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Go Ahead, Be Selfish

by Jaime Thompson on September 24, 2010

nesteggWe teach our children to share, to find the joy in giving, and that the world doesn’t revolve around them. Just as we try to model the social behaviors we want our children to take into adulthood, financial ideas and habits start developing at a young age. Whether we are conscientiously teaching them or they are merely observing our dealings with money, they are learning.  However, I’m about to tell you to be selfish and teach your kids to do the same.

As parents we want the best for our children, but do we want to leave them with the financial burden of caring for us in our later years? We cannot sacrifice our retirement savings to “benefit” our children. I watch people put off their own retirement savings to put money in a college fund, pay for an extravagant vacation, or buy a new car, but who is going to pay your bills when you retire? Unless you plan on retiring in the next few years, the only thing you can be certain of is that the future of social security is uncertain. And with an enormous and continuously mounting national deficit we cannot expect the government to cover our expenses in retirement.  So assuming you are debt free and have a comfortable emergency fund, what should you do with the extra money you have each month?  First and foremost you should be putting money in a retirement fund. Yes, this means before you contribute to a college savings fund. If you work for a company that matches some of your 401k contributions, start there until you receive the full match (it’s free money!) and then put any other money you can into a Roth IRA*.  Once you maximize your retirement investments, then you can start putting money away for college.  Remember, your children can always get loans and scholarships to help pay for college, but nobody is going to give you a loan to pay your monthly bills in your retirement years.

*assuming you are eligible to contribute

(photo by scottwills)


What’s In A Name?

by Jaime Thompson on September 18, 2010

Did you have a hard tinameme picking a name for your baby? Maybe you already have names picked out for your unborn children. What about your savings account? College fund? Vacation fund? Behavioral finance experts have found that earmarking your savings for a specific goal can have a big impact on your savings rate. In a 2009 study done by Amar Cheema and Dilip Soman, they found that labeling a college fund with a childs name nearly doubled how much was saved compared to those without a name attached. Cheema recommends opening multiple accounts and giving them labels to help motivate you to reach your goals. So, what will you be naming your savings account?

(photo by Vanderlin)


Somebody Save Me!

by Derek Sisterhen on July 26, 2010

If you could go back and talk to your teenage self, what would you say? I can think of a whole host of things. My guess is many of us would tell our teenage selves what to do differently.

“Don’t bother with that girl, she’s a heartbreaker…”

“Don’t ‘borrow’ mom and dad’s car without them knowing, you’ll get grounded for a month…”

What would you tell yourself about money? Maybe you’d impart some wisdom about credit cards, or mortgages, or how to buy furniture without financing it. Maybe you’d say you need to have a plan for your money.

Ultimately, I think we’d all agree that the most important lesson we’ve learned since growing out of that younger-looking body is that we should’ve saved more money. Even if it was just $20 here or $10 there; I have yet to meet someone upset by how much money they’ve saved.

I spoke to a group of 30 teenagers the other day on preparing for the financial responsibilities of life outside the nest. Did you know that if a 16-year old began saving $1,000 a year until she turned 21, that $6,000 would grow to nearly $550,000 at retirement age? If she puts that in a Roth IRA, that money is completely tax free. Why parents aren’t teaching their kids this simple, fundamental principle of wise financial management is beyond me.

I told the teenagers I met that the writing is on the wall – Social Security will be a shell of its current self when they retire. They understood that they are on their own for their retirement savings, but didn’t know where to begin.

So, if you could go back, what would you tell yourself? Is it any different than what you should be telling your kids right now?


Your Kids Look Like Interns

by Derek Sisterhen on June 29, 2010

My guess is that at least some of you have kids that cost money.

Well, of course, Derek, kids cost a fortune.

Right. That’s why you have a very critical lesson to begin teaching your kids right now, this summer. The lesson is connecting work with reward.

In the summer time, we take vacations, send the kids away to camp, let them sleepover at friends’ houses, hang out at the neighborhood pool, and so on. Each of these events and activities opens the door for kids to spend money. Maybe it’s a souvenir bottle of colorful sand at the beach, buying snack foods at camp, going to a movie before a sleepover, or buying a mask and snorkel for the pool.

Instead of forking over one $20 bill after another for these economy-stimulating endeavors, why not invite your kids to earn their reward? Since most kids are out of school during the summer, consider yourself to have just retained the services of an intern.

What jobs or tasks can be done around the house or can your child help with to earn money? Clearly identifying what responsibilities are required simply because your child is a member of the family is a must, too. However, if you set a list of tasks your kids can complete for pay, as well as set limits on what you will be paying for during the summer, you’ll create a wonderful teaching opportunity. And when you carry this into the fall, you just might be building up future self-sufficient, productive members of society.

I was speaking with a couple recently who said they have a son going away to camp this summer. When they told him they wouldn’t be paying for all the little extras that come with camp, that he’d have to pay for those things on his own, he became a lot more aware of his spending. They said, “Before now, he never had any trouble spending our money.”

It’s always easier to spend someone else’s money. Doing so doesn’t make us any better at managing our own, no matter how old we are.


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