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Message
How do you help financially ignorant people?
Posted on 4/20/15 at 10:57 am
Posted on 4/20/15 at 10:57 am
In this case, it would be my sister and BIL
Now for a little background: They have struggled with money the past couple of years with 3 small children (at one point that had 3 under 2 years old) and my sister having to quit work. My BIL, who is an electrician, also went off on his own at this same time. Things were tight. Well now fast forward 4 years and now my BIL is employing 5 other people and business is doing great. He just signed a huge contract with their parish.
Now the problem is that they are both financially ignorant. Me and my sister were talking about saving for college for the our kids and she told me that they just had an envelope for each of their kids in the closet...this makes me cringe. I tried to tell her about 529 plans but she blew me off and told me that my BIL handles the money.
Now I know its none of my business, but I feel like this is just more of them not knowing the opportunities or tools that are out there instead of them just choosing to not do it. What is the best way to approach them about putting that money into something better than their closet? I want them to really understand the power of compounding interest.
I don't think either of them are going to read a book about this and since my BILs mom still does their taxes (another thing that makes me cringe), I doubt I can talk them into seeing a financial advisor.
Now for a little background: They have struggled with money the past couple of years with 3 small children (at one point that had 3 under 2 years old) and my sister having to quit work. My BIL, who is an electrician, also went off on his own at this same time. Things were tight. Well now fast forward 4 years and now my BIL is employing 5 other people and business is doing great. He just signed a huge contract with their parish.
Now the problem is that they are both financially ignorant. Me and my sister were talking about saving for college for the our kids and she told me that they just had an envelope for each of their kids in the closet...this makes me cringe. I tried to tell her about 529 plans but she blew me off and told me that my BIL handles the money.
Now I know its none of my business, but I feel like this is just more of them not knowing the opportunities or tools that are out there instead of them just choosing to not do it. What is the best way to approach them about putting that money into something better than their closet? I want them to really understand the power of compounding interest.
I don't think either of them are going to read a book about this and since my BILs mom still does their taxes (another thing that makes me cringe), I doubt I can talk them into seeing a financial advisor.
13
Posted on 4/20/15 at 11:07 am to Salmon
Ugh, again with the envelopes. Do people not understand a simple house fire can erase their savings overnight? Even a passbook savings account is better than an envelope.
Giving advice, especially to family members, is such a tricky endeavor. Can you show them a statement from your 529 plan so they can visually appreciate the account's growth? Not in a braggy way, but in a "hey sis, I want your kids to have this too" sort of helpful fashion. But if she rejects the info, you're going to need to back off.
One of the hardest parts of being "family" is respecting the right of others to do dumb things. Whether smoking, eating themselves into obesity, or being willfully ignorant about financial matters...those parents have every right to invest their funds poorly or not at all. Perhaps they've decided they don't owe their kids a college education....which they have every right to decide. Speak your piece if you feel you must, but move on. As long as they're raising happy, healthy children, the size of the college fund shouldn't matter.
I'd imagine that many MT posters who graduated from college had NO college funds at all...yet we managed, somehow. LOL.
Giving advice, especially to family members, is such a tricky endeavor. Can you show them a statement from your 529 plan so they can visually appreciate the account's growth? Not in a braggy way, but in a "hey sis, I want your kids to have this too" sort of helpful fashion. But if she rejects the info, you're going to need to back off.
One of the hardest parts of being "family" is respecting the right of others to do dumb things. Whether smoking, eating themselves into obesity, or being willfully ignorant about financial matters...those parents have every right to invest their funds poorly or not at all. Perhaps they've decided they don't owe their kids a college education....which they have every right to decide. Speak your piece if you feel you must, but move on. As long as they're raising happy, healthy children, the size of the college fund shouldn't matter.
I'd imagine that many MT posters who graduated from college had NO college funds at all...yet we managed, somehow. LOL.
Posted on 4/20/15 at 11:09 am to Salmon
quote:
BILs mom still does their taxes
if she's doing a business owners taxes than she either knows what she's doing and the BIL has the family finances more in order than you sister realizes or they are in desperate need of a tax guy before they get in trouble with the IRS
If it's the later, tell them they need a CPA for their taxes and he'll likely point them in the direction of a financial advisor or at least educate them of helpful ways to reduce their tax burden which will also help them save for retirement/kid's college
Tell them the CPA can save them a lot of money (much more than they have to pay him).
Posted on 4/20/15 at 11:21 am to hungryone
quote:
As long as they're raising happy, healthy children, the size of the college fund shouldn't matter.
I know, just frustrating to see the money being "wasted" just sitting there. According to my sister, each kid has a $5k envelope, and everytime my BIL sells a cow, he gives the money to the kids.
quote:
if she's doing a business owners taxes than she either knows what she's doing
His mom doesn't even have a HS education...
My BIL also sells cows. I tried mentioning to my sister that they are probably missing thousands of dollars worth of write-offs, but again, she deferred. I'm not going to touch this one though. That one seems much trickier
Posted on 4/20/15 at 11:22 am to Salmon
Any of them having a bday coming up? Maybe ask the BIL if you could give them a little money in their 529s in addition to bday presents? Not much, but just an offer to start a conversation about it. If he doesn't have a clue what a 529 is, the its the perfect opportunity to tell him about it. 
Posted on 4/20/15 at 11:27 am to kennypowers816
quote:
Any of them having a bday coming up? Maybe ask the BIL if you could give them a little money in their 529s in addition to bday presents? Not much, but just an offer to start a conversation about it. If he doesn't have a clue what a 529 is, the its the perfect opportunity to tell him about it.
That's a great idea...or go all the way and offer to set it up and put the initial funds in it. But if those kids are still small and those envelopes each contain $5K, I wouldn't worry too much about the college funds.
Posted on 4/20/15 at 11:28 am to hungryone
quote:
Ugh, again with the envelopes.
Yes.
quote:
Do people not understand a simple house fire can erase their savings overnight?
Once you get the system in place, you can use a bank account to store Baby Step 1 and 3. It is your monthly budget items that you use the envelopes in - envelope for groceries, envelope for misc., etc.
You don't have your 3 to 6 months (Baby Step 3) of $10 to $15k sitting around in envelopes in your house.
Please don't misrepresent the system if you don't understand it.
(ETA: Now the way that the folks in the OP were using envelopes is contrary to good practices. That's Baby Step 5, anyway.)
This post was edited on 4/20/15 at 11:30 am
Posted on 4/20/15 at 12:00 pm to Salmon
I've been there before. The thing is that ignorant people don't want help. Because by accepting advices and help, they will have to acknowledge that they are wrong on a subconsciously level.
Posted on 4/20/15 at 12:13 pm to Salmon
Yeah, as others have stated, she doesn't want to appear or feel dumb.
Show her what 5k looks like if left alone for 20 years vs what 5k looks like at 8% return for 20 years.
If the money doesn't talk she's a lost cause.
Show her what 5k looks like if left alone for 20 years vs what 5k looks like at 8% return for 20 years.
If the money doesn't talk she's a lost cause.
Posted on 4/20/15 at 1:20 pm to Salmon
Sounds like you need to have an adult conversation with BIL. Make a deal like in Days of Thunder where he does it your way for 1 year (enough to see tax benefit and some interest benefit) and then make a decision.
Spin off question: How far back can you make amendments to your taxes to take advantage of items he may have been missing out on?
Spin off question: How far back can you make amendments to your taxes to take advantage of items he may have been missing out on?
This post was edited on 4/20/15 at 1:21 pm
Posted on 4/20/15 at 1:26 pm to seawolf06
quote:
Please don't misrepresent the system if you don't understand it.
I don't know a damn thing about the "system", so I'm not saying anything about it. I am saying that grown folks sophisticated enough to have a small business employing 5 people, run by someone with enough knowledge/understanding to hold an electrician's license, who obviously has the technical knowledge to read building plans/wiring schematics, can comprehend a passbook savings account rather than an envelope as a safer place to store funds. If he's truly risk averse, he SHOULD keep the dang cash in a bank where it is covered by the FDIC.
Posted on 4/20/15 at 1:53 pm to Salmon
Honestly, the best thing you can hope for is offer them a session with a tax planner/financial adviser at your cost. Let a professional wow them with some figures and knowledge. If this doesn't get them excited then I don't have any advice.
The key is, they have to get excited about their future; and I don't mean the future bass boat.
The key is, they have to get excited about their future; and I don't mean the future bass boat.
Posted on 4/20/15 at 2:33 pm to Salmon
quote:
How do you help financially ignorant people?
Keep paying your taxes.
Posted on 4/20/15 at 6:14 pm to Salmon
I would tel him about all the money your COA saved you this year.
Posted on 4/20/15 at 7:59 pm to bayoubengals88
This is the best advice to reach them. People like this don't want to be preached to and don't want to hear long winded explanations.
Show them two numbers:
$5,000
$16,000
Which one of those would he rather give to his kids in 15 years?
Show them two numbers:
$5,000
$16,000
Which one of those would he rather give to his kids in 15 years?
Posted on 4/20/15 at 9:26 pm to Salmon
quote:
she told me that they just had an envelope for each of their kids in the closet.
Posted on 4/20/15 at 9:40 pm to Salmon
People don't shove cash in th closet because they are ignorant... They do it because they have been burned. Did something happen to them financially? Like a disaster?
If he has a bank account he knows how it works and that a back account is better than cash in an envelope... Unless something happened.
If he has a bank account he knows how it works and that a back account is better than cash in an envelope... Unless something happened.
Posted on 4/20/15 at 9:53 pm to LSUFanHouston
Does he do a lot of work in cash? He may not be reporting the income at the direction of his trusted bookkeeper....
Posted on 2/10/17 at 4:05 am to Salmon
So have you gained any ground on this subject?
Posted on 2/10/17 at 4:18 am to Salmon
My electrician is always broke. Lives paycheck to paycheck. Just bought a 65k truck. 1400/mo note. He makes good money but can't seem to get ahead.
Maybe it's an electrician thing?
Maybe it's an electrician thing?
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