From our colleagues at Argent Financial:
BY: Jill Knight Nalty | Market President, Argent Trust, New Orleans, LA
BY: Mark C. Hartnett | Managing Director of Argent Family Wealth Services, Oxford, MS
BY: Jodi Penn Rives | Business Development Officer, Argent Financial Group, Oxford, MS
Watching our children race through high school and college is bittersweet.
On the one hand, this is what we’ve been preparing them for their whole lives. We want to see our kids become independent and create good lives for themselves—even as they help build a better world.
On the other hand, this transition to adulthood brings enormous changes…in every facet of life.
There’s the emotional whammy of “Where did the time go?” There are relational adjustments as sweethearts and in-laws enter the picture. Often, this transition presents geographical challenges. And then, of course, there are all kinds of financial questions. Chief among them:
- Have we taught our children what they need to know about money?
- Do they have healthy financial habits?
- What can we do about the high cost of college?
- In trying to give our kids the best possible future, are we inadvertently sacrificing our financial future?
- What if my young adult is struggling to “launch”?
Recently we sat down with three financial leaders at Argent who have successfully guided their children into adulthood: Jill Knight Nalty, Market President of Argent Trust in New Orleans, LA; Mark C. Hartnett, Managing Director of Argent Family Wealth Services in Oxford, MS; and Jodi Penn Rives, Business Development Officer at Argent Financial in Oxford, MS.
They were kind enough to share their experiences, perspectives, and wise counsel.
What’s a financial mistake you made as a parent—or that you see other parents making?
Mark: I think it’s hard for us to let our children struggle and learn from their mistakes. We tend to make things too easy on our kids.
Jodi: I agree. We always want them to have a “soft landing.” But when we rush in to save them, how are they supposed to learn perseverance, critical thinking skills, or what to do when “plan A” fails?
Jill: I think it’s that old saying: “You are only as happy as your saddest child.” That’s why it’s tempting to try to fix everything for them, even though hardships and challenges are what help them grow.
What did your parents do right—in terms of giving you a healthy perspective on money?
Mark: My parents taught me the value of a good work ethic.
Jill: My dad told us—ad nauseam—“Money doesn’t grow on trees!” So, from a young age, I knew money had value. He also preached the idea, “Never buy something you cannot afford.” He didn’t believe in borrowing money—except for your home.
We got a small allowance from an early age, and we had the freedom to do with it as we saw fit. But we were always encouraged to save some for a rainy day.
Jodi: My Daddy’s main lesson was: Don’t live beyond your means. I vividly remember the spiral notebooks he used to record my parents’ income and expenses. (I wish I could find one of those old notebooks. It would be fun to look at what they spent and how they budgeted.)
Jodi, you just brought up the “b” word…how important is it for young adults to learn to live by a budget?
Jodi: Budgeting is huge. Parents need to figure that out early—and help their children understand that concept. They won’t learn unless we teach them.
Mark: Agreed! (Although I think that word has a negative connotation for most people.)
I’ll sometimes ask young adults, “In a football game, how do you know who’s winning?” They usually give me that What a dumb question! look before answering, “The scoreboard!” I’ll then ask, “And how does someone know if they’re winning financially?” More blank stares.
I explain that there are two scoreboards when it comes to money—a cash flow statement (or what Dave Ramsey calls a “spending plan”). That’s what we’re talking about when we use the word “budget.”
Then there’s a balance sheet—a kind of snapshot of what you own and what you owe. Making that distinction opens the door to talking about the difference between the two and a system for evaluating how you are doing.
What are some practical ways parents can teach their kids important money principles?
Mark: I’d say use Dave Ramsey’s “spend, save, and give” system. Use the “save bucket” to teach them about investing. Once they’ve saved $50, match it. Then put that $100 in a mutual fund/ETF or a favorite stock. Use the quarterly statements as opportunities to talk about investing and compounding.
I sure wish I had known more about compounding when I was young! Most young adults don’t realize that if they started investing $100 per month at 8% interest once they get that first job, they’d have almost $60,000 in just 2o years. If they kept doing that for 45 years—they’d have over $530,000!
Jill: When I started my first job, I selected seven different mutual funds and had each fund auto-debit $25 monthly from my checking account. It was a nominal amount, so it didn’t affect my lifestyle, and it was a forced savings for me. When it was time to buy a house, I had a nice nest egg to use for the down payment.
Jodi: I’d say let your children see you sharing your time, talent, and treasure with others. Also, let them see you putting money in your 401(k), so they know what retirement saving is all about and why it’s important. Finally, let them experience the natural consequences of buyer’s remorse from impulsive purchases.
Jill: Great list, Jodi! I would add: Let them see that money does not buy happiness. Never use money in a controlling way. And—the last thing—make them take ownership of their financial lives.
My daughter just finished PA school and is relocating to Atlanta. We were talking about her needing insurance—car insurance, renter’s insurance. I told her, “Call around. Do the research.” They need to figure it out. Don’t do everything for them.
What about college and debt?
Jill: I had my teenagers research the colleges they were interested in attending and make a spreadsheet of anticipated costs—tuition, housing, living expenses, everything. I also gave them the actual amounts that I had been spending on their clothing and other expenses so they could see the total picture.
My instruction was, “Come up with a realistic spending plan.” I wanted them to know what it would cost to live their current lifestyle (or whatever lifestyle they aspired to).
Once they listed all their expenses, I had them fill in any anticipated scholarship or merit money, along with an amount I was able to contribute.
At that point, they could see where the gaps were and make some decisions. They had to decide which plan worked best for them.
That helped them along the way think through options. They had to decide if a particular school was feasible given their budget and anticipated lifestyles. It also helped them prioritize their desires/wants vs. needs. It gave them a pretty realistic view of things.
Jodi: That’s a wise plan, Jill. Here’s an additional thought.
As parents, we urge our children to apply for as many scholarships as they can. But for some reason, “Well, if Mom and Dad are going to pay the difference no matter what I do, what’s the incentive for me to work hard and fill out all these applications?”
So, maybe come up with a predetermined plan that says, “For every dollar you earn in scholarship money, I’ll pay you 25 or 50 cents.”
I’ve seen parents use that approach to motivate their kids.
How important is it for parents to talk about credit?
Jill: Young adults often don’t have credit. They don’t understand how important it is to know their credit score. Or they get into credit card debt.
Jodi: Yes! We send our kids to college with a set allowance and the first thing they see when they walk onto campus is a table in front of the student union where they can get a free t-shirt, a free water bottle and a credit card!
Mark: And right away, they’re in debt $1,000 or $1,500! Having conversations around that is important—helping them understand the difference between building credit and living on credit!
Do you think parents can get so fixated on their kids’ well-being that they neglect their own financial future?
Jodi: We see that all the time. While parents are doing all these generous things for their children, they often overlook retirement planning. You need to be saving for both.
Mark: So true. One way to look at it is to realize you can always borrow money for school, but you can’t borrow money for retirement. If you have to choose one or the other, choose retirement.
Is there any other wisdom for parents to pass on to young adults who will soon be leaving the nest?
Mark: Oh, so many things! Learn to live on less than you make. Never quit learning. Find a mentor. Invest first in yourself and second in your retirement. Put the power of compounding to work for you. Create an emergency fund of at least 3-6 months of scaled-back living expenses.
Jodi: They need to know that doing what they enjoy is as important as making a living. Encourage them to start saving early. And to ask themselves: “Do I really need this?”
Jill: Invest in yourself first. Contribute to your 401(k) and put money aside for a rainy day and/or large purchases. Review your spending plan at least annually and set some short- and long-term financial goals. Understand the difference between wants and needs.
Finally, what advice would you give the parent who has made mistakes—and now has an adult child who is struggling to launch?
Jodi: First, is there a valid reason? Depression? Anxiety? A learning disability? Substance abuse? Check for that.
If not—if the child just isn’t motivated or there is parent enablement—seek professional counseling. In that setting, agree on a set of goals and communicate expectations on what living independently looks like.
Jill: Yes, get professional help or spiritual guidance as needed. Set clear boundaries and be clear about what you are willing to do and not do. Give them some incentives, and remember it’s okay to say no. There is no growth without some discomfort.
Mark: I would add, love well and err on the side of supporting, even to the extent of providing basic needs – shelter, food, medical care. You can have influence as long as you are in a relationship.
At Heritage, we specialize in helping clients create meaningful financial legacies. If you’d like to explore how we can help you reach your financial goals, please contact any of Heritage’s professionals at 877.887.8899. We’ll be glad to help however we can.
