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Financial Literacy is a Family Affair

Financial Literacy is a Family Affair

April 28, 2023

Financial Literacy is a Family Affair

As Financial Literacy Month draws to a close, take a few moments to review these simple ways to take charge of your finances all year long. Key takeaway: get started, ask questions and make a plan. It doesn’t have to take a lot of time or be a substantial amount of money but the peace of mind you receive is invaluable. It makes such a big impact in the long term and it’s something you can do every month.

In addition, I encourage all of my clients to have money conversations with your children as well. It’s so important to have them with younger kids, so they start to understand the value of money and savings.

Talk with your older (adult) children or those just starting to “adult” on their own. It’s a great time for a money brush up. Opening the first credit card or making a big purchase like a car or home are all financial milestones that are best handled with some prep and education.

Lastly, make a point to ask your older family members about their wishes as well before a crisis or emergency occurs.

Keep it Simple – for yourself

We talk about it all the time, many of us are intimidated by money conversations or scared that we aren’t doing enough, so this may lead to doing nothing. I know it isn’t always fun to look at our statements and accounts but being informed and having a plan helps.

I encourage my clients to consider opening an IRA – even if you only contribute a minimal amount. As your wealth grows and earning potential increases, you’ll be happy you have this base. A recent article in MarketWatch[1] outlines how a few dollars today can be thousands in the decades to come.

Consider this example - someone opening a traditional account and contributing $10 at the end of every month from age 25 to 65, assuming a 6% rate of return, would have about $20,000 in their account at the end of that period. Of course, the more they eventually contribute every month, the larger that sum can be in retirement. When getting a raise, or after paying off other debts like a mortgage or college education, extra cash flow could be funneled into the IRA to boost the ultimate balance. 

We discuss the different types of IRAs (traditional vs. Roth IRA) here, so you can get up to speed on which is the best fit for your situation, based on tax filing status and/or income. I know that saving a few dollars a month may not seem like enough, but remember, as MarketWatch points out, retirement contributions benefit from growing with compound interest on returns or interest. Investment accounts in particular can see larger returns as compared to savings accounts as they are tied to how the market performs.

Contributions limits for IRAs have changed for 2023, up to $6,500 or $7,500 if you are 50 or older. Roth IRAs have an income limit of $153,000 for taxpayer filing singly or $228k00 for joint filers.

Your retirement savings should consist of multiple revenue sources with the IRA being one key component.

Start the money talk with your kids early and often

Financial literacy is the most important supplemental skill kids can learn in school, according to 63% of respondents in a survey from Charles Schwab.[2]

The first step is to talk about money. Let your kids hear you discussing the cost of things. It sounds easy but it can be complicated, especially depending on the age of your children. At some point, they may be noticing things they have (or don’t have) relative to friends and peers. Let them know what things cost and how they get purchased. When you get a bill in the mail or an alert that your credit card payment is due, share with them what you are paying for and how.

Examples of simple phrases to get started might be, “When you go to school each day, I go to work and make money to pay for our house or car, “or “I save money each month by taking my lunch to work and eating out on special occasions.”

As they get older, some kids will benefit from a financial literacy course in high school but this isn’t guaranteed. U.S. News and World Report cites data from the Council for Economic Education that shows only a third of U.S. states require high school students to take a personal finance class in order to graduate[3].

Colleges often offer elective courses like a Personal Finance class but this requires them to take the initiative. Take advantage of the time you have when your kids are little to share your financial values. Lots of good resources exist and here are few tips from Forbes[4]:

  • Make saving fun – play games to add up how much you’ve saved (this helps with math and counting skills in younger years too)
  • Consider giving kids opportunities to make money – by earning an allowance for chores or helping others
  • Make a savings plan – open a savings account for your child, show them how to track what they’ve saved
  • Talk about smart spending decisions – compare costs, show them different brands and how they differ in cost and features.
  • Start with something they understand – like when grocery shopping recently, I talked to my daughter about inflation at the grocery store and how the prices - especially fruits and veggies have skyrocketed over the last couple of years. This opened the door to explain how we have to spend more dollars on our needs, so this does take away some money from our wants like a vacation or a new outfit.  Teaching our kids to work for what they want is important, but not at the expense of saving, saving, saving. You can’t just buy something because you want it – you have to work for it!
  • Show the importance of giving too – some parents start Spending, Saving and Giving jars. This opens up an opportunity to help kids talk about what causes they’d like to support and why. With my own children, this gives us a chance to talk about the importance of making sure you are contributing to all of those buckets - especially the saving bucket.
  • Stress the difference between a WANT and a NEED.  Let’s be honest, that is hard for all of us I think especially with online shopping making it way too easy to get anything you really want with about two clicks!
  • Be a role model – let your kids see you making decisions about how to budget for a trip or big expenditure. Share reasons, at an age-appropriate level, why you make the financial decision you do. This can help if a financial downturn happens as well when difficult decisions may need to be made and explained.

Talk to your older kids and family members about their finances and yours

Depending on where you are in your life, you may be juggling parenting and helping a parent. This “sandwich generation” is only growing as Baby Boomers, which according to the Washington Post[5], now comprise nearly 20% of the U.S. population, age into retirement. This means more and more of our parents, spouses and family members may require healthcare and caregiving. Often this falls to the adult children to manage.

It bears repeating to plan in advance to help your parents or other family members if needed. Learn what their wishes are (for medical and financial decisions) so you aren’t caught off guard in an emergency situation. Recently a client told me her mom was admitted to the ICU unexpectedly (these admissions are by nature, not something we know is going to happen in advance) and the family had to answer questions about her coverage and her wishes. In a crisis, it is so critical to have the information on hand. Talk to your parents and compile their documents, passwords and financial information in case you need to access it. This applies to our spouses, regardless of age or health status, as well.

We offer the Family Love Letter planning program to help guide these conversations. You can access more details here.

As you may be helping a parent manage his or her finances, you may be helping to “launch” an adult child to independence. I love when clients ask me for help with this, as it is a prime opportunity to get them started on the right foot.

Explain to your adult children the importance of saving (hopefully this is something they’ve observed from you over the years). Teach them the value of direct deposit of a certain amount of money each month that goes into as savings or a 401k account. Encourage them to to contribute as much as they can to give it the potential to grow over time.

A standard guideline in our industry is to save 20% from every paycheck. This is part of a formula known as the 50-30-20 rule, which means you allocate 50% of your paycheck toward the things you need, 30% toward the things you want and 20% toward savings and investments, according to CNBC.[6] This won’t work for everyone, but it’s a goal to keep in mind and one to continuously work back to, as situations change and other debts are paid down.

A handy guide from Charles Schwab recommends the following savings formula:

  • If you're getting started in your 20s, save 10-15 percent of your pre-tax income.
  • If you're getting started in your 30s, save 15-20 percent of your pre-tax income.
  • If you're starting to save in your early 40s, save 25-35 percent of your pre-tax income—a pretty meaningful chunk of your income.

As you can see, there is no right or wrong way to save, as long as you ARE saving. That is the message to share with adult children. And, pay off your credit card debt each month and don’t let subscriptions and eating out eat up all of your hard-earned income.

For more financial literacy tools and tips, visit our website at

The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites mentioned, we make no representation as to the completeness or accuracy of information provided at these web sites.