11 Oct CPA CLIENT BULLETIN Select October 2017
Prepare Your Kids for Financial Independence
New IRS Ruling May Rescue Estate Plans
Tax Court Approves 100% Business Meal Deduction
Factoid : Costlier Care
The maximum monthly premium paid by high income seniors for Medicare Part B medical insurance grew from $161.40 in 2007 to $428.60 this year (a 10-year increase of 166%).
Did You Know ?
Nationwide, the median home sales price in the second quarter of 2017 rose 7.7% to $253,000, the biggest annual increase since the first quarter of 2014. However, the average weekly wage in the United States fell 1.4%, leading to a decrease in home affordability. Median priced homes are relatively affordable in the Detroit, Philadelphia, Cleveland, Pittsburgh, and St. Louis metro areas, but such homes require a high portion of wages in the San Francisco, New York, Los Angeles, and San Diego areas.
Source: Attom Data Solutions
Article: Prepare Your Kids for Financial Independence
An AICPA survey discovered that parents are more likely to talk with their children about manners, eating habits, school grades, and substance abuse than about finances. All these topics are important, but it’s also vital to teach your kids the basics of handling money.
This conversation can begin when children are very young—even before they start kindergarten. One tactic is to give each child a piggy bank, which might hold spare change and even dollar bills. Once the children reach the age when they start learning counting skills, you can explain how five pennies make a nickel, two nickels make a dime, and so on, until you have dollars that can buy things in a store.
Parents also can open up bank accounts for youngsters; banks may have low or no minimums for children’s savings accounts. Parents can take their kids to the bank to make deposits and show them the results on bank statements. If the child’s account earns interest, that can offer another teaching opportunity.
At some point, children may receive an allowance, earn money for doing household chores, or both. Parents might explain the choices they’ll then face. Do they want to spend the money on something they want right away, put the money in their piggy bank to save for a larger purchase, or put it in the regular bank for a long-term goal? Yet another possibility is to give some of their income to those who are less fortunate. Altogether, such an exercise can give your kids the idea that there are many options for handling money, and they should consider the alternatives carefully.
Taking your child with you when you go to the supermarket, pharmacy, or hardware store can also be an educational experience. Children can see goods that are available at different prices; for example, buying a larger package often will require more money. Again, kids can see that handling finances involves making decisions. Even at a young age, children might be allowed to pick out one cereal from the rest or one type of treat for the family pet.
As children grow older, their desired items likely will become more expensive (such as an electronic device or an article of clothing). Through online, catalog, or in-store shopping, you can show them the price of the thing they’ve requested and explain that this is so many weeks of allowance or hours of household chores. You might set up a plan to save for this outlay, with a parental match as an incentive.
One worthwhile activity is to have your child keep a record of all the things he or she would like to have. The child can then organize those items based on “need” or “want.” New shoes might be needed, for instance, but a smartphone might be wanted.
From this list, you could lead into a discussion of what’s needed versus what’s wanted for you as a parent. Milk and juice from the supermarket might fall into the needed category, but a new car every year may be wanted yet not necessary. Explain that it’s fine to have things you want, but you may have to save for them over a time and forgo other items on the want list.
With preteens and teens, other topics can be discussed. You might show your child your checkbook, for example, and describe how you balance it every month. As they approach college, it’s time to talk about college costs at various schools and the results of using student loans to pay for higher education. When children get their first credit card, they should be told how credit scores are calculated and the importance of maintaining a good record of debt repayment.