Now you that know...

GO TEACH!!

The last step in developing financial literacy (and probably one of the most important)  is now to go teach your family and friends! We've had some pretty meaty topics over the last few weeks, so hopefully this one will be a lot more fun. Try out teaching some of what you have learned in your family! Here are some thoughts...

Start young and teach your children about the coins and dollars you use. Show them the faces and buildings and tell them what each is worth. They will start studying this in kindergarten, so it's never too early to practice! Tape one of each to an index card and hang it from the back of the headrest in front of them in the car.Let them see you using cash so they know real money is being transferred when you're at the store! One game I love is the penny stack. Let your small children try stacking several pennies (and try the other coins too!) to see how high they can get it. It's great for fine motor skills and they start learning about coins.

Open a "bank" at your home! Depending on the ages and math skills of your kids, you can do anything from even trades of coins to making "loans" and charging interest. The sky's the limit!

There are many philosophies about allowance for kids, but bottom line -- let them experience using money, finding out how much things cost, and making choices about their purchases. Give them money in smaller denominations so they can choose to save some of it easily. And of course, don't forget tithing!

As kids get older, let them see your budget or spending plan. Maybe they can manage it for a month! Also don't underestimate their ability to understand banking. Start young with an account and let them practice using it.

One fun game my parents did was to take everyone to the grocery store and give everyone a set amount of money. It was a contest to see who could come up with the best meal using only the money they had!

For everyone, stress the value of work, importance of living within your means, the risks of using credit, and the benefits of saving and planning ahead. There are countless articles in Church materials about finances, so search lds.org for ideas for your Family Home Evenings. Make financial literacy a daily part of your life and it will be easy, approachable, and yes, maybe even fun... for everyone!

Keep up the good work, ladies! And congratulations on becoming more financially literate!

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Additional reading and ideas:

Cool links from Kids.gov

Family Education Ideas

Activities and worksheets about money

Planning ahead: Estate and end-of-life considerations

No one enjoys thinking about this subject, but for the sake of your families, please do! Having just been through this, I am grateful for and realize how much of a help it is to your children and extended family to have decided much of this in advance. I have a friend whose family decided to have a "party" to discuss all the hard subjects. They made food, dressed up, watched movies all along the theme (think fun Halloween with a twist), and that made it light-hearted and easier to deal with. Bottom line -- don't keep putting this off!

This week we're lucky to have the input and contributions of George Menden. He's an attorney that works in the area of estate planning (and Darla's B.'s brother!). Thanks, Mr. Menden, for your help on this topic! Here are some pointers drawn from the information he shared with me. Please bear in mind this cannot be considered specific legal counsel, but it's still a good place to start!

When it comes to end-of-life considerations, there are two main areas you need to consider. The first is planning for illness/disability; the second is what happens after you die.

DISABILITY:
Five things to take care of NOW to be prepared for disability:
1. Advance health care directive (aka "living will")
2. Health care power of attorney
3. Financial power of attorney
4. Disability insurance (see last week's post!)
5. Long-term care insurance (see last week's post!)

What are all these???
Advance health care directive (aka "living will"): In case you're not able to make decisions about your own care, this is a legal document that lets you set forth what measures you would/would not like to be taken to sustain life, your preferences for pain management, place of care, etc. Georgia has its own specific form which you need to use (Menden emailed me Georgia's form, so email me if you'd like to get it!).

Health care power of attorney: Legal procedure/document in which you set forth a specific person ("agent") who has authority to make health care decisions for you in the case that you cannot for yourself.

Financial power of attorney: Just how it sounds! Legally appointing someone to have the authority to make financial decisions and act on your behalf.

Disability and long-term care insurance -- see last week's post!


DEATH
In the event of loss of life, the main consideration is how the estate will be dealt with. These planning decisions are crucial so that YOU maintain control of what happens and how. By planning ahead, you can minimize the role of probate courts, prevent lengthy delays, hopefully avoid confusion and hurt for your family... and all the added expense/attorney fees these problems may require.

Here's what you need to consider NOW and talk with your attorney to nail down:
1. Estate -- what happens to it? how will it be divided or passed on? how taxes will impact your net worth? do you need/want to set up a trust?
2. Childcare -- if you have dependents, how will their care be provided for?
3. Trusted relations -- who do you trust to manage all this after you're gone? (to be executor, trustee, or otherwise)

The main way these questions are addressed is by putting together your last will and testament. This is a legal document that sets forth the disposition of your property upon death. It can be changed (aka "revocable") during life. It is irrevocable after death. It must be executed with certain legal formalities to be valid though. Here are George Menden's Ten Most Common Will Mistakes for you to think about:

1. No Will
2. Improperly executed Will = No Will
3. Failure to sign Will = No Will
4. No self-proving affidavit attached to Will
5. Failure to update Will

• birth, death & adoption
• marriage, divorce & separation
• tax law changes
• changes in wealth or specific assets

6. Failure to title assets to take advantage of Will (a/k/a indiscriminant use of joint tenancy with rights of survivorship or POD/TOD property)
7. Failure to coordinate beneficiary designations for life insurance, retirement plans, IRAs, and annuities with will
8.Marking on Will to make changes
9. 100% to Spouse Will where Credit Shelter Trust would avoid estate taxes
10. Failure to store Will where it can be located upon death

Some good food for thought! Hopefully this gets you thinking.... and motivated to learn what you need for your specific situation. Don't delay!

Preparation Brings Peace of Mind: Learning about Insurance

For this week's post, we're going to focus on another aspect of financial literacy: understanding insurance options. I've invited Steve M. to share some of his knowledge and expertise. Thanks, Steve!

Keep up the good work, ladies!

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The five wise virgins of the famous ten from the New Testament were prepared when the bridegroom came. They filled their lamps with oil and attended the wedding party. The other five were out of luck. Sorry. Do not pass go. No soup for you! The time for preparation had passed. Like the ten virgins we will all have moments of crisis in our lives and, like the parable, when the crisis comes the time for preparation will be over.


Insurance can help us protect ourselves and our loved ones from the different perils of everyday life. These perils include damage to property (home, cars, etc.), injury or illness, or even death. On the most basic level, insurance is simply the many helping the one. When we buy insurance we are agreeing to pay a relatively small cost (our premium, or cost of insurance) to protect ourselves from something that may have a very large cost. We willingly contribute to a big pool of money from which members of the group are compensated when they experience a loss. Before I discuss some of the different types of insurance, let’s define a few terms first:

• premium: the cost/price of insurance
• deductible: a fixed amount of money we must pay out of our own pockets before the insurance company pays out on a claim
• elimination period: a deductible in number of days; how many days we must pay for a service out of our own pockets before the insurance company pays out on a claim
• peril: the things that cause loss/damage to our property, health, lives, etc.
• limits: the maximum your policy will pay for a certain type of loss
• beneficiary: the recipient of the insurance pay out

You can pretty much buy insurance for any imaginable peril. I will mention a few types of coverages that I feel are important for most people to have and understand. My comments are not meant to be comprehensive. These are principles that generally apply to most people. Here goes.

Trivia Answer: Where do the account names come from?

Kay got it! Retirement accounts are named as such because they correspond to the specific sections of the tax code that describe and govern their use.

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Now, for our feature article this week, see below...

Alphabet Soup 101

Most of the questions I collected in the Q&A box during December had to do with investment options, especially with regard to retirement. In our Relief Society meeting last month, we got to go over some of the ins and outs of those plans, but for this week on the blog, I'm going to go ahead and summarize the basics again. This is a pretty simplified version, it's easier to remember everything when you start with a basic framework. After you are familiar with the basics, you can go on and learn more (please do!). The glossary pages of the packet from the RS meeting is the next step. You CAN understand this! Here goes...

Most employers offer some kind of plan for their employees to save for retirement. The most common one you hear about is called a   401(k) plan. If you work for a nonprofit or government-based entity, you may have something that is very similar to a 401(k), but it's called a 403(b). If you are self-employed or work for a small business, you may have a SEP-IRA. Outside of your employer, you as an individual can set up your own additional retirement accounts. These are called IRAs (individual reitrement accounts).

There are lots of federal regulations about how these plans can be handled. Your employer is required to give you a description of the rules they follow for your plan. It is called a Summary Plan Description (SPD). Go to your SPD and read about the details of your plan. Here are some of the things you'll want to look for:

• Can you put money into your retirement account pre-tax or after-tax? If it's pre-tax, you get to put money away from your income before you pay taxes on your income, so you will actually have LESS income to be taxed on (which means a lower tax bill!).
• The money you put away may be tax-deferred. Basically, you won't pay any taxes on it until you take it out. This usually happens when you didn't have to pay taxes on the front end (pre-tax).
• A ROTH contribution means you put money into your account with after-tax money, but then you won't have to pay any taxes on it when you take it out. The advantage of these is that it means you're not paying taxes on any of the additional money your account has earned over the years. So while you take a hit paying taxes now, you won't have to again. ROTH IRAs are pretty common for individuals, and ROTH 401(k)s are getting to be more common.
• Different accounts have different limits. That means how much money you're allowed to put in the account each year. Usually, you're allowed to put more into employer 401(k) and 403(b) plans than you can into your own IRA.
• Matching means your employer offers some kind of plan where they add money to your retirement account based on the amount you put in (a ratio). This is a great deal! Maximize your contributions to maximize the amount of extra money added to your account at no additional expense to you!
• Withdrawals. Basically, figure out when your plan allows you to take money back out. Some plans let you take a hardship withdrawal early if you need the money, but you pay some kind of penalty in order to do it. All plans will have an age at which you can start pulling the money back out without penalty.

Hopefully, this helps! Now our quick trivia question for this week.... do you know why the accounts are called 401(k) and 403(b)? Leave a comment if you do!

Trivia for this week: What is the full name for a CD?

Answer? The term CD is short for Certificate of Deposit.