Saturday, January 19, 2019

Summer School

Ask The CFP® Practitioner


“We all learn by experience, but some of us have to go to summer school.” 

~ Peter De Vries, American novelist,
1910-1993.

Question: Our grandchildren are spending time with us this summer. What can we can do while they’re here with us to help teach financial responsibility as they get older?

Answer: There’s no better way to build a strong foundation for financial responsibility than with the power of example. Grandparents can be exceptional role models in this process. There are obvious economic, social and intellectual benefits of financial literacy that are an important component of a child’s education and long-term wellbeing.

It’s never too early or too late to share financial wisdom and experiences with your family. Taking the time now to teach children the value of money can provide the comfort of knowing that they’ll understand how to care for their own financial legacy when the time comes. Depending on the ages of your grandchildren, different approaches may be best.

Pre-kindergarten is a great time to introduce the basics. You can start on a trip to the store and talk about how money is earned by working in order to pay for items and services and also introduce the value of different coins and bills, not just credit and debit cards.

Children as young as 5 or 6 can distinguish between wants and needs. If they’re a little older, your grandchildren could do chores to earn an allowance. Help them go through the motions of saving up for something they’d like to buy and deciding whether or not it’s a worthwhile purchase.

If appropriate, you could share a sample budget with your grandchildren, explaining the expenses you have each month, such as utilities and groceries. A visit to the grocery store with a list followed by a review of the receipt when you return home is a powerful eye-opener. The point is to get them thinking about money as something that needs attention and care.

With pre-teens and teenagers, there are several other steps you can take, such as helping them open a savings account with their earnings from chores, babysitting or other jobs. You might commit to matching a portion of their savings to help preview the value of a 401(k) match that might come with their first job.

From cleaning their rooms to doing dishes, laundry or washing cars, daily and weekly duties can lead to fuller piggy banks. Share your own tips on managing a budget and familiarize them with how you invest and save for retirement. Simply being transparent with your children about the realities and costs of living can go a long way in preparing them for the future. Introducing more complex concepts, such as investing, interest and using credit responsibly is certainly suitable for this age group. Talking about how money earns interest teaches all of us to set more aside, avoid impulse spending, and shows how money can grow and compound over time.

Helping your grandchildren manage their spending is important. Do they prefer buying things at the store every week or saving for something bigger? Planning like this helps them carefully consider their purchases—a skill that can pay big dividends in adulthood when managing their own budgets.

Finally, you have the opportunity to teach your grandchildren the importance of philanthropy by encouraging them to donate old toys and clothes, and maybe even small amounts of money, to a cause that’s important to them. While documents such as trusts and wills may help ensure that your wishes are carried out, they don’t provide a true understanding of how you choose to save, grow and spend money wisely. Without a solid foundation to rely on, financial matters can be overwhelming. The time with your grandchildren this summer is a gift in many ways, one of them is the opportunity to share guidance when dealing with money issues. Stay focused and plan accordingly.

Views expressed are the current opinion of the author, but not necessarily those of Raymond James & Associates. The author’s opinions are subject to change without notice. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Past performance is not indicative of future results. No investment strategy can guarantee success. Asset allocation and diversification do not guarantee a profit nor protect against a loss.

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame design) in the U.S.”

This article provided by Darcie Guerin, CFP®, Associate Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email darcie.guerin@raymondjames.com Website: www.raymondjames.com/InvestmentInsights

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