By Dave Coen
As you probably know, one of the unique services that we offer is to help clients identify the inefficiencies in their current planning—“holes” in their financial buckets that could be made more efficient. There is often more financial value in preventing the losses than trying to pick the winners.
As parents, we often struggle with whether our assistance to our kids will help or actually hurt over a period of time. I know that most parents who love their kids dearly would be willing to give up their lives for their children if it would save their lives. The question sometimes is: “Should we?”
Once that little baby is put into our arms for the first time, there is a “Circle of Life” protection instinct that kicks in naturally and is much stronger than any of us could imagine before we had a child.
As our little ones grow, we try to teach them lessons to help them cope with the “big world” in which they will one day have to live. Each decision that we make might make them stronger or it might not be teaching them what we would wish for them to learn.
Setting boundaries or saying “No” sometimes could be the best thing that we as parents could do for our children. And how we handle the big-ticket items could have a huge impact on our retirement plans too.
College And Weddings
College and weddings are two events that could easily “define” our future if we do not handle them correctly. We should also consider what we are teaching our kids in these moments.
Too many times I have seen daddy’s little girl end up spending $50,000 to $100,000 or more on her wedding to make it “just perfect.” This is the day she has dreamed of all her life and it is also the day that Dad will probably get most emotional about as he thinks of walking his baby girl down the aisle. How could he not give her exactly what she wants?
Here are a couple of things to consider:
1. Make These Decisions In Advance While There Is Still Rational Thought
If Mom and Dad had a “family financial talk” a few years before college or a wedding, then it would be easier to set expectations with children before the emotional decisions about booking the wedding venue need to be made.
2. Communicate Clearly To Avoid Unmet Or Unrealistic Expectations
Once you have made decisions on what you would be willing to spend on college or weddings, then have a discussion with the kids so that they know what to expect. The last thing you want is for them to rush into the room gleefully waving the acceptance to Harvard at $67,000 a year that you know is not an option with your resources.
3. Make Sure You Have A Budget And That It Fits Into Your Financial Plan
I often ask parents what their budget is for a large event. Sometimes they can give me a number, but when I ask how they got to that number, or how that might affect their retirement, there are many times when the rationale does not fit in with reality. There is some planning and math to be done before you come up with a number.
4. It’s YOUR money, YOU Make The Decision
Somehow with college or weddings there seems to be an emotional component where many parents let their kids make the decisions on how to spend the money. I am pretty sure that you would never let your kids decide how much you could spend on purchasing a house or another car. In many cases, the amounts you are talking about are just as large. Why would you leave the decision as to how much college or a wedding will cost up to them? Remember that your kids can borrow for college or a wedding, but you cannot borrow for retirement.
5. Now Make It THEIR Money—Either To Keep Or To Lose
Once you have decided that it is YOUR money and you know how much you are willing to spend, then make it THEIR money to spend. Consider telling your baby girl that you have $20,000 or $100,000 to spend on her wedding (whatever number you have worked into your budget). Then tell her: “Anything more than that, you will have to get a loan for. Anything less than that, we will give you as a deposit for your first house or car.” It will amaze you how different the decision-making looks when they know that it is their house deposit money they will be giving to that MUST-HAVE florist or AMAZING videographer for their wedding.
About Dave
Dave Coen is a Financial Advisor with SageView Advisory and the CEO of College Planning America. Along with his retirement financial industry experience, he is a College Planning Specialist. He works closely with individuals and families to provide them comprehensive financial planning that addresses all elements of their financial picture. Learn more by connecting with Dave on LinkedIn.1920 Main Street, Suite 800, Irvine, CA 92614 Tel: 800-814-8742Registered Representative with Cetera Advisor Networks LLC, doing insurance business in CA as CFGAN insurance agency. Member FINRA/SIPC. Advisory services offered through SageView advisory group, LLC. Cetera is under separate ownership from any other named entity. CA insurance license #0G82578
This material is designed to provide accurate and authoritative information on the subjects covered. It is not however intended to provide specific legal, tax, or other professional advice. For specific personal assistance, the services of an appropriate professional should be sought.
Registered Representative with, and securities offered through Cetera Advisor Networks, LLC, Member FINRA/SIPC. Cetera is under separate ownership from any other named entity.
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