All Things Financial Planning Blog


5 Comments

Will You Teach One Financial Lesson?


I saw a survey many years ago that suggested only one in five parents felt competent to teach their children about personal finance. A recent article in Military Money, quoting a survey by Schwab, said only one in four parents are training their children “by giving them a lot of experience budgeting, spending and saving it.”

It is time for each of us to teach one person one financial lesson. The lesson could be about needs and wants. It could be about creating through a budget. It could be about the value of starting to save early. It could be about the cost of buying on credit.

Few of us have developed all the right financial habits. Most of us regret some purchase we made; or perhaps a purchase we did not make. Maybe we bought on credit planning for the money to be in hand before the bill came. Maybe we took a risk that did not pan out or took a pass on a risk that did pay off for a few brave souls. But few of us have no knowledge.

What can you pass along to young people in your family or at your work? What have you done well to make your financial situation just a little bit brighter?

It is Financial Literacy Month. Will you teach one financial lesson to help make the world a better, more prosperous, more generous place?

John Comer, CFP®
Consultant
Comer Consulting, LLC
Plymouth, MN


1 Comment

Daddy’s Little Girl Learns a Money Lesson


In many ways I guess I’m just like any other father. If you’re the father of a little girl she’s probably the apple of your eye. Good thing for me I’ve got two eyes. I’ve got two little girls who clearly are my little apples. Watching both of our girls grow up has been an interesting experience for my wife and me. One child looks like me and the other looks like my wife. My wife and I still laugh to this day at a comment someone made years ago. “That girl looks just like you, with a paint job from her momma!” We’ve watched their physical characteristics develop and differentiate.  Their personalities have done the same thing, particularly their money personalities.

We started giving each of our children an allowance at the age of two. Quite a few people thought we were nuts, but we decided that if they could ask for things when they went to the store then they were old enough to start learning that things cost money. They get dollar less than their age per week. So our ten year old gets nine bucks a week and the six year old gets five. They also get performance bonuses for maintaining good grades in school. They are required to tithe from their allowances and pay for non essentials. Want that cute, cuddly new animal from Build a Bear? Save your money. Want to go the movies with your bff? Save your money.

The girls have really enjoyed summer camp this year at Kids R Travelin. The field trips have been both abundant and fun for the girls. Some of the trips are a little more fun when you’ve got some extra cash in your pocket. The final week of camp had a few of those trips. The big kids went to the Discover Mills on Monday, laser tag on Wednesday and Six Flags over Georgia on Friday. Monday morning I overheard my wife reviewing the trips for the week with Janae. She included and admonition to monitor her spending at the mall. Well let’s just say Daddy’s little girl went to the mall and “got caught up.” She spent every plug nickel she had. Well when Wednesday rolled around she got up the nerves to ask for an advance on her allowance and got a big fat “No.” Now I’ll have to admit that this was one of those “It’s going to hurt me more than it’s going to hurt you” moments. I’m actually pretty proud of myself because in spite of her looking at me with those puppy dog eyes, I stood my ground and didn’t cave. On Thursday, she took another run at getting her allowance in advance and got another no. On Friday, it dawned on her that perhaps she could get a loan from her little sister (who gets significantly less allowance because of the age difference) who had taken all of the trips and still had a substantial amount of cash on hand. I agreed to let her borrow the money from her little sister.

When we got home, my wife sat down with her and asked how her day went. She explained that she had a great time. She had already repaid her little sister, won a stuffed animal playing a game at the amusement park and enjoyed ice cream and soda with a friend. As it turns out she got a little lucky. Throughout the summer they earned merit money for learning bible verses and good behavior. She cashed her merit money in for cash. Knowing that our daughter had a good time, my wife proceeded to ask her if she had learned any lessons. Here are the three things she said.

  1. You should always have a budget before you go shopping.
  2. If there is something in particular that you want to buy, go there first.
  3. Always set aside money for later.

My wife added another one. “You can’t count on winning the lottery to bail you out.” We can only hope the lesson sticks.

leeBaker

Lee Baker, CFP®
President
Apex Financial Services
Tucker, GA


1 Comment

When is Enough, Enough?


Weaning adult children off parental financial life support

Most parents take the responsibility of raising children seriously and with the best intentions. From a deep sense of love and duty, we provide for and protect our children. How each family provides varies based on traditions, values and means. 

The whole point of parenting is to prepare children to survive and thrive on their own. Yet, parents (myself included) are so committed to provide and protect children that doing anything less can seem negligent, even when they’re capable of doing more on their own.

Increasingly, parents are asking: When does the financial obligation to children end? How can we wind down financial support of children before it presents more risks than benefits?

While there’s no one right answer, and everyone must decide for themself, consider these insights from parents who’ve been there:

  • Talk early and often about financial expectations. Communicate as clearly as possible about what you will and will not provide and for how long. Most importantly, provide fair warning about when it’s “game over”. This way, there’s reasonable time to plan and prepare, and less shock to the relationship. 

    Tip: Be very clear about ongoing financial and housing support, if any, once high school and college education are completed. 

    Create a ‘finish line’ of sorts. For example, consider gifting a final bonus upon college graduation to celebrate their independence day, and mark the end of your supportive financial role.  

  • Take baby steps. A gradual approach to change works best. Over time, parents can morph from “bank” to “coach”. When money matters come up, transfer responsibility back to the child with a simple question: “What can you do to make it happen?” With each year, entrust them with more. 

    Tip: Coach your child to increasingly share the financial responsibility for certain wants during middle school, high school and college years.

  • Set reasonable limits and keep them. Sound like familiar parenting advice? If you’ve mastered this with other sensitive issues, like curfews, you can master money limits too.  
  • No guilt. It’s in everyone’s best interests to know when enough is enough. Contrary to popular opinion, weaning kids off parents’ payroll is especially important in today’s uncertain economic times. For one, parents need more money than ever for their long-term financial wellbeing. Financially secure parents will not be a burden to their children later in life. 

    Think of this as an epic teachable moment: If our young adult kids can learn to survive on their own during tough times, imagine how prepared they’ll be for the potholes further down the road of life. Letting go is an opportunity for the child to learn just how capable and resourceful they are. 

 Over the years, parenthood gets easier in certain ways and more challenging in others, but it is never easy. Letting go of our children, financially and otherwise, calls to mind the old adage: “This is going to hurt me more than you.”

karinMaloneyStiflerKarin Maloney Stifler, CFP®, AIF®
President
True Wealth Advisors
Hudson, OH


Leave a comment

Secure Your Mask – Is Helping Your Children Ruining Your Retirement?


When talking with baby boomer clients about their biggest challenges in recent years, there’s no surprise that adult children are often near the top of the list. For many baby boomers, adult children can represent one of their biggest expenses. This can manifest itself through increased gifting, helping with mortgages, rent, child care or other increased household expenses. More and more, this can even come through the increased expense of taking an adult child back into the home, otherwise known as a boomerang kid.

While I’m certainly not against parents helping their children, I think it is an area that is not discussed enough when it comes to financial planning and needs to be addressed much more often when meeting with planners and other trusted advisors.

Most of us are familiar with the concept of helping yourself before being able to help others. We’ve all boarded a plane and heard the line, “If you are travelling with a child or someone who requires assistance, secure your mask first, and then assist the other person”. The airlines mention this scenario specifically because, although logical, it is an incredibly difficult thing to do emotionally and certainly not the average parent’s first reaction in a moment of crisis. We are wired to assist our loved ones in any way we can, even if it means weakening ourselves, and our ability to help them in the future.

This is an important analogy. I’m certainly not suggesting that parents should leave their children to struggle regardless of the situation. I am, however, suggesting that you secure your mask first so that you’re in the best possible position to understand whether your children truly need assistance and, if so, how best to assess the situation and get them the help they need.

Some parents are regularly gifting to children, yet giving up on some of their own goals. If that’s where priorities truly lie, there’s nothing wrong with this. But, if the gifting is driven by some guilt-based obligation that you must give to your children, it can build resentment and become a real problem within families. In some cases, the children are doing quite well and don’t truly need the assistance.

For those children that really do have a need due to unemployment or other circumstances, it’s still important to make sure you’re not causing undue injury to your own plans before helping. Is direct assistance the answer, or could they use some help in setting a budget and learning how to cut costs in lean times? Have they sought out debt counseling or other programs that could help them get back on their feet? Have they done the work and exhausted their options or are they turning to your savings as their first and easiest option? Giving a gift or making a loan ahead of answering these questions could damage your long term goals and teach your children to expect this kind of assistance over and over again. What happens when you’re no longer there or able to help?

Don’t be afraid to have frank conversations about your situation with your financial advisor. Include the children in the planning meeting where appropriate. Be open with your financial planner about the assistance your child needs, the timeframes involved, and discuss how that might impact your long term goals. If gifting or lending money is required, discuss how and when it will be paid back or, if a gift, how it could impact future assistance or inheritance.

Again, this is not an attempt to suggest the best path is watch your children suffer while you continue to thrive. It is simply a reminder that this type of assistance should be considered a financially significant moment, just like purchasing a new car or a major home improvement project. Any major expenditure deserves a little analysis and careful thought to make sure it has been carried out in the most efficient manner. Anything less might leave your children breathing fine in the short term, but have you both gasping for air later.

Chip Workman, CFP®, MBA
Lead Advisor
The Asset Advisory Group
Cincinnati, Ohio


1 Comment

Do You Think Money Grows on Trees?!


Okay. It finally happened. I became my father. Even today, I can hear the words ringing in my ears as they fall off of dad’s lips. So there I was a few weeks ago packing to go out of town on a trip. In the midst of packing, my daughter turned my attention to a commercial on the television. In case you haven’t seen it, the commercial is touting the benefits of the new I-Phone 4G. A young daughter who has apparently gotten braces while her father was out of town is coaxed into a smile by dad. The 4G lets them connect across the miles. So my oldest daughter looks at me and says “Daddy can you get me one before you leave? That way we can see each other while you’re gone.” Before I could catch myself out it came. “What? Do you think money grows on trees?” I immediately realized what had happened and explained to her how long she would have to save her allowance in order to be able to afford to buy one herself. (We never made it to discussing the cost of having monthly service.)

In all fairness my daughter is a nine year old and won’t be getting a phone anytime soon. Aside from the brilliance of Apple’s marketing effectiveness on the younger generation, this episode made me wonder about a couple of things. The biggest of which was whether or not I was doing an effective job teaching my own children about managing money. We all teach our children about money. Sometimes we do it on purpose. Sometimes we do it by accident. Sometimes we do it by our words. Most times we do it by our deeds.

We started teaching our oldest daughter about managing money when she was about 2 years old. She reached the point where every trip to the store resulted in a request for something new. At first we didn’t mind because she always seemed to ask for a book. My wife and I decided that if she was old enough to ask for it she was old enough to start learning how to pay for it. We started at 50 cents and shortly afterwards bumped it to a dollar per week. We saw an almost immediate change in her behavior. She still wanted to buy something every time we went to the store but she started buying little tubes of ChapStick because it was about the only thing she could afford. 

As time went buy Janae caught on. My wife shared the following experience of a mommy/daughter trip to the mall. Both of my girls love Build-A-Bear Workshop. It doesn’t take long for a little girl to rack up a pretty hefty tab. The girls were allowed to buy a bear plus any of the clothing and accessories that come with it. As they were approaching the cash register, Janae asked my wife if she would help her tally up her purchases. Once she discovered that she would have no money left after her purchases, she promptly turned around and took back the clothes and accessories. The light bulb had come on.

Our younger daughter, Lauryn, is doing a better job of saving. I honestly don’t know if my wife and I are becoming better parents and thus doing a better job or maybe she simply has a different money personality. Either way we’ve got to keep teaching.  So, how do you teach your children about money? What lessons did you learn as a child? Do you actually talk to your children about money? If you have, keep up the good work. If you haven’t, now is as good a time to start as any.

If you want some tips and tools, take a look at http://moneynighttalk.com. September 16th marks the first National Money Night Talk. The day is geared to get everyone around the kitchen table to have conversations about money. We have a lot of financial issues in our country today. Perhaps we can begin to address them at home.

leeBaker

Lee Baker, CFP®
President
Apex Financial Services
Tucker, GA