MONEY Magazine’s Best Jobs: Chief Executives

 MONEY Magazine’s Best Jobs: Chief Executives

Top 10: Highest-paying careers
	Average salary
Chief Executives	$254,643
Physician/Surgeon	$247,536
Oral and maxillofacial surgeons	$211,766
Lawyer	$153,923
Sales manager	$135,903
Financial services sales agents	$130,385
Financial managers	$128,910
Dentist	$122,883
Financial advisor	$122,462
Natural sciences managers	$116,504

100 Best Companies to Work For: Boston Consulting Group

 100 Best Companies to Work For: Boston Consulting Group

What makes it so great?

Knowledge really is power. Arrive at this management consultant with a B.A. degree, and the firm will send you to a top institution for an MBA, pick up the tuition bill, and double your salary if you agree to stay on.

The 7 biggest financial decisions you’ll make

			The Basics The 7 biggest financial decisions you’ll make How you manage a handful of major life choices can make or break your financial future.  By Richard Jenkins A lot of people spend a whole lot of time worrying about the small stuff — a little extra yield on their savings, a few dollars less in mortgage payments, slightly higher returns, slightly lower commissions. They pore over IRS publications and fat tax guides searching for ways to save a few hundred bucks on taxes. They read personal finance magazines, buy books and scour the Web looking for tips. Fine. It pays off. But does managing your money really have to be this complicated? Actually, no. In fact, if you spend all your time focusing on fractions of a point, you may lose sight of the big picture. The blunt truth is that if you make the right choices early in life on a handful of major decisions, you’ll never have to worry about financial security. 1. How you handle risk Risk affects all aspects of your life. Would you rather work for a rock-solid company with a strong benefits package, a smaller start-up with great stock options or start your own business? The potential payoffs escalate as you take on more risk, but so do the possibilities for disaster. The same is true for investments. Make sure your risks are age-appropriate. If you’re young, you can dust yourself off and start again. For people over 40, the ability to absorb losses diminishes rapidly as retirement nears. Do your homework. Risk without research is just another form of gambling. Before jumping into any kind of investment, it’s vital to do the due diligence required to accurately evaluate risk, the potential for gains and the potential for losses. Don’t make yourself a target for unethical advisers and garden-variety con artists. Example: The long-term rate of return for big-company stocks has averaged 10% yearly over the past 70 years. Joe invests $2,000 per year in those stocks (via a low-cost S&P 500 index fund in a tax-deferred IRA) while Dexter buys super-safe Treasury bonds paying an average of 5%. They start at age 25 and continue until age 65. Though the rate of return is double, the accumulation is quadruple: at age 65, Joe has $1,006,513 while Dexter has just $248,561. 2. Your choice of career There are worse things than a fat paycheck. Your options depend largely on your education and skills, but some fields will always pay better than others. Getting the training needed for a better job could be the best investment you make. Ask yourself what the long-term salary expectations are for your career field and consider how you could make yourself more valuable. Does your pay depend on distortions in the market? A lot of semi-skilled but highly paid union workers now know the sting of competition here and overseas. Blue-collar incomes have stagnated over the past 20 years as manufacturers found cheaper workers abroad. Consider what your skills would be worth in a truly open, worldwide market. Will your skills retain their value in the next century? Knowledge is the key to survival in the years ahead, whether you’re a carpenter or a computer programmer. The pace of innovation is staggering, and those who fail to keep up will find their personal stock in a nose dive. Nothing has a more disastrous impact on financial security than a lengthy period of unemployment. Example: Joe’s salary averages $60,000 over a career of 40 years; Dexter’s averages $30,000 per year. In addition to their IRA accounts, they each put 10% of their income aside each year in taxable investment accounts that yield 8% annually. At retirement, Joe has $1,092,093 to Dexter’s $546,047. 3. Your lifestyle You don’t have to live like the Unabomber to save money. Americans are conditioned to overbuy. Shopping has gone from being a chore to a hobby, a lifestyle even. Shoppers are encouraged to define their individuality in terms of "style," which for most people comes down to a matter of which mass-produced goods one chooses to buy. Ask yourself how much house you really require. The square footage of the average American home has been growing steadily since World War II. In the 1970s and ’80s buying ever-larger homes seemed a good, tax-blessed investment. Home values generally have outpaced inflation — by a large margin in many places and in spite of slow economic growth. Still, as the baby boom generation starts downshifting into retirement, there are likely to be a lot fewer buyers for those 4,000-square-foot, five-bedroom homes. Every dollar you don’t spend on a house saves roughly $2.40 in mortgage payments. A lot of people calculate what they can afford to pay for a house and use that as the floor price for their house search. They don’t even consider less expensive homes, and no self-respecting, commission-hungry Realtor would suggest it. Example: Joe and Dexter each have $40,000 for a down payment on a house. Joe buys a house that requires him to carry a $180,000 mortgage. Dexter buys a larger house and needs a $200,000 loan. Buying the lower-priced house saves Joe $49,317 in mortgage payments over the life of the 30-year mortgage at 7.25% interest. 4. How you manage debt Pay yourself instead of your creditors. At its most basic, credit is the privilege of spending money you don’t have. Prior to World War II, most people avoided it. To help Americans get over that silly notion, credit card debt was a deductible expense prior to 1987. Then, Congress created a new pool of deductible interest in the form of home equity lines of credit. We’ve learned our lessons so well that now bankruptcies are at an all-time high, despite a raging stock market and negligible unemployment. Everyone in government is, understandably, shocked and appalled to discover how deeply in debt the typical American is today. Banks make a lot of money lending to people who can’t wait to buy things. Example: Dexter buys his new $20,000 car with 10% down and a 48-month loan, while Joe postpones the purchase, saving up the money and paying cash. Dexter’s monthly payment on the loan is $448, but Joe needs to set aside only $344 each month in a 5% taxable money-market account to pay cash for the car at the end of four years. Joe started buying all his cars this way at age 30 and put the $104 savings in an IRA earning 9%. By the time he retires at 65 he’ll have an extra $352,000. 5. Protecting your assets Your most important asset is your ability to work. Disability insurance will pay you a percentage of your income, usually from 60% to 80% , if you’re sick or injured and totally unable to work, but that income never increases. Living 30, 40 or 50 years on a fixed income is one of the surest roads to lifelong poverty. Consider the financial as well as physical risks when you’re tempted to buy that Harley-Davidson or take up cliff diving. You also need to provide adequate protection for the rest of your assets. That means making sure you have adequate auto and home insurance, and for most people, an umbrella liability policy that provides extra protection against large damage awards in certain civil suits. Just about any lawyer can tell you stories about someone forced into bankruptcy by a damage award that exceeded the limits of his or her insurance coverage. If you’re self-employed, insulate your assets. Consider forming a limited liability corporation. It’s easier to set up and maintain than most other corporate forms and will make it much harder for creditors and attorneys to go after your personal assets. Example: At age 40, Joe and Dexter are each hit by a judgment in a legal case. Joe has an umbrella liability policy that pays the full amount. The judgment exceeds the limits of Dexter’s homeowner’s insurance, forcing him to turn over the $73,329 he had accumulated in his taxable investment account and file for Chapter 7 bankruptcy protection. It will be seven years before his credit rating recovers, but the real damage is the loss of the potential earning power of his investment portfolio. Dexter will have to start saving from scratch at age 40, and instead of a portfolio worth $546,047 at age 65, he’ll wind up with just $180,220. Not having adequate insurance will thus wind up costing him $365,827 in lost principal and investment earnings. 6. How many children you have Today, there’s a powerful financial disincentive to have children. Let’s start by saying upfront that we all love children. They provide joy and excitement to every family, but this is intended to view them purely from a financial perspective. In the days before Social Security, there was a positive incentive to have lots of children. Not only did they perform necessary labor on the farm or in the family business, but they also were expected to care for their aging parents, come what may. According to the latest figures from the U.S. Department of Agriculture, it now costs $112,000 to as much as $250,000 just to raise a child through high school. (Higher-income families tend to spend more.) Add anywhere from $40,000 to $120,000 more for a basic four-year college education. There are economies of scale as the number of children you have grows, of course, but there are very few multi-child discounts available for college. The cost of a happy accident. Nobody who wants three children is going to be deterred from having that many, of course. But many people who really wanted to hold the line at two wind up with three, and sometimes four or more, by what is euphemistically called an accident. Just remember that this kind of accident is among the most expensive you can have. Example: Joe has two children, which will cost him $446,000 to raise to age 18, and $80,000 more for a public university, making a total of $526,000. Dexter had planned to have just two children, but a third came along unexpectedly just as he and his wife turned 40. Even if Dexter scrimps and saves to spend just half as much per child as Joe, the total tab including college will still add up to $432,000. And since Dexter’s income is just half of Joe’s, he can ill afford the extra expense. Now, instead of socking money away for retirement, he and his wife are using that money to raise their kids and send them to college. 7. Marrying for better or worse Take everything you own and divide by two. Deciding whom to marry may not seem like a financial decision, but you’ll find out otherwise if you ever have to endure the pain of divorce. Bankruptcy, a legal judgment, even the IRS can’t touch certain assets, such as money in retirement plans. But nothing is safe from the divorce attorneys. On the positive side, getting married can double your income. While the quaint notion that two can live as cheaply as one is dubious, it doesn’t cost twice as much, either. Financial teamwork early in a marriage can yield a substantial payback in later years (provided you stay together). Choosing someone whose long-term financial goals are similar to yours will reduce friction and help you stay on track. Example: At age 65, Dexter and his wife decide to split up. They’ve tapped their retirement funds to put the last of their children through college. They’ve managed to pay off the mortgage on their $240,000 house, and it now represents the total of their net worth in today’s dollars. They’ve both worked throughout the marriage, so alimony isn’t an issue, but they will have to sell their home and divide the proceeds. Instead of living payment-free in the home they struggled 30 years to own, they’ll be paying rent again — on two homes. As the examples of Joe and Dexter show, it isn’t necessary to be an investment whiz to accumulate a substantial fortune if you make smart choices on a handful of life’s big decisions. At the end of his career, Joe has a net worth including his home of more than $2 million. He can retire with the security of knowing his conservative investments, with a 6% annual yield, will provide after-tax income of $91,000 until he’s 95, and leave a $200,000 cushion. Dexter’s $120,000 in assets will only give him $4,000 in annual income after taxes. If he retires at 65, he’ll be depending on Social Security for a large part of his living expenses and will only have about two-thirds the income he had when he was working. Even if he works part-time until he’s 75, bringing home $10,000 extra each year, he’ll have to save most of that money for the future and will only have $4,000 extra to bolster his income from Social Security.
	MSN Money’s editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor’s best course of action must be based on individual circumstances.

5 financial steps to help your aging parents

			The Basics 5 financial steps to help your aging parents It’s the perfect Mother’s Day or Father’s Day gift: help ensure their financial security. They’ll feel better — and you’ll know the full burden of care won’t fall on you.  By Terry Savage Sooner or later, the moment comes when you realize that your parents need your help. It will come as a shock — sudden recognition that these two people who guided you to maturity now need your advice or help to deal with issues ranging from health care to finances. Ultimately, your parents may need your financial support. There are steps you can take now to make this transition easier. But it all depends on communication. You don’t want to hear from your mother that Dad lost his retirement funds to an investment scam. And you don’t want to hear from a neighbor that your widowed mother has been victimized by a furnace repair service. So a program of regular discussions about your financial issues and theirs will provide a platform for future problem solving. It’s never too early — or too late — to start this two-way discussion. Even notoriously private parents will be willing to offer advice to you. Then it’s up to you to turn the discussion to their situation. Here are some steps you can take now to make sure your parents’ finances are well-planned. After all, you don’t want to be caring for them just as your children are starting college. Discuss retirement plan investments Start a conversation about their company retirement benefits. If they’re still working, you might help them diversify the investments in their company plan. Use the retirement planning tool on MSN Money to show them how to reach their retirement goals. If they’re about to retire, you might introduce them to programs such as T. Rowe Price’s Retirement Income Manager, where a one-time $500 fee will give them advice on how to invest their retirement assets to make sure they don’t run out of money. You may be able to help your parents with some investment advice. But don’t forget that they may have a lot less risk tolerance than you do. For a portion of their capital, you might consider an immediate joint annuity — a guaranteed check a month for life no matter how long the survivor lives. It’s a concept that’s considered old-fashioned by many. And certainly it has drawbacks — notably the problem of locking in a fixed payout that may not cover costs that rise because of future inflation. But it will buy peace of mind that no matter which spouse dies first, there will always be money for the survivor. Moms need IRAs, too If your parents are older, they may represent a more traditional family where Dad worked and accumulated retirement benefits, while Mom stayed home and raised the children. But even non-working spouses are entitled to open Individual Retirement Accounts. If your parents have joint income under $150,000 a year, your mother can have her own Roth IRA. Help her set up an account at a mutual fund company. (Dad doesn’t have to know.) To get more information on mutual fund companies, click here. (For brokerage firms, click here.) And if your parents have earned income but are not covered by a company pension plan, insist they each open a deductible IRA. This year, people over 50 may contribute $3,500 — a number that grows to $5,000 in 2008. Women live longer than men. But many men don’t take this probability into account when planning their retirement spending. Make sure your Mom doesn’t sign off on a retirement plan payout that ends if your Dad dies first. (A spouse is required to OK such a deal.) And make sure that both parents are participating in their retirement budgeting process. MSN Money’s retirement expense calculator can help in this important task. To estimate your probable retirement income, use MSN Money’s income estimator. Gift long-term care insurance The one thing that could devastate your parents in retirement is the need for one or both of them to have long-term care or assistance. Neither Medicare nor Medicare supplement policies cover this type of custodial care. Only after most assets and income are used up will state Medicaid programs step in to provide nursing home care — typically in an under-funded institution that would never be your first choice for an aging parent. Long- term care insurance can be a much better alternative. It offers a pool of benefits, and allows your parents to receive care in their own home if deemed necessary by their physician. Even if your parents are in their seventies, it’s not too late to purchase a policy. At that age, if they’re still in reasonably good health, the annual premiums should be less than a one-month stay in a nursing facility. (Those costs can range upward from $5,000 per month today.) Read more on long-term care insurance. You can buy the policy yourself — a perfect Mother’s Day or Father’s Day present. Or, once you’ve started the policy, you can gift them the cash to pay the premiums themselves or keep on paying it. Depending on their ages, a portion of the annual premium costs may even be tax deductible. Consider a reverse mortgage The moment may come when your mother confides that she is “running out of money.” Even if you thought your parents were well established, you probably never considered the cost of medical care, pharmacy bills, rising real estate taxes or home repairs. But one day, these costs start to overwhelm their budget. No parent wants to be a burden on the children. And a reverse mortgage may offer a good solution. If your parents are over age 65, and own their home free and clear of a mortgage (or with only a small balance remaining), a reverse mortgage will create a lifetime stream of income out of the equity they’ve built up in their home. As long as they stay in the home — no matter how long they live — a fixed monthly check will arrive. Many seniors who have worked a lifetime to pay off a mortgage hesitate to go back into debt. You’ll have to explain that this is different, and you may have to do a little homework to understand the mechanics as well as whether it makes sense in the community where you live. As I explained to my own mother, it’s sort of a “pension” out of your home equity. A reverse mortgage allows seniors to keep title to their home, while withdrawing their equity. And they can never run out of equity or be forced out of their home. When they die — or move — the house is sold, and they or their heirs receive any amount in excess of what has already been advanced through the reverse mortgage. But even if they live to 110, far exceeding actuarial estimates, the check will still arrive as long as they live in the family home! The amount of monthly check is based on the value of the home, their age, and the current level of interest rates. The National Reverse Mortgage Lenders Association has a list of lenders that make these loans. To access the list, click on the link to the association’s Web site at left. These loans are Federally insured to protect the lenders in case the homeowner lives longer than expected. But depending on the location around the country, there are fixed limits on the value from which loans can be calculated — about $266,000 maximum equity value. All costs are calculated into the amount of the monthly check. The withdrawals can be taken in one lump sum, or monthly check, or a set amount for a fixed period of years. And the money can be spent on anything — from paying back taxes to renting a condo in a warm weather location. Any seniors who take out a reverse mortgage are required to undergo independent counseling from a certified organization such as AARP. Discuss their estate plan This is the last subject that your parents want to talk about with you. But it’s also the most important Convince them that you don’t want to know “how much” they have — or might leave to you. Only that you want to make sure they have a current and complete plan. This is a gift I gave my own parents — an estate plan. I never got involved in the details of what was being left to each of the children. But I did insist that the lawyer they hired create a revocable living trust and also a health-care power of attorney for each. And my parents agreed that each wanted a living will, a document directing that no extraordinary measures be taken to prolong life. The advantage of the revocable living trust is the ability for a successor trustee to step in and act if either or both of them are incapacitated by illness, such as a stroke. (I saw the complications when my grandfather was paralyzed by a stroke, and my family had to go to court to petition for control of his assets.) And I’ve insisted that a copy of the health-care power of attorney be included in their medical records, so there will be no questions in case of a medical emergency. Don’t delay! If you consider all of these issues to be the most unpleasant task, you have no idea what a mess can occur if you leave these tasks undone. Mother’s Day or Father’s Day is a perfect time to sit down with your parents to work through these issues. (In fact, you might want to print out this column and use it as a starting point.) You may be surprised that your parents feel a great sense of relief. Either they didn’t want to burden you with their problems, or they didn’t know how to open the discussion. So use the occasion to get started. You might not cover all these topics at one sitting. But once you’ve opened the door, future discussions can cover all these issues. Consider it a gift to your parents — and yourself. It’s the gift of peace of mind. And it’s priceless.
	Fund data provided by Morningstar, Inc. © 2006. All rights reserved. Quotes supplied by ComStock, an Interactive Data company. MSN Money’s editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor’s best course of action must be based on individual circumstances.

Cost of being a stay-at-home mom: $1 million

			The Basics Cost of being a stay-at-home mom: $1 million Can you scrimp and save enough to cover that cost? It won’t be easy, but there’s a lot of help available for those who try. Here are 5 tips to get you started.  By MP Dunleavey When I was at college in the ‘80s (and a feisty, liberal-arts women’s college it was), the notion of staying home with your kids was, shall we say, unpopular. Why spend four expensive years preparing for your supposedly brilliant career if you weren’t going to put the kids where God and feminism intended them: in daycare? So it’s been fascinating to watch the pendulum swing the other way the last 15 years, as women of my generation and older faced the untold frustrations of trying to work full time and raise a family. Injuries to the number of women whose heads hit the glass ceiling soared. In her 1997 landmark book “The Second Shift,” Arlie Hochschild reported that most women who worked full time still did most of the housework. Many others found they were working to pay for child care, so they could keep working — to pay for child care. No wonder more and more of us began to reconsider the stay-at-home option, or variations thereof (flextime, working from home, extended maternity leave, etc.). As Mary Snyder, co-author of “You Can Afford to Stay Home With Your Kids,” told me, “It’s a total priority shift. Women don’t want the Supermom Syndrome. It looked great from the outside, but once you were in it, you were miserable and you couldn’t excel at anything.” Making the most of naptime I’ve ridden the waves of maternal angst with the rest of my peers, and the stay-at-home option has always appealed. Plus, I’m a writer (I said to myself), so I could always work while the little tyke naps. I wouldn’t even have to lose much professional ground. You know: “Writer Wins Pulitzer During Naptime.” Mmhmm. So I was a prime candidate to get my butt kicked by Ann Crittenden’s new book: “The Price of Motherhood: Why the Most Important Job in the World Is Still the Least Valued.” A former economics reporter for The New York Times, Crittenden documents in painstaking and depressing detail all the ways in which government policy, the tax code and corporate culture penalize mothers who work and the parents who stay at home. The stats are such a downer I won’t get into them here — but for example, working mothers earn 20% less than working women without kids. But those who pay the highest “mommy tax,” as Crittenden calls it, are those who choose to stay home. Cost of giving up a career: $1 million She uses herself, a writer (ahem), as an example of what happens when women decide to leave the workforce. Most not only forfeit their income, but also retirement savings, pension and other benefits. All told, Crittenden says, she gave up about $700,000. Shocking? Yes. Unlikely? Nope. Economists say that the stay-at-home parent who relinquishes a career may lose about $1 million over the years. Crittenden doesn’t regret a minute of the time she spent with her son; nor do any of the mothers she interviewed. But the financial tradeoffs she lists are a stunning indictment of a mother’s financial vulnerability. To combat these realities, Crittenden recommends a slew of smart policy changes that would reduce the financial penalty of having kids, especially for stay-at-home moms (or SAHMs, as they’re increasingly abbreviated). But if you, like me, would like to consider staying home before the glacial pace of government acts on your behalf, here are some practical ways to shore up your financial (and emotional) security now. Reconsider the prenup Don’t sign your rights away in a prenuptial agreement. Prenuptial agreements are meant to protect the financial assets of both partners, so make sure yours does. By choosing to stay at home, you’re limiting your future income prospects, so make sure any agreement you sign takes into account your somewhat special status as a stay-at-home parent. (If you’ve already signed one and are now thinking of having children, you and your spouse can renegotiate.) Katherine Stoner, a certified family law specialist in San Francisco, recommends the following precautions: Many premarital contracts are boilerplate, so it’s important to weed out any offending clauses. You don’t want to sign anything that waives your right to spousal support or future spouse rights in the event of death or divorce. Get a lawyer to help you plan this, Stoner says. Or you’ll be leaving an awful lot up to chance and the generosity of the courts. Even if the exact details are fuzzy, spell out your future financial plans in the prenup. For example, some couples stipulate that in the event of divorce, since the wife gave up 10 years of her career to raise Jack and Jill, the court should take that into consideration when determining her settlement. You don’t need the details, as long as the intention is clear. Figure out if you, personally, can afford this Emotionally, never mind financially, we all have a lot invested in our careers. It’s vital to spend time weighing what leaving the career track will mean. It’s difficult to go from changing sales strategies to changing diapers full time, and many women take a hit in their self-esteem and sense of identity. Luckily, many, many women have done it, and they’ve either formed or joined organizations designed specifically to support your choice. These resources offer some surprising advice and insights about the new investment you may make. AtHomeMother.com, the Web site for the National Association of At Home Mothers, advises you to first have a heart-to-heart your spouse about how this decision will have an impact on your family and lifestyle. They also urge you to be honest about what you need, whether it’s an hour at the gym or time to chat on the phone — and to find ways to give that to yourself. It’s important for you to be happy, they say, “when your lap is the center of the universe.” Now, can you afford this? Your initial response, and the response of many two-income couples, might be no. But two incomes can be deceiving. You earn more, but you also probably spend more. When you look at what many SAHM Web sites call “the cost of work” — what you pay in travel, wardrobe and eating out more frequently, plus the cost of child care — your salary may not be the big asset you thought it was. Add to that the fact that your income is taxed at a higher rate thanks to that marriage penalty, and you might be dismayed to see what your second income (or his, if it’s the smaller one) boils down to. Mommysavers.com takes fictional Julie’s $25,000 per year as an office manager and put it through the wringer of tax deductions and all the expenses of staying employed. Bottom line: “Julie” brings home $6,050 a year, or $2.91 per hour. If you’d like to see how you and your partner’s income play out, use our Second Income Calculator (and have the last two years’ tax withholdings ready to plug in). Sounds depressing, but it really makes you think: So why not stay home? Author Mary Snyder says that when she left her job as a regional market manager for a Fortune 500 company, she took 45% of the family income with her. And yet, she says, the adjustment was easier than she’d thought. “With two incomes you tend to spend more; with one, you’re smarter about your money.” A big piece of fat to trim: Many couples, she says, discover that they’re spending more on food than on housing. “Most people can cut their grocery bill by 50%,” she says. Keep planning for your retirement You may no longer have a 401(k), but you can put your money into what’s called a Spousal IRA. It has a $2,000-a-year cap, but there are ways to augment that. In some couples, says Stoner, the working partner invests a certain percentage of his/her income for the non-working partner’s retirement. This is important in the event of a divorce — or death. By some tables, the average age of widowhood is 56! If you’ve spent the years from 30 to 55 raising a family, you want to make sure your future is secure. Don’t assume you’re leaving the workforce As yet, “Experienced Mother and Architect of Young Lives” doesn’t hold much water on professional resumes. But that day will come. Meanwhile, use your child-rearing hiatus to explore new career options, if you want, or develop your own business. According to Crittenden, 45% of businesses owned by women are based at home. What in the world could you run from home? Consulting for your previous company is always a good place to start. Want to branch out? Snyder says she’s noticed two up-and-coming areas where women-owned businesses do well: party- and event-planning for adults and children (“Most working couples don’t have the time to plan their 6-year-old’s pirate-adventure birthday party,” she notes), and errand services. What can you do while you’re jogging all over town with your kids? Do the jogging for someone who’s stuck in an office (remember how you would have killed for someone like that when you were working?): Cart their kids to soccer practice, ballet lessons, etc. Think of it like this: Instead of you working to pay for child care so you can keep working, customers are working to pay you so you can stay home. Not a bad deal. Crittenden’s negative portrait of corporate culture aside, it’s worthwhile to find out if your company is more family-friendly than you think. In the last several years, research has shown that it’s in companies’ best interests to help their female workers balance work and career — and some big corporations, like IBM and Deloitte & Touche, have launched new initiatives to help women do just that. Mothers and More, an international support network for SAHMs, offers a perspective I found helpful: it’s called “sequencing”. Instead of taking the view that you stop work and start motherhood, it’s comforting to see it as a series of transitions. The fluidity of this framework is helpful, I think, because a) it doesn’t presume that you’re “giving up” your career, and b) it’s more reflective of the changing rhythms of your life, once kids come. Millicent MacIntosh, president of my women’s college some 50 years ago, would have championed the idea of sequencing. She was famous for saying that women could have it all, just not all at once. It’s nice to think that half a century later, the world is finally catching up.
	Fund data provided by Morningstar, Inc. © 2006. All rights reserved. Quotes supplied by ComStock, an Interactive Data company. MSN Money’s editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor’s best course of action must be based on individual circumstances.

9 vital money questions for Mom and Dad

			The Basics 9 vital money questions for Mom and Dad Here’s a checklist to make sure your conversation covers the proper ground.  By MP Dunleavey You don’t need to analyze your parents’ financial status down to the last nickel and dime, but you do need to cover the basics and make sure there are no surprises in their financial future — or yours. Here, the nine most important money questions you need to ask Mom and Dad: How much money do they have — in cash and investments — and how much income do they expect to have at retirement (including Social Security)? Do they think they will need your support, and if so, how much? What types of insurance do they have? Do they have adequate medical coverage and a plan for long-term care? Do they have any special concerns? Financial planner Ilyce Glink says a 69-year-old client came to her worried that she might outlive her own savings. “She won’t,” says Glink, “but many older parents are finding themselves in the situation where they are living longer than they’d planned, so it’s worth asking.” A complete list of all your parents’ accounts, passwords, financial institutions, and the phone numbers of the advisors, brokers, accountants and lawyers who have assisted them. The location of any estate-planning documents, their safety deposit box (and the key!), and where they keep the original signed copy of their will. Make sure your parents have an up-to-date will. Planners say they can’t stress this enough. “I think it’s irresponsible to die without a will,” says Violet Woodhouse. Even if your parents have no estate to speak of, Woodhouse says, they need a will. “The worst family fights I’ve seen are over the trinkets,” she says. Are the beneficiaries of their life insurance policies, 401(k) plans, etc. as they want them to be? Make sure your parents have signed a power of attorney and a health-care directive in case they become incapacitated, says estate-planning lawyer Elizabeth McKenna. “In a crisis, people need to know what to do.” Explain to your folks that it’s important to assess their estate now so they can project whether the estate is likely to owe taxes. “If they do,” says McKenna, “there are some devices that will protect their estate, and it would be wise to look into them.” m1 {margin:0 0 10px;border:solid 1px #e0eaf8;height:100%;} m1 ul li {margin:0px;list-style-type:square;} s10, .s11, .s12, .s13 {font-family:Tahoma;font-size:8pt;} s11, .s12 {color:#5A5A59;} s12 {font-weight:bold;} td.articlechoice {font-family:Tahoma;font-size:8pt;} h2 {margin:-7px -7px 8px;background:#ebf4ff;font-weight:bold;color:#000;padding:7px 12px;font-size:8pt;} #tableChoice tr td {vertical-align:top;}
	Fund data provided by Morningstar, Inc. © 2006. All rights reserved. Quotes supplied by ComStock, an Interactive Data company. MSN Money’s editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor’s best course of action must be based on individual circumstances.

3 steps to help parents grow old gracefully

			The Basics 3 steps to help parents grow old gracefully Don’t treat your aging parents like kids. If you need to become involved in their affairs, start slowly and make them part of the decision process.  By Liz Pulliam Weston Watching your parents age isn’t easy. Trying to help them can be even tougher. Your parents may be having trouble doing the things they used to handle effortlessly — paying bills, driving, even taking care of their own health. But that doesn’t mean they’re willing to acknowledge the problem or listen to your advice. You may be similarly reluctant to raise these touchy issues and risk being shot down. Failing to act, though, can have serious consequences. Financial problems could deplete your parents’ savings and trash their credit. Health problems can snowball. And the devastation wrought in June, when an 86-year-old driver killed 10 people at a crowded California farmers market, made clear how dangerous declining driving skills can be. You don’t have to stand by helplessly while your parents endanger themselves or others. Elder care experts say there are many ways to broach these difficult subjects, and the sooner your discussion starts, the better. It can help to understand the psychology involved. It’s about independence and control. The older generation puts a premium on self-reliance and deeply fears losing control — fears that were imbedded during the chaos of the Great Depression and World War II, said Marty Richards, a Seattle geriatric care manager with three decades of experience. You’ll always be their child. Your parents may have trouble seeing you as an adult who can offer meaningful help or solutions. As elder law attorney Geraldine Champion put it, they remember changing your diapers — what could you possibly know? Authority figures matter. What they do tend to respect, geriatric experts say, is authority. The word of a doctor or other professional usually carries considerable clout. So you may need to enlist the help of your parents’ physician, accountant, attorney or financial advisor to help make your points. Once you understand where they’re coming from, you can better decide how to start the discussion. Conversations about these delicate issues work best, Champion said, if you focus on preserving your parents’ dignity, quality of life and ability to make decisions, rather than on what may need to be taken away. You can try the following three-step approach: Start with a softball One of the easiest to tackle of all these difficult subjects could be discussing what kinds of treatment your parents want if they become incapacitated. It may seem grim to talk about whether they would want to be maintained on a life support system and under what conditions they would want you to “pull the plug.” But this is actually a chance to focus on how they want to live their lives, not what you want them to do. “You can say, ‘We wouldn’t want to be in a position where we didn’t know what your desires were,’ ” said estate planning expert Michael McCarthy, a managing director of Deutsche Bank Private Banking. You can get the conversation started with a free brochure called “Your Way,” provided by H.E.L.P., a Torrance, Calif.-based nonprofit for seniors. This guide talks about the different medical decisions that might need to be made and how seniors can stay in charge of their care by making these decisions in advance. Ideally, your parents would spell out their wishes in a health-care directive. They should also have a health-care power of attorney designating you or some other trusted person to make medical decisions for them if they’re incapacitated. Even if they’re unwilling to take those steps, just raising the subject can help you know what they want and open the door for further discussion. If your concern is their current health, you can talk about that next. Your local area agency on aging, listed in the phone book or through the Eldercare Locator at U.S. Administration on Aging, can help you find resources if your parents need care. Follow up with finances Once the topic of incapacity has been broached, it’s easier to segue into a talk about how their bills would get paid if they were in the hospital or a nursing home, said McCarthy, an attorney who specializes in estates and trusts. Some possibilities: Another power of attorney — this one for finances — could allow someone else to take over money management. Sometimes banks balk at accepting these, so you may need a lawyer’s help in drafting the document and in convincing financial institutions to accept it. If your parents have a living trust, you could be named as successor trustee, allowing you to step in as financial manager if needed. Again, it’s usually best to get a lawyer’s input so the trust is properly created. Alternately, you could be given check-writing authority on their bank accounts. Or more simply, you can sign them up for online bill payment, which allows you to sign in as them to pay bills if that becomes necessary. This is a less formal situation that works best when your parents trust you and are willing to give up some of their financial privacy. (That’s no small sacrifice, by the way. The older generation may be even more private about their money than they are about sex.) If your parent is already having trouble keeping up with the bills, you can offer ways to ease the burden, McCarthy said. You can help set up automatic payments, so that the mortgage, utilities and other bills are paid directly from your parents’ checking account without their having to remember to write checks. (Make sure the checking account has overdraft protection, in case they forget to keep enough money in the account.) Online access to their bank accounts and credit cards, if they assent, also can help you monitor their finances. Again, the key is to emphasize how you can help make their life easier while avoiding the embarrassment and expense of late payments. Remember, though, that your parents have the ultimate say about their money. You might not agree with their decisions play the ponies, send checks to televangelists or finance a ne’er-do-well nephew’s business schemes, but unless they’re mentally incompetent, your influence is probably limited. To wrest control of their finances, you would need to convince a judge to make you their conservator, something that’s not likely to happen unless they’re clearly mentally incapacitated. For more information on powers of attorney and other ways to assist with parents’ finances, see "Don’t wait until your parents’ health slips." Tackle the issue of driving safety It can be tempting to rail about the carnage in Santa Monica, which left among the dead a 7-month-old boy and a 3-year-old girl. But condemning elderly drivers will just put your folks on the defensive. A better approach might be to discuss with your parents ways that they can drive more safely, as well as what could trigger their decision to hang up their keys: You can point out that everyone’s hearing, vision and reaction times decline with age, and suggest that they consider taking one of the $10 safety courses for mature drivers offered by the AARP. (See link at left under Related Sites.) The National Highway Traffic Safety Administration has a booklet, “Driving Safely While Aging Gracefully,” that can help older drivers assess and improve their skills. (You can read the booklet online as well. You can discuss alternatives to cars, such as the shuttles many communities run for the elderly. Your local area agency on aging can provide ideas. Some older people put voluntary restrictions on themselves, such as not driving at night and avoiding freeways. If those aren’t enough, or if your parent is clearly dangerous behind the wheel, you may need to talk to his or her physician. Or contact the Department of Motor Vehicles (or similar agency) if the parent is unwilling to give up the keys. States differ, but some have policies that can help rein in dangerous drivers. In California, for example, older drivers must pass behind-the-wheel driving tests if their doctors, a police officer or an immediate family member notify the DMV about their concerns. Still having trouble? You may need to bring in reinforcements. Unite and conquer Remember when you and your siblings tried to play one parent against another? If your folks were smart, they didn’t fall for those games. They knew a united front was the best way to ensure family harmony. You can take a lesson from that approach if you meet resistance to your overtures. Champion recommends adult children get together as a group to discuss strategy before confronting obstreperous parents. The younger generation can decide which issues should be tackled and how to approach them. If you’re an only child, or the only one who cares, you may need to join forces with someone your parents trust — the advisers noted above, a clergyperson or a family friend. Having more than one voice expressing the same concern can have a powerful effect on even the most stubborn of parents. It’s possible, after trying every other approach to ensure your parents’ safety and security, that you’ll have to resort to drastic measures: confiscating the keys, sending them to a nursing home, having a court find them incompetent. If your parents can’t take care of themselves, in other words, you may be forced to take over. “At some point,” McCarthy said, “the roles may have to reverse.” Liz Pulliam Weston’s column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
	Fund data provided by Morningstar, Inc. © 2006. All rights reserved. Quotes supplied by ComStock, an Interactive Data company. MSN Money’s editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor’s best course of action must be based on individual circumstances.

Why allowances don’t work

			The Basics Why allowances don’t work That weekly infusion of cash often teaches kids very little. Try giving them a monthly amount — and put them in charge of their money decisions.  By Liz Pulliam Weston Raise your hand if any of the following sounds familiar: You give your children a weekly allowance, but they’re constantly bugging you for more money or stuff. No matter how much you lecture about the importance of money and saving, cash just seems to slip through their hands. Deferred gratification, comparison shopping and the difference between wants and needs are all alien concepts to your kids. What matters is what their friends wear and have. You despair of your offspring ever having the financial skills needed to navigate adulthood successfully. If this is the world you live in — or one you fear — it might be time to ditch the idea of an allowance altogether. Instead, consider replacing these weekly infusions with a monthly chunk of cash that your children use to cover most or all of their spending. Instead of turning to you for clothing, school supplies and activity fees, your children manage those costs themselves — along with all their incidental expenses that used to be covered by their allowances. Sound radical? It’s obviously not an idea that could work for kids under 10. But neither is it a concept that should be delayed until college, which is when most young people get their first real crack at managing money, argues parent John Whitcomb. Cash and responsibility can work wonders By then, they’ll be far from your supervision — and pelted with credit cards that can turn their bad spending habits into true financial disasters. Whitcomb, a Milwaukee, Wis., emergency room doctor and father of two, says it’s much better to begin giving children the reins starting in middle school, while you’re still able to supervise them. Whitcomb outlined the concept in his book, “Capitate Your Kids” (Penguin 2002), also published as “The Sink or Swim Money Program” (Viking, 2001). “Capitation” is a health industry concept that basically means giving a fixed amount of money to doctors or a hospital to care for a population of patients. In essence, they’re given both the money and the responsibility for spending it wisely. Think how different that idea is from the traditional allowance. In most cases, an allowance is: Too frequent. If you give your child money every week and she spends it all, she just has to wait a few days to get more. There’s little incentive to plan and not much real pain if she makes a mistake. Not all-inclusive. Since you’re still shelling out for most things, you remain the go-to person when your child wants something. That leads to nagging and whining — plus there’s little opportunity for your child to learn true responsibility. Too small. Allowances typically cover only discretionary expenses. In the adult world, however, most of our money goes to mandatory expenses — shelter, food, transportation, etc. Children need to learn the concept that most money is “spoken for” and not available for anything they want. At the same time, kids who are given significant sums can learn some important concepts: Resources are finite. Longer-term planning is an important skill. Careful shopping can stretch what they have. Once it’s their money — to do with as they will — the choices they make tend to change. Parent Rick Brohmer of Waukesha, Wis., has already noticed this phenomenon with his three older children, now grown. While they were in school, brand names were essential. “As [they] left the nest and started buying on their own, brand names were less important,” said Brohmer, who still has a 14-year-old, designer-desiring daughter at home. Start with the clothing budget John Whitcomb learned his own money skills as the child of missionary parents in India. Sent away to boarding school for four months at a stretch, he and his siblings were given a term’s worth of cash at a time to pay their monthly tuition, buy clothes and cover their other expenses. He adapted his experience into a six-step plan that starts when children are in middle school, with the creation and implementation of a clothing budget. Gradually, more expenses and responsibility are added. Kids learn to use an ATM card in ninth grade, a checkbook in 10th and a credit card in 11th to help manage their costs. By the time they’re ready for college, they’re handling all their own expenses, including auto insurance and perhaps even paying their parents room and board. Long-term saving, investing and charitable giving can be incorporated as priorities, as well. You can start smaller, if you want. Some parents may find that a clothes budget may be too big for pre-teens to handle. Screw-ups teach great lessons Susan Beacham, a personal finance educator in suburban Chicago and co-founder of the Money Savvy Generation Web site, is starting her 12-year-old daughter Allison off with $25 a month to cover books, magazines and the once-a-month lunch out that her parents had been paying for. Beacham and her daughter are still negotiating the details. Allison’s not at all sure, her mom says, that the added responsibility is worth losing her mom as a source of constant funds. “She’s still very apprehensive about taking it over,” Beacham said. “But we have to get more girls understanding that they have to grab the reins. It will help them in later life become the independent, risk-taking people we want them to be.” Parents who’ve tried capitation say screw-ups are inevitable — and an important part of the learning process. Nan Mead’s sixth-grade son blew his first month’s capital, meant to cover lunches, hair cuts and all his miscellaneous expenses, in a week on CDs and pizza for his friends. Mead, communications director for a financial education foundation in Colorado Springs, Colo., refused to give him more cash, and he wound up taking sack lunches to school. That was a big setback for a kid who thought hot lunches were cool. Gradually, he learned his lesson. Big enough doses to be meaningful “His money management skills improved each month,” Mead said. “By Christmas, he was doing quite well, even saving for some short-term goals.” Mead’s son is now in college and handling money responsibly. With their parents’ help, kids on this plan learn to anticipate what expenses they’ll face and how much they should set aside for them, Whitcomb said. They learn that, if they don’t buy the $180 sneakers but settle for a $40 pair, they’ll have more money for other things they want. The parents have some work to do as well. They need to figure out how much is a reasonable amount for various expenses, and, almost invariably, they learn they’re spending a lot more on their kids than even they suspected, he said. But Whitcomb doesn’t advise trying to save money by giving kids less than you’d spend otherwise. The idea isn’t to cheap out but to teach children about money “in big enough doses to be meaningful — and for purposes that intensely interest them,” he writes. “Your success comes not in saving money in the short term but in creating a state of mind that living contentedly within your means is the key to financial independence.” Monitor — but resist the urge to rescue Parents also need to keep tabs on their offspring’s progress; Whitcomb recommends monthly meetings. He also believes parents should resist the urge to step in when their kids fail. If your kid does buy the more expensive sneakers but fails to save for the winter coat he needs, you shouldn’t dig into your wallet, he says. You might, however, drive him to the nearest Salvation Army store. Beacham says she’s already learned that a firm but gentle hand pays dividends. On a recent shopping trip, her daughter began pleading for the latest issue of “Teen People.” “I said, ‘You’ve got your money; it’s in your wallet. I reminded you to bring it,’ ” Beacham said. “We walked out of that store with nothing.” As Allison gets used to handling money, she’ll be given responsibility for more expenses. By the time she’s a junior in high school, Beacham hopes to be giving her the money in one annual payout. “People are surprised by that, but, in two years, they’ll be doing the same thing on a college campus,” Beacham said, “and they’ll have seven credit cards.” Liz Pulliam Weston’s column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
	Fund data provided by Morningstar, Inc. © 2006. All rights reserved. Quotes supplied by ComStock, an Interactive Data company. MSN Money’s editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor’s best course of action must be based on individual circumstances.

The right way to loan money to family members

	To print article, click Print on your browser’s File menu. Go back   Stay home or work? What’s your time worth? Savings Calculator Personal finance bookshelf Find It! Article Index Fast Answers Tools Index Site Map Recent articles by Liz Pulliam Weston: • 4 steps to building great credit, 4/4/2005 • The consumers’ guide to credit counseling, 4/4/2005 • Fix your credit in just 72 hours, 4/4/2005 More.. Related Articles Should parents bail out adult kids? Should you bail out spendthrift parents? Why you should never co-sign a loan 16 rules for paying bills when money is tight The 3 worst money moves you can make		The Basics The right way to loan money to family members Loans to your nearest and dearest usually aren’t a good idea. But if you feel compelled, do it formally — and put it in writing.  By Liz Pulliam Weston With three words, you can sum up the most common advice about lending money to your relatives: "Don’t do it." Financial planners warn that intrafamily loans can lead to trashed relationships, shattered finances and even trouble with the IRS. People who’ve lent money to family members often complain about ingratitude, missed payments and strained holiday dinners. Even the borrowers grumble, especially when their benefactors start quizzing them about their spending. "Suddenly, (the lender) is looking at the vacation they took and saying, ‘They owe us money, how can they go on vacation?’" said financial planner Karen Ramsey, author of "Everything You Know About Money is Wrong." "The borrowers pick up on that judgment, and they get resentful." Drawing up a contract Yet still we lend. Why? The answer is contained in four words: "They needed the money," said Sharon Conway, a Newburgh, N.Y., mother who, with her husband, lent $24,000 last year to their 30-something daughter and her husband. "They really got themselves into some debt, and they asked for help." But the Conways’ experience — at least so far — shows family loans don’t necessarily have to be an unmitigated disaster. Start investing with $100. Explore our new ETF center. The Conways hired a five-year-old company called CircleLending, based in Cambridge, Mass., to administer the loan. After deciding on the terms — "the kids insisted on paying interest," Conway said — CircleLending drew up the contract for a five-year loan at 4% interest and arranged to have the monthly payments whisked from the kids’ checking account to the Conways’. The cost for this service: a $199 one-time fee, plus $9 a month. Given the monthly cost, it would be uneconomical to do this for loans where the monthly payment amount was small. "We didn’t want to be the cops when the loan was due," Conway said. "Now, the money comes like clockwork." Daughter Terri Garrison said she’s grateful her parents were willing to help, since some of the debt she and her husband Christopher had accumulated was piling up interest at rates in excess of 20%. Garrison also agreed with Conway’s assertion that the younger couple treats the loan more seriously than they might have otherwise because a third party is involved. "Money gets tight and you think about wanting to skip a payment," Garrison said, "but the payment comes directly out of our checking account." $300 billion in informal loans CircleLending also recently introduced a feature that would allow their loan payments to be reported to the Equifax credit bureau–something that could help the Garrisons build their credit rating. CircleLending is, in effect, formalizing the world of "informal loans" between family members and friends, said CEO Asheesh Advani. A former employee of the World Bank, Advani said he saw how such transfers help people worldwide buy homes and start businesses. In fact, the World Bank says informal loans and gifts between family members, friends and employers total more than $300 billion and account for up to 41% of household income in some Third World countries. Of course, you don’t need to hire a company to help you set up a family loan. And we’ll leave aside the question of whether such lending in the industrialized world is "good" for either side. I trod that particular ground in "Should parents bail out adult kids?" and the companion piece it inspired, "Should you bail out spendthrift parents?". For right now, we’ll just focus on the mechanics of doing it right. Setting clear terms and communicating them is essential, said financial planner Victoria Collins, co-author of "Best Intentions: Ensuring Your Estate Plan Delivers Both Wealth and Wisdom." Among the items you should cover: Be clear (to the borrower, at least) that you expect to be paid back. This is particularly important if previous loans turned into gifts, inadvertently or otherwise. You should discuss how much the payments are to be and when you should expect them. You also might talk about what will happen if the borrower is late or misses a payment. Regardless of what you tell the borrower, though, Ramsey believes you should be prepared in your own mind for default. Most of the time, she said, "they wouldn’t be asking you for money if they could manage money in the first place." Get good tax advice. Interest paid on family loans is taxable to the lender. But not charging interest may not be the right solution, since there’s a tax bugaboo called "imputed interest" that can cause headaches for people who lend money to relatives. If you don’t charge interest, or don’t charge enough, the IRS can essentially decide to tax you on income you didn’t actually receive from the loan, said Mark Luscombe, an analyst for tax research firm CCH Inc. Also, loan amounts you forgive may be considered taxable income to the borrower. There are loopholes big enough for most families to get through, but if the loan is for more than $10,000 or your family has made other gifts or loans recently, you’ll probably want a tax pro’s advice. Draw up a contract. You can find contracts for promissory notes in stationery stores, or you can download forms from suppliers like Nolo Press for a fee. (Nolo also publishes a book, "101 Law Forms for Personal Use.") Or you can just type up a statement that discusses how much you’re lending, at what interest rate, the due dates for the payments and the other details you worked out. Make sure both parties get and sign copies. Consider recording a mortgage debt. If you’re lending money to buy or refinance a home — particularly if it’s a large amount — consider having the debt officially recorded with the county clerk as a mortgage against the house. That will allow the borrower to deduct the interest on the loan, since the debt would be secured by the home, and gives the borrower the option of foreclosure. Recording fees vary by country, but are usually somewhere around $200. Your county clerk’s office should have information on how to record a mortgage debt, although many people hire attorneys to do the work. (CircleLending’s fee for setting up and recording a mortgage is $599, plus an annual $99 fee for processing the payments and preparing the appropriate tax forms.) Finally, and perhaps most importantly: Don’t lend money you can’t afford to lose. Let’s face it, even if you had the option of foreclosure, you probably wouldn’t use it. That means you should avoid loaning money you can’t live without, and you shouldn’t let the rather healthy possibility of default ruin your relationship with the borrower. "You could have a loving and deep relationship, and all of a sudden you’re not speaking," Ramsey said. "The chances of it going sour are much higher than not . . . be prepared for that." Liz Pulliam Weston’s column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
	Fund data provided by Morningstar, Inc. © 2006. All rights reserved. Quotes supplied by ComStock, an Interactive Data company. MSN Money’s editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor’s best course of action must be based on individual circumstances.

The hidden costs of parenthood

	To print article, click Print on your browser’s File menu. Go back   Stay home or work? What’s your time worth? Savings Calculator Personal finance bookshelf Find It! Article Index Fast Answers Tools Index Site Map
Recent articles by Liz Pulliam Weston: • The 3 worst money moves you can make, 3/16/2005 • Time to ditch your land-line phone for VoIP?, 3/16/2005 • Why treasures in safe deposit boxes get ‘lost’, 3/13/2005 More..
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The Basics

The hidden costs of parenthood

Kids are a joy; the bills for raising them aren’t. It’s more than just college and bigger houses. Here’s how to control the costs you may not have considered.  By Liz Pulliam Weston Kael and Lisa Doan-Loftus are planners. Before getting married two years ago, the two Los Altos, Calif., technology workers created a massive spreadsheet detailing all the expected expenses of their wedding. They’d like to be just as prepared for their next big project: having kids. The self-described “aspiring parents” know that not every child-rearing expense can be predicted, but they don’t want to be blindsided by costs they should have been able to anticipate. “We both remember how great our parents did with planning,” said Lisa Doan-Loftus, 35. “But there are a lot of (financial) pressures on families today that didn’t exist back then.” In addition to saving for their own retirements and dealing with the high cost of housing in many areas, families often struggle to cover the big-ticket items: child care, saving for college, buying auto insurance for teenagers, moving up to bigger houses and cars to accommodate a growing brood. Start investing with $100. Explore our new ETF center. But there are a lot of other, less-discussed expenses that add up over time. I asked a bunch of parents to talk about the potential budget-busters they weren’t expecting, but wound up paying just the same. Here is a sampling of some of those “hidden” costs: Health insurance You may have a vague understanding that your medical costs will increase with a child, but you may be surprised by how big a jump is in store. Blue Cross of California, for example, charges $625 a month to cover a 30-year-old couple under an HMO plan. Add a child and the monthly tab spikes to $965. If you’re employed and your company provides health insurance, you’ll get help with those costs; the average employer still pays about three-quarters of their workers’ insurance premiums. But you’ll still feel the bite. In 2004, the average employee paid $2,664 in annual premiums for family coverage, according to a study by the Kaiser Family Foundation and Heath Research Educational Trust. Singles paid premiums averaging $564 a year. You’ll probably find yourself visiting the doctor or even the emergency room more often, thanks to childhood immunizations and accidents. Then, there’s all the stuff that’s not covered, like allergy tests, braces for their teeth (figure $5,000 to $10,000 or more) and replacements for the eyeglasses, contacts or retainers they lose. “My son went through two expensive retainers in elementary school before we came up with an effective system, which involved him carrying a retainer case everywhere he went,” said Nan Mead, parent of a now college-age son and communications director for the National Endowment for Financial Education. “He was not allowed to leave home without it.” How to cope with added medical costs? Some suggestions: Use your employer’s flexible spending plan, if one is offered. These allow you to put aside pretax money to pay for medical expenses that aren’t reimbursed by insurance. Negotiate. As outlined in “Haggle with your doctor, cut your bill,” medical expenses aren’t carved in stone. Take advantage of state-sponsored health plans if your family is strapped. One of the ways Toby Dillon’s family of four survives on his $25,000 annual income is by signing up for Utah’s Childrens Health Insurance Program, which covers their immunizations and checkups. The food bill Food is a big part of most people’s budgets, and the cost grows along with the child. You can expect your food budget per kid to just about double as your children grow up, according to statistics gathered by the U.S. Department of Agriculture. Source: Department of Agriculture What you buy typically changes as well. Even those who were fairly frugal before parenthood find themselves reaching for convenience and costlier packaging. “Every week, my shopping cart is filled with things we never bought before, like graham crackers, Cheerios, granola bars, grapes, cheese, juice boxes,” said Michelle King, a Winona, Minn., mother of a 20-month-old son who, she says, “is certainly worth the small fortune I pay out in Teddy Grahams.” Some of these purchases may be all but inevitable. But home economists say the best ways to save on groceries, and provide good nutrition for your kids, are the old stand-bys: Make lists and stick to them; don’t shop when you’re hungry. Shop without the kids if at all possible to avoid the “gimmies.” Buy foods that are as close as possible to their natural state; avoid overly packaged or processed food. Activities It starts early, with “Mommy & Me” or organized playgroup sessions costing $10 or $12 a pop. As kids get older, the costs just mount, whether they’re in the band, taking ballet lessons or playing organized sports. As public schools cut back their support of extracurricular activities, parents face ever-higher fees and ubiquitous fund-raising efforts to pay for things that used to be low-cost or even free. When you add in the cost of equipment, uniforms, private lessons, team pictures and transportation, families can spend hundreds, if not thousands, of dollars each year trying to create well-rounded kids. “It’s remarkable how quickly, and to what degree, [the costs] can add up,” Nan Mead said. “But in many cases, if a family hasn’t planned ahead for hidden expenses, they can wreak havoc on a budget.” One poster on the Your Money message board listed the following expenses incurred so far this year for two elementary school kids: Daughter (8 years old) Son (6 years old) Soccer: $50 T-Ball: $60 T-Ball fund-raiser: $40 Fall hockey: $80 Winter hockey: $140 Hockey fund-raiser: $200 T-ball: $40 Fall hockey: $70 Hockey fund-raiser: $200 That’s on top of the $300 or so they’ve spent on sports equipment this year. The expenses do not count money the family in question will spend in gas, hotels and food once the kids are old enough to play on sports teams that travel. Participation in the arts can be pricey, too. Playing in the Canton, Mich. high school marching band cost Alan and Patrick Moran $1,400 each annually — a sum their mother Rosy collects through strenuous fund-raising as part of a Band Booster program. That’s on top of the cost of instruments, private lessons, music camps and other extras the family pays out of pocket. To quell the costs, parents offered these tips: Limit your child to one or two outside activities per semester. Arrange carpools with other parents to reduce the schlepping costs. Rent, buy used or borrow equipment until you’re sure your child won’t drop the activity. Gently steer your progeny. When it comes to musical instruments, for example, “the bigger it is, the more it costs,” one father said. “So gently discourage junior from playing the tuba, and don’t let them go near a harp!” Odds and ends Here are a few more hidden costs parents mentioned: Birthday parties. Competitive party-giving is a full-contact sport in some areas, as parents strive to outdo each other with elaborate entertainments, food and goody bags. Parents say money often substitutes for creativity, and that you don’t need to spend a fortune for kids to have a good time. Technology. Cell phones, video game systems, computers. Yesterday’s high-tech toys are considered essential equipment in many families. It’s up to you to set limits; many parents insist their offspring use allowances to help pay for games or extra cell phone minutes. Travel. The cheapest options may no longer appeal. You’ll still travel — perhaps more so if the baby’s grandparents and other relatives live far away. And theoretically you can get free passage for your child until she’s 2 — if you don’t mind holding a struggling, squalling toddler on your lap for the whole, packed flight. (Voice of experience: Don’t do it. Buy the kid a seat.) But nonstop flights suddenly become a priority, as do bigger hotel rooms. Tutoring. Your child may need extra help in school, or getting ready for college entrance exams. Few schools provide driver’s education, which typically costs $500 or more from a private company. Furnishings. Tricking out the baby’s nursery is just the start. You’ll probably wind up replacing your furniture, carpet and wall coverings more frequently thanks to the added wear and tear. “The sofa has been peed on, spilled on and puked on,” one poster said. “I would invite you over, but where would you sit? And you might as well add the carpets too . . . ” Time. This one can be hard to quantify, but many parents said their time crunch leads them to spend more on restaurant meals, household help and many purchases, since they have less leisure to comparison shop. Don’t forget the career Then there’s the effect of kids on your career. Since there are only 168 hours in a week, many parents find themselves cutting back on their work hours to spend more precious time with their only-young-once offspring. “Kids take up time, gobs of it,” one father wrote. “We have dropped our working hours from 80-90 hours per week to the regulation 50. This without a doubt has impacted our careers and indirectly cost us money.” As with any other worthwhile venture, parenthood involves trade-offs and risks. But the Doan-Loftuses hope that knowing about these costs upfront can help them budget and avoid overspending. “We all know that families have to stretch,” Lisa Doan-Loftus said. “But it’s really important to [protect] our financial health at the same time.” Liz Pulliam Weston’s column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.

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