Parents: How To Be A Good Financial Role Model

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Parents How To Be A GoodFinancial Role Model
Ann Merkley, Senior Financial Representative, Prin
cor Registered Representative
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• Insurance issued by Principal Life Insurance
  Company and the companies available through the
  Preferred Product Network, Inc. Securities
  offered through Princor Financial Services
  Corporation, 800/247-1737, member SIPC. 
  Principal Life, the Preferred Product Network,
  and Princor are members of the Principal
  Financial Group, Des Moines, IA 50392.
• While this communication may be used to promote
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  discussed in the publication, it is intended to
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  matter covered and is provided with the
  understanding that The Principal is not rendering
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  marketed opinion and may not be used to avoid
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  should consult with appropriate counsel or other
  advisors on all matters pertaining to legal, tax,
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• The Principal Financial Group and its members
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9585102010
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How Solid Is Your Financial Foundation?
Defensive
Tax Estate Planning
Savings Investments
Offensive

• Home
• Retirement Savings
• College Savings

Protection/Insurance
Defensive

• Disability Insurance
• Life Insurance
• Medical Insurance

• Property Casualty Insurance
• Long Term Care Insurance

Emergency Savings
Defensive

• Disability
• Job Loss
• Medical Expenses

• Car Repairs
• Home Repairs
• Other unexpected expenses

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Emergency Savings

• One of the most important goals
• Automate it through direct deposit
• Pay yourself first each paycheck
• Make your savings account inconvenient but
  accessible
• Use very secure investments, i.e. savings or
  money market accounts/funds

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Setting Realistic and Effective Goals

• Be specific and measurable, i.e. car, dollar
  amount, home, etc.
• Set realistic and obtainable deadlines
• Break the goal into bite-size pieces
• Reward yourself when you reach your goal

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Setting Savings Goal

• Determine whether it is a need or a want
• Save for the goal first
• Practice delayed gratification
• Involve the children in goal setting

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Setting Savings Goal

• Short Term Goals (0-5 years)
• Vacation
• Gifts for Holidays, Anniversaries, Weddings, etc.
  
• Car purchase
• Home purchase
• Appliances
• Others
• Long Term Goals (5 years)
• Retirement Savings
• College Savings
• Dream Vacation
• 2nd Home Purchase
• Others

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Risk ManagementMake your family bullet proof

• Disability Insurance
• Life Insurance
• Medical Insurance
• Property Casualty Insurance
• Long Term Care Insurance

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Disability Insurance

• 48 of home foreclosures are due to disability
• Employer paid Group disability coverage usually
  only covers 60-66 2/3 of your income and is
  fully taxable
• Medical insurance pays the doctors, hospitals,
  etc. Who pays you?
• If youre married, could you live on one income?
• If youre single, what would you do without any
  income?

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Life InsuranceWho depends on you financially
for their well being?You have life insurance
because you love someone or owe someone.

• Term Insurance
• Permanent Insurance

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Medical Insurance

• Pays the doctors, hospitals, etc.
• Flexible Spending Accounts (FSAs)
• Health Savings Accounts (HASs)

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Property and Casualty Insurance

• Renters Insurance
• Car Insurance
• Home Insurance
• Liability Insurance

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Cash Flow/Living Expenses

• Understand your monthly income and expenses
• Track all expenditures i.e. dining out,
  shopping, entertainment
• Get back in touch with cash instead of
  credit/debit cards
• Set money aside for infrequent expenses i.e. car
  repairs, home repair, maintenance, medical
  expenses, vet bills, holidays/gifts etc.
• Envelope Method
• Involve the children in the family budget

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Credit Cards

• They can be your friend or enemy
• Know your limits
• Establish needs vs. wants
• Opt out of annoying credit card offers
  www.optout.com

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Building Good Credit

• Establish a checking account and savings account
  in your own name
• Open 1-2 credit cards in your own name
• Check your credit report annually
  www.annualcreditreport.com
• Report any discrepancies
• Pay your credit card in full each month or make
  payments on time

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Credit Card Debt Dos and Donts

• Pay down debt and increase emergency savings at
  the same time
• Pay off highest interest rate cards first
• As you pay debts off, apply the old payment to
  the next highest interest rate debt
• Be careful of hidden fees for balance transfers,
  etc.
• Ask credit card companies to lower your interest
  rate
• Pay off entire balance monthly to avoid interest
  charges
• Always pay more than the minimum payment if
  possible

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Retirement Savings Vehicles

• 401(k), 403(b), 457 Plans
• Regular IRAs
• Roth IRAs

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Taxation
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College Funding(There is financial aid for
college but there is no financial aid for
retirement.)

• Scholarships (academic and athletic)
• Grants
• Work Study
• Loans
• Accumulation methods i.e. 529 plans, Coverdell
  Education Savings Accounts, etc.

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Student Loans
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College Tuition Costs
Financial Strategies, 2008
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Expected Family Contributions (EFC)

• This is the amount the students family is
  expected to pay towards college expenses
• Some of the factors that affect the EFC are
• Number of family members in college
• Parents income
• Parents assets (some examples of excluded assets
  are your home, retirement savings accounts etc.)
• Parents assets in excess of the allowable amount
  are weighted at 12
• Students income (student income protection
  allowance 2,620)
• Students savings and investments are weighted at
  35

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College Tax Credits

• Hope Tax Credit available 1st and 2nd year of
  college
• Lifetime Tax Credit available for 3rd year of
  college and beyond
• see your qualified tax advisor regarding
  qualifications

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College Funding Options
Give the Gift that Keeps on Giving

• 529 College Savings Plans www.collegesavings.org
  
• Coverdell Education Savings Accounts (CESA)
• Uniform Transfer to Minor Accounts (UTMA)
• Mutual Funds
• (IRAs) Individual Retirement Accounts
• Savings Bonds
• Life Insurance

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College Savings Vehicles
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Token Economy
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Hands-On Financial Role Modeling

• Ages 2-3 examples
• Coin identification game pennies, nickels,
  dimes, quarters, etc.
• Allowance Token Economy Method
• Ages 4-5 examples
• Clip coupons for grocery shopping make them in
  charge of looking for the products with the
  coupons
• Introduce philanthropy sort through toy box
  regularly and donate to other children any toys
  that are no longer used
• Allowance Token Economy Method

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Hands-On Financial Role Modeling

• Ages 6-8 examples
• Open a savings account and make regular trips to
  the bank to deposit money
• Encourage saving a portion of any money they
  receive for birthdays or holidays
• Start coin collecting state quarters?
• Introduce pay it forward concept
• Allowance Token Economy Method

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Hands-On Financial Role Modeling

• Ages 9-12 examples
• Teach comparison shopping at the grocery store,
  i.e. price, quantity, quality
• Have them help organize a garage or yard sale
  (organization, pricing, etc.)
• Allowance Token Economy Method
• Continue saving in bank savings account

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Hands-On Financial Role Modeling

• Ages 13-15 examples
• Teach budgeting and wants vs. needs
• Start looking for easy neighborhood jobs, i.e.
  pet sitting, babysitting, lawn care, etc.
• Allowance Token Economy Method
• Continue saving in bank savings account
• Let them make and learn from their mistakes
  dont bail them out and refrain from I told you
  so

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Hands-On Financial Role Modeling

• Ages 16-18 examples
• Help find a part-time job
• Continue saving in bank savings account and set
  up direct deposit directly from paycheck to bank
  account pay yourself first
• Open Roth IRA and have them contribute monthly
  explain mutual funds and investments and the time
  value of money
• Open bank checking account and teach them about
  balancing the checkbook and debit card usage

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Hands-On Financial Role Modeling

• Ages 18 examples
• Continue working part-time job
• Continue saving and checking accounts
• Continue Roth IRA contributions
• Shop around for best credit card offer and help
  them establish credit SET LOW CREDIT LIMIT.
  Explain credit card usage and payment guidelines.
  If you dont teach them the correct way, theyll
  learn the hard way.
• Order credit report www.annualcreditreport.com
• Explain credit scores and how they can affect
  everything from car purchase, student loans,
  apartment rentals, credit cards, etc.
• Opt out of future credit card offers
  www.optout.com

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Thank you!
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