The big news in tax land last week was about the states that are choosing to delay their refunds because of concerns over identity theft. Right now, Illinois, Utah and Louisiana are delaying their STATE tax refunds (I repeat — these are refunds for state income taxes, not for the federal returns) for weeks or even months. Here’s the writeup: http://www.politico.com/tipsheets/morning-tax/2016/01/delayed-state-refunds-a-new-trend-eli-lilly-says-its-no-pfizer-a-mutant-tax-controversy-212020
This might be the beginning of a trend. We’ll be watching.

Identity theft is becoming a significant issue for tax returns — and it is a very good reason not to be using commercial software to submit your information. Certainly, even we professionals can be hacked (NOBODY is immune) … but the kind of encryption and security that we put into place on behalf of our clients (and the enterprise-level software that we use) is just one more reason not to undertake this process on your own.

Anyway, as for federal returns (the big ones), those we can begin filing on Tuesday, January 19th. Which means that in some cases, we could see clients receiving refunds from the IRS as early as next week.

So … things are officially about to become busy here, and all over the country.

As they are for you, no doubt!

I’m going to change the topic here and discuss one of the more difficult tasks for me which is when I meet with a family or business owner who doesn’t have the confidence they wish they had about the security of their finances into future generations.

At the point of making decisions related to asset distribution, etc. (we occasionally work alongside estate-planning experts in helping our clients), we CAN put into place a whole range of mechanisms which ensure that financial assets are properly distributed, when the time does come.

But wouldn’t it be great if our children had the experience and self-control to handle money and assets starting at an early age?

That’s why I’ve put together some pointers for you (8 of them) which will help your family raise children who “get it” when it comes to money. This is a great article to forward along to your friends and family, I think … as it’s an issue which too often goes neglected within families.

Valerie McLaughlin’s
“Real World” Personal Strategy Note
Teach Your Children Well in 2016
“One thorn of experience is worth a whole wilderness of warning.” – James Russell Lowell

The beginning of the year is the perfect time to start a new regime with your family for instilling great financial smarts. We may be a few weeks in, but really — anytime in January is a good time to begin making changes.

Some of these may be difficult (the first ones, in particular, if they represent a shift for you), but after seeing many families do this well, these are some of the best things you can do with your children.

1. Talk openly about money.
Parents make a mistake when they keep information from their children. The only way children learn what is a good deal and what is too expensive is by the experience of what their family earns and what items cost. Hiding this information robs children of the financial education they need.

2. Talk factually about money.
Many parents have strong emotions about money based on their childhood experiences. These emotions are always transmitted to children. Instead of helping children, they can cripple children from growing up to make sound financial decisions.

3. Require chores; pay for optional work.
Everyone in the family has to help complete the work that needs to be done. If you want to pay your children, only pay them for optional work they can choose to do or not to do.

4. Provide children an allowance they can make real choices with.
Talk about money is important, but children need real-world lab experience to understand the consequences of their decisions. Consider giving them an allowance large enough so that they can purchase some of their own needs. Then continue to give them honest advice, and help them ask the right questions to make wise decisions based on their values.

5. Help children comparison-shop.
Help them consider issues such as cost, quality, and convenience. Every choice in life involves trade-offs, right?

6. Require children to wait before making large purchases.
Adults should wait at least a month whenever they are making a large purchase. Children shouldn’t be expected to wait that long. Here is a good rule of thumb: Children should be required to wait as many days as they are old in years before being allowed to make a large purchase (over a week’s allowance). There is always tomorrow and over half the time they won’t remember what attracted them to it in the first place. Developing this habit will help make them resistant to impulse buying.

7. Don’t use money as a punishment.
Your priority should be helping to give your values to your children, not buy their outward behavior.

8. Don’t loan your children money!
If their desired purchase is something they should be saving for, let them save for it. If you want to buy it for them for the value of the experience, buy it for them. The principles are “If they want it, they have to save for it. If you want them to have it, you will buy it for them.” Loaning your children money for items they want teaches them they aren’t responsible and they don’t have to prioritize.

Some may disagree with all of these admonitions–I don’t intend to become a “parenting guru” in my spare time–but I do hope that, at minimum, this will help you be thinking about how your wishes get passed down.

I do hope all this helps. To your family’s financial and emotional peace…

Warmly,

Valerie McLaughlin, EA
(410) 224-2600