It’s time to tackle the final three topics from this series! In Part 3, we’re covering teaching your kids to manage money (Entitlement reform), reducing healthcare costs (Healthcare), and communication with your spouse about money (Debating).
Entitlement Reform
As parents, one of our primary responsibilities is to teach our kids how to make wise decisions by themselves when they become adults. This is applicable in many areas – relationships, careers, families, etc. Money is an important area as well. I know there are many decisions adults have to make about money, and I realize that many of our financial habits are formed when we're kids, especially from what we are taught and modeled by our parents. I hope this gives you some ideas to think about and some easy starting points with your kids.
- Give them regular chores. These are things that you ask and expect them to do as their role and responsibility in your family and explain this is one of the many ways we serve and love each other. This is preparing them to take care of basic things they will need to do when they're on their own. We do not pay them for doing these things, but they are rewarded through affirmations for doing a thorough job with a joyful attitude and they see the benefit when we have a little extra time to spend with them doing something fun together. We also have a few regular chores they do each week which we do give them an allowance for so that they are receiving a small weekly allowance in exchange for their work.
- Pay them commissions when they do additional jobs, such as cleaning windows or your car. This will teach them that money “doesn’t grow on trees” and that they can earn money by being assertive and doing quality work.
- Have them ask neighbors if there are jobs they can help with. Our kids make and pass around a flyer listing summer jobs (yard work, cleaning, bathing the dog) and seasonal jobs (mailing Christmas cards, decorations). This teaches them about marketing and sales.
- Set up a lemonade, hot chocolate or baked goodies stand. Again, pass out flyers and post signs beforehand and encourage them to talk to people directly to get comfortable building relationships and selling their products. Also have your kids keep track of the number and quantity of sales and compare the revenue to the costs (e.g. buying cups, lemons or ingredients for the baked goods) so you can explain how profits are derived and how to potentially adjust the variables that impact profits.
With any money our kids receive, we have taught them to split it up between giving, long-term savings and keeping the rest for them to spend however they choose. For giving, you can keep out a ‘Giving Jar’ for them to place the money until they determine the cause they would like to donate it. For long-term savings, I would encourage you to take them to the bank and open a savings account. First, it's a great opportunity to teach them about compounding interest and while they might not earn a lot in interest, they get excited to see that their money is growing by "doing nothing". I remember when I was eight years old and my dad took me to the bank to open up a savings account. When we went back a few months later, I asked him why my balance had increased and he replied, "this is compounding interest". I replied, "this is awesome!" and deposited more money. The other reason I'm glad we opened bank accounts for our kids is they learn what is a bank and how it works, especially in today's world with technology where it's possible to never step inside a bank. I knew this was important when my four-year old son showed me his piggy bank one day and asked me if that is what a bank looked like.
Call me if you have questions about how to talk with your kids or if you would like to come in with them for me to go over some of these things in a simple and general way.
Healthcare Costs
Rising premiums and deductibles and decreasing benefits and plan choices leave you little control outside of trying to pick the best plan for yourself. Therefore, as I often tell people, focus on the things you can control and don’t worry about those that you can’t. What can you control to reduce your healthcare costs?
- Consider the deductible. If you tend to only go to the doctor for regular checkups, then consider going with a higher deductible to lower your premiums. Often, the savings in premiums will be close to the difference in the increased deductible amount. The following example from two 2017 plans for a family illustrates the difference. If you’re healthy, then you might prefer saving the $2,721 and have it to cover the incremental amount of the higher deductible. This is easier to conclude for individuals than families as families need to factor in multiple deductibles that might need to be met.
- Contribute to a Health Savings Plan. The amount you contribute is pre-tax, which reduces your taxable income, and can be used to pay for qualified health benefits (most include medical, dental, and vision expenses). The benefit is that you’re paying the expenses with pre-taxed money instead of after tax dollars. For someone in the 25% Federal and 9% California State tax brackets, this equates to $340 savings on $1,000 of contributions. Any contributions not used can be rolled over to the following year.
- In-Network versus Out-of-Network. Check to see if the doctors you regularly see are either In- or Out-of-Network. This will impact your deductible limits and how expenses are applied. Since Out-of-Network deductibles are around twice as high as In-Network, you really don’t want to be meeting both of them in the same year.
- Exercise. This isn’t a luxury or a vanity thing. Everybody benefits by doing cardio, stretching and lifting weights on a regular basis. I find that I need to work out three times each week to create a habit and maintain desire. Not only is exercise good for your body and soul, but scientists recently found that it will also save you between $500-$2,500 each year in reduced healthcare costs (read my October 20, 2016 Facebook post: https://www.facebook.com/sherpafa/) to learn more.
- Eat well. This doesn’t mean you have to go on a gluten-free or organic only diet, but you should strive to cook meals more at home (yes, limit the pre-made frozen entrees), get those fruits and veggies in those meals, and eat smaller, but more frequent meals instead of trying to have a large meal carry you throughout the day.
- Rest and sleep. Yes, these are different. Both will reduce your stress and give you more energy to focus on your daily tasks.
As you work through these, don’t forget to consider how it will impact your budget and cash flow. We can then enjoy figuring out how to direct any extra savings to your other goals.
Debating
After listening to this year’s debates, we can probably agree that effective communication was not being practiced! Knowing that money is the #1 issue that leads to disagreement and divorces in marriages, I want to provide you some useful insight to help your conversations lead to productive decisions. For several years, I taught the finance topic at my church’s premarital class. Here are some of the challenges I would explain to the couples that they would face:
- Men and women think differently and have different priorities about money (i.e. weekly golf vs. a new couch)
- Coming into marriage, we are used to managing for just ourselves
- Decisions impact our spouse, both big and small
- Remember the big picture (which is why having a budget developed together is so critical)
To effectively resolve issues, couples need to agree on goals important to them – not what’s important to their parents, friends or what others are striving to achieve; be unified in working toward goals; speak with each other about how you’re progressing and any obstacles encountered; and seek wise counsel as needed.
Obstacles, changes to goals and differences in opinions will always arise, but don’t allow those to become wedges in your marriage. I speak from experience when I say that listening and emphasizing with each other increases understanding, a desire to work together in a loving way, and strengthens your marriage.
If you’re struggling or simply are having a difficult time with your spouse in making decisions about a money-related issue, please schedule a time to meet with me. I can help you work together to find common ground in your separate financial goals.