Oct
17
A few weeks ago, I volunteered at a summer camp serving refugee kids and it was art day. Over one hundred kids were doing an art project with shaving cream and food coloring. Imagine the chaos! All I could envision was scattered kids, swirling colors, shaving cream fights – inescapable mess!
Surprisingly, the scene I imagined didn’t happen.
Before beginning, the art teacher walked the kids through each step of the project giving detailed instructions, demonstrating how to spread out the shaving cream, designing a pattern by swirling drops of food coloring together. After pressing a piece of paper onto the design and scraping off the excess shaving cream, the result was a beautiful “marbled” piece of artwork.
She said, “Now I’ve taught you what to do and demonstrated it for you and so I’m trusting you to make good decisions with the art materials and use them the way I have shown you or there will be a consequence.” The consequence for poor decisions would be sitting out. The kids did not want to miss out on creating a masterpiece.
They did an amazing job!
The kids carefully spread the shaving cream in the pans, meticulously swirled the colors to make a beautiful design and carefully pressed the paper into the color to “marble” their artwork. I was impressed.
Why was it so impressive to me?
There was a plan of action, the kids were taught what to do, the project was modeled for them and they were prepared to create their artwork when it was their turn. Using this template for teaching kids (and perhaps a willing adult!) translates into many areas of life. Kids especially are like little sponges. They retain what we teach and especially model for them, and they need practice!
It’s no different with money.
We want to make wise decisions and we want the same for our kids and other family members. We want to have a sound plan rather than making hasty decisions and suffering the consequences. There are many ways we can engage our kids, grandkids, nieces and nephews into conversations about making good decisions about money.
TEACH:
- Talk about the things you do with money. What is it used for? How is it earned? What is a need vs. a want? As you go grocery shopping or buy school supplies, plan for what you will buy, talk about what items cost and stick to your budget. There are endless opportunities to talk about needs vs. wants in everyday life. My four-year-old needs a new pair of shoes for school but wants gold sparkle dress up shoes!
MODEL:
- Put your teaching into practice so your kids can “see” you actively make decisions about sharing a portion of your money, saving a portion and spending a portion. These are the three options we all must weigh with the dollars we have. The amount of money is not the focus, but rather the concepts of the various ways we use money.
- SHARE: With whom do you share your money? Are there charities, non-profits or causes you support?
- SAVE: What is something you are saving money for? Do you have a special account to save for retirement, healthcare expenses or school for your kids or grandkids?
- SPEND: How do you plan for how much money to spend on something? Do you have an amount you spend each week on groceries for example?
PRACTICE:
- Start early with an allowance. Let your kids practice sharing a portion, saving a portion and spending a portion. You can even set up three jars labeled to help them “see” the three pots of money and talk about how they want to share, save and spend. Having many conversations and learning how to manage these decisions on a small scale will help them to be well-prepared as they go out on their own.
There is a true art to keeping our financial lives in balance. RGT offers deep knowledge and breadth of experience to give clients peace of mind as they navigate their financial worlds. RGT is committed to helping our clients make smart financial decisions, for this generation and the next.
Oct
16
“The lark’s on the wing; The snail’s on the thorn; God’s in His heaven— All’s right with the world!” from Pippa Passes, by Robert Browning.
Financial markets continued their seemingly inexorable march forward in the third quarter despite a raft of worrisome news ranging from the ongoing political turmoil emanating from Washington D.C. to the devastating impact of three large hurricanes making landfall on the U.S. mainland and Puerto Rico. Much like the titular character in Robert Browning’s poem Pippa Passes, market participants seem to see all that is right with the world, and when confronted with unpleasant realities they, like Pippa, construct a narrative more palatable to their optimistic worldview. Thus far this year financial markets have focused on economic growth, both in the U.S. and across the globe. In its most recent release, the Bureau of Economic Analysis estimated second quarter U.S. GDP growth at 3.0%. The IMF’s latest estimates of global GDP growth came in slightly higher at 3.5%. A quiet corporate earnings season and slightly rising oil prices seemed to have positive effect on market sentiment.
Across the board, stocks posted healthy gains in the quarter, ignoring the noisy news cycle and taking comfort in the sanguine economic conditions. The S&P 500 was up 4.48% for the quarter and is now up 14.24% year-to-date. Global stock markets posted even better results. International stocks, as measured by the MSCI-EAFE Index, rose 5.40% in the third quarter and are up 19.96% so far this year. The best results so far this year have been posted by emerging market stocks. The MSCI-EM Index was up 7.89% in the quarter and 27.78% for the year. Bonds have not missed out on this party. The Barclay’s 5-Year Municipal Bond Index rose 0.85% in the quarter and is now up 3.87% for the year. The broader Barclay’s Aggregate Bond Index was up 0.68% in the quarter and is up 3.14% thus far in 2017.
Maybe the most remarkable aspect of this year’s financial market results has been the extreme lack of volatility in U.S. equity markets. Per Charles Schwab, thus far this year we have only seen 5% of trading days with a move in the S&P 500 of +/- 1%, which is the lowest level since intra-day data began to be recorded in 1982. To further emphasize the point, there have been no days of +/- 2% moves in the S&P 500 this year, the first time that has happened in twelve years. The longest streak of positive calendar year returns in the S&P 500 occurred during the great bull market of the 1990’s when the S&P 500 had 9 consecutive years of positive annual returns, from 1991 through 1999. The second longest such stretch occurred from 1982 to 1989 when the S&P 500 posted annual gains for 8 years. Should the S&P 500 end the year in positive territory it would mark the ninth consecutive year of positive annual returns, matching the bull market of the 1990’s as the longest such streak.
Looking forward we will be carefully watching the Federal Reserve as they begin to unwind the policy of Quantitative Easing by allowing some of the bonds currently residing on the Fed’s balance sheet to mature without reinvestment. In addition, the Fed’s guidance continues to indicate another increase in interest rates toward the end of this year and an additional three increases in 2018. Finally, Fed Chairman Janet Yellen’s term expires in February of 2018, and the announcement of her successor, and any shift in Fed policy that may indicate, will be closely followed by market participants.