Every once-in-a-while I come upon something that I just can't hold back on sharing. I hope you find the following of great educational value.
. . .
When talking or blogging about the wisdom of owning life insurance, no one disputes that it is a vital and extremely important purchase decision in ones life. However, should the purchase be universal, whole or term life insurance. Financial professionals passionately debated this topic daily.
Mostly I just observe and wonder at the incredible misconceptions and heated arguments that ensue. Today however, I stumbled upon a post that I found most interesting.
The topic of the post is, "Term and Invest the Difference." The concept is simple, buy term insurance and use the money you save over purchasing whole life or universal life insurance as your deposits into some other type of investment plan (like your 401K, money market accounts, annuities, mutual funds, etc.).
This concept is at the center of almost all debates between financial service professionals and those within the industry who specialize in life insurance planning - like me.
There are multiple reasons why the concept "Term and Invest the Difference" does not work for many people. I found this article (link posted below) and attached comments fascinating. I am re-posting it on my blog for educational purposes.
If you have ever considered owning a whole life or universal life plan, please give me a call. I would be happy to discuss your options and the many potential benefits.
http://www.walletpop.com/blog/2008/09/11/tip-8-buying-term-insurance-and-investing-the-difference-may-b/
Friday, January 30, 2009
Thursday, January 29, 2009
Fostering Positive Money Management Skills in Kids
Helping kids develop positive money management skills is a core value at the foundation of any effective parenting model. It helps build self esteem and confidence along with goal-setting skills.
So why is it so darn hard! There are a myriad of extremely challenging obstacles parents face when attempting to teach good money management skills. Just think of the many ways we pay for our goods and services: checks, credit cards, debit cards, PayPal (on line shopping), store credit cards, gift cards, and of course, the quickly going out of style . . . “cold hard cash.”
I think we have to look back no further than the Millennium Generation, or “Trophy Kids” as they are sometimes referred, to gain clarity on some of the road blocks parents encounter in helping kids develop good money management skills. Considered born between the years of 1980 and 2001, Trophy Kids are defined as those who believe they are entitled to something for a minimal amount of work.
Is this assumption based on fact or fiction, or somewhere in-between? I vote for somewhere in-between. I also vote for more data. What forces were at play during their developmental years that could lead to such an outlandish belief as being entitled to anything?
Are the parents of “Trophy Kids” at fault? Is it in their DNA? Was it implanted in their brains by some alien species hell-bent on destroying our civilization by brainwashing kids into believe they should get whatever they want without having to work hard for it? Maybe that last point is a bit outlandish but at times it seems like the only plausible explanation. I mean, for goodness sake, it can’t be that the parents fostered this attitude! No way!
Ok, sarcasm aside, I do think parents of the Millennium Generation (and all parents since) have some serious challenges in countering the development of children who grow up with a general sense of entitlement. Here are the top three challenges as I see them. See if you can spot any commonalities:
1) Technology
2) Technology
3) Technology
Don’t take this in the wrong way, I love technology and it has made almost everything “better, stronger, faster” (did you 70’s folks catch the reference), or at least that is usually the goal. Even money has been technoed. Cash is fun to have but very rarely is it mandatory. Just think, when was the last time you went rummaging through your wallet or purse looking for exact change? Nope, it’s “Slide your card Mam.” “Will that be credit or debit Sir.”
Back in the good old 80’s, when I was in highschool (oops just gave away my age), this is the percent of friends I had that had credit cards, MP3 players and cell phones – 0%. Here are some percentages for today’s high school students:
1) 30% have credit cards in their own names (Credit Abuse Resistance Education report 2006)
2) 50% have MP3 players (MSNBC report 2007)
3) 60% have cell phones (US cellular statistics 2007)
Wow, those are some startling statistics that developed during a short 20 year span! We have experienced a complete technological revolution in a historical blink of an eye.
Maybe we should hold off on making any snap judgments about those parents of Millennium Generation kids. Maybe they were faced with an onslaught of new, exciting and sexy gadgets, gismos and whatnots at a rate that would be impossible for anyone to keep up with, let alone stopping to wonder what the long term negative effects might be!
And . . . we haven’t even discussed what I think is the biggest culprit. If you guessed I’m going to say the Internet, you’re only about half right. It’s media! It’s everywhere around us, even in the form of logoed clothing. It’s celebrities and their newest sister the “non-actor” celebrity (You know who I’m talking about, and guess what – Yep, they were born in the Millennium Generation.)
Fast forward from 2000 all the way to 2009. What is going on currently that adds even greater insult to injury in our fight to help our kids develop good financial habits and a positive outlook about money in general? It’s the current downturn (oops I mean avalanche) of the American financial markets. Everywhere you go people are having “woes me” conversations about their decreasing 401K plans and their plummeting home values. And believe me, these conversations are not being censored for the young (and I don’t mean young at heart).
So, now we have a real triple threat:
1) Total media saturation
2) Technology overload (including the Internet, cell phones, MP3 players, etc)
3) An economic crisis of epic proportions
Going back to my original point, that “Helping kids develop a positive outlook and vocabulary around money and finance is a core value at the foundation of any effective parenting model. . .” How can we possibly achieve such a goal with so many obstacles in our way?
Like most complex problems the solution is often quite simple, but hardly ever easy to accomplish . . . Start with being A GOOD ROLE MODEL.
As early as possible, introduce complex financial and money management concepts in small, easy to digest bites. Ignore the three “triple threats.” Don’t let them derail your core value systems. Use them as launching pads for meaningful discussions and demonstrations.
If all else fails, read and re-read the following statement – Dare I suggest you even put it up on your refrigerator?
“Young people nowadays love luxury, they have bad manners and contempt for authority. They show disrespect for old people and love silly talk in place of exercise. They no longer stand up when older people enter the room; they contradict their parents, talk constantly in front of company, gobble their food and tyrannize their teachers.”
Socrates 400 BC
I think that puts everything back into perfect perspective don’t you? Just in case you need more, here are a few tips for fostering good financial habits with your kids. These tips will help them succeed now and in the future:
· Set a savings goal and decide what they will do with their savings once they reach their goal. Put these goals in writing and keep a log of their deposits with a running total. An easy one is saving enough to open a savings account at your local bank (usually $100).
· There are teachable moments happening around you every day, everywhere you go. When shopping, instead of ranting about ever increasing prices of food, let your child help you find the best bargains for the money. This is especially good for early elementary kids. Challenge them to read not just the price but the weight or amount of a product versus the price. This is a good habit to develop regardless of current economic conditions.
· Change your vocabulary. If you tend to talk about money in negative ways, work on turning your attitude around. Our children get most of what they know from us (even with all the media around them). If you have a negative outlook on money and finance so will they. If you talk about how expensive things are all the time, they may actually begin to feel unsafe. It’s not hard to imagine a child drawing a connection between your comments about rising costs and your ability to meet their basic needs – even if you always do meet those needs.
· If you choose to give your child allowance, make sure the amount fits the job and is something you are comfortable giving. Most kids are happy to get a few dollars a week, but may feel overwhelmed and make poor choices if given too much.
· Listen to yourself, not to the media. If your child wants a product they see on TV, ask some questions: Why do they want it? What does it do? How long do they think it will last? Do they think the advertisers are telling them everything about the product? This will yield some fantastic family discussions and set the stage for smart money management skills development.
· And finally, say YES sometimes. Just be conscience of when you say YES, and why as well as when you say NO and why. Your children will learn that they do not get everything they ask for, but when they do, they appreciate it.
The effects of all this will be hard to see on a day-to-day basis but just think about your son or daughter going to his or her first job interview. When asked what they value most – I bet they won’t say their electronic game station. More likely it will be something like . . . “I appreciate that my parents took the time to really teach me the value of money. Now I’m ready to earn and manage my own money.” Ok, maybe not that exactly, but something equally as awesome!
Hope you enjoyed this post. Send me your thoughts, comments, additional information on the subject. Let’s keep the conversation going!
Here is a great link that posts on-going discussing about kids and money - great resource!
http://www.walletpop.com/blog/category/kids-and-money/
So why is it so darn hard! There are a myriad of extremely challenging obstacles parents face when attempting to teach good money management skills. Just think of the many ways we pay for our goods and services: checks, credit cards, debit cards, PayPal (on line shopping), store credit cards, gift cards, and of course, the quickly going out of style . . . “cold hard cash.”
I think we have to look back no further than the Millennium Generation, or “Trophy Kids” as they are sometimes referred, to gain clarity on some of the road blocks parents encounter in helping kids develop good money management skills. Considered born between the years of 1980 and 2001, Trophy Kids are defined as those who believe they are entitled to something for a minimal amount of work.
Is this assumption based on fact or fiction, or somewhere in-between? I vote for somewhere in-between. I also vote for more data. What forces were at play during their developmental years that could lead to such an outlandish belief as being entitled to anything?
Are the parents of “Trophy Kids” at fault? Is it in their DNA? Was it implanted in their brains by some alien species hell-bent on destroying our civilization by brainwashing kids into believe they should get whatever they want without having to work hard for it? Maybe that last point is a bit outlandish but at times it seems like the only plausible explanation. I mean, for goodness sake, it can’t be that the parents fostered this attitude! No way!
Ok, sarcasm aside, I do think parents of the Millennium Generation (and all parents since) have some serious challenges in countering the development of children who grow up with a general sense of entitlement. Here are the top three challenges as I see them. See if you can spot any commonalities:
1) Technology
2) Technology
3) Technology
Don’t take this in the wrong way, I love technology and it has made almost everything “better, stronger, faster” (did you 70’s folks catch the reference), or at least that is usually the goal. Even money has been technoed. Cash is fun to have but very rarely is it mandatory. Just think, when was the last time you went rummaging through your wallet or purse looking for exact change? Nope, it’s “Slide your card Mam.” “Will that be credit or debit Sir.”
Back in the good old 80’s, when I was in highschool (oops just gave away my age), this is the percent of friends I had that had credit cards, MP3 players and cell phones – 0%. Here are some percentages for today’s high school students:
1) 30% have credit cards in their own names (Credit Abuse Resistance Education report 2006)
2) 50% have MP3 players (MSNBC report 2007)
3) 60% have cell phones (US cellular statistics 2007)
Wow, those are some startling statistics that developed during a short 20 year span! We have experienced a complete technological revolution in a historical blink of an eye.
Maybe we should hold off on making any snap judgments about those parents of Millennium Generation kids. Maybe they were faced with an onslaught of new, exciting and sexy gadgets, gismos and whatnots at a rate that would be impossible for anyone to keep up with, let alone stopping to wonder what the long term negative effects might be!
And . . . we haven’t even discussed what I think is the biggest culprit. If you guessed I’m going to say the Internet, you’re only about half right. It’s media! It’s everywhere around us, even in the form of logoed clothing. It’s celebrities and their newest sister the “non-actor” celebrity (You know who I’m talking about, and guess what – Yep, they were born in the Millennium Generation.)
Fast forward from 2000 all the way to 2009. What is going on currently that adds even greater insult to injury in our fight to help our kids develop good financial habits and a positive outlook about money in general? It’s the current downturn (oops I mean avalanche) of the American financial markets. Everywhere you go people are having “woes me” conversations about their decreasing 401K plans and their plummeting home values. And believe me, these conversations are not being censored for the young (and I don’t mean young at heart).
So, now we have a real triple threat:
1) Total media saturation
2) Technology overload (including the Internet, cell phones, MP3 players, etc)
3) An economic crisis of epic proportions
Going back to my original point, that “Helping kids develop a positive outlook and vocabulary around money and finance is a core value at the foundation of any effective parenting model. . .” How can we possibly achieve such a goal with so many obstacles in our way?
Like most complex problems the solution is often quite simple, but hardly ever easy to accomplish . . . Start with being A GOOD ROLE MODEL.
As early as possible, introduce complex financial and money management concepts in small, easy to digest bites. Ignore the three “triple threats.” Don’t let them derail your core value systems. Use them as launching pads for meaningful discussions and demonstrations.
If all else fails, read and re-read the following statement – Dare I suggest you even put it up on your refrigerator?
“Young people nowadays love luxury, they have bad manners and contempt for authority. They show disrespect for old people and love silly talk in place of exercise. They no longer stand up when older people enter the room; they contradict their parents, talk constantly in front of company, gobble their food and tyrannize their teachers.”
Socrates 400 BC
I think that puts everything back into perfect perspective don’t you? Just in case you need more, here are a few tips for fostering good financial habits with your kids. These tips will help them succeed now and in the future:
· Set a savings goal and decide what they will do with their savings once they reach their goal. Put these goals in writing and keep a log of their deposits with a running total. An easy one is saving enough to open a savings account at your local bank (usually $100).
· There are teachable moments happening around you every day, everywhere you go. When shopping, instead of ranting about ever increasing prices of food, let your child help you find the best bargains for the money. This is especially good for early elementary kids. Challenge them to read not just the price but the weight or amount of a product versus the price. This is a good habit to develop regardless of current economic conditions.
· Change your vocabulary. If you tend to talk about money in negative ways, work on turning your attitude around. Our children get most of what they know from us (even with all the media around them). If you have a negative outlook on money and finance so will they. If you talk about how expensive things are all the time, they may actually begin to feel unsafe. It’s not hard to imagine a child drawing a connection between your comments about rising costs and your ability to meet their basic needs – even if you always do meet those needs.
· If you choose to give your child allowance, make sure the amount fits the job and is something you are comfortable giving. Most kids are happy to get a few dollars a week, but may feel overwhelmed and make poor choices if given too much.
· Listen to yourself, not to the media. If your child wants a product they see on TV, ask some questions: Why do they want it? What does it do? How long do they think it will last? Do they think the advertisers are telling them everything about the product? This will yield some fantastic family discussions and set the stage for smart money management skills development.
· And finally, say YES sometimes. Just be conscience of when you say YES, and why as well as when you say NO and why. Your children will learn that they do not get everything they ask for, but when they do, they appreciate it.
The effects of all this will be hard to see on a day-to-day basis but just think about your son or daughter going to his or her first job interview. When asked what they value most – I bet they won’t say their electronic game station. More likely it will be something like . . . “I appreciate that my parents took the time to really teach me the value of money. Now I’m ready to earn and manage my own money.” Ok, maybe not that exactly, but something equally as awesome!
Hope you enjoyed this post. Send me your thoughts, comments, additional information on the subject. Let’s keep the conversation going!
Here is a great link that posts on-going discussing about kids and money - great resource!
http://www.walletpop.com/blog/category/kids-and-money/
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