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How to Raise a Kid You Won’t Have to Cut Off in 20 Years

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Today’s young people are more likely than previous generations to live with their parents, according to a 2017 analysis from the Pew Research Center. In 2016, 15 percent of 25- to 35-year-olds lived in their parents’ home, compared to 10 percent of Gen Xers in 2000.

Even when kids move out, it’s not uncommon for them to receive financial support from their parents. In fact, 62 percent of Americans age 50 and older gave a relative money in the last five years, with the largest sums often going to adult children, according to a 2017 Merrill Lynch retirement study.

Parents may not find those statistics encouraging, but the good news is there are ways to teach kids how to be financially responsible, and it involves raising the bar by asking kids to do more in the way of financial responsibilities. Studies have shown that when more is expected of a child (or anyone), they actually perform to that level of expectation. The same can be said of how they deal with money.

Don Roork, a Certified Financial Planner at AssetDynamics Wealth Management, has noticed a pattern with kids, adults and money. “Kids learn good money habits from just watching and being around their parents,” says Roork.

Roork also points out that money lessons aren’t always explicit verbal lectures on finance. “Kids watch mom and dad making good financial decisions, and voilà — the kids’ money behavior matches their parents’,” says Roork.

So when it comes to raising financially independent adults, it becomes clear that it’s important to start when they are kids. Here are some ways personal finance experts recommend easing your children — gently and kindly — into financial adulthood by weaning them from the family wallet.

Set expectations

As soon as your child begins asking for things like toys, restaurant meals or trips to the movie theater, they are ready to learn about the money it takes to support these wants. When a child expresses a desire for something beyond the basics, start the conversation then and there about how they’ll soon be responsible for these “luxury items.”

Of course, you don’t have to start charging them rent (not a bad idea, though), but you will want to follow up your expectations with actions.

For example, if your family goes out to eat, your child can pay for their meal or contribute to a portion of the bill. These expenses can be age appropriate and should increase over time as your child earns more money. They can start with things like snacks at the movies and move up to cellphone bills and car insurance.

Financial adviser Jamie Pomeroy of Financial Gusto says this should all start with communication: “Sitting down with your child and having a clear and frank conversation about who’s paying for what, can pay huge dividends.”

Another good exercise would be to show them prices on things they’ll need as adults, like a home or a car. Molding their expectations around what it takes to live will only help them down the road.

To drive this point home, Pomeroy suggests laying out a real plan designed to increase financial responsibility. “Make sure that you and your child are on the same page about what expenses they are responsible for, what you’ll continue to pay for (for now), and then introduce them to a budget to help them manage those expenses,” he says.

Create a reward system

Get-out-of-debt guru Dave Ramsey warns against giving kids an allowance and instead recommends that money given to a child should be tied to actions, like completing chores or other household projects. The idea is to get kids ready for the real world by emulating it with a system of compensation tied to work.

CFP Jeff Rose of Good Financial Cents says, “One of the first steps in teaching your kids financial independence is giving them responsibilities around the home that are both paid and unpaid.”

Ramsey is also a proponent of giving children the opportunity to earn more money in “commissions” when they find extra things to do or take initiative in solving problems around the house.

Teach them personal finance

Many kids are shocked when they get into the real world and finally begin grasping the finite nature of money. Mom and Dad spring for everything, so why would money ever run out?

Clint Haynes, CFP of NextGen Wealth, says there’s a fix for this. “Make it a point to sit down with your kids and show them what your budget looks like, how it works, and why it truly is the foundation to personal finance,” he says.

When your child asks for candy at the store, don’t deflect them with, “We don’t have the money.” Instead, let them know that the money you have available isn’t earmarked for candy, showing them how a budget works in real life.

Other lessons you can teach early on include those around saving, compound interest and even giving.

Brian Hanks, a CFP out of Idaho, has an experiment he urges his clients to conduct with their children once they are high school seniors. He suggests parents hand over their checkbook and have their kid cover all the family’s expenses for the entire school year.

“Paying a family’s bills is eye-opening, and your teen starts to develop new money habits,” Hanks says.

Let them earn real money

You can start by giving your kids an allowance that is tied to performance: completing chores, excelling in school, and having a good attitude can factor into their “compensation.” Be sure to enforce the association between what they do and how they are compensated. Once they can work legally, you can taper off their allowance.

Ed Snyder, CFP at Oaktree Financial Advisors, says children who have jobs will be more thoughtful about their spending and better with money in general. “Working will help them think through their spending and hopefully be more responsible,” he says.

Keep in mind kids don’t always have to wait until they are 16 to get a job. They can start a business or participate in gigs that allow kids under 16 to work with a permit, like modeling or acting.

Challenge them

Not only should your kids be responsible for expenses and make their own money, Eric Jansen of AspenCross Wealth Management says kids should be challenged in their money habits.

“Set up 90-day savings and spending challenges as a fun way to help them better understand and manage the trade-offs between spending money on what they want and what they need,” Jansen says.

No-spend or savings challenges are great ways to teach lessons about money while showing your child what they are capable of if they focus on their goals.

You can even create competitions among siblings, like seeing who can save the most money.

Trust the process

Sound like a lot of work? It is! Financial independence doesn’t happen overnight.

“Some of these [money] lessons may click sooner in some kids than in others — even within the same family,” says Snyder. “Don’t give up hope. … Just keep showing them good examples and teaching them good old-fashioned financial lessons.”

Be patient, be kind, and be confident that the lessons you are teaching them will serve them well into adulthood.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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5 Things You’re Probably Doing Wrong With Your Money

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

5 Things You’re Probably Doing Wrong With Your Money

We’re sure you’re doing a great job with your money — making payments on time, looking out for any fraudulent activity, and putting money into a retirement account. That’s all great.

Still, there are probably just a few areas of your personal finance situation that could use some work. We want to help. Our team at MagnifyMoney has been working in and writing about finance for a long time. Here are our top tips on some things you might be doing wrong, and what to do instead.

1. You’re carrying a balance on your credit card to build your credit score

This is one of the biggest myths out there, says Erin Lowry, content director for MagnifyMoney and founder of Broke Millennial. Carrying a balance on your card each month — and paying interest on it — isn’t necessary to help your score. If you’re looking to build your credit score without paying a penny, you need to do things like keep your utilization rate low (your goal should be to not exceed 30% of your credit limit) and pay in full, on time, each month. For more on building your credit score, check out this piece.

2. You use a debit card for everyday purchases

If you’re responsible enough to keep a budget and pay off expenses in full every month, then you should be using a credit card, says Brian Karimzad, a co-founder of MagnifyMoney who worked in banking and consumer marketing for 15 years. Using a credit card helps you build up your credit score (see above), and offers a lot more when it comes to fraud protection. Check out this piece for more about fraud protection and debit and credit card use.

3. You don’t know your net worth

People always think in terms of monthly payments or getting through the month, which can lead them to think it’s okay to take out huge loans for things like cars they can’t afford, says Nick Clements, a MagnifyMoney co-founder who worked in consumer banking for 15 years. In order to truly gather the full picture of your financial situation, you need to focus on your net worth (your total assets minus any money you owe.)

4. You’re happy that your credit card company believes you’re a valuable customer

Most credit card companies (American Express is a unique exception) make most of their money from “revolving customers” who pay steep interest charges. If you pay your balance in full every month and earn rewards, your credit card company is probably losing money on you. And that is a good thing. If your credit card company loves you, you are probably doing something wrong.

When it comes to banking, you want to be just loyal enough that your bank offers you great perks, but not so much that you’re a profitable customer. Credit card companies make the majority of their money from those who are in debt and pay high interest rates and make the minimum payments on their cards, says Clements. This means you want to be a reliable customer, just not a moneymaking one.

5. You have too much money sitting in liquid assets

Fear keeps many people from investing their money, but that could be a big mistake, says Lowry. The truth is that investing your money low-cost index fund will likely grow your money fast enough to keep up with (or beat) inflation, or rising prices, so that 10, 20 or 30 years down the road, you can actually think about retiring comfortably. Check out this piece if you’re wondering whether it’s better for you to invest or pay off credit card debt, and this one to learn whether or not investing in stocks is right for your family.

Cheryl Lock
Cheryl Lock |

Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at cheryl@magnifymoney.com

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The Danger in Outsourcing Your Finances

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Businessman Holding Document At Desk

Miles Teller, the 28-year-old star of the 2014 hit movie “Whiplash”, has a net worth estimated around $2 million. With two major franchise films in the works for 2015, there doesn’t appear to be any imminent threat to the young star’s cash flow. And yet, in a recent interview with Vulture, Teller admits to not having paid off his NYU student loans. His reasoning- “My business manager says the interest is so low, there’s no sense in paying them off.”

While investing in place of debt payoff may make sense when investment returns beat out interest payments, I wonder whether Teller has seen the statements verifying such returns. According to the U.S. Department of Education, a direct unsubsidized loan taken out between 2006-2013 runs at 6.8 percent interest. With the market performance of the last few years, a return greater than 6.8 percent is actually quite feasible, but is it sustainable and perhaps, more importantly- is Teller asking himself these questions?

The people we trust with our money, “business managers” or otherwise, may not necessarily have our best interests at heart. In the case of Teller, his manager may get a commission on investments, making them a more attractive option for him personally than debt pay off, regardless of the relative costs and returns for Teller.

Money managers, advisors, websites, banks, etc., all stand to benefit from the choices we make with our finances. While we’ll ultimately choose someone to store, grow and help manage our funds- never should we surrender complete control of our finances or agree to a strategy with blind trust.

How to Use and Choose a Financial Planner

Not only should you look for a financial planner whose expertise align with your unique needs and goals, you should also look into their background, know their standards of compliance and understand their fee structure.

Background Check. Verify the credentials of your advisor and check for a clean compliance background with the Financial Industry Regulatory Authority (FINRA) or the Securities and Exchange Commission (SEC).

Standard. Ask what standard of compliance your prospective financial professional adheres to- fiduciary or suitability? Advisors under the fiduciary standard are legally bound to do what’s best for you, putting you first in their planning and selection of strategy. Planners who use the suitability standard are required to provide “suitable” financial solutions, but not necessarily those that are best.

Fee Structure. Know which fee structure your planner is using. Commission-based advisors get paid when buying or selling a stock or other form of investment on behalf of a client. These advisors may have a bias as they profit from advising you to choose particular products. Fee-based planners only make money when you pay them for their counsel- they don’t get a cut from fund companies or insurers.

Ultimately, your financial advisor should be a tool in your money management arsenal- a source of information and sounding board for insight, not the sole, unchecked manager of all your assets.

How to Choose Financial Products 

Like financial advisors, not all financial products are created equally. Take the time to shop around before handing all your valuable personal information over to any financial services company. According to the FINRA Investor Education Foundation’s National Survey, nearly two-thirds of all credit card holders reported that they did not compare offers to find the best rates or conditions. This kind of comparison and examination of the fine print however is essential to finding the best financial products to fulfill your needs.

Where to Compare. Marketing material, even third party websites often have a bias when recommending products as they stand to benefit from you choosing one product or service over another. Use tools like those at MagnifyMoney that aggregate information- yields, terms, costs, etc.- on various financial products without bias.

How to Read Fine Print. Neutral review sites can help distill the most important fine print points into an easily digestible format. It also helps to know what fine print you should be looking for- fees, conditions, flexibility, risks, etc.

Beef Up Your Own Knowledge 

Finally, don’t forget to foster your own financial education. By understanding the basics of financial fundamentals- credit, debt, savings, and investments- you’ll know which questions are important to ask when making financial decisions.

If you find yourself making justifications or explanations of your financial strategy along the lines of , “My business manager (or advisor or banker) says….”, it’s probably a sign that you’ve outsourced too many of your financial interests.

At the end of the day, you and you alone have the most to gain or lose from your personal finances. While seeking the help of a professional may seem like the responsible thing to do, having a basic understanding of personal finance and wealth management principles can help you better choose the people and products with your best interests at heart and oversee their performance.

Stefanie O
Stefanie O'Connell |

Stefanie O'Connell is a writer at MagnifyMoney. You can email Stefanie at stefani@magnifymoney.com

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How Today’s Price of Oil Impacts Your Long-Term Finances

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Gas in car_lg

If you own a car, like I do, I have no doubt that you are rejoicing at the current low price of fuel. It’s evident that you’re saving a significant amount at the pump of late and it appears that it may remain this way for some time to come.

Yet the fact that crude oil is presently below $50 per barrel can and will impact your finances in a myriad of ways.

Your Money in the Market

It’s a given that any funds you have invested in the stock market is subject to fluctuations and sometimes drastic highs and lows in a given week. The first full week of January 2015 saw upheaval in part due to the current situation of the price of oil

Seeing your portfolio value go down by hundreds if not thousands of dollars in a single day or several days in a row can be quite unsettling. See it instead as an opportunity to capitalize on the situation and buy more of the market while it’s “on sale”. Prices will rebound and increase and you will eventually recoup any short-term losses.

Avoid knee-jerk reactive measures such as sell-offs. Instead stay the course and remind yourself of your investment goals.

Potential Increases in Gas Taxes

The economic growth and energy production of the US plays an integral part in the significant dip in crude oil since early June 2014. Along with the oversupply of oil in the world market by OPEC members, other countries are also posting economic gains which results in an overall lower demand for oil worldwide.

Whereas consumers are benefitting from falling price of oil by keeping more money in their pocket, the US federal government along with several states are contemplating measures to make up for the resulting financial shortfall in their coffers.

At the federal level, the Senate is considering an increase in the federal gas tax from the current $0.18/gallon. This increase would be used to fund highway infrastructure projects. I for one wouldn’t mind the gas tax increase, as highway safety is important. As a resident of New York City, I see evidence of major repairs of the local bridges and highways, yet it’s a process that seemingly occurs at a snail’s pace

As reported by AAA, the current price of gas has fallen under $2.00/gallon in several states including Ohio, Kansas and Colorado. States across the country, especially those dependent on oil and gas revenue, are feeling the adverse effects. Based on data released in December 2014, by the federal Bureau of Labor Statistics, 2,300 oil and gas jobs in October and November of 2014 were lost in Texas. US states are actively reviewing their budgets and several may decide to increase the state tax on gas. As a result, some Americans will likely see an increase in the overall cost of fuel per gallon over the long term.

Increases in Consumer Purchasing Power

Spending less on gas means that you will have more disposable income that can translate into spending more on other consumables. You can decide whether to redirect that surplus of money to pay off debt, increase savings and purchase investments, or benefit from potentially lower costs of some goods and services such as air travel.

When purchasing a plane ticket, you may pay what’s called a fuel surcharge depending on the airline carrier and whether the destination is domestic or international. As many airlines purchase their fuel months ahead in order to mitigate price fluctuations, consumers may not see any reduction in the immediate but can expect to see slightly lower fares and fuel surcharges in the months to come.

This era of cheap oil is not one to be quickly discounted as a temporary fluctuation or “blip”. The effects of oil prices signal long-term and consequential changes on a number of levels. In terms of your personal finances, be aware that as you profit by paying less at the pump, every surplus dollar that you save or spend as a result impacts your financial well-being.

Follow us on Twitter @Magnify_Money for regular updates in personal finance

Kassandra Dasent |

Kassandra Dasent is a writer at MagnifyMoney. You can email Kassandra at kassandra@magnifymoney.com

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