“It’s OKAY to be scared. Being scared means you’re about to do something really, really brave.”       ---- Mandy Hale, "The Single Woman: Life, Love, and a Dash of Sass"
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BY JULIA ANDERSON
American President Franklin D. Roosevelt so famously said, "The only thing we have to fear is fear itself," during his first inaugural address in 1933 at the depth of the Great Depression.

The crash had closed banks; put millions out of work and farms in foreclosure. Breadlines were feeding the destitute in most major cities. That dreadful depression experience affected an entire generation including my parents who came of age and married in the 1930s.

How they thought about money, about saving and investing throughout the rest of their lives was shaped by the lessons of the Depression. My parents' motto: Don't spend money you don't have, save and invest for a rainy day and avoid debt.

How will our Great Recession of 2008-2009 and its aftermath affect a new generation?
Fear again is a factor in how our economy will move forward, say economists who study these things. The concern is that those who have experienced a financial trauma (or even those who only know of a financial trauma) become risk-averse.

People are less willing to take a chance on starting a new business, less willing to invest in a start-up enterprise and are even unwilling to put money into stocks.
Why do we care?

"The financial crisis is likely to inhibit them (people) from taking the sort of risks that help propel the economy for decades to come," reports The Economist magazine in its Jan. 25, 2014 issue. ..."studies suggest that the sweep and severity of the recent slumps in America and Europe will scar a wide range of people, not just those who lost money in the markets."

Studies indicate that women already are more likely to be risk-averse than men and are less likely to save, invest or make big career moves to enhance income. This is all bad news for a global economy still recovering from recession.

The Economist cites several studies on the subject of risk aversion:

- "Nature or Nurture: What determines investor behavior? - Michael G. Foster School of Business, University of Washington.
-"Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?" by Ulrike Malmendier and Stefan Nagel.
- "Trust, Risk, and Time Preferences after a natural disaster: Experimental evidence from Thailand," by Alessandra Cassar, Andrew Healy and Carol von Kessler, University of San Francisco, Loyola Marymount University.
- "Time Varying Risk Aversion," by Luigi Guiso, Paola Sapienza and Luigi Zingales.
- "Gender Difference in Risk Behavior: Does nurture matter?  by Alison Booth and Patrick Nolen.

This last study really interested me because it looked at gender differences in risk-taking. The conclusion: "Broadly speaking, those differences may be due to either nurture, nature or some combination of the two. For example, boys are pushed to take risks when participating in competitive sports, whereas girls are often encouraged to remain cautious.

 Thus, the riskier choices made by men could be due to the nurturing received from parents or peers. Likewise, the disinclination of women to take risks could be the result of parental or peer pressure not to do so," said the study.

The study speculates that gender-stereotypes encourage girls and boys to modify their innate preferences. For example, girls were more likely "to choose risky outcomes when assigned to all-girl groups."

Single-sex environments, the researchers said, are likely to modify students’ risk-taking preferences in economically important ways.

The Economist goes on to report that a "growing body of research links a low tolerance of risk to past emotional trauma," even non-financial trauma.

USA Today reinforces the view that investors in general suffer lingering scars from the market meltdown. A recent story said one-third of investors remain wary of stocks despite market gains of nearly 180 percent from the bottom. According to a Wells Fargo Private Bank survey referenced in the story, 21 percent of those responding to the survey said they "don't plan to invest in stocks at all."

"The take-away from the study? "Investors' confidence needs to be rooted in a conviction that they're taking appropriate risks to meet their long-term goals. Without that conviction, emotional investing and reacting to daily news are a road to failure."

I share all this because women are generally less willing to take investment risk during their working lives and end up with less money for retirement. They are less financially literate and more often rely on outsiders to advise them.

Women (and girls) must be encouraged to set long-term personal financial goals so that short-term events don't derail those plans.

Our recent recession and ongoing economic recovery will only reinforce this risk-adverse attitudes at a time when the economy needs risk-takers who have confidence in the future, in business and in their own ability to invest wisely weighing risk vs. reward.
Investors must "stay disciplined, be diversified, avoid action on emotions," said the Wells Fargo survey.

How can women overcome the negative impact of risk aversion? Being aware of it is a good first step.
​
For more:
Men Vs. Women: Risk Aversion, click here.
Gender and Economic Transactions, click here
Are Women More Risk-averse Investors?, click here.

"The easiest way for your children to learn about money is for you not to have any."  --- Katharine Whitehorn, British journalist, writer and columnist

BY JULIA ANDERSON
It may be OK to give your  12-year-old kid $10 to play video games at the arcade but is it a good idea to give $10,000 to a grown child who is just not making it?

Baby boomer parents – especially women – are guilty of forming co-dependent relationships with their adult children. The bad news is that generous gifting may affect their own ability to retire.

A recent study from Merrill Lynch Wealth Management shows that in the last five years, three out of five (62 percent) of Americans age 50 and older have provided financial help to family members…adult children, parents, grandchildren, other relatives. Generosity runs deep in our culture. The survey queried 5,500 baby boomers age 47 to 67 in mid-2013.

The average financial assistance during the prior five years was a hefty $15,000.

The money may have helped a relative with a one-time need or it could have been ongoing assistance over the course of many years.

The bad news? The vast majority (88 percent) of people 50 and older who have handed out this money had not factored in how the gift may affect their own ability to retire. And there was a “dangerous” absence of discussion about the gift among family members, said the survey analysts. Click here for the "Family& Retirement: The Elephant in the Room" full report.

Retirement fact: Every dollar that goes into a retirement savings fund such as an Individual Retirement Account or a 401(k) earns reinvested money tax-free until you retire. It’s the only real way to save enough.

 Give it to your kids – the money is gone and you may come up short at age 66 or 67.
“Given the challenging economic climate during the past several years, it’s not surprising that so many Americans have extended financial support to their loved ones,” said Andy Sieg, head of Global Wealth and Retirement Solutions for Bank of America Merrill Lynch.

“However, such admirable willingness to assist family members should not place one’s own long-term financial security in jeopardy, and can be a hidden risk to retirement that must be considered and planned for.”

Before parting with your hard-earned money, have an open discussion with all family members. It may feel right to help the kids but that giving may come back and bite everyone when it’s time for you to retire. It won’t just be your problem, it also may be theirs. Ground rules and boundaries should be discussed. Your own longer life-expectancy could be a big factor in how much you save for retirement.

The Wall Street Journal regularly reports on retirement issues. Recently Veronica Dagher wrote about the "Dangers of Giving Your Home to Your Children." (Click here.) Among those dangers are that your kids will decide to sell the house and evict you in order to do so. Or creditors come after the house if a child defaults on a loan or loses a legal dispute.
​
The best ways to give
So how can we best help our low-earning adult children? Here are a few tips from Merrill Lynch investment advisers:
- Pretend you’re running a family 401(k) and set up a plan to match the savings that your kids do. That way they have skin in the game.
- Pay for a training course or help with grad school or pay for childcare so they can build a career. That way they have goals for getting ahead.
- If you own appreciated stocks or a mutual fund outside of a retirement plan….give your low-earning kids shares as a gift. The child can sell the shares without the capital gains tax consequences that you might face. As with all tax moves such as this, consult your own tax accountant or financial adviser before taking this action.
- Make contributions to their Roth IRA accounts.
- Bypass the kids altogether and put money into a 529 account to help pay for the education of a grandchild.
- If you can’t afford to hand out money, offer non-financial aid: Baby sit, help with home repairs, or cooking so they can work.
Or you can do the math on your own retirement needs and just say NO.
FOR MORE:
​10 Best Ways to Give Your Heirs Money While You're Alive, Forbes, click here.
Seniors Giving Money to Adult Children: What's Wrong with this Picture?, click here.
Should you provide a Financial Bailout for Your Adult Children? click here.

"The easiest way for your children to learn about money is for you not to have any." --- Katharine Whitehorn, British journalist, writer and columnist

By JULIA ANDERSON
It may be OK to give your 12-year-old kid $10 to play video games at the arcade but is it a good idea to give $10,000 to a grown child who is just not making it?

Baby boomer parents (especially women) are guilty of forming co-dependent relationships with their adult children. The bad news is that generous gifting may affect their own ability to retire.

A recent study from Merrill Lynch Wealth Management shows that in the last five years, three out of five (62 percent) of Americans age 50 and older have provided financial help to family members…adult children, parents, grandchildren, other relatives. Generosity runs deep in our culture. The survey queried 5,500 baby boomers age 47 to 67 in mid-2013.

The average financial assistance during the prior five years was a hefty $15,000.

The money may have helped a relative with a one-time need or it could have been ongoing assistance over the course of many years.

The bad news? The vast majority (88 percent) of people 50 and older who have handed out this money had not factored in how the gift may affect their own ability to retire. And there was a “dangerous” absence of discussion about the gift among family members, said the survey analysts. Click here for the "Family & Retirement: The Elephant in the Room" full report.

Retirement fact: Every dollar that goes into a retirement savings fund such as an Individual Retirement Account or a 401(k) earns reinvested money tax-free until you retire. It’s the only real way to save enough.

 Give it to your kids – the money is gone and you may come up short at age 66 or 67.
“Given the challenging economic climate during the past several years, it’s not surprising that so many Americans have extended financial support to their loved ones,” said Andy Sieg, head of Global Wealth and Retirement Solutions for Bank of America Merrill Lynch. “However, such admirable willingness to assist family members should not place one’s own long-term financial security in jeopardy, and can be a hidden risk to retirement that must be considered and planned for.”

Before parting with your hard-earned money, have an open discussion with all family members. It may feel right to help the kids but that giving may come back and bite everyone when it’s time for you to retire. It won’t just be your problem, it also may be theirs. Ground rules and boundaries should be discussed. Your own longer life-expectancy could be a big factor in how much you save for retirement.

The Wall Street Journal regularly reports on retirement issues. Recently Veronica Dagher wrote about the "Dangers of Giving Your Home to Your Children." (Click here.) Among those dangers are that your kids will decide to sell the house and evict you in order to do so. Or creditors come after the house if a child defaults on a loan or loses a legal dispute.

The best ways to give
So how can we best help our low-earning adult children? Here are tips from Merrill Lynch investment advisers:

- Pretend you’re running a family 401(k) and set up a plan to match the savings that your kids do. That way they have skin in the game.

- Pay for a training course or help with grad school or pay for childcare so they can build a career. That way they have goals for getting ahead.

- If you own appreciated stocks or a mutual fund outside of a retirement plan….give your low-earning kids shares as a gift. The child can sell the shares without the capital gains tax consequences that you might face. As with all tax moves such as this, consult your own tax accountant or financial adviser before taking this action.

- Make contributions to their Roth IRA accounts.

- Bypass the kids altogether and put money into a 529 account to help pay for the education of a grandchild.

- If you can’t afford to hand out money, offer non-financial aid: Baby sit, help with home repairs, or cooking so they can work.
Or you can do the math on your own retirement needs and just say NO.
​
FOR MORE:
​10 Best Ways to Give Your Heirs Money While You're Alive, Forbes, click here.
Seniors Giving Money to Adult Children: What's Wrong with this Picture?, click here.
Should you provide a Financial Bailout for Your Adult Children? click here.