You have a financial plan - what about your kids?
March 31, 2019
By: John Zeltmann
Stan and I will both tell you we have one of the greatest jobs in the world. Helping people plan for their retirement while making financially sound decisions during their working years is an incredibly rewarding vocation. Daily, we get to help people figure out how to reduce tax bills, determine appropriate levels of life insurance, plan for college, and prudently grow their portfolios over time. Those are just some of the highlights.
When we have those types of conversations with the children of our clients, the rewards can be just as profound.
On numerous occasions, we've had the opportunity to speak with younger clients-in-waiting to help them tackle problems they’re facing. Depending on their age, we might discuss savings, investments, renting vs. owning, et al.; the kinds of discussions that can pay big dividends down the road.
These types of dialogue can even extend to the youngest of generations. One of my favorite conversations was with the 11-year-old son of a client, who we'll call Tim. Through summer jobs and a bit of entrepreneurial sweat, Tim had managed to save up a few thousand dollars in his bank account. My client, also an entrepreneur, saw this as an excellent opportunity to educate Tim on the stock market, so we set up a call.
"Hello? Mr. Zeltmann?" said a shy, high-pitched voice when I picked up the phone. The shyness soon faded; he wanted to talk about investing in the stock market. Specifically, he wanted to discuss Nike (he was a big Tiger Woods fan), Hasbro (the company that owns Nerf), and Game Stop (pre-Amazon, where video games came from). While we discussed his "buy list," I highlighted some risks and opportunities, making sure he understood that just because he likes a company's product doesn't make it a good investment.
I’m sure Tim didn't understand most of what I said, but what 11-year-old would? Frankly, our conversation wasn’t about buying stocks, it was about educating Tim. In fact, an argument could be made that a positive outcome would have been if Tim ultimately lost a little money, thus cementing at an early age that while stocks can go up, they can also go down.
Younger people, Tim’s age and beyond, have the most to gain by engaging in these conversations sooner than later. To wit:
- College Debt - It's no secret that the younger generation has taken on record levels of student loan debt and for a good reason. A college diploma can get your foot in the door, but advanced degrees can truly lock down a potential job.
- Caring for parents - They call them the "Sandwich Generation" - those caught in the middle of baby boomer parents who are living much longer than expected (and therefore increasing the risk of running out of their own retirement savings) and their children, who generate their own expenses (see College Debt above).
- Growing up in turbulent markets - Many of the younger generations came of "investing age" during two of the most turbulent times in market history - the dot-com crash in 2001 and the 2008 credit crisis. Their faith in the stock market has been understandably tested at a young age, a time when the opportunity to save is most valuable.
- The demise of employer-provided pensions - Over the past few decades, employers have killed off company-funded pension plans in favor of employee-funded 401(k) plans, thus shifting the burden of retirement saving from the employer to the employee. Navigating the variety of retirement plans available in the marketplace often requires assistance.
It's never too early to start learning about investing and planning for one's financial future. Whether your child is an 11-year-old like Tim, a 20-something trying to figure out cash flow and savings targets, or a mid-30-year-old trying to tackle a mortgage, kids, and life insurance needs, encourage them to use us as a resource. Smart decisions today can pay-off handsomely down the road.