Thursday, April 18, 2013

Stop Overlooking Your Biggest Investment


Have you ever stopped to think about your biggest investment? This article was past a long to me by the wonderful Greg Murset, from MyJobChart.com, and it really spoke to me. 
Sometimes we spend too much time thinking inside the box and miss the truly important things or obvious things. 

So I ask you before you read any further "What is or will be your biggest investment in life?" I'll tell you it's not your home. Do you think you know?  You might be surprised....

 In Honor of Financial Literacy Month, Stop Overlooking
Your Biggest Investment


You often hear that the biggest investment you will ever make is buying a home. That’s because it’s an emotional experience and involves very critical eyes. Hours of looking on the internet or driving around to see different neighborhoods takes a lot of time and energy and it should because it’s a big decision. In fact, in 2010 the median home price in the U.S was $222,000. That’s a lot of dough to plunk down at once. This is a long-term investment to provide shelter for your family and comes with an expectation if you care for it and improve it you will see appreciation in its value.

Then comes the second largest purchase - your car. According to the National Automobile Dealers Association, the average price of a new car sold in the United States is about $30,000; the average used car is $11,850. Once again, hours searching on the internet, test-drives and time at the dealership quickly adds up. Buying a car is a spendy proposition, but it’s not anywhere near your biggest investment, none the less you have expectations for it to provide your family with reliable transportation for years to come and be worth something when it’s time to replace it.

Most people overlook their biggest investment. It’s one that is larger and more important than either of the previous two investments and it doesn't come with granite countertops or leather seats.


Your Biggest Investment

Your biggest investment is your KIDS! According to a 2011 USDA report, it costs $295,000 to raise a kid from birth to age 17. And that’s per kid! The sad news is that doesn't even cover the cost of college. For an in-state 4-year program you can tack on another $68,524 or $154,356 for a private college. Where you live, your income level and the educational institution of choice can all make those numbers even bigger.

This doesn't mean we shouldn't have kids. It simply means that we need to put these costs into perspective and start treating the price of kids with more attention to detail and a sharper eye on expectation for return.

So, what expectations do you have for the BIGGEST investment you will ever make?
As a Certified Financial Planner (CFP) I have spent my entire career counseling people on how to carefully select investments, pay close attention to them and make sure their portfolios are tweaked for maximum return. My clients have come to expect this type of attention to detail.

If you are like most Americans you don’t have a plan for the investment of your kids because it’s not a one-off transaction. Instead the cost is stretched over a 17-year period, and THAT’S THE PROBLEM. It’s money slipping slowly through our fingers over time. Buying a new pair of pants or another trip to get a haircut -it all slowly adds up.



infographic
Click to view
So now that we know kids are the biggest investment you’ll make, how do you take charge to get the most out of your investment?

1. Make your kids aware
2. Make a conscious effort to share on big ticket financial items
3. Help them enjoy work and money
4. Don’t cultivate entitlement, tie work to reward
5. Consistency counts

 Make your kids aware

The days of keeping hush-hush when it comes to finances are over. Ninety-five percent of parents feel it is their responsibility to teach their kids about money, but only 26 percent feel comfortable doing it. To reverse this trend, start with some small steps. Let the kids know how much the electric bill is next month. I did this last summer when our electric bill was over $700. Yes, we live in Arizona and the A/C seems to never turn off in August! However, by letting them know how much it costs, they were more mindful about not leaving the doors open and how they can do their small part to save.

Also, let them know how much it costs to fill the gas tank of the family car. In April of 2011, the average amount American households spent on gas was $368.09. That’s just one month. All that running around from soccer practice to school adds up. There’s a good chance you will get some raised eyebrows when you expose those figures. Kids are smart.

Share on big-ticket items

Make a conscious effort to discuss big-ticket financial items. Don’t be afraid to discuss your home’s value and mortgage with your kids. They can look it up on Zillow anyways, so forget the “50’s” mentality of “we don’t share family money matters with our children”. Start sharing this financial information with them and empower your kids. Don’t leave them in the dark. Kids can feel when there is stress in the home about money, so have a sit-down meeting and discuss openly the issues and work as a family on how to get through the hard times- Maybe it’s sacrificing the skiing trip or skipping dinner out on the weekends.

Once their eyes are opened to the costs of running a family and what it looks like to budget you’ll be surprised at how quickly they start learning how to make better money decisions. You’ll also start hearing things like, “Dad, that is a total rip off! Let’s not buy it here when we can get it cheaper somewhere else!” These skills will last a lifetime. Get your kids to participate.

 Help your kids enjoy work and money.

Getting through college takes a lot of hard work, but studies show it pays off. Median income for someone with a bachelor’s degree is $54,756. Compare that to $33,176 for a high school diploma. If you do the math on this over a 35 year career that’s an additional $740,000. For a master’s degree you can add another $400,000 over a career. That’s a pretty good return on some hard work if learned early. If kids are held to a high standard when it comes to helping around the house, being diligent in their studies or staying on top of their piano lessons they will learn to enjoy work. Will you hear some complaining along the way? Definitely, but it will be worth it.

Don’t cultivate entitlement, tie work to reward

When it comes to paying kids for their work, there is plenty of debate The bottom line is that you can call it what you want: allowance, commission, work-pay, whatever… but it needs to be tied to family contribution and it needs to teach your kids something about work ethic. Giving allowance not tied to contribution only encourages the entitlement mentality. We do not need any more of that!

Adults work to earn money so kids should learn this expectation as well. Have you ever been on a job interview where the employer offers you a salary and then never expects you to show up to work? It’s not reality and your kids should learn that early.
Don’t feel like you have to pay your kids for every little thing they do around the house. Of course some things are expected, but if it is above the call of duty make it worth it. As they work and you pay them for it, it will create meaningful conversations about contribution, hard work and how to make good financial decisions with their money, such as how much they should save, spend or share.

Give your kids some jobs around the house where they not only earn a little money, but they can develop a good work ethic. Don’t let your kids sit around and plays video games all day and never learn how to contribute and become responsible. It’s a life lesson and one parents are responsible for teaching.
Get them off the couch and let their potential blossom! If you let them sit on the couch don’t be surprised if they’re still there when their 30! There is no better place to teach good money management lessons then in your own home.

Consistency counts

Don’t be hard-core one day and the next let everything slide. Stay strong and don’t give in. Once your kids learn your new resolve they begin accepting it as part of the routine where accountability and responsibly become a normal expectation. Repetition is the key to learning. Start them early with chores and family activities around the house that will help them learn how to be smart with money from a young age. This will pay big dividends down the road for them personally and for society as a whole.

Your kids truly are the BIGGEST investment you’ll ever make. 

The return on that investment won’t be seen immediately, but you’ll see glimmers of it as they grow. They’ll gain personal accountability, confidence and financial freedom. When kids leave home and know how to live within their means and not get suckered into bad financial products like high fee bank accounts and credit cards with hidden charges, when they know how to budget and talk about finances you’ll know without a doubt your investment paid off. We must pay more attention to our kids and inspire them to reach their potential. Raising your kids has a big price tag, but it’s worth every dime, especially when you start to see your return on investment and the responsible citizen they’ve become.

Article written by Greg Murset, CPF Owner and Founder of MyJobChart.com

9 comments:

slehan said...Best Blogger Tips[Reply to comment]Best Blogger Templates

No kids. So my biggest investment has been in my townhouse which is now after 30 years, all paid for.

slehan at juno dot com

Janet W. said...Best Blogger Tips[Reply to comment]Best Blogger Templates

I know children are expensive, but those stats really put it in perspective!

out source market research said...Best Blogger Tips[Reply to comment]Best Blogger Templates

ya you are correct children are expensive things

VickeC said...Best Blogger Tips[Reply to comment]Best Blogger Templates

Kids are grown,but we still are investing in them,,,it never stops,,now grandchildren,thank god at this time in our lifes the house is paid for,so we are glad of that

Tammy S said...Best Blogger Tips[Reply to comment]Best Blogger Templates

Great tips!! I love the tip 'Don’t cultivate entitlement" How true that is. I have tried to teach my kids that you have to work hard for the things you want.

Amanda said...Best Blogger Tips[Reply to comment]Best Blogger Templates

WOW! Good article! you spoke about kids a lot and found a few insightful things... dont give into entitlement is a huge thing in todays economy! Most of the things mentioned we already do and are working hard on teaching our kiddos about $. even though our oldest just turned 6 he has a bank account and all the money he gets 50% of that goes into his account :)

Betsy Barnes said...Best Blogger Tips[Reply to comment]Best Blogger Templates

Such a great post! Having kids is really the biggest investment :)

slehan said...Best Blogger Tips[Reply to comment]Best Blogger Templates

Consistency counts - that rings true for the way my parent brought up my sister and me.

slehan at juno dot com

ann said...Best Blogger Tips[Reply to comment]Best Blogger Templates

I have always told my kids and grandkids you have to work for what you want - dont expect nothing for free. You want that nice sports car - work toward it. I think my investment was in the house.

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