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Tag: Children

Family Conversations About Money

Money can be a blessing and a challenge, and families of all shapes and sizes deal with this aspect of life. Some families handle this area more successfully than others, but as a parent, being able to have conversations about finances gives you the opportunity to impact your children, regardless of their age, in significant ways.

In general, discussing money can be one of the most challenging conversations, and the thought of talking about this with your children only adds to the problem. Even if you feel comfortable discussing hard topics with your family, knowing this topic can be daunting.

Whether you have regular discussions with your teenager about how much money they would like to have for their weekend activities, or you are talking with your adult children about dealing with college debt or a mortgage, these interactions can be prickly or even explosive.

Nevertheless, engaging in conversations about money is crucial for your family’s well-being and your children’s financial success. While there may be short-term challenges, applying some basic principles and helping your family put them into practice is a worthwhile endeavor.

Outlined below is a framework that addresses your Position, Principles to employ, and Practices you can utilize when your children live at home.

When they live at home 

Position: Teacher

When your children are at home, your primary role is to teach them wise financial principles, how they can put those into practice, and what are the lessons they can learn from their successes and failures. It’s important to note that teaching is not synonymous with telling. Great teachers ask good questions, because it helps the student (in this case your children) learn to think for themselves and apply what they learn.

Any conversation that is a dialogue, as opposed to a classroom lecture, is usually more enjoyable and effective. While it will take some extra preparation to devise a few good questions, planning with your spouse or seeking advice from those further along the journey can be beneficial.

Here are a few resources:

Regarding money

https://capitaloneshopping.com/blog/teaching-kids-about-money-9848d817c7fb

Asking open-ended questions

https://www.strong4life.com/en/parenting/communication/conversation-starters-for-kids-and-teens?s_kwcid=AL!15640!3!666932766224!b!!g!!conversation%20questions%20for%20kids

Principle:

Begin with the basics and start early as that’s when children are most impressionable and learn quickly. Make discussions about money a normal topic and try to craft a creative or fun exercise to teach them wise financial practices.

Addressing financial priorities involves allocating money based on what’s most important. In theory, this sounds obvious, but in actuality, many Americans can be short-sighted in their financial decisions. Even for parents who are strategic in handling money, it’s essential to impart wise principles to their children, because children don’t always see or understand what their parents do with their finances.

A helpful framework at any stage is:

Give | Invest/Save | Spend

Give

Even if giving isn’t a normal routine for you, it’s helpful for children to learn the value of helping others. In addition, it’s good for them; the physical and mental health benefits associated with giving (or serving) are well-documented. (Benefits of Giving: Cleveland Clinic article)

Some benefits include:

  • Boosting self-esteem
  • Elevating happiness and combating feelings of depression
  • Lowering your stress: by reducing your levels of cortisol, the stress hormone that can make you feel overwhelmed or anxious
  • Lowering blood pressure
  • A longer lifespan: studies show that people who volunteer tend to live longer than those who don’t.

Possible discussion with your child: “What would you like to give to? How can we give or serve together as a family on a Saturday morning or afternoon? “

Invest/Save 

Teach the Power of Compound Interest:

One of the most important and motivating concepts in investing is compound interest. It’s a fun lesson to teach your child, and you might enjoy learning more on this topic as well. Below are a few websites that can help. While you may need to adjust them for your child’s age, consider creating a trivia game or using coins or candy for a fun and engaging way for them to learn.

https://wealth.visualcapitalist.com/visualizing-power-compound-interest/

https://www.ramseysolutions.com/financial-literacy/teaching-compound-interest

Possible discussion for this topic: Ask your child what is a more expensive item they want and how much money they will need to save to be able to buy it. Having a separate “Save” category, distinct from “Invest,” allows them to set short-term goals as they save for something they really want.

Spend

Help Your Children Develop a Spending Plan:

For younger children, this is simply a fun discussion about what they would like to buy and how can they divide their money so they can buy several of those items.

When your children are older, and they start to ask for money to go to the movies or for gas, use this as an object lesson. Instead of giving them money when they ask for it, sit down with them a tell them how much you plan to allocate each month.

Then help them develop a plan for how much they need to set aside for gas or going out to eat with friends on the weekend or other events.

Help them realize there is flexibility with this plan. If they drove more than they normally do over a few weeks, remind them they can reallocate funds from their movie/events fund to cover gas expenses. Or maybe they can share rides with a friend and use the money they saved to go to a sporting event or a concert. (Without using the word, you’ve actually taught them how to make a budget, plus a spending plan sounds more fun anyway.)

Practice

Establish Ground Rules:

Consider giving them an allowance that’s tied to their chores. This teaches them the value of contributing to the household while also managing their finances effectively.

Guide them in dividing their money into categories to meet future needs. A suggested allocation template is 10% for Giving, 10% for Investing, 10% for Saving, and 70% for Spending.

For younger children, make their allowance a fun activity. Discuss their plans for giving or saving and after allocating the first 30%, they can choose how to use the remaining 70%.  A fun activity to accompany this is to ask them if they want to take some money from their spend category and go buy something fun as an afternoon outing.

“Seeing is believing”: If they can see their money growing it’s tangible and more motivating. For the younger children, a helpful idea is to give them a piggy bank that’s clear and also has 4 compartments (readily available online). As they see their money grow, it reinforces the importance of saving. This also allows you to be creative, as you can add money to their invest and save categories to reinforce the previous lesson of their money earning interest.

As they enter the Tween or Teenager stage, continue their allowance. Their needs will increase but so does their ability to contribute to the household. Help them apply these principles on a larger scale by opening a checking or investment account with them. As you give them their weekly or monthly allowance, assist them in planning so they have what they need at a later date.

As they grow older, teaching opportunities transition from primarily instructing to asking questions that prompt them to reflect on their decisions and consider alternatives for improvement. While setting ground rules at home can be challenging, it provides an opportunity to witness their development and prepare them well for the next phase.

While these are some beginning steps to take, throughout this process you are helping your children learn to handle money wisely. You are also building a solid foundation of having meaningful discussions on the topic of money.

To learn more about CapSouth Wealth Management and our services, visit our website  or call 800.929.1001.

Article by:  Clay Cook, Associate Advisor

CapSouth Partners, Inc, dba CapSouth Wealth Management, is an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. This information has been prepared solely for informational purposes, is general in nature and is not intended as specific advice. This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth). CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from this article. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

 

 

 

 

 

 

 

 

Insurance Considerations When You Have Children

 

A growing family, by definition, means growing financial obligations both in the present and in the future. Raising children can increase your insurance needs and heightens the urgency for being properly prepared.

 

Auto. When a child becomes a new driver, one option is to add the teenager to the parents’ insurance policy. You may want to discuss with your auto insurer ways to reduce the additional premium that accompanies a new driver.[i]

 

Home. You should periodically review your homeowner’s insurance policy for three primary reasons.

 

A growing family generally accumulates increasing amounts of personal belongings. Think of each child’s toys, clothes, electronic equipment, etc. Moreover, household income tends to rise during this time, which means that jewelry, art, and other valuables may be among your growing personal assets.

 

The second reason is that the costs of rebuilding – and debris removal – may have risen over time, necessitating an increase in insurance coverage.

 

Lastly, with growing wealth, you may want to raise liability coverage, or if you do not have an umbrella policy, consider adding it now. Umbrella insurance is designed to help protect against the financial risk of personal liability.

 

Health. With your first child, be sure to change your health care coverage to a family plan. If you and your spouse have retained separate plans, you may want to evaluate which plan has a better cost-benefit profile. Think about whether now is the appropriate time to consolidate coverage into one plan.

 

Disability. If your family is likely to suffer economically because of the loss of one spouse’s income, then disability insurance serves an important role in replacing income that may allow you to meet living expenses without depleting savings.

 

If you already have disability insurance, consider increasing the income replacement benefit since your income and standard of living may now be higher than when you bought the policy.

 

Life. With children, the amount of future financial obligations increases. The cost of raising children and funding their college education can be expensive. Should one of the spouses die, the loss of income might severely limit the future quality of life for your surviving children and spouse. Not only does death eliminate the future income of one spouse permanently, but the future earning power of the surviving spouse might be diminished as single parenthood may necessitate fewer working hours and turning down promotions.

 

The amount of life insurance coverage needed to fund this potential financial loss is predicated on, among other factors, lifestyle, debts, ages and number of children, and anticipated future college expenses.

 

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

 

Some couples decide to have one parent stay at home to care for the children full time. The economic value of the stay-at-home parent is frequently overlooked. Should the stay-at-home parent die, the surviving parent would likely need to pay for a range of household and childcare services, and potentially, suffer the loss of future income due to the demands of single parenthood.

 

Extended Care. The earlier you consider extended care choices, the better. However, the financial demands of more immediate priorities, like saving for your children’s college education or your retirement, will take precedence if resources are limited.

 

To discuss your family’s insurance needs with a CapSouth advisor, contact our office at 800.929.1001 or visit our website at https://capsouthwm.com/contact/

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://cars.usnews.com/cars-trucks/car-insurance/average-cost-of-car-insurance

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