The greatest gift you can give your children is your own financial security. Take care of your own retirement planning, life insurance needs and debt reduction before contributing to your child’s college savings plan. If you have the excess funds to contribute at that point, 529 College Saving Plans are a tax-efficient, flexible tool in helping to prepare for the cost of your child or grandchild’s education.
Mutual funds are confusing to people because they are not explained clearly. They are actually quite simple. A Mutual Fund is like a shopping cart of investments. When you go to the market, being the fabulous Domestic Engineer that you are, you know which products are the best value for the best price, don’t you? We are know our favorite bread, the best ice cream, the freshest lettuce and our favorite wine. We notice when those products go on sale, and we also notice when their prices go up. The money managers in charge of the portfolios of mutual funds are doing that same kind of shopping, just in the world of stocks and bonds.
Everybody wants to create financial success. This is a basic tenet of our society, a message taught to us from a very early age, and reinforced through the media, our families and our own pocketbook. Financial success can come from many sources, it can be the result of a well thought out plan, implemented over many years, it can come in the form of an inheritance, a new business or a divorce settlement. Regardless of how it is achieved, we are ingrained with the notion that having lots of money equates success, freedom and influence. Much of this is true, and creating wealth and security is an incredibly empowering experience.
The truth is that the decade of the 1950’s, upon which we have rested the mantle of the American ideal, was an anomaly, not the norm. American women have not exited the workforce in such mass exodus at any time in American history prior or since that single decade. This idealized notion of the perfect life in the ‘burbs, with Mom at home baking cookies and Dad working 9-5 to provide for the family, was a product of an isolated economic post-war boom. If you have children, many of us argue within themselves, whether it is a better to stay at home with your children or be a working mother, but as we all know, for many of us it is not a choice we have the luxury to make.
With the way the current financial markets have been behaving, the international political tensions, ecological concerns, and instability in the Trump Era of the markets, I hear this question all the time. “How do you know it won’t get worse?”, “Am I better off just putting it into an FDIC insured CD?”. These are understandable questions in times like this. However, Investing and saving are two different things. We are most certainly in perilous financial times, and have a number of economic, environmental and political issues that are impacting the stock market and creating enormous volatility. However, the long term track record for the stock market is a healthy 10% return, and it has gone through enormous challenges in the past as well.
Gen X women have been raised by their progressive Boomer mothers and fathers that can be or do anything they want, and rightly so. We have pursued record numbers of advanced degrees in Medicine, Law, Science, Finance and Academia. In fact, many of us are burdened for decades with incredibly high student loans we needed to finance those educations! And now, as we are starting families and juggling our newfound motherhood with these fabulous careers we had planned for so long, we aren’t willing to sacrifice. Yet, with all this education we have received, many of us never received the most important part of the curriculum; life planning. From elementary school on, nobody teaches us how to balance a checkbook, what an IRA is, how investing works or the nature of compounding interest. We are full of knowledge about a great many things, but sorely lacking common sense when it comes to our financial future.