Parents are a child’s first and most important teachers. Natural learning opportunities arise daily to teach children lessons in health, safety, manners and morals: eat your vegetables, don’t touch the hot stove, always say “please” and “thank you”, and treat others the way you wish to be treated. All are essential truisms for leading a productive and satisfying life. Just as learning and living these lessons will help forge a path to a successful and happy existence, instilling solid financial values early and often can set children on a healthy financial path and help avoid common but painful financial pitfalls later on in adulthood.

Teaching children the importance of prudent money management is a lesson that is sometimes neglected by even the most caring and astute parents. Among the many crucial lessons children learn at home from their parents, basic financial literacy is often overlooked. Sometimes parents skip this lesson because they themselves struggle with understanding core financial concepts. If parents, as natural family teachers, fail to take the lead by modeling unhealthy attitudes towards money and its true value, children may grow up gaining independence in every aspect of life except when it comes to their money. Achieving a certain level of financial independence is essential to being successful as an adult. Parents can attain much peace of mind by educating themselves on basic financial literacy and passing that knowledge down to their impressionable children.

Distraction from the media, uncertainty or volatility in the markets, or pressure to buy and sell from friends, colleagues, financial “gurus” and other less than reliable sources for investment advice can directly challenge an investor’s ability to make consistent, rational and logical investment decisions. The barrage of information coupled with some inherent behavioral biases can make long term investing a challenge for most people.

Behavioral Finance has been an academic area of study since the early 2000s when Daniel Kahneman, a psychology professor at Princeton University published research that demonstrated “repeated patterns of irrationality, inconsistency, and incompetence in the ways human beings arrive at decisions and choices when faced with uncertainty.” Dr. Kahneman’s findings won him the Nobel Prize in economics in 2002 and the research strongly suggests that investors will often make decisions based on their emotions rather than on logic and historical data, even if it is right in front of them.

In a perfect world, planning for retirement should be exciting (I can’t wait to retire early!), easy (automatic savings/contributions) and not stressful (I have so much money to save!)

In reality, thinking about retirement can make people feel very anxious. How much should I be saving? Will I have enough to live? Will I run out of money? Planning for the future can be very overwhelming and it can be difficult to picture how saving into an investment portfolio can actually provide an income for you when you are no longer working.

Many times, people don’t realize the importance of starting to save early on. The earlier you begin to save money for retirement, the more successful you will be. You will have saved more dollars, and you are giving it a longer time to grow and earn interest.

As we get older, the idea of no longer earning an income and receiving a paycheck is hard to comprehend. We’ve seen a lot of our clients fearful of making a mistake as they near retirement and they become very fearful of market declines. As you approach retirement, it is so important to discuss any concerns that arise with your trusted advisor.

As financial planners, we hope our clients can achieve a peaceful transition into retirement. Here are a few suggestions:

Your time has finally come. You spent your years since high school scraping by on ramen noodles and pulling all-nighters so that you could score that great job, right? Now you have paid your dues for a few years and the time has come for you to get a raise or a bonus. This is certainly a cause for celebration!

Rewarding your hard work with some new clothes, a night out on the town or possibly something bigger like a new car is okay, but don’t get too carried away. It is important, to maintain a sharp perspective on your cash flow and your goals when your income begins to increase.

THE ESSENTIAL ELEMENTS FOR SUCCESSFUL FAMILY WEALTH TRANSFERS

It is inevitable--every day we get a little bit older. The time to begin planning for the next generation is now. As successful heads of your family, you have worked very hard saving for your future, taking care of your family and creating a plan for retirement. It’s possible that with a few additional conversations, you can create a legacy that your children and grandchildren may continue to enjoy for generations to come.

The complexities of the family and the amount of wealth transferring to the next generation can help determine how much time and effort will be required in the planning stages to ensure a successful transfer. If you would like the transfer of your wealth to benefit the next generation, then you need to consider involving your family early. It is important for each generation to try to understand each other’s perspectives regarding the shifting of assets and the impact these assets may have on their future.