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You Helped Your Clients Build A Budget — But What About Their Kids?
Empowering clients to have conversations about money with their children will generate greater client trust. • Thomas Henske
Part of our job as advisors is educating clients on good financial strategies, including helping them determine and maintain a budget. But who’s educating their kids?
Just as sure as budgeting is a key to financial success, it’s a topic that’s often avoided, even at the adult level. If you can find a way to help your clients sew the concept of budgeting into their kids’ brains, their children will grow up with a healthy attitude on the subject and will have a much better chance at achieving a secure financial future. Plus, by empowering your clients who are parents to have this beneficial conversation with their children, you’ll cultivate greater client trust, securing longer-term clients.
Beginning The Conversation
Tweens (ages 8-12) are at the age where the concept of budgeting starts to make sense. Introducing them to your actual household budget is a crucial first step in helping them understand what money is and what money does. It’s a natural next step to then move to establishing their own micro budgets.
Before introducing the budget conversations, your client will want to first explain the differences between income and expenses. In a child’s world, income can be described as any form of inflow from allowance or part-time jobs such as caddying, mowing the lawn or babysitting. On the other hand, expenses are outflows for goods and services such as toys, books, clothes and food.
With that foundation, your client is now ready to define budgeting and why it’s important. Parents can start with the
simple explanation of: “Budgeting is the way our family decides what our financial priorities are, and it helps us spend in order of greatest importance based on our financial situation. Done right, this allocation of money gives us the ability to spend without guilt, assuming we’ve included adequate saving as part of our plan.”
From there, they’ll be able to break down how budgeting helps their family determine financial priorities (such as food or school tuition) while still allowing them to spend money on nonnecessities (such as toys or a family vacation). Sharing which items are financial priorities — such as food, clothes and shelter — compared with nonnecessities is helpful too.
Establishing The Budget
After your client has defined what a budget is, they can then take the child through the steps of building their own budget. Having the child make a personalized budget allows them to think through all the expenses that are attributable to only them and go through their own process. Here is an easy process for parents to kick the conversation off with their children:
1. Brainstorm the categories of outflows. First, advise your client to ask the child to brainstorm a list of all their personal expenses. This may include clothes, food, tutoring and sports. Let the child struggle through the list over a few days and try to add to the initial brainstormed list over the course of a week. Ask the child to assign costs to each expense. They might struggle with knowing how much things cost, so you can guide them along the way.
2. Finalize the category list. Next, your client can help the child think through the categories that might have been left out. Help them get familiar with everything that is spent on them or that they spend.
3. Tweak and formalize the revised
budget. This is typically when your client should introduce the idea of needs versus wants, otherwise known as the distinction between fixed versus discretionary expenses. A fun way to introduce this idea naturally is via the needs-versus-wants game during car trips. Play the game by identifying stores, billboards, or commercial trucks that you pass that represent different companies that distribute all sorts of things: restaurant foods, plumbing supplies, accounting services, etc. For example, the parent identifies a supermarket and asks, “Is food a need or a want?” Eventually you’ll start a debate when you see a McDonald’s, which serves food, which is a need — but do you “need” to eat out at a restaurant?
Kids Have Pull Over The Family Purse Strings
1. Teens ages 13–15 drive more than $61B in annual household spending.
2. 52% of U.S. parents of children between the ages of 8 and 23 said their children influence the brands they consider when shopping.
3. 84% of U.S. children helped parents choose online groceries during the COVID-19 lockdown.
4. 97% of U.S. parents follow their children’s holiday wish list, with 1 in 5 parents saying they will buy every single item on the list.
5. 72% of U.S. parents said they typically involve their children in every step of the purchasing journey.
Source: SuperAwesome.com, National Retail Federation
The Bottom Line
When children are participating in spending and budgeting, it gives them an understanding of how much items cost, promotes ownership, and enhances gratitude for purchases made by them and members of their family. By helping your client introduce the idea of a budget to their children and having them establish their own personal budget, they can begin shaping a brighter financial future for their kids.
In addition, clients will appreciate the value you place on one of the most important parts of their life — their kids. Empowering your clients with child-friendly strategies serves to deepen their trust in you as an advisor and affirm the interest you give their lives beyond their finances.
Tom Henske, CFP, ChFC, CLU, CLTC, CFS, CTS, CES, is a 17-year Million Dollar Round Table member with two Court of the Table qualifications. He is an advisor at Fifth Avenue Financial and The Affluent Insurance Advisor and develops programs to help parents foster responsible financial habits in children. Tom may be contacted at tom.henske@innfeedback.com.
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Pedestrian Deaths Up By 17% In 2021
Rising Trend In Pedestrian Deaths
There were 6,516 pedestrian deaths Reckless drivers, a crumbling infrastructure and fewer police on patrol added in 2020, up from 4,457 in 2011. up to a deadly year for pedestrians in the first half of 2021. The Governors Highway Safety Association reported a 17% increase in the number of pedestriSOURCE: Governors Highway Safety Association ans killed in motor vehicle accidents in the first six months of 2021.
In the first six months of 2021, drivers struck and killed 3,441 people, up from 2,934 in the same period in 2020. This is part of a rising trend in pedestrian fatalities. There were 6,516 pedestrian deaths in 2020, up from 4,457 in 2011, the safety association reported.
What’s behind the rise in pedestrian fatalities? Fewer police on patrol, the association reported. When there are fewer law enforcement officials on the streets, the rate of people driving dangerously increases, said Jonathan Adkins, the association’s executive director. Better infrastructure, including newer roads and highways, would also prevent more pedestrian deaths, he said.
WHEN A BITE IS WORSE THAN A BARK
There are nearly 85 million dogs living in U.S. households. About 4.5 million people, most of them children, are bitten by
dogs each year. SOURCE: American Pet Products Association American Veterinary Medical Association
DOGS TAKE A $900M BITE OUT OF INSURANCE
A dog may be a man’s best friend, but a dog bite can be an insurer’s worst enemy. Dog bites and other dog-related injuries cost homeowners insurers $881 million in 2021 and accounted for more than one-third of all homeowners liability claim dollars paid out last year. That’s according to an analysis by the Insurance Information Institute and State Farm.
The number of dog bite claims nationwide increased to 17,989 from 17,567 in
2020 — a 2.2% increase. The average cost per claim decreased 1.1% from 2020-2021 — to $49,025 in 2021 from $50,245 in 2020. However, the report said the cost per claim increased by 39% over the past 10 years.
California led the nation in the number of dog-related claims, followed by Florida and Texas.
4TH LOUISIANA INSURER GOES BELLY-UP IN HURRICANE’S WAKE
Louisiana’s Department of Insurance took over Lighthouse Property Insurance in a court-ordered receivership, making it the fourth financially troubled insurer in that state to require rescue in recent months.
The carrier, also known as Lighthouse Excalibur Insurance, has approximately 30,000 policies and 16,000 Hurricane Ida-related claims. It covered 3.27% of the Louisiana’s homeowners insurance market.
The Louisiana Insurance Guaranty Fund, a state-sponsored safety net also known as LIGA, promises up to $500,000 in payments for unpaid claims and $10,000 for premium refunds for policyholders whose insurers go insolvent.
QUOTABLE
Most policyholders probably won’t feel the burn of FEMA’s price hikes in Year One, but by Year Five or 10, the elevated cost of flood insurance could impact where Americans decide to buy and build homes.
— Sheharyar Bokhari, senior economist, Redfin
FLOOD INSURANCE PREMIUMS GOING UP FOR 3M
Nearly 3 million owners of single-family homes in the U.S. are seeing their flood insurance premiums rise as a result of the Federal Emergency Management Agency overhauling the way it measures risk.
FEMA policyholders in Texas, Florida and Mississippi are especially hard-hit, with 90% of policyholders in those states experiencing a rate hike.
Nationwide, 81% of single-family home policyholders saw their flood insurance premiums rise, starting April 1. The remaining 19% are seeing decreases.
Of the policyholders experiencing increases, most (88%) are seeing annual premiums rise by up to $120, while 9% are facing increases of $120 to $240, and 4% are seeing jumps of $240 or more.
DID YOU KNOW ?
