Episode 11 – Ideas For Teaching Children How to be Financially Fit

Episode: 11
Originally Aired: July 29, 2009
Topic: Ideas Tor Teaching Children How to be Financially Fit with guest Neale Godfrey

The Lange Money Hour - Where Smart Money Talks

The Lange Money Hour: Where Smart Money Talks
James Lange, CPA/Attorney
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Beth Bershok: We are talking smart money, thank you so much for joining us tonight. I’m Beth Bershok, along with James Lange, CPA/Attorney, attorney, best selling author of two editions of the book Retire Secure Pay Taxes Later, and we also have a very special guest. Now this is a show that all parents should pay attention to, all grandparents, all aunts, uncles, anybody that is responsible for a minor because we have with us today Neale Godfrey. Hi, Neale, thank you for joining us.

Neale Godfrey: Thank you, it’s great to be here.

Beth Bershok: Oh, we are so happy you could join us. Now, Neale, her very first book for adults was called Money Doesn’t Grow on Trees: A Parent’s Guide to Raising Financially Responsible Children. It went to number one on the New York Time’s Best Seller List and that was just the start. Neale, after that, you wrote another, what, 15 books?

Neale Godfrey: Yeah, I know it sort of indicates that I have no life.

Beth Bershok: You just spend all of you time writing books. Now you’ve also been on Oprah, Good Morning America, The Today Show, NBC, CNN, so we are so glad that you could join us tonight. Now, can you take me back to when you wrote the first book, which I think was published in, what, 1994?

Neale Godfrey: Uh huh.

Beth Bershok: And what gave you the idea to write a book on how to raise financially responsible children?

Neale Godfrey: Well, at that point, I was President of the First Woman’s Bank in New York City and I watched women be disempowered handling their own money. And I did research and found out that it’s because we didn’t really learn anything when we were kids. And my two kids were little at that point, so I decided I would look for a book for them and there were none. Kids and money was not a topic. So, my daughter, who was about 4 years old then said, mommy, why don’t you write the book. So, I didn’t have a good excuse not to, so mommy wrote the book and really I created the topic of kids and money back then.

Beth Bershok: I want to give your website because all of the books are on the website. It’s www.childrensfinancialnetwork.com. Great stuff on there and there are even things for kids to do on that website. You went on to form the Children’s Financial Network and I have to tell you this Neale, Jim has read the first book Money Doesn’t Grow on Trees so he just wants to get right into it.

Neale Godfrey: Great. And I’ve read your book, Jim.

Jim Lange: Oh, well, thank you. First, I want to tell you I thought it was wonderful, and the second thing that I didn’t like was, I realized I’m not such a great financial parent. I’ll tell you the thing that really threw me early. You suggested turning over to your teenager complete management of their clothing allowance, and the total amount of money that they’re going to spend annually for a number of things. And I thought, wow, I’m not even close to doing that.

Neale Godfrey: Well, Jim, let’s think about this. Now, if you’re a parent of a teenager, you wouldn’t dream of making any buying decisions, are you going to go out and buy them clothing, c’mon, why would you do that to yourself? So the fact of the matter is, they’re making the buying decisions, let them make the spending decisions. You just set the budget, let them go do it.

Jim Lange: I actually think that’s great because we’ve just kind of done it on a piecemeal basis. We’ve never said, here’s how much you have per year, or even per month, and it really, to me, gets people thinking about budgeting early and I was just astounded in how many things that I probably should be doing but I’m not so…

Beth Bershok: Did you take notes when you were reading the book?

Jim Lange: I actually did.

Neale Godfrey: It’s never too late, it’s never too late, I promise you.

Beth Bershok: Now when you’re talking about the money that Jim just mentioned, where you want the child to be responsible for the money if they’re a teenager, or even a budget for the year, where is that money coming from?

Neale Godfrey: Well, in terms of clothing, what you’re doing is you’re actually saying to them on a quarterly basis, start your daughter on a quarterly basis, that’s number one. So let’s say back to school. The first thing you have to do is say to her, what do you think you need? Now you’re going to get a list that’s unbelievable, like just prepare yourself. And what you want her to do is start researching what she thinks the costs are for each one of those items. Then you sit down and go, item by item, and say, here’s a newsflash, you’re going to be shopping at, and fill in the blank, whatever that is, and not at whatever you think you are going to do. And I don’t think you need ten pairs of jeans, I think you need three, and I don’t think you need four pairs of sneakers, I think you need two. And you go down, item by item, in terms of what it is and say, we’re willing to put that amount of money into either a checking account so that she can have a debit card against that, or you know a certain amount of gift cards or something like that that you could specifically buy from the store that you’re permitting her to buy at and let her go figure it out. All of a sudden you’re going to see her shop sales and get very creative.

Jim Lange: At what age do you like having children having their own checking account and their own credit cards?

Neale Godfrey: I like to see them weaned off, sort of, mom and dad and onto their own, when they’re about 11, 12, 13, 14.

Beth Bershok: Eleven is early, that’s young.

Neale Godfrey: It is, except when you start seeing them shift to say, I want to make the buying decisions then you say to them, that’s fine, but you’re also making the spending decisions. Now, by the way, if they want to buy the designer jeans, stay out of the decision. That’s fine, but they have to earn that extra money to buy that. Or, they’re just going to have designer jeans and go bare foot and you have to stick to it. They really do have to learn the consequences of their buying.

Jim Lange: Can I ask, would the same type of thinking go for, I mean, obviously, there’s going to be listeners who could afford anything that their kids wanted and I think your point is, even if you can, that’s still not a good thing, and there’s going to be, obviously, listeners who are on a much tighter budget so how would you address even specifically people who really have enough money that their kids could afford 10 jeans, but it would just not be prudent to do that.

Neale Godfrey: This is really advice for everybody. When you don’t have the money, the decisions happen to be easier.

Jim Lange: Right.

Neale Godfrey: And this is amazing and this is for grandma and grandpa and everybody out there. We are dealing with the, I want, I want, generation, that’s number one. Number two, there is something called the nag factor and the nag factor is, actually somebody paid for a survey, this kills me, that our teenagers can nag. Guess how many times before we, as parents, say, okay fine, and buy it?

Beth Bershok: I don’t think it’s many, I’m going to say three.

Neale Godfrey: Uh huh, alright Jim, how much? You ready for this one? Nine times.

Beth Bershok: Nine, it takes that many?

Neale Godfrey: Yeah. Now listen to this one because grandma and grandpa that are out there. Grandma and grandpa can remember when they grew up and their parents lived in the depression. There was no nag factor, you didn’t stand there and go I want, I want, I want. It was no. And by the way, we heard those rules. So, the fact of the matter is, we created the I want, I want, generation by leaving the door open for them to nag us. There’s not a parent in the world, and I don’t care what socioeconomic level that you live in, that says, oh, my kids are entitled to get whatever they want. Who’s going to say that?

Jim Lange: I think not very many people say it, but I think as a practical matter, a lot of parents, that’s what they end up doing in terms of their behavior. One of the things that I thought was very helpful in your book was the saver versus spender quiz. And one of the things that I also liked is you know you often take on the role of the stern parent, if you will, you know you have to do some work to get an allowance and not just things that say children should do anyway. But one of the things that you mentioned was to teach children how to enjoy the money that they have saved and that it’s okay to spend some money. And that’s something that’s, frankly, some of my clients have a hard time with, and you gave the example of the kid who didn’t want to spend money on ice cream and his cousins would end up buying the ice cream for him. And interestingly enough, and I’m in my 50s and my friends are about the same age, we actually have one of those guys. He never wants to spend money on anything and recently he invited us to dinner and we all said yes, and then he said, oh, by the way, would you go out and do the shopping and pick up the steaks and the salad.

Beth Bershok: There’s always one in every crowd.

Neale Godfrey: By the way, it’s usually your brother-in-law. I just want you to know that’s how it usually works. No pointing whenever I do speaking there’s always someone in the audience looking at someone else and it’s like, okay, we don’t need to do that, we don’t need to expose them, but we all know people like that and it has nothing to do with being able to afford it. We’re, obviously, talking about people who can afford it and they’re somebody who, check time comes, and you know they don’t reach for it.

Beth Bershok: Do you think that behavior starts when they’re children?

Neale Godfrey: Absolutely, you see it, you do see it. Now Freud would describe this as anal behavior, it’s a fear. I describe it as sort of a pain in the neck, but the fact of the matter is, it’s a fear. It’s a phobia of spending. I just had, it was a tragic incident, a friend who died of brain cancer, and she was always the one who never got her hand on the check, we always picked up everything for her, and she always wanted to go to Paris. And a friend and I really bought into the fact that she didn’t have any money and she and I were going to give her this trip to Paris, and unfortunately, she died before she went to Paris.

Beth Bershok: That’s a terrible story.

Neale Godfrey: She died with a $5 million estate.

Beth Bershok: That’s even worse.

Neale Godfrey: Now, what have we learned from this? You need to have a healthy balance between saving and spending and what we think our kids are born with, a financial personality, and as Jim said in my books, I sort of do a little quiz so you can find out if you have a saver or a spender. But we think savers are way better because you can’t see yourself in trouble. This is what’s interesting, when you have more than one child, it seems to be one is one personality and the other is the other personality. Even, listen to this one, even twins. Twins can be separated and they will decorate their homes exactly the same way and have their favorite colors be the same. When it comes to spending, ones a saver and ones a spender. I do not know why. I have yet to meet any parent who has two kids where their financial personalities are exactly the same.

Beth Bershok: And if you have more kids, it’s totally different. There were five kids in my family, all completely different when it comes to finances.

Neale Godfrey: Yup, how interesting is that, though? Again, I don’t know why, but when we have lots of money, Jim, we’ll do a survey, but I don’t know why.

Jim Lange: Well, I actually found so many of the things in your book really interesting, getting young children to become involved with credit cards, and comparison shopping, and eBay. These are some concepts that I really hadn’t done as a parent. And the other things that I really liked, and this is some of the problems that I’m having with some of my clients and even grandparents, a lot of my clients came from a house and I’m included in that set, where the parents paid for a college education and that was kind of a given and that’s certainly what they want to do with their kids. But some of these parents, frankly, don’t have sufficient funds to cover the costs of a $40,000 a year tuition, and I fear that some of them are jeopardizing their own financial security, and you also address that and say, well, that’s not so good.

Neale Godfrey: Well, and you’re absolutely right. And I know in your practice that you tell people you can borrow for college, but you can’t borrow for retirement. We really have to look at that and the parents have to come clean with the kids, too, that in today’s world, if you’ve been downsized or you’ve lost a job, now community college may be a viable option for these kids, and there’s nothing wrong with that. And you need to be able to say to the kids, I can’t afford it without any apologies afterwards. This is what it is. And I don’t think it’s prudent that you necessarily rack up $50,000 worth of debt per year for four years. It’s a lot of money.

Beth Bershok: Do you think, Neale, in this economy those conversations at least should be happening in a lot of households?

Neale Godfrey: They better be happening, yes, I agree.

Beth Bershok: And I mean, just day to day. We are approaching back to school for instance, back to school shopping is going to be going on next month, but with the things going on and the recession that we’re in, it’s probably going to be a different story.

Neale Godfrey: It is going to be a different story. In fact, the statistics are going to be coming back right now that shopping is going to be down for back to school and that people are looking to be more economical and its got to be a fact of life. This is now a situation to come clean with your kid, and again don’t apologize. Now, let’s think of ways we can save and you have to start talking about needs and wants with these children.

Jim Lange: You seem to be a big advocate of, you’re using the word, coming clean or total disclosure. I think the new word that everyone’s using is transparent. You seem to be a big advocate of that, even things in terms of Wills and trusts and guardianships. You know, whenever I have a client with minor children, I always tell them that the most important thing about doing the Will, even forgetting the money, forgetting the life insurance, which is obviously important, forgetting all financial considerations, is the most important thing is, the guardianship provision of the Will. In other words, who will take care of the child or children, in the event that something happens to mom and dad. And you also seem to be an advocate of discussing that with your children and talking about that guardianship provision and to let them know that there is money available for them and that they will always be provided for, even if something happens to mom and dad, and that there is both life insurance available, and that there is a guardian. And interestingly, I always talk to clients about that, but I don’t talk to them about what they should be talking to their children about. So maybe you could expand on that a little bit, about, let’s assume, that you have a child anywhere between, say, 4 years old and 21 years old, and you are doing a Will, or you’re redoing a Will, or as you point out, so many people don’t have Wills. And let’s say that I can handle the lawyer part with the client, but if you could expand on what kind of conversation the parent should be having with the children, that would be very helpful.

Neale Godfrey: Well, I couldn’t agree with you more in terms of this is the most important financial planning you’re ever going to do. The point is, that we as parents, want to reduce the stress on these kids and, God forbid, something does happen to the parent. You don’t want these kids to, all of a sudden, find out that so and so is the one raising them. I mean, what a horrible position to put your kids in. You want them to know that if anything happens to mommy and daddy, and by the way, even our little 4 year old watches fairy tales where mom or dad have gotten killed. In fact, I defy anyone to mention a fairy tale that we certainly grew up with that there wasn’t some form of single parent end, or the kid wasn’t an orphan, by the way.

Beth Bershok: Oh, it happens all the time. Bambi, number one.

Neale Godfrey: Bambi shot. Mom is shot in the first frame. Lion King, dad is trampled to death. I mean, it’s nice you know you can just keep going. Sleeping Beauty, and on and on and on. And they’re raised by wicked step mothers and it’s a nice thing. So it’s not that these kids don’t think about that, and what you want to do is not scare them to death. You sit down with the little ones and say I’m sure nothing’s going to happen, but we just want you to know Aunt Allison is going to raise you. You’re going to live in this room, you have to answer the questions they’re going to have as a little tiny one, a six year old, wants to know. Or they can have their own room, let’s say, and still have their friends. And the answer may be yes, or no, no, you’re going to be moving to Pittsburgh with Aunt Susie and this is where you’re going to live. Let them know that, as they get older, you give them more and more information. And the older ones are going to want to know, do I get to go to summer camp, do I get to do this, do I get to do that, do I get a car, do I go to college, whatever? And by the way, as you’re sitting there when your clients are sitting there with you, Jim, and you’re figuring out what they do need that’s appropriate in terms of insurance. They should be adding up those numbers with you and there should be enough insurance with the beneficiaries being those people who are going to be guardians. One of the biggest things, as you know, as a financial professional, is the kids. Again, God forbid, we just think about, well, let’s just cover college. Well you may have to cover the cost of a room being added on for your children, or summer camp, or whatever that is.

Jim Lange: And the other thing that I sometimes have to deal with is, let’s say you have a brother, and by the way, this is my own little bias. I happen to like two parent homes. I mean, that sounds very old fashioned today, but so, for example, in my own Will, the guardians of our child is, let’s say, couple number 1, and if couple number 1 is not together and married, then instead of it being to either the husband of couple number 1 or the wife of couple number 1, it’s couple number 2.

Beth Bershok: Oh, now that’s interesting.

Jim Lange: Now, if you have, say, one person who you really want, whether they’re married or whether they’re not, or etc., that might override that. But I sometimes throw that in and I like to have several levels of contingency because sometimes people might say, yes, but later their circumstances change.

Neale Godfrey: I think that’s really, really significant to be able to think it through to that level.

Beth Bershok: We are going to take a quick break. We’re with Neale Godfrey and she is the author of the number one New York Times bestseller Money Doesn’t Grow on Trees. We are going to be right back it is The Lange Money Hour: Where Smart Money Talks.

Beth Bershok: Talking more smart money, thank you for joining us tonight, I’m Beth Bershok, Jim Lange and our guest tonight, Neale Godfrey, who is the founder of Children’s Financial Network, the author of the New York Times number one bestseller Money Doesn’t Grow on Trees. I want to give the phone number because I’m sure we have parents and grandparents listening tonight, and that number is, 412-333-9385. If you have a question you want to toss out to Neale or Jim, 412-333-9385. We’re talking about a very, very important topic, getting your kids financially fluent so that they become financially responsible adults. And just before the break, we were talking about discussing with your children Wills, what would be in your Will, or how your estate would be set up if something happened to them. And, Neale, you said you can start that discussion when the kids were very, very young and Jim was just about to finish a point, so let’s let Jim do that first.

Jim Lange: Well, one of the things I like to do in practice is, to actually really think out what would happen. So, let’s say for discussions sake, that your brother, and let’s say your brother and your sister in law are the choice for guardianship if something happens to both you and your spouse, and let’s say that they’re very nice people and that they would make very good parents or substitute parents, but they might be in a much different socioeconomic class than you. So then, let’s say, there’s a million dollars of life insurance and they’re going into a home that really is not in a great neighborhood, and then I like to think out, well, should you allow some provisions in that trust for, let’s say, a different neighborhood, or a private school, or what about is it fair that the child can go to a private school and then his step-siblings are all at the public school? I don’t know if you address that and I know that, to me, one of the things that I really liked about your book and your credentials is that you are, or at least were, a real life banker so you dealt with these things professionally.

Neale Godfrey: Well, my advice is to sit down, first of all, with your own spouse and make those decisions in terms of what is your value system and what is most important. As you said, for instance, with your kids is to have a two parent household, and maybe that’s to go to private school, and maybe you make that list so that you do it and the kids are raised with this religion and the kids are this and the kids are that. You make that list for yourself so that you can discuss that and make those decisions for your own children. And then, after you’ve made them, you should probably try to find somebody who fits that bill and doesn’t have to change their life because, let’s say, if someone brought kids into your household, you might feel uncomfortable that your child, I’m making this up, is raised in a different religion, or is going to school some place else, or that that kid was going to summer camp and not your kids. So what I would recommend is that you then sit down with the parents of the person that you’ve designated as the guardian and ask them, are you uncomfortable and how do you feel about this? And they’re hopefully going to voice their opinion.

Jim Lange: Well, I think you do a great service by bringing this issue up. And I will tell you that, in our office, for parents of young children, we probably spend more time on that provision then even the money because I think it’s real important. But can I now tap into your combination expertise of children and trust to talk about terms of trust for children and then also probably I’m going to guess that half our audience, or somewhere in that area, who have relationships with children might be grandparents. So, maybe if you can also include grandparents in the conversation. My starting point for a trust, so in other words, somebody is in my office and we are drafting the trust for a child in the event that something happens to them, and we want money to go for the benefit of a minor child, and maybe you can even help me with this. And let’s assume for discussions sake, that the child is too young for us to really personalize it. So, it’s not like we have a lot of clues about whether the child’s a saver or a spender or whether they’re going to have a problem with drugs or alcohol or whatever else. So, I think the more you know about a child, the more you can probably specify. But, let’s say that you, and maybe it’s even for unborn grandchildren, I would probably have something like this. The trust goes into, and let’s keep it simple, with just one child, it goes into an account and the trustee has the power to withdrawal health, I’m sorry, principal and or interest for health, maintenance, support, education, postgraduate education, down payment for a home, seed money for a business. And I used to put in one summer in Europe, people are getting a little bit tougher with that.

Beth Bershok: I like the one summer in Europe.

Neale Godfrey: For the financial advisor, by the way, yeah, right.

Jim Lange: That’s good. And then something like a third is released at 25, a third at 30 and the trust terminates at 35. Now I know that there are other practitioners who are doing these IRA trusts where the money stays in trust, actually most of the child’s life, and I actually have one client, and his kids don’t really get any principal until they’re 60. And I wanted to know if you had any opinions on drafting trust, either for a grandparent, or a child, in general, and what you think might be appropriate.

Neale Godfrey: Well, I think advice is wonderful, and I’ve worked on a zillion of these and my favorite one was I thought they were kidding when they first started talking to me about this and it was, that they really wanted to control their kids from the grave.

Beth Bershok: They actually said that?

Neale Godfrey: Yeah.

Beth Bershok: Those were the words?

Neale Godfrey: Yeah. And I was just there chuckling, and I was just brought in as a financial expert. I’m not licensed to do any of this. I was there with another person, like Jim, who’s doing the same stuff, who was glaring across the table saying to me, through his eye contact, they’re not kidding. Ninety-three provisions were written, including the type of person they would date, the type of person that they would marry, how many times they would attend church.

Beth Bershok: But how can you write that in a provision?

Neale Godfrey: They did.

Jim Lange: I tell clients, I usually quote a flat fee and then I always say, but that assumes that the client is being reasonable. And I use things like that as an example of not being reasonable. And I say, if you want that, it’s not that we can’t do it, but we can’t do it for the flat fee that we quoted. So then we have to tell you, hey, if we want that, it’s going to be so much extra and then we can’t do it unless we get your okay.

Neale Godfrey: And then the psychiatric care you’ll be under, having to deal with them. What happened, the end of the story is, they did pass away. The son opted in and the daughter opted out and her money went to the son. So we have that on one extreme, and then we have the others that we hope that we’re dealing with and the point is again sitting down and really talking to them about what you want. I, number one, agree with you there’s not a magic age where all of a sudden these kids are going to get responsible. And people ask me that. Grandparents ask me all the time, what age? I don’t know what age. You know, you tell me what you want, what’s the money for? And that’s the question they have to ask. Is it a legacy to fill in to supplement their lives, is it something for them to start a business, is it for education? Tell me what the money’s for. In my trusts that I’ve set up, and I’m a new grandma by the way.

Beth Bershok: Oh, congratulations.

Jim Lange: Congratulations.

Neale Godfrey: It’s like the best thing in the world. It’s worth hanging out just to make sure. But my thing is, I wanted my kids to be able to pick careers that they were passionate about and that they weren’t forced into taking a job that, perhaps, they didn’t like, to keep themselves in the socioeconomic level that they were in. Just because the world doesn’t pay an investment banker as much as a violinist, I didn’t want them to feel they had to go do something that they, maybe, didn’t want to do just to be able to feed themselves. So, I, personally, am willing to supplement that. I’m not willing to supplement living on the beach, drinking margaritas and tattooing your face. I mean, that’s what I’m not willing to do. But that’s my choice and I articulated that to the kids they knew going in.

Jim Lange: I like that a lot, there’s something that I do in my wills and I was curious about what your opinion is on it. I’m a big fan of disclaimer type planning. In other words, when I usually, let’s say, we have a grandparent situation and to keep life simple, let’s assume, a leave-it-to-beaver, you know, the old husband and wife and they have kids and his kids are the same as her kids, and let’s even keep it simpler, and those kids have kids. So we have grandkids, children, and grandparents, and usually, I do a type of estate plan where I name each other first. That is, the husband names the wife and the wife names the husband. The B trust comes next, the children come third and the grandchildren come fourth and the spouse gets to decide which money and how much goes to which source. So, we’re starting with the surviving spouse, the next choice is the B trust, which is usually used for larger estates, then the kids and then the grandkids. What sometimes we find is, that sometimes the children, even if they both have, even if say there’s two children, and they each have their own set of children, one might be doing very well, one might be investment banker and the other one might be a single parent or something like that. And what I like to do is, I would like to give the child the choice of, do you want to inherit some money, or do you want to have some of the money that would have gone to you into a trust for the benefit of your children, that is, the grandchildren? And what I do that I don’t see any other attorneys doing, I anticipate the possibility that a child Will, and the legal word is disclaim, but another word is, let’s say, decline money. So, let’s say for example, that my mom died, left me some money and I didn’t want or need it and I won’t go through the stretch IRA things, but particularly in an IRA or a Roth IRA, I wanted it to go to my child. I would want to be the trustee of that money and I hardly see any attorneys do that. They always assume that if the child doesn’t get it, it will end up, it’s because the child’s dead, not because the child disclaimed or didn’t want it. And I wanted to ask your opinion, if you think it is a good thing for the child to have the choice of being a trustee for their children in the event that grandma dies and they don’t want or need the money.

Neale Godfrey: I think it’s great, I think it’s wonderful. Again I’m into disclosure, sitting the kids down and saying this is what we’re doing this is what’s happening. And here’s the deal, though, that it is almost impossible to treat everyone equally just like you said before. You don’t know, there may be a child who does have a drug habit and you would want their money completely controlled by somebody else, and by health care providers whatever. There may be a handicap child where you would expect the other children to actually have that child live with them and be taken care of and have certain amounts of money. It’s almost impossible unless they’re unborn to be exactly equal. Again, I think it would have to be a situation where the family gets together and you talk about it and you discuss it. And there may be some that say, I would like the money to go to my children.

Beth Bershok: You know, Neale and Jim, you two keep bringing up this disclosure, this transparency, but in some families these discussions about money are very, very difficult.

Neale Godfrey: Well, and hence 85% of all divorces are due to money issues and the biggest thing that breaks a family up would be money. Unfortunately.

Beth Bershok: But, you know, in an ideal situation this would all work out beautifully, but what if you have a situation where the parents don’t even want to talk to each other about money?

Neale Godfrey: And that’s, unfortunately, also in our culture. It’s easier for us to sit down and have a discussion about sex than it is about money. It’s shocking that that’s where we are. And you will see young couples who have had intimate relationships, and then you will sit down and you will be advising them, and say, have you discussed salaries and debt and this and that and someone will turn to someone and go, well, that’s personal.

Beth Bershok: Right, and so how do you get the children on board?

Neale Godfrey: And then you say, what you do is, here is a chance for do over, we’re going to discuss it, it’s non-negotiable. We have to talk about it. We have to make it so the biggest secret in the family is not money. I will rest assured there will be money problems if it is a topic that is not discussed because then you’re going to, unfortunately, after the funeral say, mom wanted this to happen. Really, no, she didn’t, she wanted this to happen. Have you ever had any clients doing that, Jim?

Jim Lange: I’ve had plenty of that.

Neale Godfrey: Right, I know what mom wanted.

Jim Lange: That’s why I’m a big stickler of trying to take care of as many of those issues as possible, but on that same subject of comfort talking, and you’re talking about the parents talking to each other or the parents talking to the children. What I often end up doing, let’s say that I have clients in their 50s or 60s, and they have one or more living parents and you know one of the things that I try to do, is every time I meet with somebody, by the way, I’m one of those CPAs and attorneys, I can’t do a Will without knowing I need to have a tax return in front of me. I need to know what going on in their career, I need to know what their assets are, but the other thing that I ask people is, are you likely to inherit any money, are you likely to be on the hook to pay for your parent’s support, or is it basically a break-even? And so many of them say, well, you know mom and dad have a house, but I really don’t know their finances, and you know, like even you mentioned you had this good friend, and you had no idea that she had $5 million.

Neale Godfrey: Well, it gets worse then that I’m sure you’ve had a zillion clients that were raised in the Donna Reid syndrome where polite people didn’t talk about money and sometimes mom didn’t know what was going on.

Beth Bershok: Oh, I’ve actually known women who did not ever write a check.

Neale Godfrey: Haven’t you? And they’ve heard don’t worry you’re taken care of, which is not that it was not said maliciously, it was said with all intention that was good, but I don’t know what that means. Do you know what that means?

Jim Lange: Well, I have a real problem with it and sometimes what happens is, and I don’t know if it’s a macho thing or not, but a lot of times I’ll have, and typically a man comes to an initial meeting, say, well, I want to come and talk about Wills and I’m thinking, where’s your wife? Oh, well she’ll just go along.

Neale Godfrey: She doesn’t want to be involved, right?

Jim Lange: Right, and I’ll tell you what I tell them. I do offer free initial consultations (for PA residents only) to figure out what needs to be done and how much it will cost. And I’m at the point now, well, if you don’t want to bring your spouse, I’m not interested in doing a free consultation with you because, even for me, if one person is more financially astute or more financially experienced, it’s probably equally important, if not more important, for both spouses to be there.

Neale Godfrey: Well, I love that and what I do is, basically, I also want to discuss the children and as soon as that word is mentioned you’ll get both of them there.

Jim Lange: Well, that’s a good tip for me. That’s the way to get mom on board.

Beth Bershok: Okay, we are going to take a quick break. Neale Godfrey is our guest tonight, Money Doesn’t Grow on Trees, she was the author, also the founder of the Children’s Financial Network. We’ll be back in just a minute, it’s The Lange Money Hour: Where Smart Money Talks.

Beth Bershok: Talking smart money, I’m Beth Bershok, with Jim Lange, and Neale Godfrey is our guest tonight, founder of the Children’s Financial Network, author of the number one New York Times best seller Money Doesn’t Grow on Trees, but Neale, that is one of your adult books. We should call it because you also have books that are written specifically for children, and I have to tell you that one that I, actually, sort of read through almost cover to cover was Ultimate Kids Money, which is great for, what age would you say, a kid could pick that book up?

Neale Godfrey: That’s really the sort of middle through high school, and it’s all the basics that we want our kids to know. And I have to say that’s probably, the books that I’ve written, one of my favorites because I did it, so, no topic covers, more than a page of explaining something to somebody.

Beth Bershok: But it explains everything, it explains credit cards, bank accounts, what is the economy, what does that word even mean, and can all of these books be found on your website www.childrensfinancialnetwork.com?

Neale Godfrey: They can, and also, you can go to Amazon and purchase books. I also have curriculum, so if anyone’s interested, they can get in touch with me. I have curriculum preschool through high school.

Beth Bershok: And while she’s around, we’re going to be with Neale for about another ten minutes. 412-333-9385, if you have a question. But Jim also has another question.

Jim Lange: One of the things that I found really interesting and we’re having a little bit of this in my family, not my children, but my brothers, is college graduates. And in your book you cited that 65% of the new college graduates are going home and living with their parents. And even just an astounding number, I forget the exact number, of even people who are well beyond college are now living with their parents. And what you said was, I thought so smart, you know you were talking about drawing up a lease, setting up an end point, and don’t necessarily bail your kids out of debt. And I was wondering if you could talk a little bit about, and expand on, what is going on now with college graduates and people coming back into the family home as adults because it’s a new phenomena and I kind of fear a little bit for my own family. And if you could tell me what your experience has been in that area, that would be very helpful for me and my listeners.

Neale Godfrey: Well, and those stats in terms of the kids returning to the empty nest, which isn’t empty anymore, is even more staggering because of the economic times that are happening. There, by the grace of God, if you’re young and you’ve lost a job and you have parents that you can go back to, that’s fantastic. But like you said, this has to be also an economic situation. You have to sit down and I really think, again transparency, draw up a lease. This is what I expect you to do. This is what I don’t expect you to do. This is not hotel mom and dad that comes with room service and gas in the car and that I’m buying all the food. Sit down and say I need you to help with the utilities or whatever those rules are. And even if you can afford it, what you want to do is help these kids understand what it means to leave the nest and to be out on their own.

Beth Bershok: Do you think there’s an age where it’s going on too long, where they really just need to get out on their own?

Neale Godfrey: When you really have the urge to shoot yourself in the face, or them, then you know you might have hit that.

Beth Bershok: That’s a sure sign, right there.

Neale Godfrey: That would be a sign when you’re banging your head against the wall, that would be the time.

Jim Lange: Well, the other thing is, and I guess it’s partly related to this, but I know that a lot of the clients that I work with, or at least a number of them, have the issue of sometimes, probably the majority of my clients could afford to help their children, as much or even more then they are, but a lot of them, frankly, cannot and it’s sometimes a really tough issue when you have adult children, and they have needs, and it just might not be prudent for you to support them or bail them out of debt or do things that you emotionally want to do. And one of the things I liked about your book, and I think that sometimes they say that you know advisors sometimes take the role of a stern parent, is that you kind of said, hey, wait, you have to think about yourself. You have to think about your own retirement. And if you could expand on the idea when there really isn’t enough money to go around, and for you to do everything that you want for your kids, or now the big thing, and I see this a lot, is when your kids have kids that you don’t want your grandchildren without.

Neale Godfrey: Well one of the things that is very interesting and I know that you’re seeing it in your practice too that a lot of the money is skipping generations going from rather than right to the parent skipping and going to the grandchildren. And again it’s one of those things that we have to have those conversations to be able to say it’s my money this is what I want to do, I want you to live here but. And in today’s environment who’s retirement is not hurt?

Beth Bershok: Do you think, Neale, that sometimes parents think they’re actually helping? Let’s say a kid gets in, they come back, they move back in, maybe they have credit card debt and the parent just keeps bailing them out. They keep paying down the credit card. They keep paying down their bills. Do you think in the back of their mind, they think, I’m helping them? But in reality, it’s probably one of those things where they don’t learn to be financially responsible.

Neale Godfrey: I agree with you, totally. Again, you have to sit down and say, are the expectations that you’re going to live here for six months, a year, what are your plans, that’s number one? How can I facilitate what your expectations are, and these are my expectations. My expectations are, you’re here for a month, and then all of a sudden you don’t want guess who’s coming to dinner and they’re there forever. Or maybe you do want that, but you have to articulate your wishes to them and their wishes to you and what you feel their role is in terms of helping, in exchange for saying, here you’re going to do and then fill in the blank. Whatever that is, help me add some new rooms, clean up, and no, you’re not allowed to have guests over night. I don’t want to wake up and be standing in the kitchen and there’s a stranger next to me, I don’t want that necessarily. So you have to set the limits, and you have to set the barriers, and you have to articulate them, and you guys have to negotiate, it’s a negotiation. You have adult children coming back, expectations are different. With my kids, one of the things that I said when they sort of left the nest, and they would come back and visit, it would drive me nuts if they were out late. I’m still a mother. I don’t care if you tell me where you are, I need to know that you haven’t been in a car accident.

Beth Bershok: Were they living with you, or were they just visiting?

Neale Godfrey: No, they were just coming home for the summer, and home for vacations, and my kids would look at me and go, what?

Beth Bershok: I’m 23.

Neale Godfrey: We didn’t check in when we were in college, not the point. And it was really funny they didn’t get it until one night I was over at my sisters, and we were actually doing some work, and I decided I would stay there, and I didn’t call the kids.

Beth Bershok: Oh, good idea.

Neale Godfrey: But I didn’t mean to not call the kids. Well, they had called the police. They had called the hospital. When I walked in at 2:30 in the morning, because then I decided this bed is uncomfortable I’m going home, the two of them were standing there, where have you been, and it was so cute, and I just stood there going, oh. And never is there a problem. We get on airplanes, I mean my kids are older, they call, I landed, I have to do that. If I don’t text my kids when my plane has landed, I’m in big trouble. It’s just courtesy and check-in because you’re saying I love you, and I care.

Jim Lange: But at the same time, I think you also paraphrased a well known quote, you also say that there are times when you just say no.

Neale Godfrey: And there’s tough love. It’s the hardest thing to say no. No you can’t get the designer jeans, nope. And you know what we say no about other things. If your kids stood in front of you and nagged I want drugs, I want drugs, I want drugs, and repeated that for 9 times, you wouldn’t say okay, fine, you can have drugs. There are a lot of things we say no to. Don’t expect these kids to grow up with a value system unless you can say no.

Beth Bershok: Do you think a lot of it is just pressure from peers?

Neale Godfrey: Sure.

Beth Bershok: All of their friends have such and such a jeans, so they want it.

Neale Godfrey: And you know what you’re going to hear, it’s not fair. Well you might want to nip that in the bud with the kids, it’s not fair, life isn’t fair. Does anyone feel that they’re paid a little bit too much?

Beth Bershok: Yeah, that happens all the time.

Neale Godfrey: It happens all the time, I just heard you saying for break, I’m giving my salary back, it’s a little too much, I really don’t think I… So you know what, it’s not fair.

Jim Lange: I like that idea.

Neale Godfrey: Yeah, it’s great, it works for me. So, you know what, it’s not fair, and it’s not fair that Susie’s and Sallie’s house is a better place to live. It’s not fair that they’re your kids and it’s not fair that they’re your parents. Okay, it’s the way it is, now let’s deal with it, it’s not fair. Life isn’t fair.

Jim Lange: Could I ask you another question, I know we’re starting…

Beth Bershok: Yeah, we are down to the last couple minutes here.

Jim Lange: So, one of the big things, you know I work with a lot of grandparents, and frankly, a lot of the grandparents have, let’s say, more money then they’re likely to spend during their lifetime. And I’m often a big advocate of section 529 plans that are college education plans. And I actually don’t make a nickel buying or selling 529 plans, but the way I sometimes address clients is, I say, look, it is for the benefit of your grandchildren. They can go to any of the grandchildren, including first cousins and it grows income tax free, just like a Roth IRA.,And if you ever need it, you get to take it back. Now I’ve never ever seen anybody, or even heard of anybody, that took back a 529 plan, but I was curious as to your opinion about 529 plans, both as a banker and a child finance expert, specifically even, for grandchildren. I’m sorry for grandparents.

Neale Godfrey: I agree, I think it’s fantastic, and also you can, you know as you said, switch the beneficiaries and pay for college all the way through graduate school.

Beth Bershok: Hey, Neale, you have been an absolutely wonderful guest, thank you so much. Neale Godfrey, I’m going to give your website here, www.childrensfinacialnetwork.com and that’s where you can find all of the material we were talking about here tonight. If you had to recommend one of your books for children, what would it be?

Neale Godfrey: For kids, The Ultimate Kids Money Book and for parents, Money Doesn’t Grow on Trees.

Jim Lange: And that’s the one I read that I really like.

Beth Bershok: Thank you so much www.childrensfinancialnetwork.com. Neale Godfrey, you have been great. And we have another workshop coming up on August 29th, 9:30-11:30 and then 1:00-3:00. If you want registration information, this is going to be at the Pittsburgh Golf Club. Go to www.retiresecure.com. Also, very quickly, we want to offer, for the first five people listening today and the first five people listening on Sunday, call the office at 412-521-2732. You can dial my extension, which is 219. Jim is offering a free financial physical, which includes a review of everything, your investments, your estate planning, you retirement planning, your insurance planning. But, it’s the first five people who respond who live in Pennsylvania. So, 412-521-2732, please call, go to extension 219. We’ll be back in two weeks with another show and you can find out more at www.retiresecure.com. It’s The Lange Money Hour: Where Smart Money Talks.