What growth are you potentially giving up, so the opportunity cost, with these savings bonds you are so familiar with?

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Welcome to the EnjoyMore30s Family Finance

podcast. The only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

that tend to weigh on us, stress us out, and distract our focus

from simply enjoying life.

Hello and welcome to the fifth series of the

EnjoyMore30s Family Finance podcast. This time around, we're

going to cover what is more important than anything else and

your entire lives, my entire life, which is our kids. So as

always, if you like what you're hearing, please make sure to

subscribe, follow us on Apple podcasts, wherever you listen.

Clicking that star, leaving a review, it really helps us reach

the quite literally millions of other young families out there

just like you.

Now our other series so far, we've focused on you, your

parents, and pretty much just other general areas that we

could help work on to improve your situation. This time

around, though, it's all about the kids, which is really,

really cool. Now, I never thought at all that I would love

being a father as much as I do. Holding a child was utterly

terrifying before I had children of my own. I remember my oldest

cousin when she had her first child, it was kind of that first

child of the next generation in the family. And I was just

terrified that I would hold her and do something wrong and hurt

her and pretty much have every other member of my family

looking at me as I did in disgust. So when you have this

living thing, though, that is literally part of you. So when

you have that child and you see them grow, you connect with

them, you see them learn new things, it's just the most

wonderfully amazing thing as everybody out there probably

knows because you have kids already, but I'm still just

completely amazed that it's possible and that I could love

them both as much as I do.

This series is dedicated to your kids. We're going to cover those

financial items for you to help them of course, but we're also

going to cover the things for them to help themselves. So I

want you to first just picture your kids and they're nice and

tiny now, but picture them all grown up. You see them kind of

standing in front of you and in your mind now I hope. Now when

you picture your kids becoming all grown up, I'm guessing you

picture them with a smile on their face, right? They're

happy, they're they're stable. They aren't standing in their

bedroom still at home, right? Not living paycheck to paycheck,

not having credit card that they can pay, you know, pretty much

not relying on you anymore to still cover their bills, right?

You picture them happily standing there on their own two

feet, completely able to support themselves. So for today, let's

start at where we should always start at the beginning. And the

first thing that every child seems to receive, whether it's

from you as their parents, certainly from grandparents, I

know my grandparents gave me a million of them and that's

savings bonds. Those bonds from the government that sound

really, really great, because you only have to pay $25 for a

$50 bond that you eventually get all $50 for. I mean, pay half

get the whole amount. That sounds fantastic, right?

However, they can all too often actually be a huge wasted

opportunity for your children. Today, you're going to learn

exactly what that opportunity is, and how to give your

children a chance to have significantly more money down

the road for that same exact $25. Now, opportunity is the key

word here for all of this and more specifically, opportunity

cost. Opportunity Cost is what you give up by taking one

opportunity over another better opportunity. If a farmer decides

to plant wheat but corn turns out to be a more lucrative crop

that year than they lost potentially more money that they

could have made if they planted corn. Did you make money off the

wheat? Sure. Yes, absolutely you did. But not possibly as much as

you could have. You left money on the table with your decision.

So another example would be somebody asked you out to prom

and then somebody else after that after you already said yes

says 'Hey, would you go out to prom?' You liked them better but

you already said yes to the first one. That's the cost say

yes to that first opportunity. So if you bought a $25 savings

bond for your kid in May of 2000, so roughly 20 years ago.

Twenty years later, in May of 2020, it would have been worth

roughly $53. That's paying you back the $25 plus the interest.

Now it sounds really really good at first glance, right? I made

more money than I put in just like when we went through the

wheat example with the farmer. You did make some money.

Absolutely. Now let's say instead of that though, you used

a diversified investment, so a spread out investment, for that

same exact $25. If you've received an average rate of 7%,

over that same 20 year period, which in our opinion would be a

reasonable expectation, if you were spread out correctly

diversified correctly in that investment, then instead you

would have received $96. That's 82% more money. So you see, it's

not about 'did you make money?' You made money in either case,

it's 'did you make the most out of your money, the most out of

your opportunity?' One savings bond, not really a big deal,

right? But let's say you had a few thousands in savings bonds,

like I did. My grandparents give those gave those things to me

every single year sometimes multiple times a year. Now

instead of let's say $25, it's $2,500 of initial money. Now

instead of $53 versus $96, at the end of the 20 years, it's

$5,300 versus $9,600. That's a $4,300 difference. So how do you

do this exactly? We're saying all this money then, which

includes what you already have, and what you are going to use to

buy savings bonds in the future should all now go into what I

noted as a diversified investment, or in other words, a

spread out investment. The one caveat here is if your children

or your child is planning on using some of these savings

bonds in the next year or two. So short term, at this point,

you kind of already missed the opportunity, it's likely better

to just leave it as is. Short term money should never be

invested. Now I've talked about this in the past, the easiest

way to do this is to ask your advisor, or if you don't have an

advisor, to use an appropriate allocation fund that matches the

time horizon of when your child is actually going to use it. So

any of those major investment firms you see on TV, they pretty

much all have allocation funds now. So if your child is very

young, an aggressive allocation fund could likely be

appropriate. If your child is five years away, let's say from

using it, maybe a moderate allocation fund might be more

appropriate. Then all you have to do is just remember to not

touch it until it's needed. It's being professionally managed

professionally spread out for you already so when there are

ups and downs in the market well, which will absolutely

happen, leave it be and you have a very good chance of having

much more than you started with, and more especially than if you

just use the savings bond. So next time grandma Jane gives you

a savings bond for Sonny say thank you very much and put it

into a place where it could work for you better.

So what is the goal of today's episode? The goal of today's

episode is for you to not want to use savings funds anymore

when they're not appropriate. The goal is for you to have that

money to be put into a place that your child will get the

most benefit from it. So thanks for tuning in today and join us

for next week's episode called Education Savings, It Is Not All

529 Plans, where we're going to cover all your options for

savings for your children and the goals you're trying to

accomplish.

Overall, if you are able to implement all this stuff that we

talked about today, that is fantastic. Less to worry about

now you can focus more on enjoying life. If you are

wanting help with these things though or you have some

questions you need help in clarifying. Of course reach out

to us never a problem. Check out the Ask Joe section on the

show's website www.EnjoyMore30s that's EnjoyMore30s.com. Till

next week thanks for joining me today and I look forward to

connecting with you again soon.

The conversations on this show are

Joe's opinions and provided for general information purposes

only. They do not constitute accounting, legal, tax or other

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer or other professional before acting upon

any content or information found here first. Joe is affiliated

with New Horizons Wealth Management LLC, a branch office

of TFS Securities, Inc., and TFS Advisory Services an SEC

registered Investment Advisor member FINRA/SIPC.