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MC Stories – Why You Should Give Your Children the Desire to Learn About Finances

Studies suggest that parents may dread financial conversations with children almost as much as the conversation about “the birds and the bees.” A 2018 study conducted by T. Rowe Price reveals that two-thirds of parents show reluctance in discussing money with children. Parents may find that it is only important to begin discussing finances when there is an immediate concern, such as a health crisis or an economic downturn. However, that is not the case. A keystone to growing up is independence and part of that is financial independence. A recent study shows that 64% of adults believe that by 22 years old one should be financially independent of their parents; but, only 24% of 22-year-olds are actually financially independent.

So, how do we create financially mature and independent adults? Teach them young. In today’s world, money has moved to the ether of numbers on a screen and plastic cards. We rarely use cash for daily transactions and checkbooks (or balancing them, for that matter) are a thing of the past. In the eyes of a child, it is becoming increasingly difficult to tangibly understand the value of a dollar. Realistically, it is becoming difficult for all of us to understand the value of a dollar. We must re-wire the way we think about money and then translate that to the next generation.

Parents have a unique responsibility of molding children’s development – particularly around their financial education. The T. Rowe Price study revealed that what children learn from parents (as opposed to financial literacy courses) strongly informs their financial decisions later in life. Parents revealed that the topics they wished their own parents had discussed with them were credit and financing, insurance, basic life budgeting skills, and investing. Using that as a baseline, it is suggested that these conversations begin early and become a central part of your relationship with your family.

Establish age-appropriate conversations and activities for your children. Here are some suggested age-appropriate methods. For young kids, you can make it fun, while also teaching them basic math skills. For children 6-10, help them understand the value of a dollar by creating ways for them to earn money. Once earned, they can decide how to spend and save money. Forgo the piggy bank and help them open a bank account. The earlier the better, because this is the new way of life and it is important for children to understand not only the value of a piece of paper, but the numbers on a screen. For pre-teens, help them learn budgeting for expenses such as activities with friends and extra-curricular. Give them allowances and see if it lasts. Introduce compounding interest and the importance of investing early. For late teens, teach about credit and the importance of maintaining good credit scores throughout life.

In addition to regular conversations and supporting strong habits, there are numerous online resources available for children and parents (provided below). It’s ok to not be an expert when it comes to finances. It is more important to instill an eagerness to learn within your children. That willingness to learn and grow will develop into great money habits and forge the way to a successful financial plan for your family. And as always, if you do not feel you have all the answers, please reach out to your financial advisor or a trusted source for more information. We are always here to help you and your families.

 

Resources:

-FDIC’s Money Smart for Young People (includes activities and resources for parents of all ages) https://www.fdic.gov/consumers/consumer/moneysmart/young.html
-Credit Card Insider https://www.creditcardinsider.com/learn/
-Stock Market Game https://www.howthemarketworks.com/
-Payback – Game to teach about student loan debt https://www.timeforpayback.com/
-Practical Money Skills (games/age-appropriate discussions for children) http://www.practicalmoneyskills.com/learn/life_events/family_life/educating_your_children

Mid Quarter Newsletter – September 2019

Interest Rate Movements – How to Make Sense of Them?

At its July meeting, the U.S. Federal Reserve (Fed) lowered interest rates for the first time since December 2008. Officially, the Fed’s reasoning was that it was worried about inflation not hitting the desired 2% goal. But unofficially? They may have instead caved to market forces, political pressures and global trade tensions. Since then, interest rates on U.S. government bonds have fallen across the board, with the 30-year U.S. Treasury falling below 2% for the first time ever.

With all the talk of interest rates in the news, it can be easy to lose sight of what they actually are: simply the cost of borrowing money. In normal environments, interest rates are decided by the supply and demand for money. However, the Fed also has a hand in things—it sets the short-term rates at which banks can borrow either from each other or the Fed. When those interest rates rise, the rates that banks charge their customers for a loan (for providing a mortgage or starting a business, for instance) typically go up too. In theory, the rates that banks can pay their deposit customers should also rise, though miraculously that upward adjustment can sometimes lag pretty meaningfully behind any actual rate increases.  

Below, we take a more detailed look at how rising or falling interest rates generally affect us all, from consumers to corporations to the economy. 

So how do lower interest rates affect investors’ portfolios and financial goals? Many savers are being punished with the lower income that results from the Fed’s move to lower rates. Since yields on most bonds are so low in the current environment, otherwise conservative investors often have to move into riskier asset classes (like stocks) to try to maintain their income levels as interest rates decline. Rather than play that game, Morton Capital has elected to seek out strategies that are somewhat agnostic to moves in interest rates. Even though the future return prospects for traditional bonds just got a bit bleaker, we are fortunate to have other tools at our disposal to earn investors what we feel is attractive income without undue risk. 

Wealth and Legacy Planning – New MC Service

When Lon Morton first founded the company, he was driven by the desire to help people. In our business, helping others can take many forms, and over the years, many of you have experienced our broadened array of services to help meet this vision. This includes collaborating with you to define what it looks like to enjoy your wealth, sourcing investment opportunities to protect your wealth, and designing financial plans to organize your wealth. To further enhance our capabilities, we’ve added Brian Standing to the team, who has 12 years of experience as a wealth and legacy planner. His role is to have estate planning discussions with our clients as an additional component of our financial planning service. 

We recognize that estate planning can be emotionally daunting and time-consuming, and that it’s often difficult to ensure all the pieces of your financial life are organized in the way you want. In many cases, we’ve been a part of our clients’ lives for decades and personally understand family dynamics (such as the best way to have conversations with your children about wealth), values and intentions. This is why our advisors are now partnering with Brian to align your financial plan with your estate plan and ensure your wealth is transitioned according to your wishes.

We’re excited about this new offering and hope that you, our clients, will be too. At Morton Capital, we have a goal of empowering our clients to enjoy their wealth by organizing and simplifying their financial life. We believe this new offering should do just that. Please reach out to your advisory team if you would like to schedule a wealth and legacy consultation.

Welcome Brian and Adam

Brian Standing, Esq.
Wealth Planner

Brian Standing joined Morton Capital as a Wealth Planner in June 2019. From 2007 to 2019, Brian worked in private law practice in the area of estate planning and taxation. He received his JD from Southwestern Law School and earned his undergraduate degree from Loyola Marymount University. Brian is certified as a specialist in estate planning, trust and probate law by the State Bar of California’s Board of Legal Specialization. Outside of work, Brian enjoys spending time with his wife and three kids.

Adam Bartkoski
Finance and HR Manager

Adam joined Morton Capital in April 2019 as the Finance and HR Manager. He has almost 20 years of experience in financial services, including roles at Fidelity Investments and Fiduciary Network. Adam also spent two years as a volunteer with the Peace Corps, serving as a teacher for a school in Kharkiv, Ukraine. He earned a Bachelor of Arts degree in history from Texas A&M University.

Financial Bites Lunch Series

A few weeks ago, we kicked off our Financial Bites lunch series. This complimentary series covers the basics on a number of financial planning topics, such as investments, estate planning and long-term care. If you weren’t able to join us for our Retirement Planning session, we encourage you to attend one of the other six sessions over the next several months. 

Our next lunch, on budgeting, on Friday, September 20, focuses on the importance of checking your financial pulse – everything from what savings/spending strategies you should use to the importance of maintaining a good credit score. 

You can RSVP to any of these events by visiting mortoncapital.com/financialbites.

 

GET THE MOST LIFE OUT OF YOUR WEALTH (SM)