June 16, 2021
“So you can look at those graphs and those numbers and you know what they mean?”
When my wife and I, along with our two daughters, were on vacation a few years ago, I would check my iPhone for any urgent work emails as well as keeping up with what the market was doing. The question above was posed by my younger daughter, Megan (now 18, probably about 10 when this conversation took place). As I thought about it, I realized what a great compliment that was. Better yet, it gave me an opportunity to show Megan what those charts and numbers meant.
When it comes to fathers talking to their daughters about money, I think it’s important to be ready for those moments when they ask a question so you can respond in an age-appropriate fashion. Continually talking to your children about financial matters throughout their lives will not only allow you to instill your values, but will also educate and empower them to make smart financial choices when it’s time for them to leave the nest.
Here are some of my favorite moments when I could enlighten them on money matters:
When I think back to the conversations I had with my daughters, I’m struck by how different their attitudes about money have been. From a young age, Megan was always fascinated about money, whereas her sister Shannon (now 21) couldn’t have been less interested. I can still picture them as young girls — any cash that Megan got for her birthday or Christmas was immediately put into her pocketbook, whereas Shannon’s money could end up anywhere — the kitchen table, the ottoman, near my mail.
When I asked Megan why she didn’t put some of the money in her savings account, she said, “Why should I? I’m only getting 3 cents of interest every month.” Hard to argue that one except for the safety a bank provides versus putting $200 of cash in a purse (a purse she nearly lost at the local mall).
When the kids were 10 and 7, the family went on a cruise to Bermuda. Among the many activities offered each day, the BINGO sessions were a big draw. Most of the pots were in the $200 to $400 range, and if multiple people won on the same number, the pot was split equally between all the winners. They said it was okay for kids to play as long as they were with an adult in the event of a win. Shannon and I grew bored with BINGO, but my wife and Megan attended every session.
Long story short, in the very last session of BINGO for the trip, Megan was the only person holding the winning number. Since that was it for BINGO for the week, they made the last game the biggest pot of the trip. To this day, if you ask Megan how much she won, without hesitation she’ll say, “Two thousand three hundred and thirty dollars!”
We took the winning ticket to the casino’s cashier window. As the cashier was laying out C-note after C-note, Megan’s eyes got wider and wider. After paying out our winnings, the cashier handed me a W-2G. (I thought you didn’t have to pay taxes when you are in international waters!)
Megan asked, “Daddy, what’s that piece of paper?” In a very exaggerated way, I replied, “Can you believe this? I have to pay taxes on your winnings!” She looked me square in the eye and said, “Not with my money, you’re not.”
I called timeout on the spot, and we had a brief discussion about the cost of the trip plus incidentals and that she wouldn’t have won if her mother wasn’t with her. In the end, we gave both kids some “walking around money” and opened savings accounts for both so they could start putting money away toward some future goal.
When Shannon got her driver’s license, I started looking at cars with her as I knew we would need a third, given the family’s respective schedules. We looked at all kinds of cars, from a used one selling for $5,000 with 140,000 miles on it to something brand new and everything in between. While this research was going on, the transmission on my car gave out. So I ended up buying two cars on the same day; something I definitely would not recommend to anyone.
We had seen an ad for a used Toyota Rav 4, so we went to the dealership to check it out. Just outside the entrance was a gleaming black Lexus RX 350. I took it for a test drive and was immediately hooked. We didn’t get much of a discount for buying in bulk, but Shannon did get a good lesson on buying a car — from the research, to checking out different cars, to negotiating and, finally, to the financing (pay cash, take out a car loan or lease?). Our agreement is that she pays for her own gas as well as contributing to the car payments and auto insurance. Shannon and her sister named the car Brenda … I still have no clue why they picked that name.
Shannon was a couple of months away from the end of her sophomore year at Suffolk University last March when all students got an email basically telling them to pack up their stuff and go home for online classes because of COVID-19. Shannon was doing work study, so when that was interrupted, she checked the IRS website and found out that she qualified for unemployment. I explained to her that no income taxes are withheld, so don’t spend it all.
I’m happy to report that she listened to me and was in a position to pay what she owed to the U.S. and State of Massachusetts. When I took a first pass at her taxes, it said she owed approximately $6,000 combined for Fed and state. However, thanks to the American Rescue Plan, the first $10,200 was excluded from taxation. So when I went to file her return a couple of weeks later, she only owed about $2,000.
With Shannon in college and Megan about to graduate high school, you can imagine all the credit card offers they receive in the mail. For the most part, those got tossed into the circular file. But I do feel like they are old enough to have a credit card so they can start building up their credit scores. Whenever they’re ready to buy a car, a home or whatever the case may be, their credit reports will support their loan applications.
When it comes to credit cards, my advice to them was pretty straightforward:
Charge only what you can afford to pay. In other words, pay off the balance each month. If you carry a balance month-to-month, you will pay an exorbitant interest rate (20%+). And if you only pay the minimum due each month, you’ll end up paying much more in interest than whatever the original purchase was worth. Would you want to pay for three coffee makers when you’re only getting one? Me neither.
Don’t charge the full tab when eating out with your friends. While it might be nice to have a little extra cash in your pocket or rack up bonus points on your card, don’t take the money thrown into the pot and put the entire bill on your credit card. That cash will probably get spent before the next credit card statement arrives.
Use autopay. If possible, go to the card issuer’s website and link your credit card to your checking or savings account. Choose the option to pay the statement balance each month on the due date. It’s pretty much a “set it and forget it” exercise. In addition to the interest rate mentioned above, late fees can be pretty hefty as well. Just make sure funds are in place a day or two before the due date.
Maintain a high credit score. I can’t stress enough how important a clean credit report and a strong credit score are. If your credit report has multiple late payments, or you’ve accumulated too much debt compared to your income, one or more of the following could happen:
Your application for a loan could be rejected outright.
If you are approved for a loan, you’ll probably pay a higher interest rate.
If you’re looking for an apartment, the landlord might pull your credit report and do a background check. Similar to credit cards, you might not get the place or will pay more in rent.
The same is true if you’re applying for a job. Depending on the position and where you live, employers may run a credit check. A spotty payment history or a low score could make the difference on landing the job.
Taking advantage of those moments when your children ask about money or are exposed to financial situations can have long-lasting value. These memories have a special meaning for me as a father. As I my watch my girls grow to mature women, I’m proud and reassured to know they have the financial bearings to make it on their own with confidence.
Want the latest wealth management tips, investment insights and Aspiriant news delivered straight to your inbox. Sign up for regular Fathom updates so we can send you the most relevant content you selected below.