6/15/18 - Dad's Advice
Many of us are a product of our upbringing. Even as a financial planner, some of the best common sense financial ideas I ever received were from my parents. My dad had some life experiences that impacted how he approached things and the way he lived demonstrated many ideas through example. Here are a few of my favorite gems of my dad’s wisdom.
Choices – I grew up in a small town and there wasn’t really anything that I wanted that my parents wouldn’t have been able to afford. But periodically when I asked for something, dad would tell me I couldn’t have it. When I asked why, he’d say it was because we can’t have everything we want. These experiences taught me that sometimes I don’t get everything I want, but I can still be happy and have a good life. This may not seem like a huge financial insight, but people who don’t understand this often have a sense of entitlement. They also sometimes end up with too much in credit cards, houses they can’t afford, and trips that are great, but not affordable.
Record keeping – Dad never had a computer. He kept wonderful records that anyone could figure out. The family tax preparer told me once that dad took in his tax information every year in a shoe box, but it was organized in the box. Some of his records were typed, but many were written by hand. Several years after he retired he showed my mom how he kept the records and she started sharing some of the record keeping. So a good system of organization doesn’t have to be fancy, it just has to be organized and logical. And anyone who needs to know the system needs to have access to it.
Discretion – Dad often told me not to discuss our finances with people outside our family. He wasn’t talking about professionals. He was always completely candid with his financial advisors. When you talk to people about your money that don’t need to know your financial situation, it can sound like bragging or whining – depending on your situation. Also there can be unintended consequences. You may not be sure, going forward, if those people like you for your money or like you for you.
Charity – Dad gave generously and privately to the causes that supported his values. He didn’t assume others would step up. He walked the talk with his actions and his money.
Life Happens – Dad’s family lost their farm in the depression, they then moved to where they could get work. He’d work a couple of hours before going to high school each day. His hard work resulted in a successful business, early retirement, and financial support for his widow – my mom. Don’t feel entitled or downtrodden when circumstances turn against you. Hard work and humility will make up for a lot of bad situations.
6/14/18 - Money Smart Kids - #1
6/12/18 - Giving Kids Allowance
Giving your kids an allowance is a great way to begin teaching them about money. It’s also a good way to cut some spur of the moment spending out of your budget.
Kids can start learning about money surprisingly young – sometimes even preschool age. But for most kids, it makes sense around the first or second grade. Before you give your children an allowance, talk to them about what they can use it for and what they are not allowed to use it for. Maybe for your family that means your children can buy candy (as long as it’s not right before a meal) or toys, but not a pocket knife. Tell your children that they get to choose what they spend it on within the boundaries you’ve set and that they can ask you if something is in the approved category. If your children spend it on something they are not allowed to, you’ll take what was purchased and they don’t get the money back. And – this is important – after the allowance starts, you won’t be buying those things for your children when they ask. This is where the savings come. Instead of arguments at the checkout counter about whether your children can have some candy or the new toy they saw advertised, the discussion turns to them using their own money for it.
How much to give depends on your situation. A good rule of thumb is about one dollar per week for every year of your child’s age. So if your daughter is six, she gets six dollars a week. That might seem like a lot, but remember that you’re not buying some of the things you usually buy for her. If in doubt, it’s better to go too low and increase as she gets better at making decisions.
Having your child’s use of the money as a teaching opportunity is key. You can ask questions, but without criticizing decisions. For instance, it’s better to ask if your son is sure he wants to spend his money on that water gun and perhaps point out that it doesn’t look like it’s very sturdy, than to tell him it’s a stupid thing to buy. And if it breaks, don’t say I told you so. Gently ask how he feels about it or tell him you feel badly that it broke. That’s a better lesson than his parent gloating over his defeat.
It’s important to resist the temptation to bail your child out of their mistakes. Many of us parents would rather endure a negative outcome than see our child go through it. But that’s how the child learns. So discuss financial victories and defeats, but don’t be the safety net. That’s a poor practice to start and it can get really expensive as your child grows older.