Guest Post! Pre-Family and Post-Family Financial Thoughts

Today, we are fortunate to hear from a good friend of mine and a big Money and Megabytes supporter. Haskell shares some nuggets of pure wisdom and poses some important questions. I think you’ll agree he’s a great writer whose experience we can all learn from!


Thanks to Joey for the opportunity to write this guest post. I have been a reader and fan of this blog since its inception. I am unsure if I can offer much new in the way of financial advice, but given that I may be a bit older than the average reader of this blog, I thought some reflective, summary advice might be helpful, even if it merely echoes previous, more detailed posts. Also, I think the pre-family financial discussion is a bit different (and seemingly much more simple), than the post-family financial discussion. Below, I detail five pieces of financial advice for those in the pre-family stage, and I then pose five finance-related questions for those who, like my wife and me, have children.

Pre-Family Advice.

  1. Give Sacrificially. I wish I had been better about this, but money given can be some of the very best money spent. Many in the FIRE movement recognize this, even if it delays financial independence. (See, e.g., here, here, here, and here),
  2. Save Automatically. I don’t think I can improve on the Frugal Professor’s hierarchy of savings, but I will say that automating savings has worked well for me, especially when I was an extremely busy young professional.
  3. Choose Frugal Friends. For better or worse, we tend to drift toward those with whom we spend most of our time. As such, having friends with similar financial philosophies will be helpful in the quest for financial independence.
  4. Live with Roommates (Close to Work). Living with roommates can be difficult at times, but the relationships built, the interpersonal skills honed, and the significant savings on rent and utilities makes it worthwhile. Also, I never regretted living close to work (even when mugged; see below on “safety”) — not only did I save on car-related expenses, but I also saved time and improved my health by walking to work.
  5. Focus on Lasting Purchases. The best money that I have spent (outside of giving) has been spent on experiences/travel and building skills. These things tend to outlast material purchases, don’t have to be insured, don’t break, and don’t increase worries. As to material purchases, I have been most happy with basic, but high-quality items that promote activity (like my Garmin watch or a good pair of running shoes).

Post-Family Questions.

  1. Schools? How do you decide between “metro-public schools,” “suburb-public schools,” “religious private schools,” and “secular private schools.” This decision has massive financial repercussions, not only from the cost of the education if you choose “private,” but also on the cost of your home and the cost of your commute if you choose to live further from work to get access to “better” public schools. As an educator, I believe high-quality education is of tremendous value (though I don’t think it is clear which of the four categories of school is “best,” and which category is “best” may vary from child to child).
  2. Skills for Children? How much do you spend on skill-building activities for your children? The opportunities are endless – sports, music, art, language, tutoring in various areas, etc. I think parents should be active in their children’s education, but there are some areas (e.g., music) where my wife and I wouldn’t even be able to instruct on the basics, and there is significant value in team sports (though I don’t believe specialization or year-round training is appropriate for young children in most cases).
  3. Savings for Children? How much should you save for your children? The education landscape could look vastly different by the time my children are ready for college, and we are trying to find the right balance between helpful assistance and harmful pampering.
  4. Buying Time? Time with family is precious, so to what extent do you outsource various chores to free up time with family? I think the best strategy is to involve your children in the chores (and give them their own chores). That said, while giving children responsibility early is usually wise, we also want to have time for leisure activities with our children.
  5. Buying Safety? I’ve been held at gunpoint twice, chased in rougher neighborhoods multiple times, had my car and home broken into, and my bike stolen. Still, but for having a family, I would probably choose to live in a neighborhood some would label “transitioning” or “dangerous.” Why? I loss less than $1000 in the robberies (the bike was a $50 garage sale bike, two $200 car stereos, some fairly minor car repair, and a bit of cash), but in 12 years of independent living pre-marriage, I easily saved over $30,000 in total rent costs (not to mention the money and time saved by being close to work). Physical safety is harder to monetize, and cannot be guaranteed, but now that more people depend on me, I value the likelihood of physical safety more than I did when I was single. There are many choices between the highest crime neighborhoods and bubble-wrapped gated communities. You obviously cannot, and probably should not, completely shield yourself and your family from all danger, but settling on the “best” environment is difficult.

As my acquaintance Steven Garber likes to say, there are no cheap answers to the questions above. But the first step toward wise decisions is identifying the questions. From there, you can gather the available data (which is rarely conclusive, but can be helpful), and plot your course accordingly.
 
(For those who are curious about where we landed on some of the 5 post-family questions, we recently moved to the suburbs, for “better” public schools, the pictured common greenspace in our backyard, lower crime, more square footage, a neighborhood pool, and more community in our immediate neighborhood. It was an incredibly tough decision, and it will be costly from a financial perspective. I don’t pretend to know if it was the “right” decision, but I am happy–mainly for non-financial reasons–with the decision so far.)

5 response to "Guest Post! Pre-Family and Post-Family Financial Thoughts"

  1. By: Alex Posted: August 10, 2019

    What kind of education should we provide our children with regarding finances? The only thing I ever learned in school was how to balance a checkbook – now a quite antiquated technique.

  2. By: Haskell Posted: August 10, 2019

    Great question, Alex. Our oldest starts K next week, so, truthfully, we haven’t done much financial education so far. We do have certain chores that are expectations and unpaid (e.g., cleaning their rooms) and certain chores that are above and beyond and paid a small amount (e.g. helping me with yard work). I plan to introduce the concepts of banking and interest soon, but right now they like holding onto their physical cash (and they are not yet willing to exchange 5, 1 dollar bills for 1, $5 dollar bill….working on that concept).

    Giving children responsibility for some purchases early – at least entertainment and maybe transportation eventually – is important. As JL Collins relays, I think you can overdo financial education and actually turn your children off to the concepts if you badger them or dive into too much detail too early. Giving children increasing responsibilities (even if they make some spending mistakes), coupled with instilling something like the 9 basics that JL Collins eventually settled on for his daughter will hopefully work well. But I happily take suggestions in this area.

    https://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/

  3. By: Kathryn Kisska-Schulze Posted: August 12, 2019

    I think this is a great blog post, and the ideas Haskell provided are terrific! I’m happy offer a few additional thoughts since I’m a little farther along with kids (mine are 14 and 9).

    Regarding private, public, or parochial – we have tried all three. Private was wonderful when we lived in a city with overcrowded, low-ranking public schools. My oldest received an incredible early education in her private school (K – 4th), and I got to know her teachers personally. I’m actually still Facebook friends with a few of them! It was a huge financial sacrifice for our family, but she received a wonderful foundation for education and life while there. When we moved to a new city with exceptional public schools, we moved both our kids into that system. It was our first go-round with public, and it has been a really positive experience. Because our kids receive a “free” education, we choose to donate quite a bit of money to the PTA and class activities (as Haskell said, give sacrificially). If you love the free education, it’s best to find ways to continually support it. Finally, for one year we tried parochial as one of our daughters preferred trying a “small” school. It was a fine experience, but the small environment led (in that case) to small educational resources. After one year, we decided to move her back into the public school system because – as I mentioned – our public schools are incredible. I think there is no perfect answer for everyone. My advise is to do your homework and see what fits best for your individual family.

    As far as saving, not only do we have 529 plans in place for both kids (and have since they were born), but we set up a small saving account for our older daughter when she was in elementary school that she individually contributes to. We recommend that she put 15 – 20% of her “income” (b-day money, allowance, tooth fairy, etc.) into it, but allow her full final decision-making in that endeavor. Thus far, her account has over $600 of just HER money.

    I also taught her some basics about the stock market (VERY basics). My husband and I agree to match any amount she chooses to invest (Ally Invest is the way to go for this since the fees are very low), and recommend she buy stock in things she likes or uses. If you can believe it, she bought Boeing stock a few years ago when it was selling at $135 (my brother works for Boeing). It’s now at $333 (and has been close to $500). She also owns a few shares of GE, Hilton, and Google. Those aren’t as lucrative, but you do the math. In 10 years, she’ll hopefully have a fair amount of money invested to use to buy her first car, first house, etc. Plus, it’s fun for her to log into Ally and see how much money she’s making (or losing!).

    I will say, as kids get older, materialism becomes tough to battle. For all we’ve done to try to teach my 14 year old to save, as an incoming freshman in high school I watch more of her money go out the door on brand-name products (can we say Adidas, Vans, Sephora, etc.?). All I can do is remind her regularly that while it’s ok to have some of those things…. it’s just as important to keep saving for that (inevitable) rainy day.

  4. By: T Norris Posted: August 12, 2019

    Growing up in a 1960’s household and parents who were at the fringe of the Great Depression, I think the first thing I learned was “live below your means” and “the debtor is servant to the lender.” Personal finance was actually taught in my home “at the dinner table.” Giving was also taught by example, not rote. Form of giving was very important. In giving, make sure it is not in furtherance of habits and behaviors that placed people in their condition.

    Prior to having a child, following the above example, the most difficult process entering marriage was integrating personal finances and finding agreement about a financial philosophy. That actually took some time. The only essential long-term financial obligation was purchasing a home. In doing so, I held a big belief in putting down sufficient down-payment. Learn never to “compete with the Joneses.” Buy used (certified automobiles), take full advantage of coupons and sales. Avoid consumer debt to the greatest degree possible and save.

    Subsequent to children, buy sufficient insurance. Start planning (UTMA or UGMA) for education and look at IRC § 529 plans. Cash only, travel with your children. There is no greater education than to expose them to different regions, peoples and cultures. Consider it part of your child’s education enrichment. Remember too, work is a taught skill. Teach that there is value in one’s service and that no matter what it is you do – persevere to be the best. Let your children fail, fall and learn to recover. There is nothing like the lesson learned by experience.

    Because public schools no longer engender the values and culture of the communities they serve, choice of education for your children is one of the more difficult decisions. Public schools demand the least financially and personally – are least responsive and may often deliver the least. Secular private schools will generally deliver an excellent education and humanistic morality. Faith-based schools, depending on how chosen, can deliver an excellent education and perhaps a more complete world-view. The latter private institutions do not come cheap. What I can say is that involvement of the parents in a child’s education is singularly their most important contribution. We feel that we bought an (1) excellent education, (2) safer environment, (3) with a faith-based world-view and (4) the price of input.

    Children will more certainly “take to heart” what they see more than they pay attention to what you say. Live the example.

    Remember too, no person or government can make you safe. Despite all attempts for society to have one rely on law enforcement and other government mechanisms, we are each responsible for our personal safety and defense of our families. Obviously, more judicious choices often provide safer environments.

  5. By: Haskell Posted: August 12, 2019

    Wonderful comments. Thank you. Kathryn – I love the savings account and match investing ideas. Tom – I agree that your example speaks louder than your words. And “live below your means” is timeless advice; I am reminded of the great Steve Martin skit “Don’t Buy Things You Cannot Afford” https://vimeo.com/41152287

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