- Set a good example. While no two children, nieces, nephews, or grandchildren will grow up with the same financial savvy, the best thing you can do during their childhood and young adulthood is to set a good example of financial responsibility in your own life. While many of us grew up in more modest circumstances and want younger generation family members to enjoy a better financial life, resist the temptation to overindulge them.
- Work with them on ways to avoid excessive student loans. College is still an excellent lifelong investment, despite the growing chorus of naysayers. But there’s a whopping difference between graduating with $20,000 in student loans and $120,000 in student loans. There are many ways to reduce college costs, and older family members can provide direction and support for the young scholar.
- Help them contribute to retirement plans. If you can easily afford the outlay, giving younger generation family members money to help fund a workplace retirement plan or an IRA sends a lasting message about the importance of putting money away for a retirement that is decades away.
- Provide advice on investing and personal financial planning. Here’s a shocker: Surveys indicate that Millennials prefer to receive financial guidance from older people, particularly their parents. You can be a big help advising them on many facets of their financial lives, including saving, investing, insurance, debt, and buying a home.
- Help, but don’t enable adult children in need. You’re likely to have to grapple with children in financial need. It’s natural to want to help them over a rough patch if you can afford it, but don’t let that turn into a years- or decades-long emolument. There is a thin line between helping and enabling, so keep in mind that you’re well-intended help may eventually do more harm than good.
Smart Money Tips
- Saddled with a lousy 529 plan? Consider a rollover.
There are some excellent 529 college savings plans and there are some stinkers. Some that are sold by brokers, insurance agents, and
investment advisors are chockablock with extra fees. But, unlike most deferred annuities (another investment that can be loaded with fees), you can move a 529 plan to greener pastures without penalty. A withdrawal from a 529 college savings plan is not treated as a distribution if it is rolled over within 60 days to another 529 plan for the same beneficiary or a member of the beneficiary’s family. Only one rollover is allowed in any 12-month period, however. A rollover from one child to another is not subject to the federal gift tax rules so long as the new beneficiary is in the same generation as or a higher generation than the old beneficiary and is a member of the family of the old beneficiary. - Take care to name the right executor in your will.
Settling an estate is usually a complicated matter requiring a lot of attention to details and deadlines. Make sure the executor you choose is up to the task. It’s common to name family members as executors, and this may be a fine choice – or it may not. One helpful approach if you have any doubt is to instruct the designated family member to seek as much legal help as necessary to discharge the responsibilities of an executor.
Food for Thought
Success usually comes to those who are too busy to be looking for it.
-Henry David Thoreau
Money Can Be Funny
Misers may be tough to live with, but they make great ancestors.
Word of the Week
onychophagia (on-i-ko-FAY-juh, -jee-uh) – The practice of biting one’s nails.
Last week’s stock market volatility has done nothing but exacerbate my onychophagia.