Managing Kids’ Tech Use

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With so many kids receiving new devices over the holidays, you may have noticed that you now see more of your young techie online than you do in person. After all, so much of how tweens and teens interact these days is done in a digital environment: texting, social media, or video chats are much preferred to talking IRL (tween speak for In Real Life).

But just because your kid is a digital native doesn’t mean that she or he possesses the knowledge or maturity to navigate this online environment in a way that is healthy. Parents need to set expectations and guidelines for acceptable online behavior. A contract can be the best way to establish those boundaries.  

Why Technology Contracts?

You may refer to it as a tech contract, a media contract, an electronics contract – feel free to call it whatever you like. What matters most is that the contract serves as a tool that both informs and educates your child, while also providing the freedom that comes with knowing upfront what is and isn’t permissible. 

Why contracts? They serve as a collaborative approach to help your child have autonomy over self-regulation, a technique that is more effective than the traditional “do as I say” method. This article sums up the benefits of contracts by pointing out how culture has shifted for this generation: “Today’s children tend to roam the world as independent contractors…they are growing up in a culture of democracy and equality and they feel that.” 

If you’re ready to create a contract for you and your child, the internet is chock full of examples and templates to use. The most effective ones, however, focus on a few key elements that will help your kid (and you!) stick to the agreed-upon guidelines. 

Incorporate Social Skills

This contract is a great way to underscore the importance of maintaining or even deepening real social skills. In other words, use this contract upfront to balance how much communication is happening online vs. offline. 

For example, the contract we use with our tween clearly outlines that she put down her device and be immediately responsive when being addressed and that she interacts verbally with her friends when they are together. 

You may also consider including a clause that requires one hour of social activity for every hour that your child is online, or the joining of a club, group, or sport that aligns with their interest. 

Lastly, make sure your child knows what you consider unacceptable social behavior in the online world, too. We give our daughter a version of the golden rule: don’t text, email or say anything through your devices that you wouldn’t say to their face, or in front of us. Be polite. NO bullying. 

Make Safety a Rule

While kids can know what they should do to be safe online, remember that they lack impulse control in those still-forming brains. For them, the leap between knowing the path and walking the path may prove to be one they are not yet capable of making. 

Build safety into the contract by making it clear that all downloads and purchases must be approved by you. Encourage them to build their case for these items by researching them first on sites like Common Sense Media or Smart Social. 

Talk about the ramifications of sharing personal information and photos, whether their own or that of others. Review this article from Parent.com or this one from McAfee for talking points, and strategies teens can use to step away from the selfie culture. 

Define the When & Where of Technology

Should devices be off-limits during meals? Accessible up to a certain time in the evening? In common areas only, or also in their rooms? And what happens when the rules are different at their friend’s house?

Every judgment call is different based on your child and your family. But there should be clear expectations for when and where built into your contract. 

For us, we feel it’s appropriate to limit screen time during the week, but extend it on the weekends. And no screens during homework time (unless it’s to aid in homework completion). 

Allow the Contract to Grow 

As your child grows, so might their trustworthiness with their devices or their need to access more apps or features. For that reason, it’s important to review the contract regularly. This will give your child the structure of knowing that as they behave responsibly, more responsibility will be granted. 

Be Accountable and Role Model Good Behavior

As part of your contract, your responsibilities to your child should also be outlined. For us, that means putting it in writing that our child can share anything that she deems alarming or unsafe and we’ll support her. It also outlines the penalty system if she breaks the contract.

You may also document any ground rules you want to set for yourself about tech usage, like putting your screens away during drop-off and pick-up or meal times. Modeling the expectations you have for your child can go a long way in strengthening your contract. 
As I mentioned, there are plenty of contract templates available online that you can modify to suit your needs. If you need help learning more about this timely topic, start here for a good round-up from various sites. 

Making Smart Money Moves for School

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Planning for College

Ah, September. After the dog days of summer, this is the month where we can finally enjoy some cooler weather, all things pumpkin, football, and maybe even a cozy sweater or two. And if you’re a parent, you are either counting down the days or already basking in, what is really the most wonderful time of the year: back-to-school time. 

It’s fitting, then, that this month we take a look at what it takes to get your kids to and through school —  and we’re not just talking college! Let’s face it, K-12 can be costly, too, at both the public and private level. Luckily, there are two savings plans that help you plan and save for both your immediate secondary school costs, as well as your future college costs.  

Coverdell

Let’s start with the Coverdell Education Savings Account. This investment account allows you save up to $2,000 annually in after-tax contributions until the beneficiary turns 18. Earnings are tax-free and so are withdrawals, if they are used for qualified education expenses. 

This a self-directed plan, giving you the flexibility to invest in what you’d like. Parents, grandparents and other family members may contribute in the child’s name. However, it does come with limitations on who can contribute, based on income: if your AGI is more than $190,000 for joint returns or $95,000 for single filers, this is not available to you. 

For Use In: K-12 and College 

Qualified Expenses: Books and supplies, tutoring, computers/laptops, transportation, special needs services, uniforms, private school tuition, college tuition, and room and board. 

Other Things You Should Know: The balance must be spent by the time the beneficiary is age 30. However, you may transfer the balance to another beneficiary or roll it into a 529. 

529 Plan

The 529 plan is administered at the state level and also offers tax-free earnings and withdrawals for qualified education expenses. Think of 529 plans and ESAs as Roth IRAs that are pinpointed for education.

Previously used only for post-secondary costs, the 529 plan was updated in 2018 to allow for an annual withdrawal of $10,000 per year for K-12 tuition. Take note of that: unlike the Coverdell, the 529 can be used only for tuition at the K-12 level. 

The 529 also differs from the Coverdell in that there is no contribution cap. However, $15,000 annually is a good number to shoot for, since that is the maximum allowance under the gift tax exclusion. There is also no income limit for contributors.

With this plan, your investment selections are limited to what your state provides. Thus, you may choose to use another state’s 529 plan (yes, you can do that!). Your state may try to keep you local, however, by offering an income tax deduction for your 529 contributions. Check state-by-state deductions here. 

For Use In: K-12 (private school tuition only) and College 

Qualified Expenses: Books and supplies, computers/laptops, private school tuition, college tuition, and room and board. 

Other Things You Should Know: Should your child not go to college or you have excess funds, you can still use the 529 balance for non-education expenses. However, you will be assessed a 10% penalty and pay taxes on the earnings (and may have to repay any state tax breaks). 

The 529 is also transferable to other beneficiaries for education expenses, including siblings, grandkids, or even yourself. Or you can let the account stand and apply it toward graduate school. Worst case your grandchildren could inherit them!

Tax Credits

In addition to these savings plans, don’t forget to look into any state or federal tax credits for which you may qualify. 

State Programs

For secondary school costs, there are some states that allow for credits or deductions on qualified expenses. Depending on the state, that can include private school tuition or out-of-pocket costs for special needs students. You can view all state programs here. 

American Opportunity Credit

At the post-secondary level, you or your student can take advantage of the American Opportunity Credit for most undergraduate college costs (except transportation or living expenses). You may claim 100% of the first $2,000 spent on qualifying expenses, and 25% of the next $2,000 for a total credit of $2,500. 

Parents will get the credit as long as the student is claimed as a dependent, with some limits based on modified AGI. The credit can be claimed for a maximum of four years. 

Lifetime Learning Credit

A little more flexibility is available with the Lifetime Learning Credit, including the ability to claim books or supplies, and the inclusion of graduate, vocational, and non-degree students. There is also no time limit on how many years you may claim the credit. 

The maximum amount you may claim is $2,000, or 20% of up to $10,000 in qualifying costs. Like the American Opportunity Credit, there are also income limits based on modified AGI. 

Ask an Expert

Just like we encourage our kids to seek help from a trusted expert, I encourage you to sit down with a financial advisor to make sure you’ve explored every option to make the most of your school savings plan. As programs and plans vary among states, your advisor can keep you posted on the plans, credits, or deductions that will allow you to maximize your money – now that’s a smart move!

The Funny Month of February: Love and Money

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Ah, February. With only 28 days, this short little month manages to pack quite a wallop, from wacky weather to omniscient groundhogs, to Super Bowl hype, to Mardi Gras, to the wrap up of a glitzy Hollywood award season.

Our general mood seems to shift with this month, too, as the practical and the romantic converge to realign our focus to a few key February agendas:

  • taking stock and organizing, as a byproduct of lingering New Year’s resolutions, being stuck inside, and current Marie Kondo mania;
  • money, thanks to those freshly delivered W2s and the commencement of tax season;
  • and love and relationships, as Valentine’s Day serves as our annual reminder to ply our loved ones with cards, candy, and gifts.

Because of this unique convergence of organization, money, and love, the brief month of February can serve as the perfect catalyst to get on the same financial page with your spouse or partner.

In other words, make February the time you have “the talk.”

Whether newly coupled, further along the path, or with the golden years right around the corner, reviewing your plans for combined finances and retirement can ensure you are both taking the right steps to get to where you want to be together.

Here’s how to get started.

Common Ground

The 2018 Fidelity Couples and Money Study shows just how out of sync most couples are when it comes to shared financial planning:

  • 46% cite money as the biggest challenge in their relationship
  • 67% argue over money
  • Over 40% of couples do not agree on when they will retire
  • 54% don’t agree on how much they need for retirement savings; 49% have “no idea” what that number might be

Clearly, we seem to be acting as single people within the context of our shared finances.  Only by gaining insight into our partner’s resources and goals can we begin to remove the fear and anxiety around money and replace it with shared purpose and strength.

It starts with establishing a common ground in which you are both completely honest about short and long term issues:

  • Current financial debts and obligations
  • Current methods of budgeting and saving
  • Shared goals for short term savings (think vacations, cars, home improvements)
  • Shared goals for long term savings

This last category will be very broad and should include the big questions like where you want to live in your later years, what you want to accomplish in retirement, any known health issues or how you can plan for the unknown ones, at what age you want to retire, how much you want to dote on the kids or grandkids, and so on.

The key to this discussion is to be frank and open about your dreams and expectations, and how you can work together to make both of you happy.

Be thorough, but don’t make it painful. Stretch it out over a few nights, maybe with your favorite takeout, or the promise of watching your favorite show together once you’ve covered X, Y, and Z.

RESOURCE: Fidelity’s Couples and Money Starter Guide

Take Action

With a new perspective on where you both are coming from and where you want to eventually be, now is the time to lay out a plan for the next year. What steps can you take in the next twelve months to get you closer to those shared goals?

Months 1-3

If you haven’t budgeted together before, now’s the time to do so. Otherwise, you’ll each be making decisions in a vacuum, never knowing if or how you are contributing to the future.

If you have been co-budgeting, try recalibrating and seeing how you can cut back, rearrange, or prioritize in ways that positively impact your goals.

RESOURCE: Best Budgeting Apps for Couples

Months 4-8

Get your affairs in order. Take these months to review all the paperwork: insurance policies, account statements, wills, and trusts, etc. Work with a professional if you have to in order to create a solid plan for your assets.

This exercise will serve double-duty, not only tackling these important topics but helping to identify which one (or both!) of you need help in better understanding these topics.

Part of caring for your partner is caring enough to give them the information and resources to be financially empowered in the event they will have to manage finances on their own.

RESOURCE: Estate planning for unmarried and married couples.

Months 9-12

Take advantage of end-of-year incentives to better align and maximize your goals:

  • If you get a holiday bonus or tax refund, use that money to max out retirement account contributions, beef up your emergency fund, or build college savings plans.
  • If you itemize, now’s the time for charitable giving.
  • Most companies offer open enrollment toward the end of the year, usually in October. Analyze your benefit utilization to determine if your enrollments are appropriate, or if you could make better use of the options available to you.
  • If you’ve got FSA money to spend, now’s the time to schedule a physical, get new glasses, order the screenings, dental issues etc. Remember that physical wellness is a component of overall financial wellness.

This twelve-month plan will prepare you well to meet again next February, maybe over a romantic Valentine’s Day dinner, to review how far you’ve come, and plan once again for the year ahead.

RESOURCE: Year-end Money Moves

Know When You Need Help

If managing shared finances were as easy as all this, then money wouldn’t be the primary cause of stress for almost half of all couples.

Navigating “the talk” can be challenging even for the most simpatico of couples. You should expect to hit some bumps along the way, and maybe even face what appear to be absolute stalemates as you try to establish your joint plan.

This is where a certified financial planner can help. We can provide an objective third party perspective, guide you with expert advice, and suggest solutions that will be in the best interest of both of you and your future plans together.

Including a professional advisor in your financial planning may be just what you need to ensure that you and your partner remain happily on track for many Valentine’s Days(and Mardi Gras) to come.

The Basics of Benefits Enrollment Packages

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Photo courtesy of Brennan Clark on Flickr

When you think about your compensation, do you immediately think of your salary?

Most people do. But your salary is only one part of your compensation — and if you fail to account for the other aspects of that, you might be missing out.

Those other aspects, of course, are your benefits. As open enrollment season approaches, it’s worth considering the basics of your benefits package. By optimizing the benefits you use, you may keep more money in your own pocket — which is money you can then save and invest.

Here’s what to keep in mind.

Get the Right Health Insurance

One of the biggest benefits of working with a company is the fact that you get access to group insurance policies, which are far cheaper to utilize than buying your own private insurance.

The obvious policy you want to get through your employer is health insurance — but what might not be so obvious is the right choice of all the policies you can choose from.

Many people opt for the plan that offers the lowest deductible possible (which can still feel pricey even when it’s the smallest amount available). That makes sense if you want to minimize what you could be on the hook for paying out-of-pocket.

But you might want to at least consider a high deductible health plan or an HDHP. Yes, the deductibles are high. Some run into the thousands of dollars for individuals and even more for families, which can feel like a bad idea to take on if you know you’ll have to pay so much for healthcare.

HDHPs, however, remain a good option for two main reasons. For one, your monthly premium payments will be lower. That keeps more money in your pocket — which you can then use to save into an account that an HDHP gives you access to a health savings account.

HSAs are the second reason why HDHPs make a lot of sense. They offer tremendous tax advantages.

You can deduct your contributions from your taxable income. You can invest the money you contribute so it can grow over time — and those earnings are tax-free, too. And finally, you can spend the money in the account, tax-free, if its used on qualified healthcare expenses.

No other account offers so many tax advantages, which makes HSAs well worth the HDHP required to use them. If you want to get even more value from them, max out your HSA — but don’t spend down the money in the account.

Instead, pay your medical bills out of pocket as long as you’re working and earning an income. Leave your HSA money invested until retirement. Then, you have a specific fund of money to spend on healthcare in your later years (when medical bills will likely be the highest expense in your retirement budget).

As for that high deductible? You can either build in a line item to your budget to set aside a little money each month in case of emergencies. Or you can plan to use your emergency fund should you need to cover a big medical bill before you hit that deductible.

Look at Other Policies, Too

In addition to health insurance, your benefits likely include disability and life insurance. Life insurance policies are usually small, and the benefit paid out to your beneficiaries may only be enough to cover the cost of a funeral.

Still, it’s better to opt into this coverage and relieve your surviving loved ones of being on the hook for such an expense. (It also means any assets you leave behind can go to those beneficiaries, instead of being used on any end-of-life costs).

If you have people in your life who depend on your income for their financial stability (like a spouse, even one who earns their own income, and certainly any minor children), you may also want to buy term life insurance to supplement the small policy you get through work.

Disability insurance is one of the best benefits your employer offers because it protects your biggest asset: your ability to earn an income.

Life insurance only covers you should your life actually end. But if you’re injured or ill and can’t work, disability will kick in to provide an income when you can’t earn one.

You need to look at both short-term and long-term disability. Both these policies cover different needs — and what you get through your employer may or may not be enough.

Look at what they offer and opt-in, as it will likely be cheaper than buying your own policy. Then, consider what gaps that coverage leaves and consider talking to a financial planner about strategies to cover those gaps as necessary.

Take Advantage of Your Retirement Accounts

Retirement plans that provide you with an employer match offer a great way to literally increase the amount of money going into your account. If your match is 3 percent, for example, your employer will match your contributions up to 3 percent.

Contributing at least enough to your retirement accounts to get the full match offered is like giving yourself an instant raise that goes straight to funding your future self. It doesn’t get much better than that.

Keep in mind that this could be an option for you even if you don’t have a 401(k). You might have a plan like a SEP or SIMPLE IRA, but these could also provide your match. If you’re not sure, ask your HR department and get information about what your plan includes.

What If You Already Max Out Your 401(k)?

That last point might not be helpful if you’re already on top of it and contribute not just enough to get your match, but enough to completely max out how much you can put into the account. (That’s $18,500 in 2018.)

If that’s the case, consider other ways to save. Do you have other benefits that allow you to take advantage of tax-advantaged accounts or even equity compensation?

Look into your benefits and see if you can take advantage of ESOPs, ESPPs, or nonqualified deferred compensation packages. These are a great way to build wealth in a different way than just topping off retirement accounts.

What Else to Look for — and What You Shouldn’t Use in Your Benefits Package

As you go through your benefits, you may want to take advantage of additional offers, like stipends or reimbursements for wardrobe or transportation. Some companies offer perks like free (or at least discounted) gym memberships, meal subscription services, tuition,  or childcare.

If you’re not sure, ask HR what kinds of perks might be available. The answer might be, “none,” but it’s worth making absolutely sure if you could opt in and use what the company offers rather than spending your own money on services you use anyway.

But you shouldn’t fall for the so-called “teasers” that may be included with your benefits. You don’t need things like accidental death insurance. You probably don’t need vision or dental insurance either.

A more effective use of money will likely be setting up a comprehensive financial plan that accounts for these kinds of things — and is less expensive than the fees and premiums you’d pay otherwise.

Good financial planning can also help you evaluate all the benefits available to you, and make sure that you take advantage of the ones that will help you add to your nest egg or help your dollars stretch just a little further.

Before You Kick Back to a Traditional Retirement, Read This

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Photo courtesy of ulvi can @Flickr

 

Dreaming of the days you can sit on the beach, tropical drink in hand and not a thing on your to-do list? Ready to call it quits at your job and walk out to an endless vacation where you never have to check a single email or attend a meeting again?

It’s nice to daydream like this when you’re in the middle of your career, drowning in responsibility at work and home, and feeling like you’ll never catch up on all the sleep you missed in the last 10 years.

After all your hard work, you might look forward to the day when you can quit for good and kick back to a relaxing retirement free of any kind of obligation or responsibility.

But you may want to rethink that plan because more and more research shows that a “traditional” retirement — where work up until full retirement age only to quit and never work another day in your life — can be bad for your health.

The Potential Pitfalls of a Relaxing Retirement

When you simply stop going to work and have nothing on your to-do list, you can quickly run out of reasons to leave the house and interact with others during your everyday routine.

Many retirees become increasingly secluded and lonely without jobs to go to or people to see for a specific reason.

You can always plan trips to visit friends and family, of course. But it’s hard to beat the loneliness that can settle in when that’s not part of your day-to-day life.

A UK study found that loneliness, depression, and physical health issues are common among retirees who kick back to a traditional retirement with nothing on the daily agenda.

Initially, that relaxing retirement is restful and rejuvenating. But the longer it extends, the more prevalent health issues become as retirees increasingly retreat — consciously or subconsciously — from a more active life.

How to Have a Healthier Retirement

To avoid these pitfalls, plan your retirement around communities, relationships, and experiences. Researchers at Harvard found that you need to organize this new phase of life to include 4 fundamental factors for good mental and physical health:

  • A new social network outside of the job you leave behind.
  • Play, meaning hobbies you enjoy like camping or tennis.
  • Creativity, in whatever form that takes for you — taking up some sort of art, making something by hand, and so on.
  • Constantly seeking to learn new things and keep your mind engaged.

If you don’t have family nearby, consider how you can engage more in your local community, make new friends, and maintain existing relationships with neighbors or coworkers.

You could also consider a move as part of your retirement planning so you can be closer to those you want to have good relationships with as you age.

Play and creativity may be easier to weave into your retirement plan, as these are fun and rewarding activities. The key is to be intentional and make them part of your plan — don’t just assume you’ll naturally fall into something that satisfies these needs.

Retirement planning needs to cover the financial stuff. But you can plan for your actual retirement lifestyle, too. Make sure you give yourself a reason to get up, move around, and interact with other people every single day.  

You’ll Enjoy Financial Benefits When You Switch Your Retirement Mindset, Too

When you consider alternatives to the traditional retirement that include possibilities like working part-time, putting your expertise to work as a consultant, or even starting your own business, you also make retirement planning considerably easier.

For one, you’ll enjoy all the benefits outlined above. Your physical and mental wealth will likely be better than if you kicked back and did nothing at all.

That, in turn, benefits your financial health. Healthcare is the biggest expense for most people in retirement. If you can maintain your health for as long as possible, you’ll likely pay less in medical costs down the road.

Plus, creating some form of income stream beyond just your retirement savings nest egg means you alleviate some financial pressure. If you continue to work — even if it’s just part-time — you’ll earn some amount of income.

That means you don’t need to rely 100 percent on what you saved during your working years to last you through 20 or 30 years’ worth of retirement.

Are You Planning for an Active, Robust Retirement?

Of course, kicking back and relaxing should be part of retirement. But it shouldn’t be the only thing you do in your life after work.

“Retirement” today could simply mean the day you no longer need to depend on a full-time job that provides you with a specific number on your paycheck.

It’s the day when you’re free to explore your hobbies, pick up a part-time job doing something you really love, or volunteer with an organization you’re passionate about.

This could be your chance to start a second act as a freelancer or consultant. You could start your own business — or even learn a completely new set of skills that allow you to start an encore career (with more flexibility and a lighter schedule than your previous job, of course).

Retirement shouldn’t mean you retreat from life. Find ways to stay active, engaged, and productive.

You’ll be happier as a result — and as a bonus, you could make it even easier to fund the retirement you want since you won’t be sitting around, twiddling your thumbs and hoping your savings alone will be enough to fund your retirement lifestyle.