Retirement Planning vs. Life Planning

People do not retire. They are retired by others. ~Duke Ellington

Retirement is usually held up as something we all must prepare, plan and save for because it’s the ultimate, natural end-game. However, there is nothing natural about it. In fact, the concept of leaving the workforce at a certain later age and having the money to support oneself was originally a socialist idea! It was adopted by the United States government in the early 20th century as a means to force older workers out of the workforce so there would be room for younger workers. The government then sold the idea to all Americans, branding it as the reward for decades of hard work which spawned many new industries and the rise of Florida as the go-to retirement destination. Though we may think of this as completely normal, it’s only been a popular model for a couple of generations. (The New York Times has this great overview of the history of retirement.)

We’re not fans of the idea of retirement or the notion of retirement planning. It suggests the end of life as you know it or the end of life, period. It’s off in the future, some idealized “some day.” If the picture of that “some day” isn’t your own, or if you don’t find value in delayed gratification, retirement planning may be stressful, painful, or impossible. Some people give up and give in to the pitfalls and distortions of their natures, trapped by self-imposed ceilings. Many people never become aware of living like this, but others do. Each scenario is equally tragic.

We favor the idea of life planning which includes the goal of financial independence plus room to keep living and growing beyond any one financial level, life stage, or age limit set by legislators. Life planning is in the present. It’s a process powered by your intrinsic motivation rather than discipline, which is a lot more comfortable. Our approach begins at the core of who you are rather than a foundation of external factors. Life planning is about being fully alive, growing and developing, and evolving with your money.

Our goal is to help you create and practice a financial strategy that looks out for all your needs, wants, goals, and aspirations. That starts right now and keeps a healthy eye on the future. That’s using your money to support your life as it unfolds, expands, and evolves.

Age in unimportant. Good planning is about what we’re being called to do now and getting on with it.

Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. They do not necessarily reflect the views of LPL Financial. No strategy or process assures success or guarantees against losses.

Camp Counselor: teens & young adults working outside the home.

Allowance: Adolescents to Young Adults

Before jumping in, take a look at the broader context and relevant details, and find your child’s nature.

Walking dogs is a great job for teens.Job & Own: from 16 to 18 it’s important for kids to do something for the world at large and get paid for it. Babysitting, mowing lawns, scooping ice cream, walking dogs- owning the responsibility of reporting on time, working diligently, having a good attitude, keeping commitments, and planning ahead are all important things to learn at this stage. Their ability to earn money and have savings is a gift made possible by your generosity, and they will need help securing that first outside job or turning a hobby into an entrepreneurial venture. Your time, connections, attitude, energy, and love are more important than your money as you help them become independent, (rather than “I-dependent”). Introduce them to the costs of more independence and consider charging them for services rendered or backing off some of their allowance. Up to now their stuff has actually been yours, and they are motivated to get a job so that they can own their own things. They’ll become more selective about their friends, clothes, activities, etc., letting go of some things and cling more dearly to others. This is a time to allow them to learn about how money works and become engaged in the ownership of money gifted to them, and if you have investments earmarked for college consider transferring unofficial ownership to them.

Suggested allowance: again, customize appropriately.

Suggested expectations: engaging with money as a source of positive energy.

 

You've done a great job, and it's time to let go of adult children. Self-Development & Leverage: there are many ways to continue to invest in our kids and ourselves. In the 19-21 stage kids learn to be interdependent because nobody can accomplish much on their own; we all need good people, and people need us to be good. Help your kids maintain interconnectedness through summer jobs, inviting them to participate in the care of their homestead through chores when they are around, and schedule these in the mornings. The more people invested in their success, the less likely they are to give up, and the more likely they are to stay connected to the value of the experience not just the price. Your kids should be involved in all factors that go into paying for school, including having a say in how assets are liquidated, how much money is borrowed, and how much of a work-load to take on in order to actually learn. If they need to borrow money it’s best to go to the bank and apply in front of someone they know; kids at this age should be able to make a case that they are a good risk, and the bank or others extending credit should be clear about their expectations. At this stage you’re really there to encourage, support, and ground your kids. As long as they know you’re there for them they can feel free to reach for the sky. The challenge at this point is to let them go and allow them to make small mistakes that help them learn without snowballing into something that can take your financial house down with it.

 

Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. They do not necessarily reflect the views of LPL Financial.

 

Tween Mowing Lawn

Allowance: Tweens & Teens

Before diving in, read this overview of the whole strategy for important details and review finding your child’s nature

Sponges: get creative with household chores for the kids.

Chores & Earn: from 10 through 12 kids can adhere to some routines that help the household function better. The tasks they once helped you with now become chores that are their responsibility. When children have ownership and responsibility they have things to trade; the more entrepreneurial among your family may end up doing all the work, but they might end up with all the money, too. (A good book: Lunch Money by Andrew Clements about a kid who makes a fortune off his older siblings.) In this stage you are helping them with chores that are under their purview. “Let me help you (insert chore),” or “how can I help you XYZ” are a great means to give them jump-start getting something done. A slight increase in allowance will empower and enable them to start buying the things they want, like specific clothes or shoes, that you were likely to purchase anyway.

Suggested amount: $10+, customized to your family.

Suggested expectations: their ownership of their chores should come with a new level of quality and few reminders.

 

kids on swing rideWork & Save: in early adolescence children go through another great developmental leap. From ages 13 to 15 they are far more socially aware, and often they want to buy the cool stuff or go to awesome places but don’t have the money. Now is a time to impress upon them the idea of having a financial goal and working to earn money over and above what they, and you, have come to expect. Doing more voluntarily because they have needs and desires should be encouraged. You’ll need to support creativity and expose them to more and more of your finances and financial decisions. Kids in this stage can learn to do more at home and venture outside the home to earn extra money. They are primarily interested in fitting in and being a part of a peer group, so they are beginning to respond less to what you say and pay more attention to what you do. Speak less and work along with them more. Pay them with cash and open a bank account for them to put a portion of their earnings into savings. They may ask for more work only occasionally, but you can offer opportunities to earn more money.

Suggested amounts: customize fairly according to job.

Suggested expectations: (clear communication is critical), vacuum & wash the car, clean the windows, vacuum & dust the house, watch younger siblings, mow the lawn. Outside the home: babysitting, yard work & mowing, pet-sitting, etc.

 

Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. They do not necessarily reflect the views of LPL Financial.

 

 

Allowance: Teaching your kids about money and value.

Teaching our kids about money and financial health is critical. According to a great article from the Wall Street Journal, despite the best intentions, we’ve been getting this all wrong. “Most children still grow up into adults who can’t properly save, spend, and budget,” and invest, leverage, and give. In other words, kids are growing up without an understanding of money as a neutral tool to help them create the lives they want and instead arrive at adulthood with financial anxiety, unable to speak about finances rationally, and unable to distinguish cultural associations and personal emotions all too often attached to money.

So what do we do? How do we instill in our children a healthy financial perspective and the ability to navigate finances with confidence?

The answer is honestly simpler than you might think. We’ve gone back to our philosophy  to create a developmentally appropriate, easy to integrate approach to teaching children about money and value, and it centers around allowance. The benefits are many: kids learn about themselves and their relationships to money & value while earning some money, and parents are able to eventually off-load some work they’d otherwise have to do themselves. The plan is customizable, and each family can determine the amount of allowance as well as specific expectations and chores.

This strategy spans from birth to age twenty-one, and we’ve broken that time into 7 distinct stages. Each stage naturally comes with its own challenges and opportunities. Your role is to identify and make the most of them. They are:

Allowance Ages & Stages

 

Need to know: before jumping in we need to introduce some necessary vocabulary. Each stage goes through three phases: Assurance Ensurance, and Insurance. These phases will look different at each stage, and your children will need you to be responsive to each one. When in Assurance, they’ll need you to be supportive and to show, tell, and model what they need to know. Each stage will demand that you give your children Assurance support for a good while in the beginning, especially when they are younger, and it requires an investment of your time more than anything else. Ensurance isn’t a word you’ll find in the dictionary, but it’s absolutely the right word to describe making sure, ensuring, your children have enough practice and anything else they need to develop a strong, healthy habit. The Insurance phase is the pay-off for you: you’ve invested in your kids up front and installed in them habits that minimize their risk of back-sliding. By the time you and your kids reach Insurance they are moving along under their own steam.

Additionally your children are born with their natures intact. In order to be the best mentor and guide you can be you’ll need to do your best to identify their natures. It’s not as though they can take our survey like adults can, so we’ve created this guide to help you identify their natures as accurately as possible as early as possible. More here…

Jumping in: birth to 3 years is characterized by discovery and massive developmental leaps, something that doesn’t come around again until early adolescence. Your children will need you to be in Assurance all of the time. [Read more.]

Play & Competition: kids from 4 to 6 are fun, playful, and naturally competitive. Playing games introduces them to rules, winning, and losing graciously. When in Assurance you’ll demonstrate the rules of fair play and sharing. [Read more.]

Help & Cooperation: by the time kids are 7 they will want to help around the house. In the 7-9 years children naturally want to please their adults and relate their value within the family to being asked to do things and go places. [Read more.]

Chores & Earn: from 10 through 12 kids can adhere to some routines that help the household function better. The tasks they once helped you with now become chores that are their responsibility. [Read more.]

Work & Save: in early adolescence children go through another great developmental leap. From ages 13 to 15 they are far more socially aware, and often they want to buy the cool stuff or go to awesome places but don’t have the money. [Read more.]

Job & Own: from 16 to 18 it’s important for kids to do something for the world at large and get paid for it. Babysitting, mowing lawns, scooping ice cream, walking dogs- owning the responsibility… [Read more.]

Self-Development & Leverage: there are many ways to continue to invest in our kids and ourselves. In the 19-21 stage kids learn to be interdependent because nobody can accomplish much on their own; [Read more.]

You’ve likely heard the saying, “it’s the journey, not the destination,” and this strategy for helping your kids evolve with their money is a wonderful journey with a fantastic destination. You and your children will appreciate and learn a great deal from this intentional, organic process, and you both win at the end: you’ve raised a kid who has healthy money habits and perspective, a kid who knows herself or himself and understands money as it relates to his/her nature.

 

Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. They do not necessarily reflect the views of LPL Financial.

No strategy or process assures success or guarantees against losses.

 

 

Discovery is part of learning about money & value.

Allowance: Early Childhood & Elementary Years

Before jumping in, read an overview of the whole strategy and find your child’s nature.

 

Happy baby discovers smiling as currency.Discovery & Curiosity: birth to 3 years is characterized by discovery and massive developmental leaps, something that doesn’t come around again until early adolescence. Your children will need you to be in Assurance all of the time. To teach them kindness, you’re kind, for example. You’re modeling affection, stability, sharing, compassion, and many, many other positive behaviors. In infancy this is all you do, but as children become toddlers and begin to understand cause and effect there becomes an opportunity to experiment with rewards like stickers and other little items. Money is best put into a piggy bank, first by you then by your child, and larger gifts should be set aside until they’re older.

 

Playing with money & purchasing.Play & Competition: kids from 4 to 6 are fun, playful, and naturally competitive. Playing games introduces them to rules, winning, and losing graciously. When in Assurance you’ll demonstrate the rules of fair play and sharing. You provide your kids with food, clothes, shelter, entertainment, and unconditional love, and you’ll have your own set of age-appropriate expectations such as taking care of certain physical needs, (like tying shoes or using the bathroom), communicating pleasantly, and generally conducting themselves with appropriate self-sufficiency. Introducing a weekly allowance because they are members of the family is a good idea. They aren’t yet ready to work for the money and are still learning that money is something exchanged for things they may want. You can use proxy money like marbles which represents a comfortable amount which your child can then exchange with you for real money. They can use this money to buy things or gifts, but they’ll need to be taught how to count it. In this stage you all can have a lot of fun together!

Suggested amount: $3, one to spend, one to save, and one to give.

Suggested expectations: brushing teeth, cleaning up toys, keeping room neat, making bed, clearing dishes, picking out own clothes and getting dressed.

 

Helping around the house.Help & Cooperation: by the time kids are 7 they will want to help around the house. In the 7-9 years children naturally want to please their adults and relate their value within the family to being asked to do things and go places. They will need a fair, balanced cooperative system because they keep track of value. They count the number of times they get to spend time alone with you, and the special things Dad does with Son will be noticed by Daughter. In Assurance, you’ll need to create this system. This is a good time to teach them the difference between “no” and “not right now.” Help them learn to save for the things they want and give them ways to earn money for helping out. Increase allowance slightly along with raising expectations. In this stage they begin to help you, though there is a difference between the quality of kid work and adult work, but it will improve with time!

Suggested amount: $5. However, if agreed-upon expectations aren’t met, (by not doing them, cheating, something other than doing them with understandable kid-quality), they haven’t earned their whole allowance; in this way fines are introduced.

Suggested expectations: (in addition to the above), set the table, put away clean dishes, take out trash, recycling, and/or compost, fold laundry, help prepare food, help with yard work.

 

Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. They do not necessarily reflect the views of LPL Financial.