FINANCIAL HOUSEKEEPING | Teach your kids to save
Many adults have a hard time saving for things they want, while also having to pay for things they need. Hoping to solve that problem by teaching savings lessons in childhood, investment firm A.G. Edwards has created mysavingsquest.com, a website that helps kids learn to balance spending and saving.
The free site has kids create a character, pick a job and then complete tasks to earn money, which must then be saved or spent based on needs and desires.
Mysavingsquest.com is easy and fun to play. Each of the different jobs has separate tasks to be completed, and there are different potential savings goals, so the game can be played multiple times to reinforce the lessons and show how saving for small or intermediate items is different than paying for big, long-term goals.
SHORT COURSE | First in, first out
Often known by its acronym, FIFO, first-in, first-out is how the Internal Revenue Service treats the sale of securities unless you advise them to handle it differently.
So let’s say that every Jan. 2 for the last three years, you purchased 100 shares of XYZ Co. stock. The first year, your shares cost $20 each, the next $25, then $40. If the stock drops to $30 and you decide to sell 100 shares, the IRS will believe you sold the first shares purchased, the $20 ones, creating a capital gain of $10 per share, on which you owe taxes.
By comparison, if you used “specific selection” and informed both your broker – or mutual-fund company – and the IRS that this is the method you wanted to follow, you could sell the shares with the highest cost ($40), allowing you to report a tax loss of $10 per share and minimizing your current tax burden. Generally speaking, specific selection or average-cost basis accounting is better for investors than FIFO.
