. Help your children sort the coins based on color and shape and educate them on the different coin values.

3. Treasure hunt. Finding Canadian Pennies or old silver coins can be exciting. Find a silver nickel or dime and you can take your kids to the local coin shop to find out the value.

4. Compound interest. Deposit those coins in your local bank and educate your children on the power of compound interest. Those coins aren’t earning anything when they are stuck in a jar. Deposit them in the bank and your money starts working for you. Compound interest is a source of passive income.

5. Saving money. Use this time you are rolling coins with your family as an opportunity to talk about saving money. Why do you need to save these coins and what can you purchase with them? Get your children involved in the savings process and start a family “savings jar” that will be for a common goal. Maybe you want to save for a family vacation or start a college 529 savings account for you kids.

Have you started a savings jar with your family?

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I may be the last person on earth to have a savings account at a traditional bank, so I thought I would ask some friends what the best online savings account has been for you. I’ve been lazy in the past about establishing yet another bank account. I’m finally tired of receiving a horrible rate for my savings account at about .50% I have 3 buddies that talk a lot about the Orange Account, and how great they are. Also, many sites talk about the ING Orange account as a great option at 3.0%. I’ve done a little research on the Orange accounts and noticed that you can link the account directly to your existing checking or savings account. Seems really easy. Any catches that anyone has found?

Some requirements of mine:

1. FDIC insured.

2. No fees or penalties for withdrawal.

3. Yields higher than .50% Should be easy to beat my current savings account.

4. Easy online web access.

5. Great customer support. 24/7 would be nice as I’m sometimes checking accounts and bills late at night.

What has been the best online savings account for your cash? If you know of any alternatives to the ING Orange account, please let me know. I would love to compile a list of passive income or alternative income savings accounts.

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I recently talked to a friend about an unexpected car repair he was facing for $900, and he was going to tap his savings account or home equity line of credit for the bill. My friend is a great saver and does live a very frugal lifestyle, but life happens, and this car repair caught him by surprise. Many great finance and budget coaches talk about an emergency savings account that is used for unexpected expenses. A flat tire, cracked radiator, broken dishwasher or temporary loss of job, are all examples where an emergency savings account would be helpful. If you are one of the few who have a savings account in the U.S. or even an emergency savings account, you are way ahead of the curve. Most Americans carry over $9,000 in debt and have very little in savings. I would think that if you dug a little into the data, you would find the $9,000 in debt paid for many emergency repairs.

My wife and I had no savings for the first few years of our marriage; and spent every dime on debt repayment and living expenses. I had always read that the goal for each person, should be 3-6 months of living expenses in an emergency account. That’s a ton of money for the average family. If you make $40,000 a year, you should have saved between $10,000 and $20,000 in emergency savings. Who can do this? Well, if you are like many Americans, you can’t yet.

Many experts recommend that you start somewhere. My wife and I started putting aside $50-$100 a month until we reached $5,000 for an emergency account. We were living in an apartment in San Francisco and only had one car. Not a lot of emergency expenses then. Now, we have many. With a house, two kids, two dogs, and two vehicles, comes a lot of emergency expenses. Start with a few dollars and build something, anything. If you can’t save $50-$100 a month, cut something out of your budget. This may take some work, but you can do it. I’ve cut out lot’s of things from our families budget in the past. Starbucks, dry cleaning, movies, dvd rentals, and hair cuts. Have your wife cut your hair, and you could save $200-$300 a year.

If you are just starting out, set a goal of $1,000 for your emergency savings account. You will be excited the next time you can use your cash, rather than a credit card for life’s emergencies.

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The Passive Dad combines my interests in working from home, passive income and the adventures of being a husband and dad. This blog will allow me to document my journey and share successes, failures, and have some fun along the way. I’m 35, and a work from home dad who raises our children from 6am-5pm. I say that because after 5pm, my wife comes home and gives me a breather from our 2-year-old son and 4-year-old daughter. As far back as high school and college, investing and personal finance have always been a passion of mine. I would spend hours daydreaming of business ideas or inventions that would transform everyday chores. I majored in Business and Economics in college and enjoyed business law, personal finance, and marketing classes. After college I worked for 12 years in the banking and investment field and was fascinated by the amount of new wealth created daily. At one firm, they called the new clients “Googlers”, for all the newly minted Google millionaires. Google is just one example. Many of the companies were also less known, but still impressive. Restaurant chains, software companies, telecommunication companies, and even teen clothing companies, all followed the same business model. Creating a new product or way of business, while increasing profits and growing sales quarter after quarter. This is a dream that I share and that many would like to attain in their business venture. While working at the brokerage firm I enjoyed reading research material on new prospects and finding out how they had created their wealth. Even the most successful entrepreneurs manage risk in both their business life and in their investment portfolio. Over the years I have read some wonderful books about some of the pillars of the investment community: Lynch, Buffet, Gates, and they all spend time discussing managing risk and having a diversified portfolio. Warren Buffet is probably the most talked about and most admired businessman for his financial success and discipline with investing.

My days are spent working from home and finding great investment opportunities through stocks and mutual funds, while also starting to build passive income. My current strategy has been to find stable and conservative passive investments and branching out to online opportunities. Passive investments are those that require little to no work and pay income in the form of rent, dividends, interest, or commissions. A simple example would be a bank money market account. You deposit $100, and the 3% interest is passive income. You had to earn the $100, but the interest on that money is passive. The banks clients (borrowers), are working to pay you that 3%. The online example would be an ebay affiliate. You can earn a commission for every ebay sale that originates from your website.

My interest for starting a blog was created after reading several “work at home mom” websites and several budget blogs. One day I googled “work from home dad income” and didn’t’ find much information. I found the typical parked domains and news articles for the first few posts, and had to really search to find some great content for dads. I found myself reading blog after blog of stay at home moms or SAHM’s and was fascinated by the online community that existed. Several sites discussed online income opportunities such as paid surveys, reading emails, and clicking websites. All this sounded interesting, but was this passive income or just a part-time job.

My other reason for starting a blog was to write about and find others who are passionate about eliminating debt. I just don’t mean being “frugal”. I actually don’t consider myself cheap or frugal. I do have some rather expensive items and can splurge from time to time on my wife and kids. Being frugal is something I admire in many of my friends, but that doesn’t mean everyone has to be or should be frugal. I actually might consider myself a hybrid-frugal man. I recently paid to have our new HVAC system replaced in our house. The new air conditioner was over 12 years old and not efficient, and we couldn’t keep our house under 80 degrees during the summer months. Some of my “frugal” friends don’t even have air conditioning and think I should have saved my money for something else. Well, very simply- “Happy wife, Happy life”.

My parents and grandparents helped me create my first budget when I wanted to save for the most treasured item of a 10 year old. The ATC or motorcycle cost $650 and I had to mow many lawns to pay off the loan. My dad kept my loan above my growth chart in the kitchen and allowed me to watch the progress daily, and dream of the day that I would be debt free. I was thankful that my parents kept the loan on the wall, as it was a reminder of my contract and promise to repay the debt. My original loan of $650 would not last long. My parents thought buying safety gear was probably a good idea for a 10-year-old boy; and we needed to go shopping for a helmet, goggles, boots, and gloves. In total my original loan grew to $800 and I was learning very quickly the power of compound interest. I didn’t realize it, but I was about to add to this debt over the next few years and get to a point where I became very frustrated and confused. My dad and I went to take the motorcycle out one day and ran into a U.S. Park Ranger. He was very interested in my motorcycle and enjoyed finding issues that needed to be fixed. He pointed out that I needed a proper spark arrestor and off-road permit to drive my motorcycle. Add another $75 to my loan. How was I going to pay back $875?

Fast forward to graduate school for my wife. We were about to get married and we both had debt from college and she needed a new computer. Our old computer from college was not able to connect to the Internet and we needed a color printer. Yes, my wife and I went to college before email. We had to put the new computer on our Visa card and were about to learn a hard lesson. Our student loans were manageable as the interest rates were low and we could manage on our tight budget. The computer, monitor, and printer cost $2700. When the credit card bill came we paid the minimum and didn’t look at the interest. Our budget allowed for $25, but nothing else. This was a hard lesson. The 19% interest was much more than the 5% student loan rate, and the burden seemed huge for us. How were we going to pay down this computer debt? Did we have to buy a new computer? Did we have to buy a color printer? The use of the Visa card didn’t end with the computer. I had to be hospitalized from a food allergy and was working as a consultant without health benefits. $1,000 was added to our Visa balance. Next came the new tires for the car and the cost to rent a car during some unexpected repairs. Our Visa bill quickly grew to $5,000. Ouch! We needed a plan of action, as this amount was not decreasing.

I would like to say that this was an easy and fun learning experience for my wife and I. It wasn’t! It was tough and taught us a lot of our spending behavior and lifestyle wants/desires. We had a wonderful used bookstore around the corner from our apartment in San Francisco, and we would spend hours reading investment and self-help budget books. What I learned got me excited that we could change our situation, but it would take hard work and time. I was looking for that quick fix or easy money as a young 25 year old, trying to climb his way out of $5,000 of unsecured debt. I don’t recall the author that I found then, but Dave Ramsey talks about the same principle today in the Debt Snowball Plan. Ramsey recommends an emergency account of $1,000 first, then working on paying down debt. We made the minimum payments on our student loans but applied $200 a month towards our Visa bill. W
e weren’t making more money at the time, but we did move our focus from the student loans to the Visa bill. The psychological benefits were huge for us a young married couple. Over the next few months we managed to each receive a raise at work and we applied that money to the Visa bill. Once the Visa was paid off, we applied the $200 to pay off the student loans. Our next goal was to establish a safety net and setup a savings account for unexpected purchases.

My wife and I have been using the same principles we learned through our twenties and think back to the $2700 new computer when we want to purchase something new. As I mentioned before, I don’t believe I am frugal or cheap. I enjoy buying quality and dependable items that I feel will last a long time. We have purchased some very expensive items for our family, but we still adhere to the principles of living within our means and not straying from our personal budget goal. Another reason for starting this blog was to network with others, who are at different places on their financial journey. I would enjoy sharing ideas on personal spending habits, family budgets, and sources of passive income.

I am fascinated and eager to hear where you are on your financial journey.

Scott

ThePassiveDad.com

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