More and more often we are hearing about seniors saying yes too often. They are getting into financial trouble and then have nowhere to turn. Some may be supporting elderly parents who themselves do not have sufficient funds. They have to pay for their own health care in long term stay homes. Then there are the children who used to a life of never wanting for anything. They expect the same thing as grownups. They forget that their parents worked hard for the money and saved before they bought a big home, car etc. We see many of our friends dealing with these issues. They agonize over how much money to hand out. Should they give money now and jeopardize their retirement?
Why are Seniors Saying Yes too Often are Getting Into Financial Trouble
In most situations, they just want to help their family members now while they are still alive. If they help them now they can also enjoy what their financial gifts have purchased for their kids. Quite often it is the children putting pressure on the parents for them to help out.
Perhaps a down payment on a home or a new car. There credit card bills are due and they need help paying the bills. It might even be verbally worded as a loan, however one the money is given, most never see a penny back again. If you do give money to a family member, assume you will never see it again. If you do it is a bonus.
Can You Give Away Too Much Money
Seniors sometimes give too much money away. Then they find that they are living longer than anticipated and run out of funds to pay for whatever expenses they have. Many are forced to take room mates, move in with the kids or just downsize to a one room apartment. If only they had been more careful with their money and perhaps had held back a bit. If only their kids were now in a financial situation to help them now.
Sadly, the money is gone and no one has enough to support their parents in this kind of situation. The answer is that every senior should evaluate the impact of loaning or giving money to a family member. Will impact their lifestyle or quality of life in the future? What will be the impact if you never see this money again?
Make plans now to set up a budget. Ensure that you will have the funds you need to pay all of your bills and living expenses. Then if you think you will have money left over, you might consider gifting funds to your family while still alive.
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This is a continuation of the previous post about teaching your kids about managing money. In this post, Money Management for kids we will explain some of the terms we discussed in the previous post. These are lifetime skills that will help them and even yourself in the long term. One of the most important rules is the 10% rule. Save 10% of all income, including allowances and pay checks. It is never too late to start, but if you can get them to begin as children and follow this rule into adulthood, they will be financially well off by the time they are in middle age, barring other unforeseen emergencies and lifestyle issues. This is one of the single most important guideline money management for kids that your kids and even yourself can follow.
Money Management for Kids
- Pay an allowance – and teach them what they can do with the allowance they receive. Many will want to spend it immediately, however the power of saving for a goal is a major lifestyle achievement.
- Assign age appropriate tasks tied to their allowance – money received that is not tied to some kind of performance teaches nothing. Real life ties work, performance and pay checks. They might as well learn now, even if it is just taking out the garbage.
- Open a savings account to teach about saving – watching their money grow through savings is a powerful tool. While they will collect little interest on their savings at this time, watching their balance grow is still an important lesson.
- Establish emergency savings – everyone needs to have emergency savings. You never know when you need some money for health issues, major repairs etc.
Goal Oriented Savings
- Establish goal oriented savings accounts – saving for a new bicycle, trip, car, education or many other items is a great way to establish goals and save towards them.
- Young adults should start saving for retirement – most people think that retirement is too far away to worry about, however if you start saving early, it takes the pressure to keep working later in life instead of retiring on your own terms.
- Learn the power of compounding interest rates and income – tied to saving early for retirement, with proper investment, savings can morph into a large number if all income is reinvested – interest, dividends etc.
- Older teens should obtain a credit card to learn about credit, debt and credit ratings – focus on repaying the balance every month to avoid the high interest rates charged on overdue balances. It also helps to establish a credit rating.
Saving for a Home
- Start saving for a down payment on a home – if you want to purchase a home, the minimum amount you will need is 10% of the value of the home. Some lenders will want to see 15% or even 20%. The more you have as a down payment, the lower your monthly payments will be.
- Learn about debt ratios and the 35% rule – most lenders will tell you to never allow your monthly debt payments and living costs (rent , mortgage payments) to be above 35% of your monthly income. This is the maximum for most people to ensure that they have sufficient spending money for utilities, food and clothing.
That is it for this post, stay tuned for more money management posts. For more posts about life style issues, click here.
Teaching your kids about managing money can be among the most important life skills that parents can teach their kids. If you can avoid debt problems and save for things you want as well as retirement, you should have a pretty good life. At least financially. It is never too late to begin teaching your kids about managing money. Even pre-teens, young adults and even older adults can benefit. So what are the things you should do to help people and kids start learning about money? How to manage money and how to avoid getting into problems later in life over money?
Teaching Your Kids About Managing Money
These points are listed in general from an age perspective. However many can be applied even for older teens and adults:
- Save 10% of all income, including allowances and pay checks
- Pay an allowance
- Assign age appropriate tasks tied to their allowance
- Open a savings account to teach about saving
- Establish emergency savings
- Establish goal oriented savings accounts
- Young adults should start saving for retirement
- Learn the power of compounding interest rates and income
- Older teens should obtain a credit card to learn about credit, debt and credit ratings
- Start saving for a down payment on a home
- Learn about debt ratios and the 35% rule
We will expand on this list. We will also xplain some of the items in our next post about teaching your kids about how to manage money.
For more posts about life style issues, click here.