Welcome to Redwood Financial Network!
Redwood Financial Network is an independent wealth management firm headquartered in Solon. Our community involvement has led us to an exciting new partnership with your Signature Life publication. Each month be sure to flip to our page to see what’s new and gather some tips that you can use to manage your financial life. Between Covid-19, changing presidential administration, job changes, and the Browns finally being good, things feel different. Life in these unprecedented times have likely prompted many new questions. That is especially true when we think about our finances. If there is a topic you would like to learn about, let us know! If you have any financial questions, we want to hear them!
We look forward to a great relationship with your terrific community.
Don’t Be an April Fool
Welcome April and the beginnings of Spring. As the tax season winds down, we start looking for signs of Summer. Graduations, First Communions, Confirmations, College Acceptances, it’s the time of year where these celebrations bring money handling top of mind for many kids. Whether trying to calculate college tuition, setting a budget for the upcoming school year, or trying to figure out how to get gas money, now is a great time to start teaching kids about money. At Redwood Financial Network, we work with many parents and grandparents who are concerned with bolstering fiscal awareness in their child. To best prepare your future fiscally conscious guru, start with focusing on the following concepts. (Also, be sure to read about our scholarship at the end!)
The most basic concept defined by what money comes in versus what money goes out. Cash flow needs to be the foundation of all fiscal learning. Identify where money comes from (i.e., allowance, job, gift). Next, where does the money go (i.e., bank, item needed, item wanted). Ideally, we want more to be coming in then going out. Once they understand cash flow, a great next step is to introduce budgeting.
Needs vs. Wants
This is one of the most difficult concepts for our children (and us for that matter). Truly identifying a need versus a want can be hard when money is in our hands. It’s a great opportunity to lay a strong foundation in fiscal finesse. Learning to make choices is important. One great practice is teaching kids to wait a week before making a purchase. After a week, it is likely that they will realize they don’t NEED whatever it was.
Importance (and Power) of Saving
The importance of saving is a cornerstone of financial literacy. It is wise to establish a determined portion to go into savings every time money is earned or received. Paying yourself first is a philosophy that can be used to have a strong financial approach for a lifetime. When you treat your savings as a bill, you are less likely to rationalize skipping a month. For young people, like any habit, starting this young will hopefully stick for them.
Once a child reaches early adulthood, it is time to build on their knowledge of proper credit card use. Kids need to be taught that they should only use their cards for purchases they can pay back. They need to understand the cost of balances carried on their credit cards. More specifically, how balances can spiral out of control if they purchase more than they can afford.
Good Credit History
The credit card discussion is a good time to explain credit history and scores. Kids need to understand the importance of a good credit history leading to a high credit score. The savings experienced over a lifetime from lower interest and insurance rates is quite powerful. Those are made possible by a high credit score.
Earnings and Taxes
A child’s first job not only helps with the many concepts listed above, but also can teach the concept of being a responsible tax paying adult. It is never fun for the first check to arrive and to quickly see you don’t get all of the money you earned. It is important for kids to understand tax withholding and tax filing as soon as they start earning money.
Hopefully, as your child/grandchild graduates from high school and organizes the next step, they have embraced the steps to financial development. College presents many heavy and complicated financial decisions. The ability to reduce college debt through savings and scholarships are steps that should have been in the works for years. Take time to talk through all of it with your kids. Help your young adult find extra funds towards the frightening college invoice.
Do you know a graduating senior? Can they use extra funds to help with college expenses?
Redwood Financial Network is accepting applications for their 7th annual $1,000 Scholarship.
This non-need-based scholarship is open to any graduating high school senior who has intentions of attending college in the Fall of 2021. Candidates will be judged based on academics and an approximate 500-word essay answering the question, “What does financial responsibility mean to you?”
The deadline for the application and essay is April 30th, 2021. To see the specifics of what needs to be submitted and check out past winners, go to http://www.redwoodfn.com/scholarship
Don’t forget, scan the QR Code in the Ad for the Signature Life virtual page.
What are we hearing?
With the beginning of March and Spring around the corner, our clients are focused on taxes. This is the month our wealth management team hears most frequently from our clients. Their main concern usually revolves around their tax situation. Specifically, how to minimize their taxes. We assist in devising, implementing, and maintaining tax strategies to build endurance in their family’s financial wellness plans.
While some tax strategies must be implemented before December 31, there are steps you can still take now, before your tax filing, to impact your 2020 taxes.
- IRA Contributions – If you are not self-employed, you may still be able to contribute to an Individual Retirement Account and gain the short and long term advantages of that strategy. The 2020 contribution limit for Roth and Traditional IRA is $6,000, or $7,000 if you’re age 50 or older. There are restrictions that could impact how much you can contribute and what you can deduct based on your income level. The link to our site below has a “Taxes at a Glance” document you can reference to see where you fall.
- Health Savings Accounts – If you have a high deductible health plan of more than $1,400.00 deductible expenses, you may be able to add money to an HSA to offset your personal taxes. An individual can add up to $3,550.00 in a personal Health Savings Account for 2020. You may be able to contribute up to $7,100.00 for the family. These savings vehicles also offer a catch-up contribution of $1,000.00 for individuals age 55 and over.
- Simplified Employee Pension – Self-employed individuals may have the opportunity to increase their deductible retirement contributions and save up to 25% of compensation or $57,000.00 (whichever is smaller) for 2020.
- Children’s IRA’s – Do you have a working teenager in the house? If so, they may be able to create a Roth IRA for themselves and grow tax free money for very many years. This step can still be taken for tax filing of 2020 as well.
As with any financial strategy, speak with your tax and financial professionals to confirm the strategy is appropriate and available to you. Our team enjoys building financial knowledge and wellness through education and we’re looking forward to bringing that to The Signature Life.