How to Teach Young Children to Save and Invest

It can be both fun and educational for your kids.

When it comes to teaching children about money, you should get them involved early…as young as 7 or 8 years of age. Have them help with the bill paying. Expose them to preparing your tax return. And, if you have the money, set up a brokerage account for them. Let them pick a stock or two. The neat thing about this concept is it introduces children to buying the companies that make the goods we want. For children, that means companies like Mattel or Disney. A kid who loves Mustangs might buy stock in Ford. Of course, they won’t know what really goes into stock analysis before investing money, so that’s where the educational process begins.

Another resource is popular mutual funds. Many fund families offer material designed for kids; some even offer actual mutual funds aimed directly at children. One company’s prospectus is written like a children’s book, with simple explanations about mutual funds and investing. (Whether the fund is worthy of your child’s money is another matter.)

Kid Friendly Resources to Learn About Money

If you yourself aren’t that familiar with stock or mutual fund investing, learn about it, because your kids are going to ask! If you can’t give them an answer, use the question as an opportunity to learn the answers together. It’s a great way to spend time with your child, as well as improving their education and your personal finances.

A great website that can help you teach your children about money is www.jumpstartcoalition.org, sponsored by the Jump$tart Coalition, a nonprofit organization committed to helping educate school children. You can access more than 150 nonprofit organizations and sponsors via this web site. It’s ideal for schoolteachers and others who want to teach students about money or investments.

Making Financial Education a Game

For example, there’s a game on the site that teaches children about earning money and paying bills (https://www.jumpstart.org/what-we-do/support-financial-education/reality-check/). The children first select the level of education they want (high school dropout, high school degree, or college degree). Based on the level chosen, a corresponding average salary is given. Then it’s up to the child to budget and plan for expenses, which include housing, food, car, and more. The site also lets the child build a lifestyle, such as choosing the kind of house and car he or she wants, and then it shows how much money the child needs to earn to support that lifestyle and the types of careers that pay such salaries. It’s a great opportunity for children to gain insight about what we grownups have to contend with.

The site also contains the only single source for finding publications and training aids designed specifically to teach kids about money. If there is a child dear to your heart, we strongly encourage you to check out this website. Just imagine how much more financially successful we all would be if this information had been around when we were tykes.

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Market Summary: January 2019.

Markets bounce back – at home and abroad.

January saw positive returns across markets. Read more to find out what happened and what it may mean for you.

What happened.

After a disappointing December, stocks surged in January at home and abroad. US small-cap stocks led the pack, up 10.64% (S&P 600 Index). Large caps were also strong, up 8.01% (S&P 500 Index). International stocks fared well, with emerging-market stocks up 8.76% and developed- market stocks up 6.57% (MSCI Emerging Market and EAFE indexes). Volatility was comparatively low: the S&P 500 moved by more than +/- 1% on only six days in January. Bonds were up as well, with the Bloomberg Barclays Aggregate Index rising 1.06%.

Why it happened.

The Federal Reserve loomed large over markets in January. The month’s biggest jump in the S&P 500 came on the day the Federal Reserve Chairman said the central bank was willing to adjust its policy to help the economy if needed. The second biggest jump was on the day the Fed kept interest rates unchanged and signaled there were no increases imminent.
Earnings news also affected markets. We’re now in earnings season, when companies report how they fared in the last quarter of 2018. So far, actual earnings for a large majority of companies have beaten expectations—and remember, markets react to what happens compared to what’s expected. US economic news was mostly positive too.

The US private sector added more jobs than expected and wages rose faster than expected, though there were some signs of weakening in manufacturing. Globally, the International Monetary Fund struck a more cautious note in a report forecasting weakening economic growth around the world.

What this means for you.

We build your personal portfolio to help you achieve your goals, while taking into consideration your tolerance for risk. In this month’s sidebar, we look at the lessons of December and January. It’s importance to understand your tolerance for the inevitable ups and downs of markets and set your portfolio’s risk level accordingly. In January, your portfolio will probably have seen positive returns. The more aggressive the portfolio—because you’re further from retirement or have a higher risk tolerance—the better it will likely have done. As always, it’s important that we know as much as possible about your personal situation and risk preferences. Please let us know of any changes by logging into your Financial Engines account or calling one of our advisors.

©2019 Edelman Financial Engines, LLC. This publication is for informational purposes only and does not constitute investment advice or an offer to buy or sell any security. Future market movements may differ significantly from the expectations expressed herein, and past performance is no guarantee of future results. Edelman Financial Engines assumes no liability in connection with the use of the information and makes no warranties as to accuracy or completeness. Future results are not guaranteed by any party. Financial Engines® is a trademark of Edelman Financial Engines, LLC. Advisory services are provided by Financial Engines Advisors L.L.C. Call (800) 601-5957 for a copy of our Privacy Notice. Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. All other intellectual property belongs to their respective owners. Index data other than Bloomberg is derived from information provided by Standard and Poor’s and MSCI. The S&P 500 index and the S&P SmallCap 600 Index are proprietary to and are calculated, distributed and marketed by S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC), its affiliates and/or its licensors and has been licensed for use. S&P®, S&P 500® and S&P SmallCap 600®, among other famous marks, are registered trademarks of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. ©2019 S&P Dow Jones Indices LLC, its affiliates and/or its licensors. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.

5 Myths About Credit and Debt

Whether it comes through a friend, a relative, or an ill-informed website, many folks have the wrong information about credit and debt. Here are five myths that many people share about credit and debt, according to Money Management International, a nonprofit credit-counseling agency. Let’s set the record straight on each of them:

There Is an Easy Way to Fix Bad Credit
Wrong. Some TV and radio ads claim their sponsors can “fix” or somehow improve your credit report in a few easy steps. The truth is that no person or company can remove accurate entries from your credit report. The Fair Credit Reporting Act says that information about a delinquent account (late payments, nonpayments) can remain on your file with the credit reporting agencies for seven years, starting 180 days after the account becomes delinquent.

If you do need help managing your debt, make sure to enlist the help of a legitimate firm. You can find a list of legitimate, government-approved credit counseling organizations, by visiting usdoj.gov/ust.

Bankruptcy Discharges All Debts
This is simply not true. A number of debts don’t go away through bankruptcy, including back taxes less than three years old, student loans, child support and debts incurred through fraud.

Debt Collectors Can’t Call Others About Your Debts
As unfair as it may seem, they can. The Fair Debt Collection Practices Act allows debt collectors to make such calls, but there are a few restrictions: They can call others only to find out where you live, your telephone number and where you work. They can’t reveal the reason for the call to anyone other than you or your attorney. And unless you tell them otherwise, they can call you at work.

A Divorce Decree Matters to Creditors
Again, that’s wrong. A divorce decree is between you and your ex-spouse; the creditors are not involved. While the decree may state how your assets and debts will be divided, the creditors were not involved in the settlement and had no input in the results. Therefore, the decree doesn’t change any contracts with them. Whoever signed the contract with them is still obligated to pay the debt, regardless of the divorce or its decree. If payments are not made, the creditors can sue the debtor and file the negative information with the credit agencies.

Your Credit Card Company Can’t Change Your Interest Rate
According to the Credit CARD Act of 2009, card issuers can indeed make key contract changes to your account terms and agreement, including rate increases, with 45 days’ notice. Many will raise your interest rates if your credit score declines — even if you have paid on time and according to the terms of your contract.
These are a few examples of misinformation about credit and debt. There are similar myths about workplace retirement plans, Social Security, college loans, mortgages, car loans and a host of other topics.

Before you act on what you “know,” make sure to check with a trusted financial advisor. They can make sure you’re acting on valid information, not inaccurate assumptions.

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