Financial Plan – Silent Killers

CPAs and financial advisers point out five “silent killers” that create barriers for the successful implementation of estate, retirement, and investment plans.  These common mistakes are:

1. Unrealistic Expectations. A valid financial plan must be based on practical assumptions, such as an appropriate forecast of rate of return, inflation, and future cash flow needs
2. Emotional Decision Making. Feelings and personal sentiment must be identified and minimized when setting goals and planning financial projections.
3. Inflexibility. A useful financial plan must take into account unexpected events. Creation of an emergency fund and contingency plan is vital.
4. Inaction. Without a plan for action, the perfect financial plan is worthless. Common results of inaction can be not having appropriate of property and casualty insurance coverage, financial hardship of dependents due to inadequate life and disability coverage, failing to address how assets are to be distributed in an estate plan, and overlooking a tax strategy.
5. Unclear Values and Priorities. Being on the wrong path will result in an undesired financial destination. Reflection of areas of importance and priorities is fundamental for implementing a financial plan and achieving financial goals.

For additional information on financial planning silent killers, click here.

Teaching Suggestions

  • Have students talk with others about barriers they have encountered in their financial decision making.
  • Have students create situations that reflect each of the five situations. Ask them to suggest actions to overcome these difficulties.

Discussion Questions 

  1. Explain which of these financial planning barriers you believe is the most dangerous.
  2. What are possible actions a person might take to avoid these financial planning barriers?

Dangers of not teaching children about money management

Financial difficulties in a household can create anxiety for children. To minimize these apprehensions, parents should begin communicating about money at an early age to help children grow up to be financially literate adults.  Rather than allowing the youngsters to arrive at their own conclusions, a proactive approach can help the children avoid the mistakes of their parents. Without an open discussion, children will likely grow up lacking financial knowledge.

Suggested actions for developing good money habits among children are:

  • teach them to budget since this is the foundation of successful personal finance.
  • develop wise spending decisions for wise choices and avoiding impulse buying.
  • create an understanding of the rewards of work with a system of work-for-pay chores, which go beyond basic required chores, such as a clean room.
  • develop an appreciation for delayed gratification with saving for a goal.

For additional information on wise money management for children, go to:

http://www.bankrate.com/finance/smart-spending/the-danger-of-not-teaching-kids-about-cash.aspx?ec_id=cmct_02_comm_PF_mainlink

http://www.bankrate.com/finance/financial-literacy/4-money-lessons-for-children-to-master-1.aspx

 

Teaching Suggestions

  • Have students research various actions that might be taken to better involve children in family money management decisions.
  • Have students create interview questions that they might ask when trying to determine if parents are teaching their children wise money management habits.

 Discussion Questions 

  1. Describe various problems associated with not involving all household members in family money management activities.
  2. What actions would you take to teach young people about wise money management?