A Guide to Starting Family Financial Conversations

A Guide to Starting Family Financial Conversations

By Jeff Johnson I’ve been a close observer of the way families make, communicate and implement financial decisions for most of the last four decades. In that time, I have learned that many individuals and couples make family wealth and lifestyle planning decisions privately, then avoid discussing them with other family members because it’s an uncomfortable conversation. The family leader or leaders usually know it would be better, in many cases, to explain details, discuss issues, and secure commitments to and acceptance for the family’s financial direction. Clarity equals confidence, and being financially confident empowers a fuller life for all involved. Yet many, if not most, family leaders struggle to share the intimate specifics, fail to collaborate on decisions, or neglect to have reasonable and open conversations about a range of family wealth and life planning matters. In my experience, the reason for this is twofold. First, as I previously mentioned, it’s just plain uncomfortable (or, at least initially, easier to do nothing at all). Second, few people are trained to hold money discussions and just don’t know where to start or how to do it. So, you may ask, what exactly is involved in starting a constructive dialogue about your family finances and the decisions that affect them? Having worked with hundreds of families to meet their life and long-term financial goals, and based on my unscientific observations, here is where and how you might want to start your family’s next important conversation about money: 1. The late Stephen Covey, a legendary author and speaker, advocated planning by “starting with the end at the beginning.” Before sitting down for...
Important To-Do’s Before Sending Your Child Off to College

Important To-Do’s Before Sending Your Child Off to College

By Ken Rosenbaum The day has come. Your little baby has grown up and is now ready to leave the nest. He or she has graduated high school and the next big step is awaiting. Whether it’s college, a gap year, a year abroad or any other life adventure lies ahead, this time can be filled with much emotion for you and your child. As departure day gets closer, you’re probably focusing on last-minute shopping lists and feeling overwhelmed with trying to get everything done in time. Of course, you have already visited Walmart, Target and IKEA for the dorm room basics, purchased the new computer (yes, that is a 529 College Savings Plan qualified expense), figured out the move-in logistics, and coordinated with the roommate about who will bring what. Congratulations, you are well on your way. However, you might not be finished just yet. The following are six important tasks you may have overlooked. Make an appointment with your attorney to create a durable power of attorney document for financial matters and a health-care proxy. Without them, in most states, you, as a parent, don’t have authority to make health-care decisions or manage money for your children once they turn 18. That’s true even if you are paying the tuition, have your child on your health insurance plans, or claim your child as a dependent on your tax returns. Without such documents in place, if your child is in an accident and/or becomes disabled, even if only temporarily, you might need court approval to act on your child’s behalf. Establish a monthly budget for your child. The precise...
4 Ways to Be a Financial Lifeguard for Your Children

4 Ways to Be a Financial Lifeguard for Your Children

By Joe Delaney My son was recently home from college. I was relaxing on the couch one evening when he called me over to his laptop to ask for help. He had been looking at his credit card statement online. Something was wrong. It appeared he had been charged a double payment. He was naturally a little alarmed. As it turned out, he had simply signed up for auto pay. Wanting to make sure he didn’t go into arrears, he had made a manual payment just before auto pay kicked in. Easy mistake. I told him I’ve done it myself. If only it were always this easy to protect our children from the perils of financial ignorance. We parents have our work cut out for us if we want to be their financial lifeguard. Here are four ways to do it. 1. Financial Literacy It’s important to start teaching our children about money at a young age.  Teaching them how to save their allowance is the first step. Later, you can empower them with a checking account. My kids had checking accounts (joint with me) before their teenage years so we could show them how to balance their checkbook. Unfortunately, the ability to see account activity at a moment’s notice through online banking has made it very tempting to think balancing a checkbook – or even having a check register – is unnecessary. Banks can still make mistakes, however. It’s important to teach kids to do their own accounting. We also need to help them establish credit, and teach them what it’s for.  An easy way to do this...
Before You Write That Check: Back to School Time Is 529 College Savings Plan Time

Before You Write That Check: Back to School Time Is 529 College Savings Plan Time

By: Joe Delaney It’s back to school season, an exciting time for parents and grandparents watching the next generation advance to the next step in their journey. Whether they are heading off to kindergarten, middle school, high school or about to meet their first dorm mate, it’s a good time to look at your own journey, too. Our financial journeys are influenced by our families, like it or not, and vice versa. That’s part of why we get so excited to watch the next generation come up. We understand that to be attached in some way to their success is our family privilege. We’re attached to their potential financial insecurity as they come up in the world, too. We know if they work hard and achieve their goals they will be more likely to be self-sufficient. Anything we can do to help is a good investment we’re more than willing to make for our children. Before you write that check, though, hold on. There are great benefits to supporting their future in a smart way you don’t want to miss out on. What is a 529 college savings plan? Simply put, a 529 plan is like a savings account specifically for college. It is not literally a savings account, however; it is an investment vehicle offered through your state that can be set up in a variety of ways to try to maximize returns in time for teens to head off to college. Who opens it? You do. 529 plans belong to the account holder, not the beneficiary, making 529s an ideal alternative to direct gifts to the college-bound...
Parents: Don’t Sacrifice Yourself on the Altar of Your Children’s Education

Parents: Don’t Sacrifice Yourself on the Altar of Your Children’s Education

by Joe Delaney Parents have sacrificed their financial futures on the altar of their children’s education. Fueled by easy federal money and self-interested colleges, the result is a student loan crisis that appears already to be eclipsing the catastrophic proportions of mortgage indebtedness leading up to the financial collapse of 2008. I’m not anti-education. In fact, I valued my college education so much that I went back to teach at my alma mater, Towson University, for seven years. Please allow me to disclaim a few things: I believe that a college education is a) inherently valuable, b) an enhancer of career prospects and c) fertile ground for unforgettable life experiences beyond the classroom. I’m a parent. I’ve encouraged my two sons, 13 and 11, to strive for a college education, and I’ve also offered to share in the financial burden. I’m not a prognosticator. Therefore, I’m not predicting an imminent crisis akin to the Great Recession, led by student loan defaults. Crystal balls don’t work, and anyone who claims to have one is selling something. I’m also not a conspiracy theorist, but the facts, according to a new Wall Street Journal article, are indisputable: Overall student debt—with over 42 million loans outstanding—is north of $1.3 trillion. Roughly 40% of borrowers had credit scores below the subprime threshold of 620. Subprime mortgages peaked at nearly 20% of mortgage originations in 2006. The vast majority of the loans were originated by the federal government and cannot be eliminated, even in bankruptcy. As of September 2015, 11% of borrowers had gone at least a year without making a payment on a Parent Plus...
Grads: How to Save Pennies Now and Retire Rich

Grads: How to Save Pennies Now and Retire Rich

By: Robert Powell Hey, Class of 2016. Meet 2061. What’s so special about that year? It’s the year that most of you will likely turn 67, which at the moment is the full retirement age for Social Security. To be sure, 2061 is a long time from now — 45 years to be exact. But those years will go by quickly and if you don’t start planning for retirement right now, right this instant, you’ll find yourself on retirement’s doorstep regretting — deeply regretting — that you didn’t start saving and investing for retirement shortly after tossing your cap into the air. Or, to put it another way: Start saving for retirement today and you will retire rich. But wait until you think it’s important, or urgent, or that you can afford it — and you may retire poor, or not even be able to retire at all. So what should college students and grads do now to avoid regret later? Tackle your student debt. Evaluate whether to refinance your student loans if you have them. “It might not make sense, but some people are going to be able to significantly reduce the interest rates for their loans,” says David Blanchett, head of retirement research at Morningstar Investment Management. Defer consumption. “No excuses,” says Blanchett. “I know you have student loan debt and you really want that fancy new iGadget. Here’s the thing, saving isn’t ever easy and it isn’t ever fun.” But might you make saving fun and easy? First, think of saving not as saving but as deferred consumption. “This is a somewhat wonkish phrase, but it...
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