Power Up Wealth podcast – Setting Up Children for Financial Success – Episode 56 transcript:
James Derrick 0:00
Money influences everyone, not just adults. I’m James Derrick, the Chief Investment Strategist at Smedley Financial Services, and today, I’ll be joined by Sharla Jessop, President of Smedley Financial, to talk about how parents can prepare their children for financial success.
Sharla Jessop 0:27
Welcome to the SFS Power Up Wealth podcast, where we provide impactful insight and expert opinions on timeless financial principles and timely investment topics, preparing you to make smarter decisions with your money.
James Derrick 0:50
In addition to being President at Smedley Financial Services, Sharla is also a Certified Financial Planner and a member of the wealth management team. Thank you for joining me today, Sharla.
Sharla Jessop 0:59
Thanks for having me.
James Derrick 1:00
You wrote an article recently called Setting Up Children for Financial Success. And I found it fascinating. And I’m thinking about my own life with my own family. And I gotta say, I could use some advice.
Sharla Jessop 1:13
Anyone who’s raised a family feels that way.
James Derrick 1:17
One of the things that stood out was you said that although high school children are now getting instruction on personal finance, something that I didn’t get when I was in school, you probably didn’t either. So they’re getting that. But they still say that 88% of what they learn about finances comes from their own family.
Sharla Jessop 1:35
Yeah, isn’t that incredible? You think that in the school, they’re going to teach them a deep education about finances. And the reality is they can touch the surface, give him some of the basics, but the actual habits that they’re going to learn that will take them through their lives, they’re learning right there in your home from you.
James Derrick 1:52
So you cannot delegate being a parent, I guess.
Sharla Jessop 1:55
Not this time.
James Derrick 1:57
So first, you’ve divided this up into saving, spending, and investing. So let’s do this, and then I may go off on a few tangents as I think about my own family. But starting out when children are really young, how do you teach them to save?
Sharla Jessop 2:10
You know at a young age visual, and something they can handle, hold, touch, see, understand is really important. And if they have change, giving them change or money, whether they earn it from doing a chore, and it can start out really simple, you know, you’re gonna get 25 cents for doing this or doing that, and teaching them to put it into their savings account. Put it in their little piggy bank where they can hear it and see it and pick it up once in a while and shake it. Show their grandparents how much money they’ve saved. That’s really fun for kids, but it gives them the habit of putting money aside saving.
James Derrick 2:42
When I was a child, we had allowance, but then we also had ways to earn extra money. And I remember my mom would offer us 25 cents an hour to go weed and it just wasn’t appealing at all. So with my children now one of the things we do is we have a list of potential jobs and a value on each one of them. And if they don’t want to weed, you know, maybe they’re willing to do something else to earn money.
Sharla Jessop 3:03
I think also James, another idea of saving as your kids get older, the piggy bank kind of loses its gleam, you know, they’re not so excited about that. That’s the time to get them into a bank account, a savings account at a bank or credit union, and talk to them about compound interest and what’s gonna happen to their money, if they put it there. How it’s going to grow and how they’re going to benefit by putting it aside.
James Derrick 3:24
I think that’s extremely valuable. And delay giving them the debit card as soon as possible.
Sharla Jessop 3:30
Yes, or never.
James Derrick 3:32
Let’s jump into spending. So how do you encourage good spending habits?
Sharla Jessop 3:36
It’s a combination of two. You have to put spending and saving together. Because sometimes spending money is just as important to saving it. And if you teach them that a part of everything they get is theirs to keep. And they take their let’s say they get $5 and they take 10% of that and put it aside in their savings account for themselves, then the other money they can use to spend. But helping them understand that the money only spends once is really important.
James Derrick 4:01
Yeah, I feel like when we were spending with actual money, it was a little bit easier. You know, you had coins and you had bills. And when you were out, you’re out.
Sharla Jessop 4:10
If there’s no money in your pocket or your wallet, you’re not going to buy anything. You don’t have that opportunity to spend beyond your means or live beyond your means.
James Derrick 4:17
So now in a more digital world, it just feels like children are a little bit farther or further removed from the limits of spending.
Sharla Jessop 4:26
Absolutely! Because if you think about it, when you when you’re spending with cash, currency, you always know how much money you have left. But when you’re using a credit card, you can swipe it and the money is spent but you don’t really remember that or you swipe it again and it’s spent and until you get the statement. That’s when you realize how much you’ve actually spent. Maybe some cases the parents come down on you for spending too much.
James Derrick 4:46
I also feel like we’re in a cycle of conspicuous spending, meaning that 20 years ago, it felt like everyone was a little bit more thrifty. Maybe that’s just me, but that’s the way I see it and now we’re spending more as society. Just in the last five years, like we hit a tipping point, and people are just excited about spending.
Sharla Jessop 5:06
Because it’s so easy. Everybody will tell you what you can find on Amazon. How easy it is to get. My grandchildren know, if you need something, you look it up on Amazon and you click on what you want, and you’ll have it within a couple of days. To them, there’s no understanding of the financial transaction that just happened or the money that has been spent.
James Derrick 5:24
Yeah, my money or your money, right?
Sharla Jessop 5:26
Yeah, maybe not their money.
James Derrick 5:27
Not their money, which is part of it. So you educate them. And then when do you start talking about investments with them?
Sharla Jessop 5:36
As kids get older, say high school age, they’re going to start thinking about college, maybe some other things that they want to do that are going to cost money that they’re trying to save for. That’s a good time to introduce them into investing. Because until a child is the age of maturity in the state of Utah it’s 21, a parent has to be a custodian with them on the account. But a parent can help a child set up an account in their name under their social security number. So any growth capital gains is at their tax rate, which is probably nothing. And that teaches them that if they put their money aside and invest it for a purpose for a period of time, they can benefit in potential growth in the market. It also shows them about losses as well, because if they’re too aggressive in their investing, they’re going to watch that money go up and down. And it’s going to really impact them to see the change positively and negatively.
James Derrick 5:37
Well, it’s never too early to see the ups and the downs and just get used to them. Certainly, the tolerance of that can be helpful.
Sharla Jessop 6:31
And the nice thing about that is, let’s say the child becomes 21, that money is theirs, they don’t have to take it out, the account doesn’t have to be liquidated, they can continue to save in that account for a down payment on a home or other life goals that they might have.
James Derrick 6:45
Absolutely. And then the final thing that you talk about his entrepreneurial opportunities. So talk a little bit about giving your children a chance to make money.
Sharla Jessop 6:55
I think teaching them that they can do something they really enjoy or are passionate about and earn some money is a great way to teach them about money and saving and spending and the value of $1. Because it’s not like you said about your children who wants to pull the weeds? You know, it was never something I wanted to do. The task doesn’t have to be manual to earn the money. So if they can do something, let’s say they’re crafty, maybe they can make some crafts, and sell them at a craft fair and make some money. I know my granddaughter actually did that and made quite a bit of money. But she’s the one who did the work. She made the crafts. So she put the time and energy and effort in and she got the reward of selling that. Well there’s lots of things that kids can do.
James Derrick 7:33
My my daughter when she was 16 wanted to start teaching piano lessons. And I was thinking, wow, like, isn’t she a little young for that? But you know, she she got a few students who are younger. And anyway, now she’s older, but she’s got about 20 students, and it’s quite exciting for her. Because it’s pretty good money for a 20 year old.
Sharla Jessop 7:54
And it’s something that she enjoys. You know, it’s not like getting, it’s not like getting up and going to work at something you don’t enjoy or that is a big task.
James Derrick 8:00
She loves the flexibility and loves to teach. Loves to play the piano. So you’re absolutely right.
Sharla Jessop 8:07
And I think we live our world is a lot different than it used to be, you know, rarely does someone get a job and stay in the same career or at the same company for 30 years and get a pension at the end, you know when it’s time to retire. We have many more young people who are entrepreneurial driven who create their own businesses.
James Derrick 8:24
Absolutely. Sharla, anything else you want to leave with listeners?
Sharla Jessop 8:29
Just that you can make a positive impact on your children that will last generations if you will take the time to talk with them about money, teach them how to spend, how to save. Be their cheerleader, so that they have a positive experience and give them the guidance. Like you said earlier 88% of their knowledge is going to come from what you’re able to show them. Good habits.
James Derrick 8:51
Incredible. Thank you, Sharla.
Sharla Jessop 8:52
Thank you.
Shane Thomas 8:58
Thank you for joining the Power Up Wealth podcast. Smedley Financial is located at 102 S 200 E Ste 100 in Salt Lake City, UT 84111. Call us today at 800-748-4788. You can also find us on the web at Smedleyfinancial.com, Facebook, Instagram, Twitter, and LinkedIn. The views expressed are Smedley Financials and should not be construed directly or indirectly as an offer to buy or sell any securities or services mentioned herein. Investing is subject to risks, including loss of principal invested. Past performance is not a guarantee of future results. No strategy can assure a profit nor protect against loss. Please note that individual situations can vary. Therefore, the information should only be relied upon when coordinated with individual professional advice. Securities offered through Securities America. Inc., Member FlNRA/SIPC. Roger M. Smedley, Sharla J. Jessop, James R. Derrick, Shane P. Thomas, Mikal B. Aune, Jordan R. Hadfield, Registered Representatives. Investment Advisor Representatives of Smedley Financial Services, Inc.®. Advisory services offered through Smedley Financial Services, Inc.® Smedley Financial Services, Inc.®, and Securities America, Inc. are separate entities.
