Family Financial Update

Great food for thought

The financial experts have differing points of view when it comes to kids and allowances — always debating whether to give $5 or ten. But underwriter, financial consultant and estate planner Tripp Friedler, in his new book, Free Gulliver: Six Swift Lessons in Life Planning (Trost Publishing), suggests that to best teach kids how to manage money, give them a big allowance. But here's the caveat: they must use it for everything. Friedler gives his 15-year-old daughter $50 a week. But she has to use it for all of her entertainment and consumer spending: movies, clothes, dinner with her friends, even music she downloads to her iPod. When it's gone, it's gone — no going to Mom for $10. "Counterintuitive as it may sound, a generous allowance is a great way to teach the value of money," Friedler believes. "$50 sounds like a lot, but it's not nearly enough to finance everything a teenage girl wants. She has to choose between a movie date with her friends or that $80 sweater she saw at the mall. And when it's her own money, she's a lot more likely to wait for that sweater to go on sale before she buys it."

We all want to give to our kids because we love them so much. But Friedler also makes a great point about financial independence. “Some of the most successful people in the world started out with nothing and built their fortunes with their bare hands. Succeeding on your own is the greatest feeling in the world. If you're ever tempted to 'give your child everything,' without giving him the opportunity to struggle or fail, stop and ask yourself, Why would I want to deprive my child of that great feeling? Preparing your children to enjoy success on their own merits, on their own terms, is what it's all about. That's a legacy worth living."

Start saving now!

The cost of a college education is expected to triple by 2020; the tuition rates have been rising at more than 2.5 times the rate of inflation over the past 10 years.

But a new study delivers a hopeful message: parents can afford college tuition by saving just a few more dollars a day. The study, from Citi and Upromise says that a typical American family with two young children (ages 2 and 5) — defined as parents who are both 32 years old, with a combined income of $60,000 — can send those children to a four-year public university (starting in 2018), while still meeting their retirement needs, by saving another $4.42 per day, beginning today. (This dollar figure is actually modest, thanks to more student aid being available than ever before: three out of four students receive financial aid and total aid has doubled over the past 10 years).

“The message of our research is a powerful one: saving early can have as big an impact on a family’s ability to pay for college as the family’s income,” says Rob Rosenblatt, executive vice president, Citi Cards, which offers a rebate card, the Citi Upromise MasterCard, where a portion of spending is automatically saved into a college savings account.

The study figured that if the typical American family with a college savings gap of $28,022 had started saving five years earlier when their first child was born, they would have faced a much smaller college savings gap of only $12,401. To fill this gap, they would have had to invest just $1.87 per day.

Conversely, if this family waits an additional five years to start saving (when their children are ages 7 and 10), assuming similar incomes, their college savings gap goes up to $42,413, or $7.10 in additional needed daily savings.

Here’s a great gift suggestion: Relatives and family friends can also open a Upromise account, and direct the college savings they earn to any student of their choice.

For more info: 1-800-Upromise, or visit