In May, we commemorated Mother’s Day. This month, we celebrate Father’s Day. And in honor of these special holidays, Jenny Rucker, SVP, senior private banker at UMB (and a mother of a recent high-school grad herself) shares key advice about her best practices for financial conversations with your children. “Here’s what I’ve learned over the years and how I suggest my clients open up a dialogue with their kids,” she says. “Trust me, sometimes these discussions aren’t easy, but they’re almost always necessary—and we’re always here to help facilitate the conversation.”
For any new parents or soon-to-be parents out there, what are some tips you would give?
“Because children typically follow their parents’ or guardians’ saving and spending pattern, parents/guardians need to create as much of a positive savings experience for the child while they’re young. A great first step? Opening a new custodial account after the child is born so that money on behalf of the child can be deposited and earn interest. Instead of, say, a new toy the child won’t remember long after the fact, put some of those monies in an account where it can be appreciated later. A fund for a new car or schooling will be just that much more memorable.”
As children begin to grow up, what are some of the ways parents can help teach about finances?
“The bottom line about the bottom line? Talk about money openly and often. The more comfortable you feel talking about money, the more comfortable your child will feel.
For instance, I started talking with my daughter Brynn at the ripe old age of eight years old. Now she’s looking at her investment account, seeing the return, watching the market and loves watching her money grow. Early on, I made a date with Brynn and took her into one of our branches to sit with a personal banker to open her first checking account. I made sure the banker knew this was her account and that I was merely a co-signer.
The banker got my gist and posed all the questions about how Brynn was going to use the account and what the true purpose of the account was directly to her. Brynn felt important and ready to take on the responsibility. Another easy suggestion is to create a budget with your kids, even if it’s the family’s budget. It’s a huge eye opener for kids to see what comes into the account, but, more importantly, what goes out. Let them see how expensive that cell phone bill really is. Finally, there are plenty of books geared towards a teen’s independence and helping them become financially savvy. Read that book together and discuss accordingly.”
Are there any common financial mistakes you see parents making that you help stave off?
“Money is one of the toughest things to talk about, but not talking about money can also cause ample concern. Avoiding discussing finances increases fears about not having enough, spending too much, but not understanding your significant other’s goals. If you take the time to understand what’s important, what your goals are, the more you can create a plan you and your significant other, but the entire family buys into, so to speak.”
One of the toughest decisions for parents is saving for retirement vs. saving for their children’s education. How do you advise balancing this?
“You either do or you don’t—it all depends on what the priority is within your family and your financial goals. Some parents pay for their children’s school, some pay a portion, and others pay none. Believe me, there is no right or wrong answer.
Having a budget and living within your means but investing in your retirement should be a priority that every person should focus on—and that’s regardless of if you’re going to help your child with continuing education. If saving for your child’s education is important, use your budget to find how much monthly you can contribute to a savings account, or a college investment vehicle. Ensure these are separate accounts and designate a certain percentage of your monthly income to it. A helpful tip is to auto draft from your family’s primary operating account into that separate account.
I like to have an account for every goal I have, such as college monies for Brynn, wedding for Brynn, vacation, and the all-encompassing discretionary funds. Granted, I’m a visual person—so the more I see, the more I believe. I also update my personal financial statement annually to confirm what percentage of my allocated salary needs to be assigned to each of my goals.”
Many people find themselves in what’s called the “sandwich generation” where they’re caring for both their own family and their parents. How do you advise clients to navigate this situation?
“Being almost 50 myself, this is tough, as I started experiencing these difficult conversations with my parents a few years ago. Parents are proud and they want you to believe they have all their financial needs and and/or obligations wrapped up. It can be uncomfortable for them if you, the child, is initiating what still needs to be handled. Is everything titled appropriately? Where are the reserve funds? Do they have enough to live monthly? Tough questions, but it’s a conversation that needs to happen. Full stop.”
Are there any key lessons you’ve learned over the years as a parent that you would want to share with others?
“We want to set up our kids for as much success as possible when they leave the house. While we want them to learn on their own, we also must prepare them when it comes to simple things like avoiding overdraft fees, late charges, etc. Opening a checking account and having the child learn how to use a debit card, write checks, and balance their check book is critical before leaving for college.
Teach your kids how to balance their checkbook through written and online methods. You’d be surprised how many teens have no clue that writing checks remains a tried-and-true option. My suggestion? Consider opening a credit card for your kid when they’re still in school so they can have a credit score by the time they graduate from college or trade school. Another thing to consider when your child turns 18 is having them sign a durable power of attorney and a health-care proxy before they leave the nest. It’s always better to be safe than sorry.”