Teaching Kids About Money
Teaching your children and grandchildren about money is one of the greatest gifts you can give.
And that instruction should go well beyond simply telling them that “money doesn’t grow on trees."
An article in the Wall Street Journal provides some good guidelines with The 15 Money Rules Kids Should Learn:
- Spending money happens only after you earn it.
- When kids start asking parents to drive to the toy store to buy some plastic whatnot, it’s time to consider an allowance.
- The size of an allowance shouldn’t be so meager that your child is a pauper among peers, nor so generous that your child can easily afford all wants with little financial planning.
- Good grades are expected and help around the house is simply the price of family life.
- While 16 is generally the legal age of employment, encourage kids starting around age 13 to think of ways they can earn an income.
- Guide and advise your kids about money, but don’t dictate.
- Failure to balance the debit-card bank account monthly means losing access to the debit card for a week or more; failure to repay an entire month’s credit card balance means the loss of the card until the balance is fully paid off, plus one additional month.
- Only 50% of the money put into a piggybank can be taken out to buy something. At least half must remain inside the pig.
- Children should have the right to screw up financially so they can learn from their mistakes.
- When it comes to investing in stocks, kids should understand a company at such a basic level that they can draw a picture of the business model with a crayon.
- You don’t need to be wealthy to begin teaching your children about the stock market.
- If a child’s charitable interests lie outside your special interests, so be it.
- Parents don’t have to save every last dime a child will need for college expenses. You only have to save up to your ability or desire to pay.
- One of the greatest gifts you can give your child is your own financial self-sufficiency when you’re old.
- At some point, you have to tell your kids that the Bank of Mom & Dad is officially closed.
Need to learn some of these lessons yourself?
Like many, Don Spivack never planned to retire early, but planned to remain in his career and continue doing work he viewed as important. Retirement packages and pensions were offered according to individuals by age and seniority. The retirement offers were generous, and the agency would begin to lay off people if not enough accepted the proposal offered. Not wanting to take the chance to be in the group of individuals to be let go, he begrudgingly accepted the offer and retired.
Planning for retirement is very important. When you reach your 40s, you have roughly 20 years of your career behind you. Many individuals love their career choice and plan to work until they drop, but the sad fact is that you may not be healthy enough to work that long, or may be forced to retire involuntarily. During your 40s, you have about 20 years left of your career and have time to save for your retirement. There are many reasons you can give for not increasing the amount you put into your retirement savings, but you cannot afford to not save now. It will be too late if you wait until later.
Planning for your retirement is not only about the amount of savings you put aside. While putting aside enough money for retirement is important, it is also important to determine how you would like to spend your time later in life. By doing this, you can determine how much money you will need to save and how fulfilling your retirement will be for you. Following is a five-year timeline prior to retirement to determine what you need to do. Five years, if not before, you will need to start thinking about what you and your spouse wish to spend your time in retirement doing. Look at your current hobbies and activities. Also look at your finances and determine if you will have saved enough in the next five years to realistically retire. If you have not done so, create a will, appoint a power-of-attorney, create a health-care directive and make an estate plan. Four years from retirement, you should start researching ideas of what you would like to do for retirement and whether it includes moving into another community. It is also a good idea to start thinking about when to claim social security; the longer you wait to receive it, the bigger the monthly payout. Three years before retirement, you will want to start visiting other communities if seriously planning on moving, determine the benefits you are eligible for, and become knowledgeable about Medicare. Two years out, you will need to determine if you will want or need to work for pay in retirement and research interim health insurance if you plan to retire before becoming eligible for Medicare. A year before retirement, you will want to adapt your retirement savings into a stream of income that will last your lifetime. You can consult financial advisors to help create a budget that would be ideal for your circumstances and savings.
As baby boomers are nearing retirement age, they are finding themselves financially unprepared for the future. On average, a household headed by someone 60 to 62 has less than a fourth of what is needed for their retirement. Of those households nearing retirement age, about 60% rely at least in part on 401(k) plans. However, 401(k) plans should be used as a retirement supplement, not as a full retirement plan, especially for baby boomers who were not exposed to them for long enough. Those who are using 401(k)s as their retirement are not contributing enough each year to obtain the amount of savings that will be needed for retirement. If you have fallen behind on saving for retirement, now is the time to save more. Another way to help with retirement is to delay taking Social Security. If a person entitled to benefits at age 66 starts to withdraw at 62, they will only receive 75% of their benefits. But if that person was to wait until age 70, they would receive 32% more than their full benefits. Older individuals are also able to contribute more to their 401(k)s without it being taxed. Rising health care costs also affect how much an individual should save for retirement. Some advisors suggest that 85% or your working income is needed in retirement, while others say 100% needed. With the rising health care costs and unstable housing market, it may be advisable to save 100%. The worst thing that could happen is that you outlive your retirement savings. The sooner you start saving for retirement, the better you will be.
Many neglect to save for their retirement and have a multitude of excuses to defend this decision. Some excuses are better than others, but saving for retirement should not be something that is put off.
At this moment in time, retirement for those lower income households is not good. Anyone and everyone who is not wealthy are at risk of not achieving a financially secure retirement. Not everyone has this mindset, but if you had more to put away for your future, you would probably take the chance. This year there are three ways to help do just that.
While employers may think that some of the heat is off with Baby Boomers entering into retirement, employee benefits are still of importance because of the Generation Y employers entering into the work place. Generation Y, which is the youngest generation now entering the workforce, is taking an interest into building and protecting their financial lives. Rivaling the number of Baby Boomers at 80 million, Generation Y is nearly 75 million strong. Generation Y, individuals ages 18 to 32, is displaying an interest in planning for the future. The amount of individuals from Generation Y who said they are extremely/very familiar with life insurance increased from 31 percent in 2008 to 44 percent in 2010. Those who stated they are extremely/very familiar with retirement accounts increased from 31 percent to 43 percent. Twenty-four percent of this generation said it is extremely/very familiar with disability insurance, which increased from 16 percent.
Saving for retirement is critical for everyone. It is especially important for women. Women tend to live longer and make less than men but save, on average, 40% less than men. Women’s defined contribution (DC) plan balances tend to be 60% of men’s balances, which can be concerning due to the longevity of life and disruptions for caregiving. Capitalizing on savings opportunities is of great importance while working. On average, working women 50 or older have a DC plan balance that is almost $63,000 below working men of the same age.
A provision of the Small Business Jobs Act of 2010 that passed in late September will soon allow investors to move savings from a regular 401(k) to a Roth 401(k) if the companies they work for offer it.





