Meet Our Newest Planner: James Jacobucci

April 10, 2017

The newest member of our CERTIFIED FINANCIAL PLANNER™ team, Jim Jacobucci, CFP®, MBA, has always liked to save money. It’s one of the reasons he switched careers to financial planning from manufacturing. I asked Jim some questions about his money story, money and family life, and what it means to come to Financial Finesse:

What’s your personal mission? Who do you most want to help? I most want to help people who generally do not have access to sound financial guidance. Those who have problems making ends meet each month or who have taken on high levels of credit card debt need help just as much, if not more, than anyone else. My mission is to provide sound guidance on how to navigate through everyday financial issues that are important to everyday people.

What’s your money story – what your parents taught you about money, etc.? Did you hold any negative beliefs about money that you had to overcome? For as far back as I can remember, I liked to save money. I’m not really sure why. When I was, say, 8 years old, I did not have a goal in mind to buy something specific, but I just liked to save what little money came my way.

I do not recall my parents teaching me specifically about money, but we were a middle class, single income family. When my dad was working, things were fine, but if he was laid off, things got pretty tight, pretty quickly. Maybe just experiencing this influenced me to save when I could.

What is the biggest mistake you ever made with your money, and what did you learn from it? The biggest financial mistake I ever made was not having an adequate emergency savings fund while I was going through a career change. I knew that my income would drop during this transition, but I did not properly plan for all scenarios. For a while, money was pretty tight until I gained some more traction in my new profession. What I learned from this is to always hope for the best but plan for the worst when it comes to making decisions that will have a long term financial impact.

What have you learned about money and marriage that you can teach the rest of us? I am very fortunate in that my wife and I are pretty much on the same page regarding our finances and how to prioritize. And therein lies a lesson learned. This may sound a bit too clinical, but I believe when you commit to spending the rest of your life with someone it just makes sense to be sure you have the same general philosophies when it comes to money.

My wife and I never really had in-depth money conversations before getting married, but you get a pretty good grasp on someone’s financial tendencies when you are spending time together. While dating someone, if I saw she was spending frivolously on luxury items at the expense of more practical things, that would have been a red flag for me. Not that she would be “wrong” in her spending choices, but having such a different outlook on spending compared to mine would present some challenges if we did get married.

How do you teach your kids about money? I try to explain to my kids why I am making the everyday choices that I am with regards to money. It started out at the grocery store when they were young.

If we were going to buy a gallon of ice cream, I would explain why I was buying the brand that I was. Was it on sale? If one brand is more expensive, is it worth spending that extra dollar on that brand or would it be wiser to spend that dollar somewhere else?

Now that they are a bit older, when it is time to make a purchase for my kids for say, new summer clothes, it is left up to them what to buy (as long as it is tasteful). They are given a budget of how much to spend, but it is up to them on how they spend it. My wife and I certainly provide some coaching along the way and help weigh the pros and cons of buying a designer item vs. a more run-of-the-mill item.

What do you think your generation does differently with money/attitudes about money? Being a Gen Xer, I think my generation sees money that is something that you need to work hard for, to earn. Put in an honest day’s work and get an honest day’s pay.

If you could wave a magic wand and reform financial services, what would you do? I am frustrated that those who need the most help, those who are really struggling to make ends meet, get the least help. One of the great things about delivering workplace financial wellness benefits is that we’re compensated and incentivized equally for offering financial guidance to an employee with a net worth of $10 or one with $10 million. This is the approach of Financial Finesse and why I love working here.

Tell me about your financial coaching philosophy? First and foremost, I respect every employee that I am coaching. They may be in a bad financial spot, but there are always reasons for getting to where they are.

Understanding those reasons, how they affected their finances, and what can be done to improve their financial wellness is what I strive to do. I never pass judgment on a person, regardless of their situation or how they got there. It’s my job to listen and understand and give employees the tools to make improvements.

Why did you want to earn your CFP® designation? What does it mean to you? There were three main reasons that I decided to pursue my CFP®: to broaden my knowledge base in tax and estate planning, to provide myself with a certain level of intellectual stimulation that was lacking in my job at the time and to give me the ability to help a wider range of people. To me, the CFP® designation represents an ongoing commitment to keep current on financial planning topics, which enables me to be in a position to help people make the right financial decisions.

Is there anything that really surprised you about coming to work at Financial Finesse? Why? The thing that surprised me the most about coming to work at Financial Finesse was all of the planners are deeply involved in the company in areas which impact how workplace financial wellness programs are designed and delivered. They are involved in many parts of the business – research, consulting, communications, recruiting and fact-checking. This is a great because the planners all have unique skill sets and experiences that are useful in multiple areas of the company.

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here and on Twitter @cynthiameyer_FF.

How to Budget for Child Care

January 17, 2017

I was flipping through old pictures of my children and came across the one above. My daughter, now 7, was about 10 months old in this picture. My friend needed a baby for a photo shoot and I volunteered my daughter if I could get copies of the photos. This picture is one of my favorites.

As I think back to when she was a baby, I can’t help but think of how expensive that time in our lives was. In fact, I used to call her my little mortgage payment. With the average cost of childcare for an infant easily exceeding $10,000 a year, many parents struggle to budget for it. The following strategies can help take the financial bite out of child care:

1. Create a budget to see exactly how much you can spend on child care. Look for items you can cut back on such as cable, eating out or entertainment.

2. Once you have created your budget, decide how much you can reasonable afford for child care. Contact your employer to see if they offer a child care search services. Research childcare options that meet your budget. A private nanny may be out, but a quality daycare facility may fit into your budget. A friend of mine did her budget and realized that it was cheaper for her to stay home rather than put her children in daycare.

3. Once you have narrowed potential childcare providers, ask about discounts. You may be able to get an employee discount or a discount based on where you live or if you have multiple children attending the same daycare. If your income is limited, contact your child care provider or your state’s Child Care Program Office about financial assistance.

4. Consider using employer savings plans like a dependent care FSA to save money for daycare pre-tax or claiming a dependent care tax credit on your taxes. Since you can’t use both on the same expense, weigh your options to see which one is better. In general, a dependent care FSA is better for higher income earners (above the 15% tax bracket) and the dependent care tax credit is better for lower income wage earners.

Don’t let yourself get overwhelmed by the cost of daycare. With a little bit of planning, childcare does not have to bust your budget. A little bit of research can go a long way to helping you find the best childcare option for your needs.

What a Financial Planner Told His Daughter After Her First Job

December 30, 2016

This week, I’m sharing a blog post from my colleague, Steve White:

My daughter is 22 and recently graduated college with a degree in human biology cum laude no less and she has a job working with a medical practice. (I’m a dad so I have to brag a little.) She has done several things that have reminded me why 1) being able to support yourself is important and 2) your kids do listen to what you say.

She called me when she got her first paycheck and said “Dad, I got a paycheck with a comma in it. Now you have to listen to me.” My father used to jokingly tell me that until I got a job with a paycheck, he didn’t have to listen to me, and yes, I jokingly told her the same (full disclosure – my dad did listen to me and I did and still do listen to my daughter). That paycheck with a comma in it meant that she now got to experience adult things that I’ve taken for granted like employee benefits. Her questions (and my answers) that we covered when she accepted her job included:

What health insurance do I sign up for? (the one that fits your situation) Should I check and see which one covers my prescriptions? (yes) If I take the high deductible plan, should I put money into the HSA? (yes) If I take the other plan, should I put money into the FSA? (yes)

How much life insurance should I get? (enough to cover your debt – see this life insurance needs worksheet) Who do I name as beneficiary? (whomever you want to – not me, name your mom) Wow, I don’t like thinking about if I die (Yeah, I know.)

Who is your beneficiary? (Mom) You need to name me as your medical power of attorney [see human biology major – cum laude] (I’ll think about it – aka no, let’s get back to your benefits.)

How do I fill out a W4? (What do the instructions say?) Will I have to file my own taxes? (yes) Can you help? (yes)

Thanks Daddy! (You’re welcome. What other benefit questions do you have?)

Do I need disability insurance? (yes) Why? (You’re statistically more likely to be disabled than die young – 24% chance of being disabled for 3 months or longer.)

Before she got her 3rd paycheck, she called me about budgeting, here’s how that one went:

Dad, I think I’m going to run out of money before I get paid again. (Oh, why is that?) I’ve got $23.42 in my bank account. (Yeah, I’d say that’s a possibility.)

I hate budgeting. (We all do sweetie.) Can you help me set up a budget? (Sure, I do it every day. That is one of the things I’m paid to do.)

(You remember when I decided to start watching what I ate?) Yeah, I remember you arguing with me about how many calories are in a fried pork chop. (Okay, besides that, when I thought about watching what I ate as a diet, I thought about in a negative light. I decided to think about it as an eating plan. That feels positive to me.)

Oh, I get it. I need to think about budgeting as a spending plan. (Yeah, just like you plan what you are going to eat, plan what you are going to spend.) Can you send me that spreadsheet thing you sent me before? (sure: Easy Spending Plan)

When she got her 3rd paycheck, our conversation went like this:

Dad, this morning at work, I was so excited that I got paid that I gave everyone a hug. (That’s nice.) I don’t think they expected that. (They have gotten a lot more paychecks. They have learned to restrain their excitement.)

I’m working on my spending plan and I’ve got a question. How much should I spend on lattes? (less than you do now) But I really like my soy double pump vanilla latte (I know), so what do I do? (Spend less on something else.)

But I need gas and food! (I know.) Dad – sometimes being an adult stinks. (I know.)

(Love ya sweetie.) Love you too Dad.

How to Stay Sane During School Breaks

December 20, 2016

I love the holidays. The world seems to slow down a little and I get the time to catch up with friends and family. The chocolate is even better. But with every holiday, comes a winter break and the inevitable question of what to do with the kids comes up. With the babysitters called “TVs” and “iPads” quickly exhausted, the following are cost effective ways to entertain kids during school breaks.

1. Organize babysitting swaps. If you have neighbors with kids close to your kids’ ages, consider doing a swap where parents take turns managing the children, giving the other parents a break. As odd as it may sound, it is sometimes easier to have a lot of kids that can entertain themselves than one or two kids who expect you to be their entertainment.

2. Look for winter break camps in your area. Some are surprisingly affordable, but the affordable ones go quickly so start early. Consider looking into the programs at your local YMCA or community center.

3. Eat out on the cheap. Eating out in a restaurant is a fun activity for the kids. For many of us, the problem is the expense. MyKidsEatFree.com is a national database of places where your kids can either eat at a reduced cost or for free. You can also Google your local area for places where kids can eat for free.

4. Look for free activities. Stores like the Pottery Barn and Home Depot have fun kids’ activities. Local malls as well as your local public library also host kids’ events.

5. Plan an agenda. I got this one from my colleague, Cynthia, and it worked like a charm. I planned a series of events for the kids to include a talent show. This kept them occupied until the evening. I also had them watch a few movies and created a trivia game of questions to answer about the movie for a prize.

Holidays with the family is wonderful and tough at the same time. With these strategies, they don’t have to blow your budget. Then they can truly be happy holidays.

What to Do When Your Kids Ask for Expensive Toys

December 19, 2016

Do your children ask you – or Santa — for expensive toys? If they’re a kid in America today, chances are that they’ve asked you for an item whose price made you gasp. It could be an American Girl® Doll and accessories, a Thomas and Friends™ train set, a Microsoft® Xbox, or the latest Apple® iPhone.

Say “yes” and you’ll spend hundreds of dollars. It may not be affordable for you to gift something that expensive. Many parents are tempted to put the purchase on a credit card and deal with the payment later. Even if you can afford it, there are reasons to reflect and plan how you will handle the request before agreeing.

Start the conversation about money

A child asking for anything that costs money is an opportunity for financial education. Use your child’s gift request to initiate a conversation about spending, saving and prioritizing. Consider asking your child these questions:

How much does it cost?
Where will the money come from to pay for it?
How do grown-ups earn money?
Can you think of ways to save up for this?

For more ideas on how to talk to your kids about money, the Consumer Financial Protection Board (CFPB) has an excellent resource, Money as You Grow. It includes a book club with age-appropriate suggestions to spark money conversations. I also recommend picking up a copy of Ron Leiber’s perspective-changing book, The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous and Smart About Money.

Santa has a budget, too

I’ve always told my kids that Santa represents the giving spirit of Christmas but is imaginary. However, if your kids believe in Santa and have asked for an expensive item on their wish list, talk to them about how Santa has a limited amount of resources to get gifts for all the world’s children. Check out this great interview with personal finance columnist Michelle Singletary for tips on how to explain Santa’s budget.

Have your child research buying options

When my kids ask for a pricey gift or want to purchase a large item with their own savings, they have to do their research first. Ask your child to:

Shop around for three price quotes. Show them how to evaluate costs, including shipping.
If there are alternatives to their desired version, have them make a grid to compare features and ratings. Ask them to explain how they made their choice of the best buy.

Consider buying a gently used version

If your child is discovering a new line of toy that’s been around for a while, consider buying a gently used version on eBay or your local second hand network. Take Pokémon® cards, for example. For the price of one new “mega” set with 60 cards, you could buy an entire set of thousands from a teenager who has outgrown them.

Sell or give away your kids’ outgrown toys

One family’s cluttered playroom can be another family’s holiday treasure. We’ve been the recipients of many wonderful hand me down toys, including a fabulous kitchen set, dress up costumes, train equipment and Lego® pieces. When your child has outgrown a toy, encourage them to either give it away to a younger child or charity or sell the item and apply the proceeds towards the expensive gift they’ve requested.

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

What To Teach Your Child About Money Over Winter Break

November 29, 2016

Experience is often the best teacher. My mother told me this often and like most kids, I ignored her. I thought I knew everything when I was a teenager despite my lack of a high school diploma, never having had a job or paid a bill, and being on the earth for less than 18 years.

When I went to college, she gave me an amount of money to spend monthly. I, like most kids, did a horrific job managing my money and I found myself broke within days of getting my monthly allowance. My mother refused to give me extra money. Needless to say, it was a humbling experience.

During my first major break in college, my mother pulled me aside and showed me how to budget. For those of you with kids in college who are floundering with their money, take the time to help them learn how to budget. Trust me. They will be much more receptive after they have tried and failed. The following steps can help your child manage their money better – and create less of a headache for you.

1. Work with your child to create a budget.

At the time I went to school, the Internet did not exist, so my mother helped me create a budget on paper. My budget consisted of eating out, clothes, and entertainment. To her credit, my mother did not roll her eyes over my eating out expenses but guided me into limiting my spending so my money could last. Today, your child can use websites like Mint to manage their money. Help them think through how much they should spend weekly, so they have money for the month.

2. Establish rules for overspending.

This one was easy. My mother said, “Don’t ask me for more money.” She made it clear that if I could not manage my money, she was not going to be “Bank of Mom.” Knowing that there was a limit to my spending scared me into thinking more about how I spent it. Go over the rules for overspending so you and your child are on the same page.

3. Consider a part-time job.

I complained to my mother that the money I was given was not enough. She went over the amount and then how I spent it, which I blew on pizza, clothes and movies. She then told me that her job was not to manage my social life and if I want one, I should get a job to cover the expenses. Immediately, my complaining subsided.

If your child is struggling to manage the money they have, go over their funds with them to assess if the struggle is a result of poor money management or truly a lack of funds. Depending on your child, encourage them to work a part-time job. Surprisingly, when I eventually got a job, my grades went up. The job was a wake up call as to what my life could be like without an education.

While your child is home for the holidays, take the time to review their spending. Helping your child create good money habits now will go a long way to creating a financially successful adult. They’ll thank you someday.

The Parents’ Guide to Making a Will

October 31, 2016

Are you raising one of America’s 73.6 million children? If yes, do you have a will? If you don’t have one, you urgently need one. Don’t wait. A will, with a provision which names the person who should be the guardian of your children if you die, is the most important step in making sure your kids are raised by the people you would want to raise them.

What happens if you don’t have a will?

It’s not fun for any of us to think about what would happen if we died unexpectedly. That probably won’t happen, so you might be tempted to put it off thinking it’s silly to prepare for a worst case scenario. The problem is, if you die without a will which names a guardian for your children and specifies what funds are available to care for them, you have zero control over who raises your kids and how much money remains for their support. Your state’s courts, with government social services, is going to decide what happens to your kids, who raises them and how your money is divided up.

You need a will even if your spouse remains to take care of your children. If you die without a valid will, the courts will decide what happens to your assets according to a preset formula (e.g., some to the surviving spouse, some to the kids). Your spouse may not have full access or control over the money allocated to the children.

Don’t feel sheepish about not putting one together yet. According to a Caring.com survey, nearly half of American parents don’t have a will or living trust. Here’s how not to be one of them.

Make three decisions

Once you’ve decided you are going to make a will, it’s relatively straightforward to get started. You’ll need to make three critical decisions before you write anything up:

Name a guardian. Who is the best person to take care of your children until they are adults in the unlikely event that you are no longer living? Does that person share your values? Do they share your beliefs about parenting? Do they love your children?

FYI, in most cases where parents are divorced or unmarried, the default would be for the children to stay with the surviving biological parent, so if you have an objection to that, you’ll need to put that in writing. Choose your first and second choices for a personal guardian to include in your will. You’ll want to name a legal adult who has the time, energy and willingness to raise your children if needed. Before naming a personal guardian, make sure you’ve asked that person and they have agreed to accept the responsibility if needed.

Decide what happens to your money and stuff. Any assets that do not automatically pass according to their title or beneficiary (called “beneficiary of law,” such as property held as joint tenants with right of survivorship, retirement accounts or life insurance) are included in this category. Make sure you fully designate what happens to your property, bank accounts and investments.

Minor children won’t be able to manage that money for themselves, and you may not want them to have full access to it until they are well established adults. Who will control the checkbook? Decide if that’s an individual – it could be a different person than the guardian if you prefer – or a trust company.

Name an executor. An executor is a person named in your will (or appointed by the court if you die without a will) whose job is to carry out the instructions in your will. The executor takes care of your last financial business such as paying taxes/bills and re-titling property according to your will. Don’t forget to include a digital executor to control your online and social media accounts, who may or may not be the same as your financial executor. As with a guardian, make sure your executor is someone who is willing and capable to take on that kind of big responsibility.

Prepare your will

Once you’ve made the big three decisions, you’re ready to write your will. Here are some options for preparing a valid one:

Use an attorney. The biggest advantage to using an attorney to prepare a will is that — if you pick a qualified estate planning attorney – you can be more confident that it conforms to the laws of your state. The downside is that it’s more expensive. Check your employee benefits. You may have access to a prepaid legal program as a voluntary benefit or access to lower cost resources through your employee assistance program (EAP). The American Bar Association also offers an online state by state guide to wills and estates.

Use an online legal resource. If you need a basic will without a lot of personalization, an online resource may be a fit for your situation. Check with your EAP to see if you have access to any free or low cost will preparation services. There are also online will preparation sites such as Nolo.com and Legalzoom.com where you can make a will for a reasonable price.

Communicate your plans

Finally, a will won’t help if no one knows you have one. Let a few trusted people, such as a sibling, parent or close friend, know that you’ve prepared a will, and where they can find it if it’s needed. Make sure your executor knows how to access your will and has contact information where needed.

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

Lessons in Home Buying

September 20, 2016

I was recently at an overdue dental appointment talking to the dental hygienist, Jana. I try to talk about anything that distracts me from the drilling and moans of pain I hear in the other booths. She started telling me about her new home purchase and how she used lessons learned from her last property to make a better decision – like giving her kids free reign to run around the house. I will admit that I have never heard of this as a house hunting strategy, so I asked for more info and below is what I learned from our conversation:

Test drive a new house. She said the mistake she made with her first home was that she did not think to check on how soundproof the home was, especially with four kids. When she was looking for a new home, she brought all of her kids with her and unleashed them in the prospective homes to test the sound quality of the different rooms. If you value peace and quiet with kids, have your kids go upstairs and be loud (they will love this), walk through the rooms, and close the doors to gauge the sound quality of the rooms

Neighbors are your best friends. Jana mentioned that after she bought her home, she talked to the neighbors and learned most of them were moving out within the next few years because the neighborhood was recently redistricted into a not-so-great school system. This time she walked around prospective neighborhoods and struck conversations with neighbors who were not shy about telling her about the good, the bad and the ugly of the community. This saved her from potentially buying a home in an area that she learned was having major traffic issues during rush hour traffic – enough that some of the neighbors had formally complained.

Don’t just relay on what a real estate agent tells you. Visit a neighborhood you are thinking of living in during different hours to get an idea of the traffic flow and talk to neighbors. Many are not shy about giving you their opinion.

You get what you pay for. For the first home she bought, she went with the home inspector that was the cheapest. She was not present during the inspection and ultimately paid the price with plumbing, appliance and roofing issues. This time, she interviewed home inspectors and paid an additional fee for a more thorough inspection. She also stayed for the entire inspection, asked questions along the way and was able to get a rough idea of whether the repairs were small or large.

She said the lessons she learned saved her from making another home buying mistake and helped her get into the home of her dreams. Take the time, like Jana did, to take the extra steps to make sure you are choosing the right home for you. It will go a long way into making your home buying experience a good one.

What Our Dads Taught Us

June 10, 2016

Since Father’s Day is right around the corner, I asked some coworkers what the best piece of advice their father gave them was. I’ll share their responses and add a bit of commentary with each one:

My dad is from Guyana and he stressed the importance of education in the U.S. He told me that my ability to grow my income will be based in part by finishing my degree- the rest is up to how hard I work.

As a dad who stresses the importance of education AND hard work (either one alone will not suffice), I totally agree with this dad’s advice. My kids have heard countless times that they are expected to do well in school and expected to put forth effort in all things they attempt to accomplish. This dad’s advice should be universally accepted as true wisdom.

Dad didn’t always say a lot, but he set a great example with how he prioritized his time. He got to work early, was home on time for dinner with the family and helped us with homework if we needed it, then he went back to work until the job was done. If we had a ballgame or a concert, he adjusted his schedule to make sure to be there and he loved going to sporting events with me and my brother so he made that a priority as well.

Again, this is timeless wisdom from a dad who put family first. If more dads followed this path, perhaps we wouldn’t have many of the issues we see in this country today.

Don’t trust a man or get pregnant before having a job.

Well, this is certainly advice that served my coworker well. She’s a very independent and successful woman, and she’s raised lovely daughters as well. The principles of self reliance and good decision making that her father instilled, in his own unique way, have served her well. The lesson here, at least as I see it, is to find ways to communicate your financial lessons to your family members in ways that they will receive.

Mostly about being in a desperate situation or feeling down-trodden: 1 – You can’t fall off the floor. 2 – They can’t take away your birthday.

One of my favorite sentiments, this dad was all about the power of resilience. Resilience is a key trait in those who I’ve seen reach a high level of success. It’s what can keep a person moving forward toward a goal when most rational people would fold.

Have a firm handshake as it shows confidence.

A timeless pearl of wisdom, right there! A firm handshake and the ability to look someone in the eyes when holding a conversation sometime feel like “the way things used to be” rather than what I see in today’s higher tech world.

My dad was the one who taught me about how little changes add up. For example, when our credit union introduced debit cards back in the late 90’s, they were paying members $.25 PER TRANSACTION to encourage use of the card over checks. My dad was like, “Hot diggity, this is free money for spending money you’re already spending! You have to do this!” This was my first foray into taking advantage of rewards programs, discounts, etc, but ONLY on things I was going to buy anyway. I learned to be practical and frugal from my dad.

This dad should be a Financial Finesse blogger!!!

Your work ethic is something nobody can ever take away from you, so work hard and let it speak for you. It will take you further than your talent alone can and past the majority of people who aren’t willing to work as hard.

This reminds me of the first dad’s advice about education and effort. It kind of brings the list of dad tips full circle.

What I love about this list of tidbits from dads is that the children who received this advice ended up being successful adults and working here at Financial Finesse. Every single item on the list is also reminiscent of either what my grandfather taught me as a child or something that my kids have heard from me. None of these items seem like a “get rich quick” kind of message. It’s definitely a lot of tortoise and not much hare. If you absorb the messages from Financial Finesse’s dad squad, you are certain to be thankful this Father’s Day.

How to Teach Your Kids About Money With An Allowance

June 08, 2016

Do you remember the financial lessons you learned from your parents or other close adults while growing up? No doubt your own financial habits and mindset are influenced to this day by the actions and attitudes you observed as a child. This is a good reminder that your adult behavior around money will most certainly affect your children and other young people who look up to you.

One great way to have a positive influence, even if you’re still on your own personal journey to financial security, is by paying an allowance. There is an ongoing debate about whether an allowance should be tied to household chores or not, but many people agree that it’s a great way to teach children about money and financial responsibility. Regardless of whether you believe children should work for their allowance or whether it should be a gift, here are some tips to make the most of this lesson for your kids.

Be consistent. One of the greatest things an allowance can do is teach your kids how to budget, which requires consistency of income. Whether you pay weekly, biweekly or even just monthly, do it on the same day and in the same amount so they understand the value of making their money last. Caving and paying kids early could be akin to payday loans, which is the exact opposite of what you want to teach your kids.

Help them set goals. This can help them see the value of skipping short-term wants, like candy, in exchange for reaching longer-term goals like a video game. One suggestion is to require kids to put one-third of their allowance into savings and one-third toward a charitable need like an animal shelter or church, with the remaining third available for immediate spending.

Introduce them to banking. Open a savings account for your child’s longer-term savings and show them how to check their balance online, pointing out how interest (however miniscule) accumulates, allowing their money to compound. This is also a great way to demonstrate that the ‘M’ in ATM doesn’t mean “magic.” That cash gets in there somehow!

What if you don’t have the money to pay an allowance? This was sometimes the case in my earlier years, but there are still ways to pass along the lessons even if you can’t pass along cash:

1. Use a grocery allowance. Allow your kids a certain amount of the grocery budget that they can spend on special treats or even for their breakfast foods, which you need to buy anyway. I’ll always remember watching a mom do this at the store. When her son selected an expensive yogurt smoothie, I heard her explain how that was a fine, healthy choice, but if he wanted that instead of the less expensive store brand yogurt for breakfast, he would have to put back the juice he had already chosen. The trade-off was tangible and clear.

2. Keep a written tab. If you don’t always have the cash available on allowance day, simply keep a written record by adding that week’s amount to your child’s tab and then when you buy something for them, subtract it from the tab. This isn’t a bad way to go even if you do have the funds as it’s closer to the way we are paid and spend money in modern times anyway.

3. Remember that it’s often more about the practice than the amount. Perhaps you can’t afford to pay the average $67.80 per month that’s the current going rate. Even just $5 a week can teach the lessons.

These are some great ways to use an allowance to raise financially responsible adults, but I know there are others out there. How do you teach your kids about money? Please let me know via Twitter at @kclmoneycoach or post on our Facebook page.

Life Lessons to Help Your Kids Start to Value Money at an Early Age

June 07, 2016

One of the greatest gifts I have been given is to be what is called a “first generation American.” My dad came to the U.S. over 45 years ago from Guyana to pursue a degree in law. The financial lessons I learned sandwiched between my American and Guyanese cultures have helped me to understand the value of money at an early age.

Money is earned, not given. I do not remember ever getting an allowance. I worked and earned money, starting at about age 4. My dad was very clear on what work was. Work was helping out with household chores, cleaning my room without being asked, and getting good grades and reports from my teachers.

When I did these things, I earned money. If I did not, dad deducted the money I earned. I learned that I have to work to earn money and not to expect anything for free. Consider having your kids earn money instead of an allowance and hold them accountable when they do not do their work. You will teach them the value of money and to have a strong work ethic.

The pain of discipline or the pain of regret – my choice. The money we earned was to pay for school activities, clothes and any extra expenses from a family outing (a balloon, toy, food, etc.) My dad held us accountable. Once the money was gone, so was our ability to pay for school activities and buy anything for an event. This taught us to think about the future and to budget our money for things we want to do.

When you give your children the money they earned, come up with a plan for it. In our home, our children give 10% and save 10% ,and we work with them to plan for how they will spend the rest. We make it clear, just like my dad, that once the money is spent there is no “Bank of Mom or Dad” to bail them out.

Be generous. My family were givers from as early as I can remember. We gave of our time but also our money. We gave money to our family in Guyana, to causes we cared about, and to our church.

This taught me from an early age that money is a tool that can be used to get the things you want but also to help others in need. It also led to feeling gratitude for the things you have. Teach your children the true value of money by having them donate some of their earned money to someone in need.

Of course, not every family is like mine. Your family and values may be different. Whatever they may be, come up with a game plan to set a strong financial foundation for your child(ren) so they can build a successful future.

How To “Budget-Bust Proof” Your Spending Plan

September 01, 2015

Okay, I am going to call this Confession Tuesday. I have spoken to so many people that struggle with creating a budget. I can hear the guilt and even shame in what seems to them like their inability to live within their means. Continue reading “How To “Budget-Bust Proof” Your Spending Plan”

Passing On Your Money Skills

May 05, 2015

Working as a financial planner gave me the opportunity to meet so many people and to hear their amazing stories as to how they became wealthy. Most came from humble means, from former refugees who did not speak English, to former teenage moms, to those that grew up in foster care. Their stories are an inspiration. Continue reading “Passing On Your Money Skills”

Why You Need to Talk to Your Kids About Money

May 01, 2015

I know that many people are hesitant to discuss money with their children — or their spouses/partners for that matter. I have talked about this with one of my pastors and he told me that people will come to him for help with all sorts of issues ranging from drug abuse to infidelity in a marriage, but money issues still remain a taboo topic for a lot of people. Many parents are embarrassed by their past money mistakes and do not want to discuss these with their children.

Continue reading “Why You Need to Talk to Your Kids About Money”

Financial Lessons From the “Game of Life”

March 02, 2015

Recently, my family had one of those cold, winter weekend days where the social calendar was completely empty: no birthday parties, no basketball games, no play dates, and no plans. I am usually very eager to get out and explore all of the beauty outside of our little casa but my initial reaction was relief and joy because the “Mom & Dad shuttle” was staying at home for a change. This was an excellent plan until the excitement of a lazy stay-at-home day getting some household chores wore off and Monster #1 and Monster #2 decided they could no longer coexist peacefully in our house. Continue reading “Financial Lessons From the “Game of Life””

College is NOT a Right

January 21, 2015

Today I met a man who is taking a rather practical approach to teaching his kids about college planning. This gentleman has three kids, the oldest of which will be going to college in a few years. He said something rather profound that made me reconsider how I’ve been talking to my own kids about college. He said, “College is not a right.” Continue reading “College is NOT a Right”

My Back to School Checklist

August 11, 2014

It is hard to believe that summer is winding down and school is right around the corner. I talk to many other parents this time of year who have a wide range of thoughts regarding the back to school routine. Some ask “where did all of the time go” while others cannot wait to get their cute little monsters out of the house and out of their hair. If you are a parent with school-aged children, you are likely experiencing a similar feeling of disappointment/relief. Continue reading “My Back to School Checklist”

What Old School Insurance Sales Reps Won’t Tell You

August 01, 2014

I will admit that I own life insurance…lots of it. If a meteor were to fall from the sky and incinerate me today, my kids would benefit tremendously from a financial standpoint. They’d miss the wisdom (yeah, that’s what we’ll call it…) that I could pass down to them over the next 50+ years but they’d be OK financially. Continue reading “What Old School Insurance Sales Reps Won’t Tell You”

Teaching a Work Ethic to an iPod Generation

June 19, 2013

I’ve lived in my current home for six years. From the day we moved in, the water dispenser built in to the refrigerator door has not worked very well—the water just kind of trickles out—so unless you like standing in front of the refrigerator for two minutes waiting for a glass of water, it doesn’t get used. On top of that, the ice maker recently stopped making ice. That was the straw that broke the camel’s back. I went online and looked into the problem to see if it would be an easy fix. Continue reading “Teaching a Work Ethic to an iPod Generation”

Even a 14-Year Old Can Understand Dollars and Sense

May 29, 2013

This week’s blog post comes from a very special author: my 14-year old daughter. As a parent, you always wonder if your children are listening and as my pediatrician would always reassure my wife and I, they hear us just fine. Proof of this can sometimes come in the most unexpected of ways. Continue reading “Even a 14-Year Old Can Understand Dollars and Sense”