Money and Family

Create a solid foundation for a lifetime of wise financial decisions

The rewards of having a family are priceless. But there are very real costs associated with it:

These costs can really add up. But if you have a sound financial plan in place, you won’t have to worry about where the money is going to come from in the future.

Raising Children

A vital part of raising children is teaching them about how to handle money, and it can start with a simple conversation.

For some parents, talking to a child about money is almost as hard as broaching some of those other difficult subjects. But understanding money and how to manage it is a crucial life skill parents must pass on to their children.

Childhood

Lesson 1: Learn to handle an allowance

Decide what approach to take and how much to give your child based on your values and family budget.

Lesson 2: Open a bank account

Many banks have programs that provide activities and incentives designed to help children learn financial basics.

Lesson 3: Set and save for financial goals

Try these tips to get your child excited about setting and saving for financial goals instead of buying a new video game:

  • Let your child set his or her own goals (within reason) to give them incentive to save.
  • Write down each goal and the amount that must be saved each day, week, or month to reach it.
  • Tape a picture of an item your child wants to a goal chart, bank, or jar.

Lesson 4: Become a smart consumer

Commercials. Peer pressure. The mall. Children are constantly tempted to spend money but aren't born with the ability to spend it wisely. Here are a few things you can do to help:

  • Set aside one day a month to take your child shopping, and let them save up to buy one item he or she really wants.
  • Just say no. You can teach your child to think carefully about purchases by explaining that you will not buy him or her something every time you go shopping.
  • Show your child how to compare items based on price and quality.
The Teenage Years

Lesson 1: Handling earnings from a job

Encourage your teen to get a part-time job to earn money for expenses and begin taking financial responsibility. Here are some things you might want to discuss when he or she begins working:

  • Agree on what your child's pay should be used for.
  • Talk to your teen about taxes.
  • Introduce your teen to the concept of paying yourself first.

Lesson 2: Develop a budget

Your ultimate goal is to teach your teen how to achieve a balance between money coming in and money going out. To develop a spending plan, have your teen:

  • Create a list of all sources of income.
  • Make a list of regular expenses.
  • Subtract the expenses from his or her income.

If the result shows that your teen won't have enough income to meet his or her expenses, you'll need to help your teen come up with a plan for making up the shortfall.

Lesson 3: Save for the future

Here are some ways you can encourage your teen to save for the future:

  • Motivate your child by offering to match what he or she saves towards a long-term goal.
  • Praise your teen for showing responsibility when he or she reaches a financial goal.
  • Open up a savings account for your child.
  • Introduce your teen to the basics of investing by opening an investment account for your teen (if your teen is a minor, this will be a custodial account). Investing involves risk, including loss of value.

Lesson 4: Use credit wisely

Although most major credit card companies require an adult to cosign a credit card agreement before they will issue a card to someone under the age of 18, you can't ignore the credit card issue.

If you decide to cosign a credit card application, make sure you discuss the following with your teen before he or she uses it:

  • Set limits on what the card can be used for (eg, emergencies, clothing).
  • Review the credit card agreement, and make sure your child understands how much interest will accrue on the unpaid balance, what grace period. applies, and what fees will be charged.
  • Agree on how the bill will be paid, and what will happen if your child can't pay the bill.
  • You may want to start off with a prepaid spending card; it looks like a credit card, but works more like a prepaid phone card.
The College Years

Lesson 1: Budgeting 101

Once your child is in college, he or she may need to draft a "real world" budget. Here are some ways you can help your child plan and stick to a realistic budget:

  • Help your son or daughter figure out what income they will have and when the funds will be available.
  • Determine together how you and your child will split the responsibility for expenses.
  • Acknowledge that college isn't all about studying, but explain that splurging this week will mean scrimping next week.
  • Encourage your child to plan ahead for big expenses.

Lesson 2: Open a bank account

For the sake of convenience, your son or daughter may want to open a checking account near the college; doing so may reduce transaction fees. Ideally, a student checking account should require no minimum balance and allow unlimited free checking. If you can’t find that, look for an account with:

  • A simple fee structure
  • ATM or debit card access to the account
  • Online or telephone access to account information
  • Overdraft protection

Lesson 3: Getting credit

As soon as your son or daughter arrives on campus, your child will be deluged with credit card offers. Here are some tips to help your child avoid getting into trouble with credit card debt:

  • Advise your child to get a credit card with a low limit to keep balances down.
  • Teach your child to review each credit card bill and make the payment by the due date.
  • Remind your child that life after college often involves a student loan, car loan, and even mortgage payments, so the less debt they graduate with the better off they will be.

By educating your child about money, you’re helping them to establish good financial habits that they will carry with them throughout their lives. One day, they may even thank you for it!

Buying a home

For many, the American dream still means owning a home. Whether you’re buying for the first time, refinancing, or beginning home improvements, you need to understand the complex issues involved.

Being prepared and understanding the process can help make it a little bit easier, so start now by reviewing these tips for home buying success:

  • Know how much you can afford
    To figure this out, you will need to take into account your gross monthly income, housing expenses, and any long-term debt. For help with this, use an online calculator to help determine the amount you can afford.
  • Mortgage prequalification vs preapproval
    Prequalification gives you the lender's estimate of how much you can borrow, but if you are serious about buying you will want to get preapproved. You will need to complete an application and pay an application fee. The lender will then check your income and credit and tell you how much you can borrow.
  • Should you use a real estate agent or broker?
    A knowledgeable real estate agent or buyer's broker can guide you through the process of buying a home, which can be especially helpful to a first-time home buyer.
  • Choosing the right home
    Before you begin looking at houses, decide in advance the features that you want your home to have.
  • Making the offer
    Most home sale offers and counteroffers are made through a real estate agent. All terms and conditions of the offer should be put in writing to avoid potential problems. You will need to include a nominal down payment, such as $500. If the seller accepts the offer, he or she will sign the contract, which becomes a binding agreement. For this reason, it's a good idea to have your attorney review any offer to purchase before you sign.
  • Getting an offer accepted
    Once the seller has accepted your offer your lender will finalize the mortgage loan and order an appraisal and property survey.

Paying for college with costs on the rise

According to the College Board and the Department of Labor, the costs for higher education—already expensive—are rising. Will you be able to help your children through college without jeopardizing your lifestyle or postponing your retirement plans?

If college costs continue to increase at the current rate, the amount you and your family will have to pay over time is staggering. But as with any financial plan, the earlier you start, the easier it will be.

Financial vehicles that can help

When saving for your child’s education, you may want to consider the following programs:

  • Cash value life insurance
    The cash value of certain life insurance policies can be borrowed against tax-free to help fund your education expenses. However, you should be aware that accessing cash values may result in surrender fees and charges, may require additional premium payments to maintain coverage, and will reduce the benefit and policy values.
  • Coverdell IRAs (formerly known as Educational IRAs)
    Eligible parents, grandparents, and others may make annual non-deductible contributions to Coverdell IRAs for a child under 18, subject to maximum limits.
  • 529 Plans
    State-sponsored 529 plans allow parents to contribute fairly large amounts of after-tax dollars to an account with a minor beneficiary.

Before you invest in a Section 529 plan, request the plan's official statement from your qualified Financial Advisor and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the 529 plan, which you should consider carefully before investing. You should also consider whether your home state or your beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's 529 plan. Section 529 plans are not guaranteed by any state or federal agency.

Working with a Financial Professional can help you evaluate your choices for paying for college and compare the benefits of each option.

Creating a will

If you’re like most people, then you’ve probably put off creating a will. It’s a difficult subject to think about, and if you have a spouse, you may think they’ll be able to take care of everything.

But did you know that, without a will, the state actually decides who will receive your assets and care for your children? Having a will:

  • Protects your family in the event of your death
  • Gives you control over the future of your children and your assets
  • Ensures your wishes are followed
  • Provides peace of mind

Next, read about financial planning for business owners



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