Market Watch

[drumminj]

Exactly. setting up multiple 5%+ cds maturing at regular intervals over the next few years is basically safeguarding a future income stream than can periodically be drawn on or reinvested at a future time. Having cds might save a person from selling other assets to raise cash when the markets are not favorable. Or they may provide capital for a future opportunity that a person is not aware of yet. There are few safer places to squirrel away funds that don’t have a specific purpose right now.

This really gets into having a balanced portfolio that allows you to weather volatility, especially if you're retired/drawing down on your investments. CDs/cash-equivalents are good for exactly what you describe - not needing to sell volatile assets that are currently down.

Would be interesting to have a thread on this topic.

 

[Cahaba Valley Farm]

CDs/cash-equivalents are good for exactly what you describe - not needing to sell volatile assets that are currently down.

Well said.

 

[check]

My SIL teaches high school and actually covers a lot of this using real world examples. He tells the students "you've moved away from home so you're on your own, your salary is $6,000 per month, illustrate where and how you plan to live." The first obstacle for some is when they learn they will take home less than $5,000, from a $6,000 salary. Then there's rent, utilities, transportation (they soon realize the new SUV they were planning on is out of the question), food and entertainment, clothing, on and on.

We did the same with our children and actually they loved learning it. We'd show them pay stubs with what my wife made and what came out. Then what costs to budget for; house payments and mortgage interest, budgeting for taxes, utilities, escrows for car and home maintenance, grocery, and more. They were most astounded by how much was withheld from pay and the amount of money we were paying in interest on our home (the rate was 14% IIRC at the time).

We kept our daughter apprised as well. LOL I remember the first time she saw our income tax return. She almost had a heart attack when she saw how much we had to give away to the government for income tax. Thus, the birth of a tax hater!

 

[Milo]

We kept our daughter apprised as well. LOL I remember the first time she saw our income tax return. She almost had a heart attack when she saw how much we had to give away to the government for income tax. Thus, the birth of a tax hater!

Mine's a tax hater too. She about flipped when they got the personal property tax bill in northern VA for their truck and Tahoe!

 

[MoKelly]

We kept our daughter apprised as well. LOL I remember the first time she saw our income tax return. She almost had a heart attack when she saw how much we had to give away to the government for income tax. Thus, the birth of a tax hater!

It is fascinating to see how your children change their ideas going from college to working.

Once they actually experience where their salary goes - Fed income taxes, state income taxes, FICA, city earnings tax - they are shocked! They see 35% disappear and begin to question why.

 

[stevem5215]

Teaching kids about the cost of living and what expenses etc there are is a part of growing them up. If you just keep giving them money they'll still keep looking for the money even when older. I once asked a friend of mine how he did it with his kids. He just said he told them they will have to pay for their own college education so they better figure out what degree will make them the money needed to succeed. And amazingly they did succeed.

 

[Torvy]

^we did something similar. From the time they were old enough to understand, we let them know college was something for which they were responsible.

 

[2manyrocks]

The great thing about computer spreadsheets is you can build a budget spanning several years and then use them to show how different spending and investment patterns can either cost someone or put them ahead 5-10 years from now. It can take the appeal right out of buying that shiny new car. You can talk about it and get ignored, but seeing the numbers tends to get someone's attention.

 

[Torvy]

The great thing about computer spreadsheets is you can build a budget spanning several years and then use them to show how different spending and investment patterns can either cost someone or put them ahead 5-10 years from now. It can take the appeal right out of buying that shiny new car. You can talk about it and get ignored, but seeing the numbers tends to get someone's attention.

I used (and shared) spreadsheets with my students to illustrate that concept and give them a tool to do their own budget.

 

[ultrarunner]

My brother told his kids they better have scholarships to pay for college and they all did.

They are all pretty savvy on money having a dad that is self employed.