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Investing in Your Child's Future. Or, You Know You're a Dad When Your Wallet Starts Emptying

You know you’re a dad when… your wallet starts emptying. I’m joking. Sort of.

As my 18-month-old son continues to grow, and my wife and I fall into our respective roles as parents, I feel like an anthropologist watching male-female gender role patterns play out before my very eyes. Which means my wife is doling out kisses and I am doling out money.

Of course, being a dad is more than just spending money. I cherish doing my share of day-to-day care for our little guy; I read books to him, play silly games, and I show him lots of affection. All in the hopes that someday he will have enough money to pay me back for all of this. Just kidding!

And of course my wife doesn’t just shower our child with love - she is as much a financial provider for the family as I am, and she spends money, too. Like when she bought that Kiss-o-matic 76™, which allows her to kiss our child more. Again, I kid – such a machine does not exist… yet.

But in all seriousness, we just opened a college savings account – a 529 plan – for our son. It was yet another in a long line of events that have made it very “real” that I am a dad. You mean, one day I am going to have a child in college? And it will cost how much? (For those of you wondering, the average cost of one year at a private college is estimated to be $76,406 in 2027; public college, here we come!)

The interesting thing about this process is that my wife really pushed me to take the lead in opening our account. Like it was “dad’s job” to do this. And I think, on the whole, dads are the ones who take care of this sort of thing for their families. That’s why most investment and insurance companies market to men and/or fathers. It speaks to our instinct to provide for and protect our families.

Interestingly, the guy who I worked this all out with is a new dad himself. You may know him as this guest blogger on this very blog. Sean and I observed together that now that we are dads, we have to take very seriously the need to plan ahead for our families.

And that is a central part of being a dad – sacrificing the “now” for the future. Gone are the days of using that extra money to buy cool (but useless) gadgets, fancier cars, and expensive nights out with your friends. That extra money is for our kids now.

Do you have any examples of how you had to sacrifice in the present to make for a better future for your kids? Please share!

Guest Post: The Other Side of the Coin

This is a guest post by Shane Barkley, President of Dad the Family Shepherd & Savvy Dads, and author of Dad Cents.

"She hit me!," said one of my three daughters. Then another daughter yelled, "She called me _____!" I am sure this never happens in your home, but our daughters regularly remind my wife and I that debate always includes different sides. Just as debate has two sides, the way we approach our finances has two sides as well. The two sides of our financial coin are: 1) the short term, or the present, and 2) the long term, or the future.

I recently viewed a video by Dr. Caroline Leaf concerning our brain and new understanding researchers are gaining into its inner workings. Dr. Leaf has been studying the brain for the last twenty-five years and has some incredible insights. In the video, she explains that the two sides of our brain actually work differently than previously thought. Instead of one side being creative and the other side containing logic, the two sides function in the following way: One half of our brain thinks from the small picture to the big picture; the other half thinks from the big picture to the small picture. Stated another way, one half of our brain thinks from the present to the future; the other half thinks from the future to the present.

So what does our brain function have to do with money? Everything! Do you know someone who lives only for today and does not plan for the future? How about the person who lives for the future to the detriment of their life, or health, today? These perspectives are both unbalanced, especially when applied to our finances. We must teach our children to have a balanced thought process of the present and the future concerning the use of money.

Examples of living for today are not hard to find. One of the best examples of this problem is the United States government. What are we doing to the future of our children by passing on a fourteen trillion dollar (that is $14,000,000,000,000.00) debt to our children?

How does this need for balance affect our daily living? Trust me, I know the rigors of the wants and desires of our children—including what we as parents expect of our children—but balancing these desires with our actual cash flow is tricky. Do you have the recommended three to six months' salary in a savings account? I know very few that are able to keep those kinds of reserves for a rainy day. As a matter of fact, my family has difficulty with keeping this kind of reserve! When a job is lost or pay is cut, what happens to families in our country? Homes and cars are repossessed! The instability of our economy is challenging many families.

So what may be the best way to help your children understand how to think about money? It's the example you demonstrate in your financial life!

A survey of teenagers, completed in 2010, asked this question, "The biggest influence on the way I spend and save money is...?" The four choices provided in the questionnaire were teachers, the media (including TV, magazines, books, radio or celebrities), friends, and their parents. The answer 7 of 10 teens gave was... drum roll please... THEIR PARENTS!!!! (Notice the key words in the question "...spend and save..." which is another way of saying the present and the future!)

You may be thinking, "Oh, no!" But take heart! If you have not given your kids a good example thus far, you still can. My encouragement to you is, be intentional! Take the time to learn about improving your finances and allow your kids to participate in the learning.

Editor's note: Shane's book, Dad Cents, gives you the practical tools you need to help your kids avoid some or most of the mistakes you may have made with money. Shane is offering NFI's Dad Email readers and Father Factor blog readers a special on the book! Click here to order.

The views expressed in this post do not necessarily reflect those of National Fatherhood Initiative.

Are You Trying to Rob Your Kids?

This month’s focus at NFI is “Dad Cents,” and our plan is to give dads sound advice about ways that dads can improve their kids’ financial literacy.

Since I worked in banking, this area is near and dear to my heart. Indeed, I often use financial lingo when I am discussing fatherhood principles. For example, I talk about how important it is to “invest” in your child’s life and how critical it is for dads to make regular, substantial, and consistent “deposits” in their children’s relationship “bank accounts.” After all, chances are that one day – like when a daughter wants to date a junior member of the Hell’s Angels or a son wants to tattoo the name of his most recent girlfriend across his forehead – you may have to make a huge withdrawal. Frankly, if you have not made these deposits, the conversation could sound something like this…

(Scene—You rush into the lobby of the 'First National Bank of Your 15-year-old Daughter’s Heart' and quickly approach her window.)

Your Daughter: Good afternoon. How may I help you?
You: Hi. I need make a big withdrawal fast!
Your Daughter: Ok, sir. No problem. Could you please let me see some ID?
You: Sure.
(You hand her a copy of her birth certificate where you are listed as “Father.”)
Your Daughter: Everything looks in order, Dad. Please wait just a minute while I check your account.
(She turns away from you but then gets a strange look on her face.)
You: Is there a problem?
Your Daughter: Yes, sort of. I clearly see that you opened an account here a long time ago, but it doesn’t appear to have a sufficient balance for you to make a big withdrawal. When was the last time that you made a deposit?
You: Well, I don’t remember. I guess it’s been a while. You know, I have been very busy working and stuff like that. But, my wife has been making lots of deposits. Seems like every time I turn around she is heading here. Since we are married, can’t I just make a withdrawal from her account?
Your Daughter: Dad, no you can’t because we don’t offer joint accounts here.
You: Oh yeah…That’s right…I remember hearing that. What about a loan? Can I get one of those?
Your Daughter: I’m sorry…We don’t offer loans either. You can only withdraw what you have deposited.
(You start to get a bit upset…)
You: Well that just doesn’t seem fair! I clearly have an account. And, well, I need to make a withdrawal. Can’t you make an exception? After all, I am DAD.
Your Daughter: Dad. I am sorry. I just can’t help you...
(You are becoming more upset…)
You: Well, doggone it, I am not going to take no for answer.
(Your daughter gets a concerned and stern look on her face and you can see her reaching under the counter to push the button for security.)
Your Daughter: As I said, I can’t help you. You knew the rules when you opened the account. How can you expect to withdraw funds that you didn’t deposit? That’s just not the way it works here. All you had to do was make consistent deposits. Even small ones would have been fine because “interest”—your interest—would have compounded these deposits substantially over time. Taking deposits that don’t belong to you is, well, robbery. So, I need to ask you to leave now. Or, do I need to call security?

Guest Post: Teaching Your Children the Power of a Dollar

This is a guest post from Luke Swygard, Financial Representative with Northwest Mutual Financial Network serving the Maryland/Virginia area. He is a married father with two children and lives in Richmond, VA. Visit his website at www.nmfn.com/lukeswygard for more information about his financial services.

The most precious moment of my day is walking in the door and hearing my boys racing to the door to see who can be the first to jump into my arms. Wow, what a feeling! Yes my boys are at the age where me coming home is still a cool thing, and I’m sure that will change over the years as it did for me and my father. Still today, I embrace excitedly some of the financial principles my father instilled in me and I smile each time I remember his wisdom.

The biggest principle he taught me is to never spend more than I earn. Simple. To the point. Not so easy. We live in a world today that demands we please ourselves, our spouses, our children, and our image. It’s a challenge to walk into Target or WalMart today and get through the store without your children looking at you with hopeful eyes that they might get something “special”…something that quickly finds its way to the bottom of the toy box. But how do we say no to that look, and better yet how do we teach them the value of an earned dollar and the power that it has to control us or help us?

Today I want to unwrap that power of a dollar and how we can teach that to our children. It’s invaluable to know the difference between a need and a want and talking with our children in simple economic principles. A need is food, shelter, and clothing. Moving forward from that…do we buy ramen noodles for dinner, or do we go to the finest restaurant in town? Do we rent a small apartment or do we live in a mansion on the water? Do we shop at Salvation Army or do we go to the fine clothiers in the fancy shopping center? Help your children define in needs and wants how to know what is prudent and what isn’t is extremely important. Thinking through that from my father’s advice, it’s all based on your income. You make a little and you live on less. You make a lot and you live on less. Either way there is distance between your expense and income, and that distance is in your favor.

Practical ways to help your children understand your thought process when you purchase things is a really fun exercise. Surprisingly you start making better financial decisions when you have to justify it to your children. Say you are at McDonalds and you are trying to decide between the happy meal and the value meal and you explain that by ordering three items off the value meal (value fries, cheeseburger, and small drink) for $3.00 versus spending $4 on the happy meal, you have the power of another dollar still in your pocket. The next logical question is what is the power of that dollar!

It still amazes me the time value of money. Albert Einstein referred to compound interest as the eighth wonder of the world and it truly is amazing. Realize for a second that a dollar invested today is worth thirty two dollars just thirty-five years from now. (Average rate of return in the market is about 7% over that time period). I know it is not an easy thing to tell your son or daughter that you aren’t getting a happy meal with a toy, but if you help them understand that by you saving that one dollar and setting it aside later for them that when they are 40 it will be $32 or when they are 75 it’s $4,096. Truly a wonder. Just imagine if you didn’t go to McDonald’s and you got the ramen noodles!

In summary there are really two thoughts. Spend less than you make and save the difference. If you do that you’ll find yourself getting ahead financially. Take your children to the grocery store and talk to them about why you pick one thing off the shelf and not another. Just last night I asked my five year old as we were looking at red onions which one was a better buy. He looked at the price per pound and promptly answered correctly. Have fun with your kids, do math in the grocery store, but never forget to tell them why it is important to know where your money goes. We worked hard for that dollar and we can make that dollar work hard for us, but if you’re not careful, the longing for what the world tells us will creep in and we’ll soon find we are strapped too tight or we don’t have enough money left over each month to save.

I leave you with one last challenge, what legacy will you leave for your children?

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