It’s Time to Talk to Your Kids About Your Finances

As a strong advocate for financial education of both children and adults, I was interested in a recent T. Rowe Price survey which discussed the type of job parents are currently doing with teaching their children about finances.

According to this new survey, parents are talking to their kids about shopping, but are skipping conversations about household budgets, savings and financial goals. Close to 75% of survey respondents say they regularly have conversations with their kids about money, but the focus is on spending—not the family’s current financial situation.

As parents we have a tendency to want to shelter our children from many adult issues, this includes money.  But at the end of the day, money and financial responsibility is what can get our children into trouble if they don’t have good habits, and we as parents are responsible for this education.

While many parents in the survey think they strongly encourage their kids to talk about money, only 19% of children agree. In fact, close to one-quarter of child respondents say their parents discourage them from talking about money.

The survey shows children want to learn the financial basics with 34% citing wanting to know how banks and credit cards work, 29% would like to learn about managing money and 27% have inflation questions.

I understand that discussing finances can be difficult, especially if the family is struggling with debt, finding work or other financial problems, but learning at a young age how to properly manage money is a skill which will carry over into adulthood.

Whenever clients come in and we discuss financial difficulties they are having, I generally encourage the clients to have age appropriate discussions with their children about the situation, and what the parents are doing about it.  These are great life learning lessons – take advantage of them!  The conversations may not be pleasant, but the lessons parents can teach their children may be pain their children can avoid by repeating history when they are adults.

I am asked when it is a good time to start discussing financial issues with children.  This depends on the children’s maturity levels, but many experts say first grade is a good starting point. Money lessons should happen all the time, at the grocery store, bank line when paying bills and should continue until adulthood.   It is essential that parents take responsibility and teach financial literacy to their children because schools aren’t.  Personally I am amazed that young adults in high school don’t know how to balance a checkbook, they have no concept of investing money and saving money.

The T. Rowe Price survey shows that only half or fewer of parents have strong financial habits. For instance, more parents save for a family vacation than have an up-to-date will. What’s more, one in ten don’t save regularly for retirement, purchase life insurance or save for a family vacation.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®



Industry Groups Launch Retirement Planning Awareness Campaign

As a Certified Financial Planner specializing in Retirement Income Planning, I am always educating clients of all ages of the importance of the focusing on retirement income.  So I was pleased to read about new industry initiatives to help educate the American public on the importance of focusing on retirement income planning.

It was recently reported in InsuranceNews.net that in the wake of a spate of studies showing Americans worried about their ability to finance retirement, the Insured Retirement Institute (IRI) and the National Retirement Planning Coalition have launched a campaign to increase consumer understanding of important retirement planning.

“Too many Americans are woefully unprepared and lack the savings to enjoy a financially secure retirement,” Cathy Weatherford, IRI president and chief executive officer, said in a news release. “Financial security in retirement is attainable, but to achieve it requires planning and saving. Education will be the key to get Americans back on track.”

The goal of the initiative is to help Americans understand retirement planning concepts, long-term financial needs, products and services that meet those needs, and to chart a course toward financial security.

The six-month nationwide campaign will include activities focused on various aspects of retirement planning, including Social Security, budgeting and managing assets. More information is available at www.retireonyourterms.org. The campaign was announced during a meeting of the American Savings Education Council held as part of National Retirement Planning Week.

The latest Retirement Confidence Survey by the Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates found that the percentage of workers confident about having enough money for a comfortable retirement remains near record lows.

Results of a separate nationwide survey released this week by Wells Fargo found that African-American investors are also worried about having enough money to retire. Three in five African-American investors are more focused on debt reduction (59 percent) than saving for retirement, the Wells Fargo survey found. Just over half (52 percent) are concerned they won’t have enough saved for retirement.

“All investors – regardless of age or level of savings – should be focused on planning for retirement, and turning plans into actual saving and investing,” Jeff Cosby, financial advisor and vice president, investment officer in the Bloomington, Minn., office of Wells Fargo Advisors, said in a news release.

Saving for retirement in this economy may be “daunting,” but professional advice can go a long way to helping investors reach their long-term goals, he said.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®


Investors Prioritize Retirement, but Not Planning

Although half of Americans consider retirement a top priority, 58% do not have a formal retirement income and savings plan, according to a report released by Deloitte.

Harris Interactive surveyed nearly 4,500 Americans over 26 on behalf of Deloitte Center for Financial Services and found that although just 30% say they feel “very secure” in their retirement prospects, those with a plan were four times more likely to feel secure. What’s troubling, though, is that many people are convinced that no matter how much they save, it won’t be enough.

“People used to think about retirement as a straight-line plan to a lump sum,” Ed Tracy, one of the authors of the report, told AdvisorOne on Friday. “That’s changed, particularly since the financial crisis; the way people think about retirement is fundamentally changing.”

Investors are facing more short-term challenges, Tracy said. “Life is more turbulent in terms of employment, education—the cost of college isn’t going down—health care, basic short-term expenses. It got to the point where a lot of people are pessimistic.”

To combat that pessimism, “wealth managers have to recognize that viewpoint has changed a bit and pursue short-term, medium-term and long-term strategies.

The influence of an advisor is undeniable. Two-thirds of respondents who work with a professional advisor had a retirement plan compared with 28% of respondents who don’t have an advisor.

Deloitte identified five potential barriers that may be keeping respondents from adequately preparing for retirement.

First, they may be struggling to find a place for it among their other financial priorities. Respondents said the No. 1 reason they didn’t have a financial plan was because they had other, more important priorities.

Furthermore, the retirement industry may be failing these consumers. Sixty percent said that in the past two years, they’ve had no interaction with any financial institutions about their retirement needs. Even when financial institutions do communicate with consumers, according to the report, they often don’t help them integrate their retirement planning needs into their larger financial plan.

A third barrier is consumers’ lack of understanding about financial products. Nearly 40% don’t know about or understand annuities. Many are simply unaware of the number of options available to them.

Another barrier is a holdover from the recession. Respondents had a remarkably low level of trust for financial institutions in general. Just 20% said they had a high degree of trust for financial institutions of any type.

“After the crisis, investors started looking closer at their portfolios and that hasn’t ebbed,” Tracy said. “Folks are leery about proprietary products and assets allocations that don’t tie to their individual goals.” Tracy said that “intertwined with that mistrust” is investors’ disappointment with a lack of tailored advice.

That sense of mistrust and disappoint gave rise to the fifth barrier Deloitte identified: the DIY investor. Many respondents said they simply didn’t need any help with planning. About 40% said they preferred to manage their own portfolio.

Trust, or a lack of it, was one of the top reasons those DIY investors gave for wanting to take on their financial planning by themselves, Tracy said. While it may seem like investors who are trying to plan on their own are at least a little better off than those who aren’t planning at all, the report found just 17% of respondents are managing their portfolio on their own and also have a retirement plan in place.

Tracy noted, though, that just because there’s a large segment that doesn’t have a plan, that doesn’t mean there isn’t a lot of activity in terms of investments. “Wealth managers need to rethink what they need to be providing,” he said.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®