Gold Star Saver

Everyone who earns money must pay a portion of it to the government as income tax. The money the government collects through taxes is used to pay for the services the government provides, such as schools, hospitals, postal service, police, military, road repairs, parks, fire department, ambulance, courts, and much more. The United States tax system is a sliding scale system. The more you earn, the more you pay.

Kids have to pay taxes too. If you have a job and earn more than $850 a year (this amount changes every year), your parents will help you file an income tax return (a document showing how much you earned and how much you owe in taxes) and pay a portion of it to the government.

Tax returns and any money that is owed have to be filed by April 15 of the next year. So if you earn enough money this year to have to pay taxes, your return will be due on April 15 of next year.

Income tax is serious business. There is an entire government agency called the Internal Revenue Service (IRS) that is in charge of collecting taxes and making sure people pay the correct amount. If you owe taxes and don’t pay them, you will have to pay fines. Some adults who don’t pay their taxes for many years or who lie on their tax returns end up going to jail for their crimes.

You know that a dollar bill is worth $1, but did you know that the value of that dollar actually changes? Money is valued by looking at what it will buy. If a dollar will buy you a candy bar today, but tomorrow you need two dollars to buy that same candy bar, then the value of the money has changed.

Inflation is what happens when the prices of things go up. Inflation means money will buy less than it did before. When inflation increases faster than the increase in people's salaries, it means people are able to buy less. Using the previous example, if you had $2 yesterday and could buy two $1 candy bars, but today the price has gone up and your $2 will only pay for one candy bar, you've just been hit with inflation!

Count On It: Paper Money Today
Today, all U.S. bills are printed by the Bureau of Engraving and Printing, which is part of the U.S. Treasury. In 1929, big changes were made in U.S. paper notes. The size was reduced by 25 percent to make the bills easier to handle and the design was standardized for all the denominations ($1 bills, $5 bills, $20 bills, etc). Very few changes were made until 1994, when paper currency was redesigned to add anti-counterfeiting and other features. These newly designed bills are being added over a period of years. The first to be introduced was the $100 note in 1996. There are seven denominations of paper money currently being produced: $1, $2, $5, $10, $20, $50, and $100.

At one time there were also $500, $1,000, $5,000, and $10,000 bills, but these haven't been printed since 1946. The largest U.S. bill ever was the $100,000, and only 42,000 were produced, all in 1934. The $100,000 bill was never in general circulation. It was used only for Federal Reserve Bank transactions.

It's Raining Bills
Large amounts of new money are printed each year. Check out the number of bills that are created every year:

$1 bills: 4.5 billion
$5 bills: 800 million
$10 bills: 851 million
$20 bills: 889 million
$100 bills: 950 million
Not all denominations are printed every year. The $50 and $2 bills are only printed every few years.

Dead Dollars
The U.S Treasury is in charge of making sure that money in circulation is in good condition. Ever wonder what would happen if a bill you had got ripped or damaged? As long as you have at least half of the bill, you can take it to your bank and exchange it for another bill. The U.S. Treasury will exchange it for the bank. Every year the U.S. Treasury handles approximately 30,000 claims and exchanges mutilated currency valued at more than $30 million.

Damaged paper bills are shredded and recycled. The U.S. Treasury shreds and recycles 715 million bills each year. Can you imagine having a job where you destroy money every day?

Pretty Please? Borrowing Money
One way to get money is to borrow it. Adults borrow money often. An adult can go to a bank and apply for a loan. The bank looks to see if the person has a job, pays his bills on time, and is a good credit risk. If so, the bank loans the money. The loan is usually for a specific amount of time, such as five years or thirty years. The person borrowing the money must make monthly payments to the bank. These payments are used to repay the amount of the loan and to pay the interest the bank is charging. Adults often borrow money to buy homes and cars. A home loan is called a mortgage.

When an adult borrows money for a home or car, she agrees that if she doesn’.t pay back the loan, the bank can take the home or the car. This is called repossession. Usually a bank will sell the home or car and use the money to pay off the rest of the loan.

You’ve probably borrowed money from your parents or friends. If there is a big purchase you want to make, such as hockey gear or cool new shoes, you could ask a parent if you could borrow the money. When you do this, create a plan so that your parent knows you are serious about paying it back. If you want to borrow $50, you could plan to pay back $5 a week. Your loan would be paid off in 10 weeks. Most parents don’.t charge their kids interest, but a sibling or a friend might. Your brother might agree to lend you $20 if you pay him back $22 total. He would earn $2 in interest.

Home Sweet Home
If your family owns the home you live in, you've probably never thought about how much the house really cost. The average cost of a house in the United States is $264,000. Sounds like a lot of dough to come up with, doesn't it? Most people don't pay cash for their homes, though. Most families get a mortgage. A mortgage is a special loan that you can get from a bank in order to buy a home. The homebuyer has to provide a down payment (an amount of cash) to show that he can invest in the home. The bank provides the rest of the cash payment to the person selling the home. The new homeowner then has to pay the bank a certain amount of money every month for a number of years (often 30 years) until the loan is completely paid back. The average monthly mortgage payment is $1,300, according to the U.S. Census. The bank earns interest on the amount it lent and the homeowner gets the benefit of living in a house he could not afford to buy any other way.

Families who do not own the house or apartment they live in pay rent, which is a monthly payment to the owner of the building to pay for the right to live there. How much does it cost to rent? About $700 a month on average, according to the U.S. Census Bureau.

Buying Is Smart
Buying a house might seem expensive, but houses often increase in value over time, so if you buy it for $200,000 today, it could be worth $300,000 in ten years. A person who pays rent just gives the money to the landlord and never sees it again, but a person who buys a house is putting money into the value of the house (called the equity), which can be worth more money as time goes on.

First you start with an idea or an interest. Do you enjoy helping your dad plan for family barbecues? Shopping for matching paper plates and cups? Making up a menu of special treats? You might want to think about a party business and offer your service to other parents.

Expanding on the party idea, you could think about entertaining little kids at birthday parties. Would you like to clown around and get dressed up in costumes? Taking the idea one step further, how about making twisted balloon sculptures? Could you learn to make balloon animals and silly hats? Little kids love to watch balloon animals being made. And they love it even more if they get to take a balloon home!

So now you've got an idea. You can set up a business entertaining little kids at parties by making balloon animals. Next you need a plan .a business plan. Consider your situation. Do you have the time to do everything that is involved? Will it interfere with your schoolwork? Think about the balloon animal business. You'll need to learn special skills and practice your act. Should you make or buy a costume. How about a catchy name for your business? Where will you advertise your services? What will you charge your customers?

Before you start on any of these, you want to do a market survey. What's a market survey? It's a study that will tell you if there is a need for your business in the area you live. Wouldn't it be horrible if you spent time and money setting up your business and then found out that there are twenty other businesses in your town that do the exact same thing?

Start in your own neighborhood. Are there many kids ages eight and under? Ask the parents of these children if they ever hire entertainment for their kids' parties. Who have they hired? Were they happy with what they got? Would they be interested in balloon entertainment? What would they be willing to pay for someone to keep the kids amused for about forty-five minutes?

Get out the yellow pages. Look up clowns or parties and see if there are any listings for children's entertainment. Go to the public library. There may be a children's services directory that lists entertainment services in your area. (If there is a directory, make a note of the publisher. If your business is a success you could advertise in the directory!) Do an Internet search for party entertainment in your area.

Okay, your market survey has left you feeling that there's definitely a need in your town for your service. What's next? Training. Having seen a balloon twister at work and thinking, "It looks easy enough," doesn't mean balloon twisting is easy! Again, go to the public library and look for books on balloons and/or clowning or visit some websites about it. Remember how the people you've seen making balloon animals always kept up a steady stream of talk? Take out a few books on jokes or bookmark some websites.

Start-up Cash
You'll need start-up money to get your business going. You may have to buy a balloon twisting book to bring with you to parties. Also necessary are a supply of balloons and perhaps a small pump if your lung power isn't great! You might need to buy some clothes to create your entertainer outfit. Look at your own savings to see if you have enough. If not, discuss with your parents if they will loan you the money until your first paying gig. To add a professional touch to your arrangement, put the promise of repayment.

Price Point
At this point you will need to be ready to tell a potential customer your price. You got some ideas of what the market will bear, .that is, what people are willing to pay .from your market survey. A parent may help by telephoning a professional entertainer and asking for her rates. Since you are new at the business, you should be willing to be paid a whole lot less! Professional rates are something for you to shoot for a business goal.

Finally, the day arrives. You show up on time. You and the kids have a good time. You get paid your $25. Now it's time to see if you've made any money.

"But," you say, "I just made $25." Yes, you did, but did you remember to subtract your expenses? If you subtract your expenses from your income, you find that you made -$1.45 for your first gig! A negative amount is known as a loss.

Have you failed? No, of course not. You did a good job. Two mothers asked for your flier and a dad booked you on the spot! Give yourself a pat on the back!

You have to remember that some of your expenses will last through all of your jobs. The second gig is easier. You have a larger audience this time, so you have to buy more balloons, but you don't have to buy another book or a new outfit for yourself! You get paid $25. Now have you made money? This time when you subtract your expenses from your income you find that you made $14.95! A profit!

Your business has begun. Now you should update your business plan so that you can continue in business. Include advertising, continued training (you have to keep wowing your customers by twisting new animals), setting up a system of bookkeeping, paying taxes, and seeking free publicity. If you do a free show, ask the group you do it for to invite the local newspaper. You'll get your picture in the paper and will make yourself known to more potential customers. And if you get a few parties signed up in advance, you may be able to buy your balloons in a larger quantity so they'll cost you less per balloon.

After a period of about six months, sit down and evaluate your business. Is it going according to your expectations? Are you happy doing the work? Do your losses outnumber your profits? Are you keeping up with your schoolwork? Your social life? At this point you could decide to throw in the towel and quit. You've given it your best, so there is nothing to be sorry about. In the adult world, 70 to 80 percent of new businesses do not make it beyond the first year!

If you are enjoying your work, meeting new people, and making a little money, then you may decide to keep going. Good for you! Or, maybe you've been successful but you've outgrown your business idea and would like to try some other business. Either way, setting up a business has been a valuable learning experience, you learned a skill, you increased your self-confidence, and you proved to your parents that you can see a project through.

You've probably heard credit cards referred to as 'plastic.' The reason for this is obvious: they are made of plastic! Ask your parents how many credit or debit cards they have. You might be surprised at how many they have in their wallets!

How Credit Works
Before we talk about plastic credit cards, let's talk about credit itself. Credit is an arrangement between the seller and the buyer. The seller agrees to trust the buyer to purchase something, leave with it, and pay for it later. The seller is rewarded for her trust by prompt payment, or, if payment is not on time, the seller charges an additional amount called interest.

Imagine that you want to buy your friend's bag of marbles. You didn't bring any money with you when you went to her house, so you tell her you will pay her for it on Tuesday when you see her again. She gives you the marbles and you take them home, then you pay her the next time you see her. She has just given you credit. Now, if you forget to pay her back when you see her, she may not be happy and if you want to buy her bouncy ball next, she might decide you are not a good credit risk and refuse to let you take it without paying.

There are different kinds of credit arrangements. One is the installment plan method of buying. Say your parents want to buy an expensive item such as a new dishwasher. The store allows them to make a down payment; that is, they pay a certain percentage of the total price when they make the purchase. Then, over a period of months or years, your parents pay off the rest of the purchase cost, plus interest. If they fail to make the payments, the seller gets to take the item back (repossess it) and sell it to someone else.

Credit Cards
Charge accounts are credit issued by individual stores or chains. These accounts come with credit cards that are only good at that particular store or one of its branches, just as a gift card is only useful at the store the card is for. Major credit cards (MasterCard, Visa, Discover, and American Express are the most popular) allow adults to buy goods and services at any business that accepts that particular credit card.   Credit and credit cards are not given to everyone. So that businesses don’t end up in a situation like your friend when you didn’t pay her for the marbles, they Businesses carefully screen out people who are a credit risk. How do they do this? They have a person fill out forms listing their assets, employer, yearly income, credit information (such as other credit cards owned), loans, and so on.

Adults who use credit cards must be careful with them. They should not share their account number with anyone and always check their bills carefully to be sure they charged everything that is listed.

Interested in Interest?
Interest is the money a bank pays you for using your money! Sounds kind of silly doesn't it? Someone will pay you to put money in a savings account? No way! The bank is in business to make money, so how does it make money if it is paying you more money than you put in? Simple. The bank gets to use your money for other things and it pays you for the right to do this. Banks make money through other services, one of which is lending money.

A bank lends money to an individual or a business that qualifies for a loan. That is, the bank checks to make sure the borrower can pay the money back! The bank does not just hand over the money to the borrower, either. A contract must be signed. Part of the contract covers interest. Interest is the money a borrower pays to the bank for the use of the bank's money.

The bank takes your money, pays you to be able to use it, and turns around and hands it to people who want loans. These people then pay the bank a higher amount than the bank pays you for your money.

CDs
Certificates of deposit are also known as CDs. They are not disks that play music! A CD is a piece of paper, a certificate that is a bank's promise to repay the holder. CDs pay a higher interest rate than a regular savings account. These are some rules that the holder must follow in order to get the interest:

1. A specified amount -- $1,000 for example -- must be deposited.
2. The money must not be taken out for a fixed amount of time; six months, eighteen months, or three years for example. The longer the fixed amount of time, usually the better interest it pays.
3. If the money is removed before the time is up, then the holder forfeits (gives up) some of the interest! This is called a penalty.

The bank pays more interest on a CD than a savings account because it knows it will have your money to use for a set period of time. With a savings account there is no guarantee that you won't close the account and take out all the money tomorrow!

Do Some Good: Giving to Charity
One of the easiest ways to get involved with charities is to donate money. You might decide you want to take a regular percentage of your allowance or earnings and donate it to the charity or charities of your choice. You might also decide to do some work just to earn money for charity. You could take a week and donate everything you earn walking dogs in your neighborhood to the SPCA (a charity that helps finds homes for pets). You could go through your neighborhood and ask people to give you their recyclable soda bottles and you could use the money from returning them to donate to the charity.

Another great way to regularly give money to charity is to put all your change in a jar and donate all of it to your favorite charity once a year. Or once in a while you can empty out your piggy bank and decide to donate the money to charity. If you're going to donate cash, be sure to talk to your parents. They can help you make sure you know where and how to give your donation. You may need your parents to write a check, or you may need to be driven to a drop-off location.

There are likely to be lots of times when charities will ask you or your family for money. At Christmas, you will see Salvation Army workers ringing bells and asking for donations. At the grocery store, when your parents check out, the cashier may sometimes ask them if they want to donate $1 to a certain cause the store is helping to promote. You can also help charities by buying things from them. Your local hospital might sell Christmas cards and use the profits to help treat patients.

Seeing Your Dollars at Work
Sometimes it can be hard to donate your hard-earned money and never really know where it has gone or how it has been used. There are some charities that help you see the good you've done. The Christian Children's Fund allows you to help one specific child in another country. You get updates and photos and can send letters to that child. Another great way to feel involved in your giving is to adopt an animal. You can 'adopt' a wild animal through a variety of different charities (check out World Wildlife Adoptions as examples). You make a donation and get a photo of your animal, as well as a certificate and sometimes even updates about your animal or its species. Some adoptions even offer a stuffed animal of your species to cuddle.

Other Donations
While cash is a great kind of donation, there are lots of other donations you can make that can help people. Many charities accept donations of used clothing, toys, games, books, and other household items. They might distribute these items to people in need or sell them and use the money raised for the charity.

Sometimes you can donate things you don't need or want and make a big difference in someone's life. The Lion's Club is a charity that accepts donations of used eyeglasses, which they refurbish and give to those in need. If you wear glasses and get a new pair, you have no need for the used pair and the Lion's Club makes sure they help someone else see.

You can also donate new items to charities. Your local food bank always needs donations of nonperishable food, such as canned or dry goods. There are organizations that collect school supplies, personal hygiene items (toothpaste, toothbrushes, soap, and so on), and more to give to hospital patients, needy schools, and soldiers.

When you do decide to spend your money, you want to make sure you get the best price.  There are lots of great ways to save money and be a smart shopper - if you know what to look for.

Comparison Shopping
Comparison shopping means you compare prices at different stores before you make a purchase. You don't have to get your parents to drive you to every store in the universe, though. You can do a lot of your comparison shopping online. Most large stores have websites where you can check the price of an item.

Sale Shopping
If your family gets a newspaper, you might already know that every Sunday the paper comes with a huge pile of ads from local stores. If you know you want to buy a certain DVD, you can check the sale ads to see if it is on sale anywhere. Sometimes stores print coupons in their ads that save you money on purchases as well. It's also important to know that if you buy something and the store puts it on sale the next week, you can usually go back and get the difference between what you paid and what the sale price is.

Earn Points
If there is a store you shop at a lot, ask if they have a shopper's card or a discount card. Many stores have special cards that give you extra discounts or earn you points toward a free purchase when you use them. You may also receive special coupons or offers in the mail. The store may require that only adults can have cards. If that's the case, ask your parents to sign up for one for you.

Bargain Hunting There are lots of great ways to save money on things you want to buy. Try some of these ideas:

•  Second hand stores. Second hand or thrift stores are a great place to find incredible buys and unusual items you can't find anywhere else.
• Clearance rack. Most stores have a clearance rack or discounted section with items they have marked down to sell quickly. You can save half of the regular selling price or more by checking this section of the store.
• Yard sales. People sell things they no longer want at yard sales, tag sales, or garage sales. Lots of times people whose children are grown want to get rid of toys, games, books, and other kid's items and are willing to sell them for pennies. Check out the yard sales in your neighborhood to see what's for sale!
• eBay. Your parents can help you look for great prices on things on eBay.com, a website that is like a big garage sale. People list items they want to sell. If you're interested, your parents can bid on items. The person with the highest bid wins!

Impulse Shopping
Avoid buying on impulse when possible. Stores are designed to convince you to buy things. They don't really want you to take the time to think things over. It can be really tempting to snap up a T-shirt or a cool set of gel pens. You can spend a lot of money on these kinds of purchases if you aren't careful.

The better plan is to go home and think about it. Consider how much it costs and how big a bite that would take out of your weekly budget or your savings. Think about other things you might want to buy or things you are saving for. Weigh these things in your mind against the cool thing you just saw in the store. You might still decide you want to buy it and that's OK! Once you've thought it over, you know it's something you really want and something that is worth that amount of money to you. You might also decide that you don't really want it, or you may not want to pay that much for that type of item. That's OK, too! Making these kinds of choices makes you a smart shopper!

Bikes and Barbie Houses: Big Splurges
There may be big items you would like but can't afford to buy right now. Whether you want a bike, electronic game system, Barbie house, giant Lego set, iPod, or something else, it can be frustrating to want something desperately but not have the cash to make the purchase! The best way to afford a big item is to investigate the cost. Find out exactly how much money you need. Talk to your parents. Sometimes parents are willing to match what you save toward a large purchase so that you only actually have to save half of the price from your own dollars.

Once you know how much it's going to cost, think about how much money you can save per week. Can you put aside part of your weekly allowance? Could you pick up a few extra babysitting or lawn raking jobs to make some extra cash? Do you have a birthday or holiday coming up where relatives will give you money? Once you figure out how much money you've got available, you can set up a savings plan. If you can save or earn $10 a week and the item you want costs $100, you know it will take you 10 weeks to get enough money for the big buy.

Once you've reached your savings goal, you really have something to be proud of. Making that big purchase is a special moment, and one that you have worked hard to earn. Ask your parents to take a picture of you with your new buy so that you can remember the victory of this great moment!

Figure It Out: Budgeting Basics
Once you have money to control, you need to start to think about what you want that money to be for. Do you want to be able to spend whatever you have spontaneously whenever the mood strikes you? Do you want to save your money and spend as little as possible? Or do you want to be able to do both? Some people are definitely more comfortable with one method or the other, but many kids find that they can save some money and spend some money.

It can be hard to decide how to spend (or save) your money. One day you might feel like doing one thing, while another day you might want to do something else. And you might have those times when you desperately need money for something (like a school lunch or a birthday gift for your mom) but are totally broke and unprepared.

If you take some time to think about your money and spending, you can make sure you always have enough moolah on hand for what you need. The best way to do this is to create a budget. First, think about expenses you have that don't happen every week; like your mom's birthday gift, souvenirs on vacation, holiday gift costs, or new earrings. Don't forget about things like gifts for your friends' birthday parties. You should think about the whole year so that you remember everyone's birthday and every event.

Now let's take a look at what your weekly expenses look like. Think about the things you need to have money for every week. This could be for school lunch, entry to a skateboard park with friends, or a pack of gum. Don't forget to list the amount of money you want to put away in a savings account each week. You can spend less in the coming weeks to make up for it.

Now you can see how much money you need each week to pay for your regular expenses and to set money aside for your special occasion expenses. If you don't earn enough money each week to cover these costs, remember that you will probably get some gifts of money throughout the year that you can add to your savings. You can also think about ways to earn more money. Another choice is to take a look at your expenses and find ways to cut them back. Maybe you could pack a lunch instead of buying one at school. Instead of going to the movies with your friends each week, maybe you can only afford to go every other week.

The Amazing Growing Dollar
If you wanted to start up a leaf raking business but needed money to buy tools and do some advertising, your mom might agree to invest some money in your company. She might agree to give you $50, which you would not have to repay, as long as you shared part of your profits with her. She gives you the $50 which allows you to buy good tools and do a lot of advertising. You get a lot of work and start making money. You pay her ten cents for every dollar you make. The better your business does, the more money she makes.

This is how investing works. People invest money in companies. The money allows the companies to grow. As the companies grow, they pay money to their investors.

Investing is a neat way to make money without doing any work. However, it can also be a way to lose your money quickly! If you fell out of your tree house and sprained your wrist and could not rake any more leaves, your mom wouldn't get any profit from your business. She would have made a bad investment. Investments can be good or bad, so it is important to be knowledgeable before you invest your money.

Are You the Investing Type?
Are you the type of kid who can be an investor? There are several things you must think about before seriously considering investing. Examine your own personality. Do you find the idea of buying stock in a new company that may (or may not) come up with the next big electronics miracle exciting? You could make some real money! But what if the company you invest in fails and you lose your money? Would you be very upset? How much money can you invest? Based on your income, allowance, gifts, babysitting earnings, and so on, if you can set aside even $100 a year, it might be worth it to you to invest this money.

What are your goals?
Do you want to buy Christmas presents for your friends and family? If so, then investing is not the way to go. To see the results of your investments, you must be willing to be patient and wait.

Many kids don't realize the amount of time and effort that goes into investing. You earn your money by taking on the job of investing, but overnight success is rare. If you're looking to get rich quick, forget it. One of the keys to investing is patience, think five years or more! Also, you must remember that by investing you are tying up your money. If you want your money where you can get at it easily, then perhaps a savings account is the best option for you.

Stock Market Secrets
A stock is a share in a business. Here are some things you should know about stocks: 

• When a new company feels a need to expand, it may not have the money to do so. A decision is made to "go public."
• By going public, a company decides to sell shares (stock) in its business. The people in charge of the business now have to report to the shareholders, the people who bought stock, who each own a tiny part of the company, just as your mom did with your raking business.
• The initial public offering (IPO) is the first time stock is sold by that company. Investment bankers buy up the stock and then are responsible for selling it. It is interesting that this is the only time the company makes money from selling its stock. From this point on, the buying and selling of stock is in the hands of the investment bank and brokers.
• The shares of stock are sold to investors. Investors come from all walks of life. They may also include groups other than individuals,.for example, institutions or other businesses.
• Businesses that make a profit pay dividends to their stockholders. Those companies that make high dividend payments to their stockholders every year are called income stocks. People buy income stocks so that they can depend on a steady income from their shares.
• Stocks are traded on exchanges, special places where stocks are bought and sold. The New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX) are the primary exchanges in the United States. The National Association of Securities Dealers Automatic Quotation System (NASDAQ) sells stocks that are not listed with an exchange. These are called over-the-counter (OTC).
• A person who buys and sells stocks for a client is called a broker.

When people talk about the stock market, they mean the entire industry of selling and buying stocks. The stock market is deeply tied to our economy. When the economy is doing well, prices of stocks go up. The stock market can also affect the economy. If the stock market prices fall, the economy can be negatively affected.

People make money from stocks, not just from the dividends. Some people buy stocks and wait for them to increase in value. When they do, they sell them for a profit. The key is to guess which stocks will increase in value and to sell them before their value goes down.