Financial Habits are Learned Behaviors, Kids and Money with John Chidwick

If you could have a candid conversation with financial advisors who have decades of experience helping professionals, business owners, and families just like yours plan for their financial future, what questions would you ask? I'm Chip Munn, financial advisor, author, host, and CEO of Signature Wealth Group. For decades, my partners and advisory teams have had the opportunity to answer the tough questions for hundreds of our clients. Now we want to do the same for you. On the Signature Life Show, you'll hear answers to your burning and most perplexing finance, investing, and retirement questions from our Chief Investment Officer, senior wealth advisors, certified financial planners, and more. We aren't just financial advisors. We're parents, children, community leaders, and entrepreneurs with a passion for helping empower our clients to live life intentionally, what we call a Signature Life. John Tate, what's up, man?

You know, it's a Friday, I'm podcasting with my favorite people, Chip Munn and our guest John Chidwick. What could be better?

I can't think of it. One of the cool things about doing this show is the opportunity to talk to some of our financial advisor friends about topics that are not only things that we see on a regular basis in our office, but also finding folks within our organization that it means something to them. And so today we're going to be talking to John Chidwick. John is one of the senior wealth advisors in Charlotte and Mooresville, North Carolina. John, welcome to the show.

Thank you, Chip. Thank you, John. Thank you guys for inviting me to be here today and happy Friday. And let's kick it off for a good weekend with basketball and have a good time here.

Yeah, looking forward to it. So John, one of the things that I know you to be passionate about, and one of the things that we wanted to talk about today was is really the importance of working with your kids as it pertains to learning about money. And I know that that's always been something that's been kind of close to your heart. Tell me a little bit about why that is.

You know, working with my kids, it might be that I work with other kids more than I do my kids. I would like to work with my kids more, but I've included them in some of my classes, but my clients' kids tend to reach out to me more and call me. Those that are interested in finance, I found it to be just enjoyable to take it from the very beginning and watch some of them get on and we're on a call for an hour to an hour and a half just going over what they're becoming passionate about. They don't know, they're interested, they want to learn. And that's where I've found the most enjoyment is for those that really want to learn, I make them call and set up an appointment because I don't want them to be forced to come in and sit down and have me go over the 101s of finance and all that. I don't know what really got me going on it other than The fact that I learned at an early age, my father taught me, you know, the earlier you catch people, the better, um, and the better off they're going to be financially. And that's just kind of what started it.

Well, and it's interesting. So I'm curious, when you have folks who call in, what are some of the more popular topics? By the way, my kids don't listen to me about anything. And so I typically try to find one of the folks that I work with for them to talk about things too. So I, I can certainly understand where you're coming from with regards to your kids. And I think for our listeners too, that's part of the benefit of having a financial advisor is being able to give your kids somebody to talk to about things that they might not listen to you about. It's not as if most of our clients don't know about some of the basic money things that young people might need to know about. It's just that sometimes just having a professional to either get to go and talk to or have to go and talk to, whichever one it kind of ends up being for them. I think there's a lot of psychology that goes into that, that really is helpful. What are some of the things, John, that you feel like, or that you're noticing that people call in about most?

Well, I think not that they're calling in for it, but they're just interested in knowing how to invest and how to grow their money. And basically the most powerful thing that we have is at our fingertips every day that I think we take for granted, which is hypotheticals. Using Morningstar tools to educate them on basically taking them from, "Do you think that you're going to be a millionaire someday?" And that open-ended question. And most of them say, "I don't know. I have no idea. No." Or they say, "No." None of them usually say, "Yes, I'm going to be a millionaire. No problem." But they're interested in growing their money. So we get into that and you start off with a person who's 20 years old, put $1,000 in and show them an illustration of Putting $1,000 a month in or $500 a month in and compound that from age 20 to age 55 and growing that, a balanced fund grows to $3 million. A diversified portfolio with 10% bonds grows to $5 million and a diversified portfolio of the right stocks grows to $20 million. And so you start showing them those numbers. It's kind of hard not to be a millionaire. If you start early and you invest, whether it's $100, $200, $500, and you pay yourself first like a bill, So you then start getting into everything. Well, how can I save $25 or $50 a month? And then you start getting into budgeting and expenses. And we know when we run a plan, the most important thing is not how much they have, but it's how much they spend when they get into retirement. So getting into that discussion, and it starts right now with, do I go to Starbucks and spend $5 or $10? Do I go online and order from Amazon and spend $100 a month on Amazon? But watching what you spend And you're never not going to pay your phone bill. So if you just set up your retirement now at age 20 and you put aside $25 or $50 a month, like a bill, like you pay your Apple bill, then you'll put that money and you'll start to invest it. And then as you make more and more money via education and via getting a job or getting promotions, you continue to, as you get raises, give yourself a raise in retirement so that you someday can live off that retirement at age 50 or 55, as opposed to 65 or 70.

Yeah, and I think that just to point out for our lawyers in the listening audience, the numbers that John mentioned are hypothetical examples for illustrative purposes only. So if you'd like to see exactly how the growth in a particular type of investment, what that looks like, that's a great tool for kids, young adults, adults even. I mean, it's a really helpful tool. But just to point out that those numbers are examples, but good examples. And if you want something more specific, just reach out to any of us and let us know. But Tate, I know that you're our resident researcher and you found a study that kind of delved into some of the particulars about parents and kids and money. What are some of the things that you found?

Well, you know, it's all very interesting and it all kind of goes back to what John was just talking about when it comes to psychology. And I'll kind of ask the two of you a question to kick this thing off, which is, if you had to guess, which do you think came first, the name of the fruit or the name of the color orange?

I'm going to go with the fruit.

John Chebot.

It's absolutely the fruit.

The fruit, right? So the name of the fruit predates the name of the color by about 200 years. And if you look at the other questions like that, of which came first, Which came first, the currency or the system of taxation that we have in this country? The currency came first, and then the country came up with— our country, our founders came up with a system of taxation that would create demand for our currency. Because if you're going to pay your US taxes in US dollars, you have to figure out a way to earn US dollars. If you're earning US dollars to pay US taxes, the government is creating demand for this currency. And so when you think about how children, how young people think about money, as a parent, you can come up with ways to create demand for money in their sense. And they can try and figure out, "Okay, so what do I need to do to get money if I want to buy a certain thing?" Is it just the parents go out and buy the kids whatever they want? I mean, is that teaching them any kind of lesson? Probably not. If you want to teach them any kind of lesson about how to earn, how to save, how to get by, and how to get the things that they want on their own independently, it would be creating some sort of system, whether it's an allowance system, and we'll kind of get into that in a minute, or the Dave Ramsey approach, which would be to create a system of a commission-based system in the household where they do certain things for a certain amount of money. If they know that they want to earn a certain amount of money, they got to do all these different things to get to it. And so getting back to the survey that Chip was talking about, if we're trying to think of a way to get kids interested in money and interested in the concept of both earning, saving, and growing, we need to figure out how all of these families nationwide use money and use these systems in their own houses. So at any rate, T. Rowe Price has been doing this survey for the last 13 years, and they survey about 2,300 families nationwide. And they talked to both the parents and the kids and asked them the questions separately. So we get different points of view on how each group looks at these questions. And they surveyed both parents and children of all financial backgrounds. And I don't think it's any surprise that the majority of the parents talk about finances with their children. And some of the common financial conversations have to do with not living above your means, setting financial goals, saving for emergencies. I mean, it sounds like these are all 3 topics I have no doubt that the 3 of us incorporate into our financial planning conversations when we talk to the parents all the time. You know, when it comes down to saving for emergencies during the pandemic, 3 out of every 4 parental groups felt like they did have a sufficient emergency fund to handle what happened. I have no doubt that the majority of them spoke to a financial planner when developing how much— a system for saving that emergency fund, figuring out how much they needed. Then 3 out of every 4 parents felt like they needed to either replenish it or grow it after the pandemic, meaning either they figured out they didn't have enough saved for an emergency like that, or that they spent some of it down, so they needed to replenish it. That system works because they had to use it. It was there. Most all the respondents strongly agree that having that financial knowledge and planning ahead helped them create that emergency fund, helped them get through the pandemic, which was a major focal point of this most recent survey that they did in 2021, as you might imagine. But how do you all, Chip or John, either one of you can field this question, but how do you all talk about saving with the parents on one hand, and how do you think that filters down to the kids? Do you do it at the same time? Do the parents that you talk to have a different system? How do you approach that in your businesses?

I find that most everybody's ideas on everything are what they learn from their parents over time. Parents, grandparents, kind of the structure that they have, whether we're talking about retirement or saving. I think in a lot of cases, I mean, it's very much a learned behavior. And so I think first you have to understand when you're talking to parents and then potentially through them to kids is you have to understand where the parents are coming from and what their background is and what their kind of family history is and what their habits are. Because that's the old adage of, I can't hear what you're saying for how loud your actions are speaking. I think that that's, very true when it comes to money. And I think that the kids see how the parents deal with that. But for me, I rely in at least some on my own experience as a young person and how I learned about money and the experience that I had of a grandparent giving me a few shares of stock that then I religiously back then followed in the newspaper. It was Coca-Cola. And for 20 years, I didn't drink Pepsi. Wouldn't do it because I owned Coca-Cola and it was kind of ingrained. And, and so I think that that's been a big part for me in having conversations with parents, because a lot of it I find, John, is that folks just don't necessarily talk to their kids about money. Chip, what do you think?

Yeah, I agree with you on that. Once you end up talking to the kids, the beliefs, and there's a lot of similarities that are just transferred down just from watching. But I think it's both eye-opening for the parents as well as the kids in having a discussion. And again, the most important thing is building that plan and showing them how to make that part of a monthly habit and change the things that they did in the past. And once they see it, like we've seen in the last 5 years with a lot of our clients, they start calling us to increase their amounts that they're putting in monthly and whatnot, just because they get used to doing it and get comfortable with it. But it all comes back to education, to taking a look at everything and building out a plan and have a reason for doing what you're doing in the first place.

And I think a lot of it with young people is just getting them interested. We've seen plenty with whether it is the various cryptocurrencies or the partial share trading platform. I mean, we've seen plenty of opportunities where one of the things that those industries, we'll call it, have done really well is getting them interested. And I think that's the biggest part for me. When I look at, and we actually built a program called Invested in You for our clients, for them to be able to use with kids that built on my experience that, that own a few shares of stock and that kids can follow and that they know, but we intentionally selected companies that they had heard of that they're interested in. And I think that's the biggest thing. And I think then should we show in the kind of material that you were talking about earlier of showing what the power of compound growth can do and things like that once they're interested a little bit, it gets fascinating. We actually have a client who brings his grandkids in once a year. It's a grandson and a granddaughter and each of them. And I don't recall off the top of my head how much money it is, but he gave each of them a little bit of money and they each have their own portfolio. And they like to compare who's doing better or worse right there. And he brings them into the meetings.

I've probably got 25 to 30 kids that are clients through Roths or investments that way. And I work directly with them and talk to them about the portfolios. I make them pick stocks and we put them in the Hypo system and we look at good stocks and bad stocks. And it just helps with the education process, but you want to have them be involved and then have them help you and you show them right on their phone. I mean, they all have the Apple phone. They all have the stock charts. I have them pull it up. I say, what are the top 5 that are already there? It's just getting them involved and having them part of the process so that they feel like they're part of it. And you see some of them get really excited about it and other ones look at me and say, you just do it. And that's fine. That's what they're learning. And they're going to have somebody do it for them or they're going to learn how to do it themselves.

Yeah.

And there are a lot of basics, Tate, that I think that survey touched on that are important questions for young people. And we won't delve into the answers of all of them, obviously today, but for our listeners, One of the ones was, how do I save? And just the basics of how do I do it? And I think that John touched on a handful of ways of automating and doing things like that, that are incredibly important to make it easy. You know, one of the reasons that the government decided, you mentioned earlier taxation, Tate, the government decided that we probably wouldn't write a check to pay our taxes. So they figured out how to take it before we get it. And I think that we need to be mindful, particularly when kids are getting a paycheck, that that's the easiest way for them to save too. What were some of the other things, John, that were kind of big questions?

Well, and John Chegwit brought it up, so I'll kind of expand on that too. But one of the best ways to teach children is to include them. I mean, inclusion is important. And you think about the most effective teaching methodologies in the classroom in schools. Is kind of this immersion into something, you know, a field trip out to the port. My son, his class went out to the Port of Wilmington and took a tour of the port so they could see how ships come in and the big containers that are unloaded and offloaded. And seeing it in person, doing it in person, experiencing it in person and making that tie-in between what you learn out of a book and what you can see in real life, that I think is a very important tool in connecting those two things together. So when they have these questions like, how do I How do I create a checking or savings account? How does a credit card work? Take them shopping with you.

One of the things that I found really useful in the classes, don't mean to interrupt you, but created a worksheet, a budget worksheet that they would fill out. And I'd say, well, how much are you going to earn when you get out of college? And they say, I don't know. And I have a little thing that shows each one of the jobs, what you actually earn, what you earn if you just have a high school degree versus a bachelor's degree versus a master's degree, and then have a discussion about that. And then plug in a number and then work through a budget and then start going through all the expenses. And you look and see what you got left. And on $30,000, you don't have anything left. That number I gave you earlier, that $1,000, that came from my budget worksheet, which was $52,000 earned, taxes, saving for retirement, iPhone, energy bill, all that stuff. And it left $1,300 a month. And so we invested $1,000 a month. And so you have them go through it and they tell you how much they're gonna invest off of that dollar amount. And then 4 years later, they're working and then they come back and they're investing with me and they're investing $500,000 a month. It's just awesome to see.

Exactly. I mean, there's no better way than to tie in the theoretical, you know, you think about saving versus the actual doing of it. I think that's an important piece. And so of the parents, one of the responses of the parents that don't talk to their children about finances often or at all is that they believe they're too young, that they have too many other things to worry about. Those kinds of things, I would say, you know, of course there's too young when they're in maybe diapers to understand what's going on, but it's never really too young to take them around with you while you're spending money or when you go to the bank to make a deposit or when you go to the financial advisor's office to make a deposit and to see what that money does over time. It's never too early to start those kinds of things and make that real-life connection with here's how you become something later. Here's how you have a savings account later. Here's how you control your spending later. The earlier you have those conversations, the better. There's no time like the present, right, Chip?

Right. Well, and understand, you don't have to get into the weeds of all of your personal finance to let them see you practicing some of it in action. There's no judgment or shame. I think there are plenty of people who don't necessarily want to talk too much to their kids about their personal financial situation because Many of our clients still have some personal anxiety about it until they're— maybe not if we're talking grandkids, but a lot of the parents do. And it's one of those things that I think that's also why we're here. Yeah. If you're listening to this, if you have a financial advisor, if not, we're available, but if you have a financial advisor, part of teaching them is introducing them to your other professionals and let us be there to help you, whether it's helping save for college. Kids do know how expensive it is these days. Sometimes when they're at college, they act like they've forgotten when they blow off classes and things like that. They've forgotten how much those classes cost. But anyway, that's just me being a little bit salty. But some of the basics, there are a lot of things that we can help with. I mentioned the Invested in You program. And being able to have them get a statement every month. A lot of times it's just the little things. Should we, as we're kind of wrapping up, I'll assume we're talking to parents or grandparents. What's one suggestion you would have for them in terms of what's something that they can do today to help the young people in their lives when it comes to money?

That's a great question. And I think it's really, really, really simple in the fact that if the kids are working, and I always ask them if they're working, They can contribute to a Roth and maybe they won't contribute to the Roth. So what I tell them to do is come up with a matching program, start teaching them the way it's going to be when they get out of school and they start working. They're going to get a match from their company if they do their 401 plan. Have them put their money where their mouth is. If they invest $250, you're going to match $250 and put that in their account and put it in their Roth. It's their retirement account and start that for them. They can put in up to whatever they earn up to the max dollar amount. $6,000, I believe it is today. And that money goes in and you match it and you start the investment program. And most of them come back, they'll put in the whole amount that the child made the previous year as they contribute. And then they'll match going forward. And that's how I've gotten a lot of them to start. Just had one with a grandparent as well, did a great-grandchild's, just a regular taxable account, but they're doing a matching program with the son who didn't invest for himself. So he's helping them start early with the grandchild.

I think that's a great example of using your money to have influence and to influence good decisions of the next generation. Chip, we appreciate you sharing all your insight. I think our listeners can hear, it's obvious you're passionate about this. And so I'm sure we'll have you back, not only to talk about other things, but probably to talk some more about this sometime. Tate, any parting words?

Obviously we've got a lot of different opinions and ideas about how We work with our clients. I mean, I think we all come up with on a daily basis different ways that we work with different clients and the different experiences that we have with their kids. So if you haven't been to talk to your financial advisor recently about financial conversations in your household, do it. And if you don't have a financial advisor, come talk to us. We'll set you up with a Signature Life Plan and see what we can do to help your kids figure out how to save for college, how to save for things that they want to spend their money on. And watch that money grow over time. It's always fun to do.

That's right, Tate. See you next week, brother. Yes, sir. Thank you for sitting in on this candid conversation with our team. This show aims to inform, inspire, educate, and sometimes entertain you, our listener. If you enjoy the show, please subscribe, share it with a friend, and help us empower others to plan their future with confidence. If you're interested in evaluating your own financial and retirement plan, go to signaturewealth.com/scorecard to download a copy of our Signature Life Scorecard now. If you'd like to speak with an advisor, go to signaturewealth.com and choose the location nearest you to schedule a meeting at your convenience. Our advisors are always expecting your call.