Money Lessons You Must Teach Your Grandchildren

Millions are now graduating: Pass on these life-changing lessons that lead to prosperity

1. Debt is a form of slavery
2. Financially successful people live below their means
3. Pay yourself first
4. Forget about impressing the Joneses
5. Save aggressively early, and you won’t have to save so much overall
6. Craft clear financial goals
7. Don’t believe everything you hear about money
8. Set your own spending limits – and stick to them

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You’re doing amazing – you have a budget, you’re contributing to your emergency savings and your retirement account is looking good. But headlines about a trade war are giving you jitters. You don’t have enough money to hire a professional to manage your account, what should you do?

A) Head over to a trusted financial news source and research tips on the right mix of stocks and bonds for you.

B) Choose a target-date retirement fund and investing using dollar cost averaging. This way you invest the same amount when the market is up and when it is down.

C) Take advantage of employer financial education resources.

D) All of the above.

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Answer D. Any one of these moves are a good idea and will put you at ease.

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You have saved enough for a down payment on a house. Congrats! Your mortgage broker is suggesting an “ARM” rate but you’ve been assuming you would have a 30 year mortgage. What does an “ARM” mean?

A) ARM rates that are fixed for 15 years.

B) ARM rates means that the adjusted rate will go down after 5 years.

C) ARM rates are for first time home buyers only.

D) ARM stands for Adjustable Rate Mortgage and it means just that – that the interest rate could adjust (up or down) after a certain period of time – usually 5 or 7 years.

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D is the correct answer. Adjustable rate loans start out fixed for a period 5, 7, or 10 years — and then the interest rates fluctuate on a monthly or yearly basis. This could be an options if you are willing to accept interest-rate risk in exchange for a lower rate and lower monthly payments. This could be an option if you are willing to accept interest-rate risk in exchange for a lower rate and lower monthly payments.

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Roth IRA’s can be smart investment, but not everyone understands how they work. Which one of these answers is untrue about the Roth IRA?

A) Contributions are made after-tax, which means you pay no taxes when you take out funds in retirement

B) There are no mandatory withdrawals starting at age 70 1/2, like in other types of IRAs, but there are income restrictions.

C) If you are single, you can’t contribute it if your modified adjusted gross income is over $137,000.

D) Couples both need a jobs in order to contribute to.

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D is the correct answer. Single adults cannot contribute to an IRA without a job but married couples can as long as one spouse is earning a paycheck.

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You have been recently hired for your dream job and can’t wait to start. But leaving your current job means you’ll lose your employer-sponsored retirement account. What should you not do?

A) Leave the account alone, it will keep earning interest even if you are not making contributions

B) Roll it over into an IRA. This will give you more flexibility in your investment choices and how your money is given to your heirs

C) Cash it out – take the money and run!

D) Invest in a friend’s small business. There’s a 33% chance they will make it.

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The correct answer is C:

The worst thing you can do is cash out. Look to roll over the account into another retirement account such as an IRA or simply leave the account alone.

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You’ve just received a bonus at work for excellent performance. Assuming you have paid off all of your debt what should you do with that money?

A) Treat yourself to dinner with your partner or go on a shopping spree — you earned it.

B) Buy that plane ticket for the exotic trip you have been planning for.

C) Boost your emergency savings account or retirement.

D) Donate it to a charity that you support.

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C is the correct answer. Boost your emergency savings account or retirement. There is not an absolute answer here, but we suggest investing in your savings or retirement account for an added cushion.

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When trying to keep track of your expenses, why is it better to use a debit card instead of a credit card?

A) Using a debit card allows you to keep track of purchases without having to worry about unpaid balances.

B) Overdraft fees are often lower than interest rates

C) Credit card points encourage you to spend more and make it harder to track expenses

D) There are advantages and disadvantages to credit and debit cards. One of the best ways to keep track of your money is to use an app. like Mint.com or YouNeedABudget.com

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D is the correct answer. There are advantages and disadvantages to credit and debit cards. One of the best ways to keep track of your money is to use an app. like Mint.com or YouNeedABudget.com

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Your emergency fund should easily accessible but it should also be making money. Which option below will keep your money safe but will not grow.

A) A money market fund

B) An internet bank

C) A traditional savings account

D) Certificates of deposits (CD’s)

E) All of the above

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The correct answer is All of the above. All four of these options are liquid and easily accessible. However, keep in mind that a traditional savings accounts are the slowest growing.

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The car commercial said that the low interest rate is for exceptional borrowers with strong credit. I thought I had strong credit but I am not sure. What exactly does my good credit score mean?

A) A score that lends use offer you promotional deals

B) A score that creditors use to determine if they should try to collect debt from you

C) A score that employers use to determine the trustworthiness of potential hires

D) A score that gives lenders a picture of your financial life and could determine what type of rates you pay on loans

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D is the correct answer. A credit score gives lenders a picture of your financial life and helps them determine how likely you are to repay a loan. It’s their way of seeing if they trust you or not.

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Do you want to retire eventually? Most of us do but aren’t sure how much we need by the time we hit 65. Once you start saving, which of these retirement funds is best for you?

A) An index fund comprised a balanced mix of stocks and bonds

B) A target-date fund that slowly alters becomes more conservative

C) An emerging markets fund that invests money into a portfolio tracking volatile, often foreign markets

D) A money market account tied to your checking account

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B is the correct answer. With a target-date fund you chose the fund closest to your anticipated retirement date, and as it approaches, a fund manager slowly alters the portfolio to become more conservative.

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