HerMoney Podcast Bonus Mailbag #14: Children, Families and Finances 

Kathryn Tuggle: (01:06)
Absolutely. 2020 is on the horizon. We want to get all your questions for this year answered.

Jean Chatzky: (01:11)
Rebecca Cohen is my new assistant. She’s been with us now for a couple of months and she’s getting me down to inbox zero. I’ve never been at inbox zero.

Kathryn Tuggle: (01:20)
It’s a big deal. To be an inbox zero.

Jean Chatzky: (01:22)
It’s a little frightening to try to go to inbox zero because you’re, I mean, I’m a little frightened at what I lose from deleting those email messages from 1994 but I’m just going to be brave about it. And go ahead.

Kathryn Tuggle: (01:35)
1994, really?

Jean Chatzky: (01:36)
Yeah, no, not 1994 but not so far away from 1994 I think. What was the, uh, two thousand. Two thousand. Yeah. No. 2010. 2010. Becca said not 2000. Thank God. 2010. I had 73,000 emails.

Kathryn Tuggle: (01:54)
Wow. Wow. I actually just recently went through my Gmail, which I’ve had since 2004 and I did a search, you can search for certain files that you want to delete and I happened to see in 2004 I was sent an email from a friend of mine who I haven’t talked to in a really long time and he asked me if I’d like to get a drink and I randomly decided to reply to it as if he just sent it. And that was in 2019. So 15 years later I replied to this request for a drink.

Jean Chatzky: (02:32)
Did you have a drink?

Kathryn Tuggle: (02:33)
We did.

Jean Chatzky: (02:33)
How was it?

Kathryn Tuggle: (02:34)
It was fine. He was great and we got to catch up. But, he was like this, this is a first, a 15 year delay.

Jean Chatzky: (02:41)
That is unbelievable. I hope you didn’t say, I’m so sorry for the delay.

Kathryn Tuggle: (02:45)
No, I just said, “a drink sounds great. How’s next Thursday?

Jean Chatzky: (02:50)
Fabulous. I’m going to put that one in my back pocket. All right, so I know we tried to organize these questions a little bit. So today these on the topic of kids and families and relationships.

Kathryn Tuggle: (03:02)
Questions around children and family raising and supporting children and educating them about money.

Jean Chatzky: (03:08)
Awesome. All right, let’s go.

Kathryn Tuggle: (03:10)
Our first question comes to us from Becky. She writes Hi Jean. I’m a mom by adoption twice and the founder of helpusadopt.org and national adoption grant program. So many women today, both single and married, find themselves needing and wanting to adopt. However, the average household income is $54,000 and an average adoption costs $40,000 to $50,000 especially when people don’t necessarily plan to adopt like they do with buying a home. How do people afford it? Do you have any suggestions for what women can do to save for adoption? Obviously there’s gofundme and I know some employers offer adoption stipends, but what other options are out there?

Jean Chatzky: (03:50)
Becky, This is a great question and I think it’s the first time I’ve actually been asked this question in my whole career as a financial journalist, so thank you so much for raising it and bringing it to us. You’re absolutely right about the fact that some employers are now offering assistance. There are also some state programs that offer assistance and there are some substantial adoption tax credits built into the tax code around $13,000 available for an adoption, so that is definitely not nothing but it’s also not that full $40,000 to $50,000 cost. My guess is that for many families, this is not something that happens overnight. This is something that people have been thinking about for a while and so I would say think about it like any other financial goal. When you have your mind on affording a down payment for a house, you think about ways to boost your income, ways to cut your spending and you funnel all of those extra resources into a pool of money specifically for this purpose. f this is the goal that moves very quickly to the top of your list. I think that there are often ways to increase the available pool of assets. There are also ways to borrow, not just from banks who do have loans for these purposes, but this is one of those scenarios where even though I am not necessarily a fan of borrowing money from family, this might be an exception to the rule if there are potential grandparents who may have assets that they would be willing to pass along to you in life rather than at death. Either way, I hope that there are people who are listening to this particular question who are a little more knowledgeable than I am and if you have thoughts that like to share to the conversation, please write us a letter, send us an email at mailbag@hermoney.com And it sounds like something we should do an entire show on.

Kathryn Tuggle: (06:06)
I would love that. Our next question comes to us from a member of our private HerMoney Facebook group. She writes, we are finally getting around to starting 529s for our girls, ages 8, 5, and 2 should we just have one account to share among them or should they each have their own account? If separate, should we give more to the oldest child’s account to make up for time lost on saving? We’re already fully funding our retirement accounts and have no consumer debt. Thanks so much.

Jean Chatzky: (06:32)
Again, great, great question. And just so everybody knows a little bit more about the private Facebook group, so we do run this HerMoney Facebook group. It is private in that you have to ask to be admitted to the group. And then once you ask, there are just three questions to prove that you’re a real person who actually is interested in belonging. What I love most about the HerMoney Facebook group is that there are thousands of women in there answering each other’s questions every single day based on their own experiences. It’s the ultimate judgment free zone and I learn a lot when I go in there myself. So, thank you for being a part of it. You want to have one 529 for each of your girls. They should each have their own account in their own name. I probably would put more into the account of the oldest who is closest to college just to make up some time. And one thing that you should know about these accounts is that you can move money between them. If for example, your oldest child, because she’s so brilliant, gets a full ride and doesn’t need all of the money, then you can take the money out of that account and you can move it to the accounts for your other two daughters so that they’ll be able to go through as well. And if all three of them get full rides, you can use that money for grandchildren. The other important difference is going to be in how you invest the money for each of these three girls, because the eight year old is substantially closer to starting college than the five year old and the two year old, you’re going to want to be in a less aggressive portfolio, probably a moderate age-based portfolio for the eight year old, whereas you can be more aggressive for the five-year-old and the two year old. And by all means, don’t feel that you have to do this all on your own. Again, we’re leaning on the grandparents in this show, but if you’ve got grandparents, aunts, uncles, cousins, anybody who says to you, what should I get, Susie for her birthday? you say, Susie doesn’t really need anything but a contribution to the 592 college savings plan would be great. And what happens is they’ll get Susie something a little bit smaller, but they’ll make a contribution as well.

Kathryn Tuggle: (09:00)
Amazing.

Jean Chatzky: (09:00)
Let’s just take a quick breather here to remind everybody listening that her money is proudly sponsored by Fidelity Investments. What if you could demand more from your money? What if you could make your savings work as hard as you do and what did that helped you reach your goals faster? It all starts with a financial checkup and an understanding of what you own and what you owe. From there, we’ll work with you to evaluate your investment options and ways to grow your savings. You can get started at fidelity.com/demandmore. We are back with our mailbag special. We’re tackling your questions around raising your kids, supporting your kids. Kathryn, what else do we have?

Kathryn Tuggle: (09:40)
Our next question is from Kirsten in Fort Collins, Colorado. She writes, I so appreciate her money and have learned so much from listening to the podcast. My 26 year old daughter is going back to school. She has about $8,000 in credit card debt that she will not be able to pay off before she quits her job and start school in January. She’s thinking about rolling the balance over into a new zero APR credit card, but my husband and I think she should get a personal loan with a fixed interest rate instead. She won’t be making any money while she’s in school and we’re going to help her with living expenses while she’s there. She has federal student loans for her education which will take about 16 months to pay off. My worry is that we’re going to get caught up in a web of rescuing her, which we don’t want. What would be your suggestions for the best ways to support her but not to enable her.

Jean Chatzky: (10:27)
Boy oh boy. So I can totally see where you think this might be heading and I want to help you prevent that. If she rolls the balance over to a new zero APR credit card, the teaser rate on that card will expire in somewhere from 12 to 18 months. If she is out of school in 18 months and able to start making payments on that debt, that’s okay, but I’m not sure how long she’s actually going to be in school. And what you don’t want is for the teaser rate to expire and for her to then have to start making payments at a higher rate. I suppose when the teaser rate does expire you could then move the money over to a personal loan but at that point she won’t have any income and so qualifying for that personal loan will probably be much more difficult. I actually think that your 26 year old going back to school should have a part-time job simultaneously and I think it should be a lucrative one. I think she should think about getting her bartending license and working a few nights a week at a place where she can earn substantial money that she can not only put toward her college debt and her living expenses, but toward that credit card debt as well. And then I would just hold a really hard line with her because you’re right, if you support her fully through this time and you bail her out where this credit card debt is concerned and then you bail her out where those student loans are concerned, I think you are looking at a lifetime of potentially bailing her out. She needs to work. And if she really wants to be in school, she will be able to work while she’s in school. Simultaneously. I worked through college, I know Kathryn, you worked through college. My parents both worked largely full-time through college. There’s a lot of research on the fact that people can work while they go to school. They may not be able to work and go to school and have the social life that they want. But you can have two out of three and I think we can tell which two out of three are most important here.

Kathryn Tuggle: (12:56)
Right. And I worked in the office of admissions when I was in college answering phones and questions and there was a lot of downtime when I would just open up my computer and work while I was working, so you know of bartending, if she doesn’t want to be on her feet, here’s a lot of secretarial-type jobs…

Jean Chatzky: (13:12)
…where you have the ability to multitask, to do some studying and not feel like you’re losing that entire time. Yeah, I was just thinking about well-paying part time jobs and for some reason bartending always ends up pretty high on that list because of the tips.

Kathryn Tuggle: (13:28)
Yeah, cash is great too. You know, even just a babysitting side gig is good as well.

Jean Chatzky: (13:32)
Well babysitting too because if you’re babysitting, especially for young kids and the kids are sleeping, then you’re getting paid really well in cash and you can study.

Kathryn Tuggle: (13:41)
Totally.

Jean Chatzky: (13:41)
So I would be pretty tough with her about how much money you are and are not willing to give her.

Kathryn Tuggle: (13:49)
Our last question comes to us also from a member of our private HerMoney Facebook group. She writes, my 12 year old just started her own dog walking/dog sitting service and actually has a few clients. I’m pretty proud of the kid. She has a great attitude of, I don’t want to spend my money on frivolous things, so she will be saving most of her earnings. I was considering helping her open a brokerage account to start learning about investing, but my ex was very anti investing when we were married, so I’m still in the learning phase myself. Do you have any suggestions for how I can get started with her in a way that we can learn together? Do you have any tips on your favorite brokerage? Please note she won’t have a lot of money to invest yet, so we’ll be starting small.

Jean Chatzky: (14:28)
I love this idea of learning together. I think this is fantastic and I would say if you’re thinking about buying an individual stock, then pick a company that you both know something about because it’s a part of your life. Pick a company that you’re both interested in that you both sort of understand what they do and you think, wow, I really like this product because then you’ll have more of an interest in actually tracking the fortunes of that product. Ordering the annual report, reading about who’s running this company and how they got to the place where they’re running this company and what this company is doing to grow. Mutual funds, although they are more diverse and therefore less risky, they’re not as much fun, but you could get some fun out of them by picking elements of those mutual funds that you would study. The same way that you would study these individual stocks. So for example, if you buy an S & P 500 index fund and you can figure out five different stocks in the S & P 500 that you both would like to know more about, you can study them in the same way. And then you put Yahoo Finance on the computer and you keep reading and you watch the ups and downs and you have a conversation about it. And it’s a very, very interesting exercise. I wouldn’t do it with more than a small portion of her earnings, but you could because she is working for this money as long as it’s earned income and she’s filing a tax return, she could put it in a Roth IRA, she’d be among the youngest to open a Roth IRA, but if she pays taxes on this money now, she never has to pay taxes on it again. And if you don’t want to go that route, if you want to just do a plain old brokerage account, that is just fine too. As far as my favorite brokerage, I think any of the low cost brokerage firms are just fine. Fidelity sponsors this podcast, we are a big fan of them.

Kathryn Tuggle: (16:38)
If she were to open a Roth IRA, would it require her setting up an LLC or incorporating?

Jean Chatzky: (16:44)
No it wouldn’t. It’s just you have to be able to prove earned income, which generally means you have to file a tax return or you have to be paid on the books and I can’t tell she may not be being paid on the books. I mean, I certainly wasn’t paid on the books when I was a 12 year old babysitter or dog walker or lemonade seller or any of those things, so that may be premature. I love this idea of learning about the markets together. You’ll be building your confidence in tandem, which is really, really great. Amazing.

Jean Chatzky: (17:13)
Thank you so much for joining us today on HerMoney. As we dig through our mailbag, we hope that we’ve helped to answer some of what’s on your mind. Keep writing mailbag@hermoney.com and if you like what you hear, please subscribe to our show at Apple Podcasts. Leave us a review because we love hearing what you think. We also want to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Track Tribe and our show comes to you through PRX. Thanks so much for listening. We’ll talk soon.