Are Blue-Chip Companies Good Investments when Approaching Retirement?


Dear SmallIvy,

I am 59 years old and believe that I need to “catch” up some to have a comfortable retirement. I have been contributing $23,000/year to retirement account at work through AIG Valic(only option. I have a variable annuity income lock investment with them. Periodically I will contribute to a separate 401 K regular and Roth IRA investment vehicle through another company. I do not have a financial advisor or accountant. My question is, I am leaning to putting new investments in large, solid “blue chip” dividend producing companies such as Johnson and Johnson, Proctor and Gamble, Baxter,Dover with plans to diversify into energy companies and REITS. Is this a sound strategy or can you offer some suggestions. Thank you for any help.

Thanks, Benny


Dear Benny,

You are right that blue chip stocks are a good investment when you’re looking for more stability.  These are big companies with many different product lines.  They have the ability to wait out bad times and buy out competitors before they become a major threat.  They also pay a good dividend.  This means that if you get into a period where stock prices are going nowhere you’ll still have income from the company. which is important when you’re retired and need to pay expenses whether the economy is growing or not.  An ideal situation for a retiree is to have enough dividends and interest payments coming in to pay for expenses so that you don’t need to sell shares of stock for cash.  You just write checks or use a debit card to pay for things from the account and then magically the cash in the account is replenished by dividends and interest payments that come in.

That said, even big companies run into trouble.  Shareholders in General Motors and General Electric, giant companies that looked unstoppable, saw sudden drops in the price of their stocks during the 2008 credit market collapse due to the large numbers of loans these companies had made.  They are safer than young companies, but there is always the chance that a single company stock could lose 90% of its value or more very rapidly, so you need to spread your investments out and not have any more invested in one company than you could afford to lose.  Mutual funds are a good way to do this, and there are mutual funds that invest in income producing assets (I’ve held the Duff and Phelps Income fund (DNP) for about 25 years now) and also ETFs and Index Funds that favor large companies (like the Vanguard S&P500 Fund and the corresponding ETF).  If you go with the individual stock route, I would have at least 10 different stocks in your portfolio – 20 would be better.

Energy is getting killed right now with oil prices declining.  I invested in Cameco (CCJ), a large Canadian Uranium producer, as a way to both invest in the energy market and have a hedge against inflation (uranium prices, like all commodities, will increase in price if there is inflation) a few years ago with bad results so far.  I’ve also taken up positions in Oasis Petroleum (OAS) and Enesco (ESV), but I think I may have bought in too late for the current rally and am sitting on losing positions right now.  I’ll reevaluate these soon and decide if I should stay pat, invest more, or sell out.  I like energy long-term as an inflation hedge, so I’ll probably stay invested.  That’s the beauty of long-term investing – it makes decisions a lot easier.  Energy companies also tend to pay large dividends since they generate so much cash, so holding isn’t a bad thing.

I always like REITs as another way to generate income, as an inflation hedge, and as a non-correlated asset to stocks.  These will not generate the returns of stocks over long periods of time, but the returns are very respectable when compared with bonds.  Some of these can be volatile, however, so buying a handfull of them, keeping them as a relatively small portion of your portfolio, and buying them in a mutual fund of REITs instead of picking individual REITs are considerations you should make.

Let me finally say that there is nothing like cash when you are retired.  If you have a year or two worth of cash assets (money market funds or CDs) you can wait out dips in the market.  You can even have 3-5 year’s worth stored up if you want to be more cautious.

Thanks for reading and best of luck.



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Disclaimer: This blog is not meant to give financial planning advice; it gives information on investing, personal finance, and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Playing Catch-Up With Retirement Investing

Dear SmallIvy,

Hi, thank you for this blog. I am 53 and have always “lived for today” and seriously regret it. The only debt I have is a mortgage which will be paid off in February of 2014. I am very interested in the market but know NOTHING about it. I don’t even have a savings account but my mother’s estate is in probate and will be settled by June 2014. I don’t know how much I will inherit but just say the available cash is $10,000, where should I invest? Also, could you give me an idea of how to recoup years of financial gain that are lost? Thanks in advance.



Dear Lynne,

I’m sad to hear you say that you regret “living for the day” because there is certainly something to be said for doing so to some degree.  There are things you can only do (or at least do right) when you are young.  I certainly don’t advocate squirreling every dollar away and waiting for retirement to start living.  I just advise taking care of necessities and making little sacrifices (like eating in fairly often or buying used cars instead of new) appropriate to your life that will allow you to take advantage of the power of investing and compounding.

That said it is definitely a lot easier to invest and grow wealth when you are young than when you are old because time reduces risk and doing really well in investing involves putting money into more risky things but doing so for long periods of time to reduce your risk.  It is easy for someone who is 20 to fund their retirement by simply putting a few hundred dollars away each month into a 401k and investing it in stock mutual funds.  It is much more difficult for someone who is in their 50’s because they need to put a lot more away and be more cautious with investments, but there is still the potential to retire a millionaire with some discipline.  For some one in their 60’s, there is almost no chance without a huge income and the willingness to live like a college student for a few years.

As far as where to invest, with your need to preserve what you have while still trying to grow wealth, combined with your lack of knowledge about investing, the only way to go is mutual funds.  Individual stocks would be too risky and require you to gain too much knowledge to know how to pick stocks.  With mutual funds the secret is to buy funds with low fees and costs (less than 0.5% of assets), which means index funds.  The best funds are those that are “plain vanilla,” such as large cap funds or small cap funds, rather than exotic funds with some sophisticated trading strategy.  You would also want to include income stocks and bonds in your portfolio to help dampen the fluctuations in value that an all-stock portfolio would produce.  Again, there are bond and income mutual funds.

Finally, the biggest and best tool you have right now is the ability to generate an income through work.  If you can increase your income through job promotions, working paid extra hours, possibly working a second job for a period of time or during holidays, and maybe finding a side business that can generate some income you still have time to save up enough to have a comfortable retirement.  This is if you combine increasing your income with cutting your expenses because you will never be able to out earn your ability to spend.  Paying off your mortgage is a good first step since now you can direct that money into savings and investments so long as you don’t add new expenses to replace your mortgage payment.  If you never spent time living like a broke twenty-something, maybe this is the time to do so for a period.  It will beat living in poverty during the long years of retirement.



Contact me at, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

What is the Best Way to Invest Graduation Money

Dear SmallIvy,

My daughter – she is 18 has received about $2500 for graduation money. What is the best way to invest it? She is all set for college – have 529 and she works part-time making $7 an hour. Takes home depending on hours she is given $50 to $200 per week. Appreciate any thoughts. Thanks!

Thanks, Reina


Dear Reina,

It’s great that your daughter has such a great gift to help her start her adult life.  It is also great that she’s thinking about investing it so that it will last rather than spending it on frivolous things.  Here are some suggestions of things that she could do with the money:

1.  Use it as the start of an emergency fund.  An emergency fund is 9,000-$15,000 that you keep around to pay for things like emergency car repairs and unexpected medical bills.  It is money that keeps you from pulling out the credit card and going into debt at 18% interest whenever life throws you a curve.  It is also money that you can use if you lose your job while looking for another one.  It should be replenished as fast as possible when you need to dip into it – before you go on vacations or even go out to eat – because it really needs to be there when you need it.

With $2500, she could buy shares of an ETF such as the SPDRs (S&P500 fund, pronounced “spiders”) or the DIAs (Dow Jones Industrial average tracking fund, pronounced “Diamonds”).  To buy the ETF you would need to go through a broker.  With $500 more to add to the $2500, she could buy index mutual funds such as an S&P500 fund through Vanguard or another fund company.  During college the value of her ETF or fund could go up of down depending on what the market and the economy does – four to five years is a short amount of time for investing in stocks – but by investing in mutual funds she has a chance of growing the value to $4000-$6000 in 5-10 years.  She could then sell the fund around the time she starts work and put the cash in a bank account as a starter emergency fund, add to it over time from her salary, and then have a fully funded emergency fund that would give her a good measure of financial security within a year or so.  If the fund doesn’t do well and perhaps sinks in value (worst cases scenario would be that it was worth maybe $1000 after five years, which would only happen if we had a very serious economic decline like the Great Depression; this is very unlikely statistically) she would just hold onto the funds and build up an emergency fund from her salary.  When the fund recovered enough after a few years, she could then sell and top off her emergency fund.

2. Invest it in a mutual fund or ETF as a starter portfolio.  In this case she would invest in an ETF or a mutual fund as before but just plan to leave it invested for a long period of time.  With a mutual fund, when she started working she could then add to the position with regular contributions from her paycheck, for example, adding $300 per month.  With an ETF it would not be cost effective to invest $300 at a time.  Instead, she could just save up each month in a savings account until she had enough to buy a second ETF or more shares of the same ETF.  She would do this each time she had enough money saved up to make the brokerage fees she’d pay when she bought the ETF a reasonable percentage of the amount she was investing.

 3. Use the money to start an IRA.  Since she is working, she could invest as much of the $2500 in an IRA as she earns in wages during the year.  If she puts the money in an IRA and then invests it in a mutual fund or ETF in the IRA, she would go a long way towards funding her retirement before she even goes to college.  If she could earn 10% annualized between the age of 18 and 70, which is very possible invested in stocks, she would have $355,107 when she retired at 70 years old just from that first investment.  If she could work a few summer jobs in college while staying at home during the summer to avoid rent and food costs, she could invest a few thousand more in an IRA and easily be set to be a millionaire before she retires.

4. Invest in a business.  Many people who buy individual stocks try to beat the markets by trading, where they buy a stock, hold if for a few months, then sell for a small profit.  This is a losers game and I would not recommend it.  Instead, one option is to buy an individual stock with the money but do so as if she were buying a stake in a business as a venture investor.  She would want to find a company that has a great product, a stellar management team, and plenty of room to grow and expand over the next ten to twenty years.  She would then buy in with the idea of holding through think and thin, giving time for the company to grow and reach its potential.  There is certainly a risk of losing the money by doing this (maybe one in 100 stock picks will go belly-up entirely, while maybe half will just sit there for years and not grow), but $2500 is a small amount of money compared to her future earnings and it could grow into enough money to make a good down payment on a house in ten years or so if she picks the right stock.

As with investing in mutual funds, she could also set aside some money from her salary when she starts working and buy shares in other companies with good long-term prospects each time she has $1,500-$3,000 saved.  She should start to put some money in mutual funds as well as her portfolio grows to protect the wealth she gains.  By doing so she would build up a portfolio and eventually reach financial independence.



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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

A Simple Way to Pay for College without Student Loans

If you’re in a family of four and making $40,000 per year, chances are good that your children will get grants that will not need to be repaid.  Those making $60,000 or $80,000 per year, however, or who will be making that sort of money by the time their children are ready to attend college, will have more difficulty qualifying for such grants.  Many families in this middle class income bracket, however, and even many in the $100,000-$250,000 income range, never manage to save enough to even pay for the first semester, leaving them at the start of the Freshman year figuring out how to pay for things.  Often, student loans are seen as the only answer.

Student loans may be more insidious than a car loan because at least with a car loan you start to pay right away.  With student loans the balance just grows and grows while your student is off taking classes and living a life beyond her financial means, thanks to the credit available from the loans.  It is only after graduation that the reality sets in.  Suddenly she has a $80,000 loan balance and perhaps a $800 per month loan payment but only makes $2000 take-home at her first job.  She want to get a car and a home, but that student loan is swallowing up the income she needs to do so.

Student loans don’t need to be the norm, however, with just a little planning and foresight by the parents, combined with perhaps a little sweat equity from the students while they are in college.  Here is a simple plan to avoid student loans.

1.  Get a 15-year mortgage.

Instead of getting a 30-year mortgage on your home, opt for the 15-year.  That way when you’re a few years out from your oldest going to college, you’ll be paying off your mortgage, leaving the money you were paying free to direct towards college savings.  With a $1000 per month mortgage payment and three years to save, you could have $36,000 saved up by the time the first child enters the dorms.

2.  Put away $2000 for each child in an educational IRA each year if you can.

You can put away $2000 in an educational IRA for each child each year.  Start this when they are born and direct it into mutual funds and you’ll have maybe $40,000-$60,000 saved by the time they are 18.  And that money will be tax-free as long as the money is used for college expenses.

3.  Look into a 529 plan and have gifts from relatives go into this plan.

State 529 plans are a way to save even more money for college, but they have less flexibility on investment choices and how you can use the money than do educational IRAs,  Still, once you’ve fully funded the educational IRA, they are a great way to save up more.  Other relatives can also contribute, so think about putting some birthday money from aunts and uncles in when the kids are young instead of buying more toys to clutter the room.  Grandparents may also want to contribute.

4.  Save, save, save during the last four years before college.

Once the children enter high school, it will only be a blink of the eye before they are looking at colleges.  Be sure to direct whatever money you have into saving for tuition and room and board.  By this point you don’t really have enough time for investing in stocks, so bank CDs and maybe some bond funds would be your best choices for the money.

5.  Choose a school that fits your financial situation.  This might mean community college for a couple of years.

If you’ve been following this blog for a while and have a million dollars in the bank when the kids are ready for college, you might consider taking a couple hundred thousand dollars and send your children to their dream college with the $50,000 per year price tag.  (Then again, you may not.  See: Would You Rather Go to an Ivy League School, or Have $184,000?)  If you haven’t, you need to get realistic about what you can afford.  Certainly a state school will cut costs dramatically.  Even better, look at community colleges for the first year or two to knock out the basic courses.  Tuition will be a lot less and you can save on room and board by having them live at home.  This also allows them to mature a bit more before being out on their own.

6.  Look at summer jobs and part-time jobs during school.

Summer is a great time to earn a few thousand dollars to help pay expenses during the next school year.  It is also valuable experience, particularly if it is in the field the student is pursuing.  Looking at jobs at the school that have flexibility during finals time and other crunch times are also a good way to earn money to put towards expenses.

7.  Work with your state legislators to stop allowing student loans at state colleges.

One of the reasons that college costs so much is that people are using college loans to pay for schools they could not afford otherwise.  This allows schools to pay essentially retired faculty who don’t teach or contribute to the school, build lavish student centers and workout facilities, and have immaculate grounds.  Colleges could cost a lot less and really should.  One way to bring down the costs is to encourage your state legislators to pass legislation limiting of eliminating the use of student loans for state schools.  This would force colleges to cut costs and bring them back in line with what a middle class family can afford.

Contact me at, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Want to Get the Kids Out of the House? Maybe Start Them with a Starter Portfolio.

Ask SmallIvy

Many families expect to continue to support their adult children through college and often beyond.  The norm is to pay for their tuition, rent, utilities, food, cell phone, and even some entertainment expenses through college.  Ideally that would all end with graduation, with perhaps a brief visit home before starting off for a new job and a life of independence.  The new norm, however, is getting to be to continue that support until your son or daughter is 30 or even older.

The issue is that many college students are graduating with enough student loan debt to amount to a car or rent payment each month.  This makes it difficult for them to start an entry-level job and pay for both their loan payments and their living expenses while they gain the experience needed to get enough money to be fully self-sufficient.  They are also much happier living at home in a spacious home with free meals, particularly if their mom still does their laundry, while they are gaining that experience than they would be in a cramped efficiency apartment.

My parents did things somewhat differently for my sister and I than the norm, and it seemed to work well (if your definition of “working well” is to launch your kids out on their own after college).  From the time we were about 14 my parents started depositing money in a brokerage account for each of us and worked with us to pick investments and manage the accounts.  They were able to do this tax-free because their contributions were always under the gift tax allowance (currently something like $28,000 for a married couple to each son or daughter per year).  By doing this for a number of years they were able to build up a sizeable starter portfolio for my sister and I before we went to college.

Once at college, instead of calling Mom and Dad each time I had a bill, I would just use cash from interest and dividends on the investments or sell shares of stock as needed.  Because I was living very modestly and on scholarship, I was actually able to cover most of my bills from just the interest and dividends I was receiving from the investments.  I therefore had a reasonable portfolio to help pay for graduate school expenses after I completed my undergraduate degree.  With the portfolio, thrifty choices on schools (I went to UC Berkeley, where I got in-state tuition paid for by the grant for my graduate work instead of Stanford where I would see tuition bills of $20,000 per year), and some side jobs along the way, I was able to make it through school loan-free and still have enough in the portfolio to serve as a good emergency fund after graduation.

This worked out very well for my sister and I, but things could have gone really badly.  Since the money was put into a custodial account, once we turned 18 the portfolio was ours and our parents had no legal say on what we did with the money.  One of us could have blown the money on parties and junk, leaving us without the money needed to go to college.    It probably would have served us right to then need to drop out of college and get a regular job to earn the money to go back, but it still would have been a disappointment for our parents to see their hard-earned savings wasted.  Of course, there are also students who spend six or seven years in college on loans and never get a degree.  They then have both loans to pay back, often with help from their parents who may be consignees on the loans, and no degree to show for the money.

There are many advantages to using this method of college/early life funding rather than paying for expenses as they occur:

1)  You can help your son or daughter learn how to manage a portfolio of investments while still under your roof.

2) When your students go out on their own and start earning money from their portfolio, they will (possibly) be paying taxes at a lower rate than you since their total income will be a lot lower, so it may be better for them to be earning the money in their portfolio than for you to earn money in your own portfolio and then send the money to them for expenses.

3) When it is your student’s money, they will usually tend to want to save it rather than spend it, so they may be more thrifty with their college choices and spending while at college.

4) It will force you to save the needed money for their college before they go rather than hoping you’ll find the money somehow when they get there.

5) It allows you to tell them they’re on their own and that the choices they make are now theirs without worrying about them not having the money for rent the first month and ending up on the street.  There is security in having enough money to have a few unfortunate events without becoming destitute.

6) If they work a job in college, they may be able to fully fund an IRA with their wages since they’ll have the money needed for living expenses from the portfolio.

Still, giving them all of the money when they are 18 may not be the best option.  While legally adults, people make some pretty bone-headed decisions when they are 18-23 or so.  It is good to be able to give them a second chance if they screw up early but then learn their lesson and mature.  A second plan would therefore be to give part of the money when they head off to college, but then give the rest of the money as they mature and prove they can handle the wealth.  For example, maybe give enough for them for living expenses for the first two years of college before they turn 18, then continue to give them money through the gift tax exemption for the next four years after their sophomore year if they prove that they can handle to money and are making good progress in college.  This unfortunately will make it less likely that they will be able to pay for most expenses using just interest, but it does help protect the parents from spendthrift students (and gold-digging relationships).

Now one final “disadvantage” of starting your children with a portfolio is that it may well hurt their chances of getting financial aid.  Really, though, this should not be seen as a disadvantage at all.  Why is it that middle and upper-middle class families who have plenty of money to spend on cable packages, kitchen upgrades, Caribbean cruises, and big data packages for their phones need to go begging for charity when it comes to college?  Maybe it is time for families to put first-things-first and not accept public charity when they can pay their own way through better choices.

Contact me at, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Is Having Adult Children at Home Really That Bad?

The United States has always been a country of independence.  Adult children would normally leave home to go to college or to work at the age of 18 (or even at 16 or 14 during the 1800’s) and do everything they could to not come back home for more than a visit.  It was seen as a sign of maturity to have your own place and take care of yourself.  This was especially true of men, and few women would date a man who still lived at home with his parents before recent years.  This made sense since if a guy could not take care fo himself, why would you want to start a family with him?

Today this is shifting to where about a quarter of young adults return home after college and continue to live with their parents until late into their thirties or forties.  Even those that don’t still sponge off of their parents for many years for things like utilities, health insurance, and cell phone bills.  Money Magazine reports that many parents are now expecting their children to continue to be supported until they are maybe 25-30 as there is now a new transitional phase and children are continuing to be dependent longer.  The children are expecting that support to continue until they are 27-32.

Some of this change is due to millennials coming of age during the “Great Recession,” a term I use in quotes because it really wasn’t that bad in comparison with other recessions we had despite the news media playing it up as much as possible.  What is different, perhaps, is an increased difficulty in finding good full-time jobs, largely driven by the Affordable Care Act’s requirement that employers who have 50 or more full-time employees, defined as those that work more than 29 hours or week, be provided full coverage health insurance.  For many jobs where the employer doesn’t make that much per hour per employee, the only solution to stay in business is to cut all employees below that threshold.  This means that not only is a barista only making $8 per hour, he also can only work 29 hours per week unless he gets a second job.

The other difference is the expectations of millennials in what their living conditions should be.  Those before them mostly spent their 20’s in small 1-bedroom apartments, 2-bedrooms they shared with a roommate, or even in the rented room in a house while they worked their way from entry-level to better paying, higher-level jobs.  Some individuals now are expecting to move right into a four bedroom ranch with a bonus room like the one their parents have.   Not having the resources to do this, many figure it is better to stay at home and live rent-free.

America is somewhat odd, however, in the expectation that adult children leave home.  In many cultures, particularly in Asia, families all live in the same home, with sons bringing their wives into the home and eventually taking over their parents’ room and their role as head-of-household.  In many ways this makes sense.  Having several people supporting one home reduces the cost each must pay for upkeep and utilities.  In places like Tokyo children would probably never be able to afford a home on their own, at least for many years, and paying out high rents may make it difficult to ever save up enough to do so.  Living at home also provides readily available people to help watch and raise the children.  It also gives individuals more time to spend with their parents, children, and grandparents.  Moving out greatly limits the time you have to interact with your parents and grandparents, which is time many people miss once their relatives have passed.

The difference between these cultures and the new American culture, however, is that while adult children may still live at home, those in Asian culture mature and support the home while some in America live as perennial teenagers.  This is largely the fault of the parents who allow their children to sleep until noon, go without a job, and not contribute for rent and food.  Certainly continuing to do their laundry and not expecting them to help with cleaning and yardwork also is a contributing factor.

Perhaps adopting the Asian culture and having children live at home wouldn’t be such a bad thing if the children were given the responsibilities that any adult should have.  This first starts with doing everything needed to not place a burden on others, including paying for their food, doing their own laundry, cleaning up after themselves, and paying for other expenses they generate.  The next step would then be for them to really step-up and contribute to the upkeep of the home, including helping with mortgage payments, helping maintain and clean the home, and eventually helping with major household decisions.  By pooling labor and resources, this would help everyone in the household to live a better life financially than they could on their own.  They would also have a lot more time together.

Another aspect of Asian culture is that children care for their parents in their old age.  Living in the same house would also make it much easier for adult children to look after their parents in their declining years.  Many would probably rather not have this burden, but it seems only fair after the years the parents spent raising the children and helping with the grandchildren.  Living in the home would ensure that someone was there in the night to help as needed and professional nursing help could be hired during the day when the children were working to support the household.

While it certainly wouldn’t be the ideal choice for everyone, maybe having children stay at home is a good choice for some people.  The key is to require that they grow up and accept their share of the load rather than letting them continue to live as children with the advantages of being an adult.  In some cases this will help them leave the home sooner as they learn the skills needed to live on their own and they would rather have their own place than continue to live under the roof and rules fo their parents.  In other cases children may choose to stay at home their whole lives, but this would provide a lot of advantages to the typical separated American family.

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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Is a Cell Phone a Need?

I’ve been reading through an article in Money on parents supporting their adult children well into their twenties and sometimes thirties.  One thing that is striking in the article is that in every case the parents were paying for their adult children’s cell phones.  This got me to wondering where a cell phone is a want or a need, and if it is a need, why do the parent’s cover the expense in every case instead of the son or daughter covering the cell phone and the parents covering something else less critical.  Is it expected that parents should cover their kid’s cell phones for ever because they start them on their family plan when they are tweens?  If parents didn’t cover their children’s cell phones, would that cripple their lives or just give more incentive to earn more and cover their own phone?  Money from delivering pizzas at night or mowing a few lawns would be enough to easily cover the cell phone bill.

Understand before you roll your eyes that I don’t personally own a cell phone and don’t really find it an inconvenience not to have one.  I find that I am normally near a phone at times when I would actually like to talk to someone, such as at my desk at work, or near the home phone when sitting on the couch.  I really don’t want to talk to people when I’m in a meeting at work or doing something else away from my desk because I’m busy with other things and don’t want to be interrupted.  (And by the way, those of you who are talking to someone and then stop to answer the phone and have a conversation while the person you were talking to is waiting are extremely rude, unless you are a heart surgeon and providing assistance with a surgery or something equally critical at the time.  Texting someone while talking to someone else is equally irritating.)  Likewise, when I am out and about I really don’t want someone calling to talk about something.  I usually won’t have the information needed with me if someone needs information and holding a private conversation with a friend with passersby listening in at the grocery store isn’t something I like to do.

I do understand that many people use their cell phone as their only phone and that having some means of communication is critical.  Still, adult children could get a flip phone for something like $15 per month.  That is about three hours at a minimum wage job.  You can get a land line for $9.95 a year according to one advertisement I heard.  I understand that it is nice to be able to play games, watch television on your phone, and use apps, but is that really a need that you should be asking your parents to pay for when you don’t make enough to buy it yourself?  Realize that while they may not say anything, continuing to support you can put a real strain on parents who haven’t been saving for retirement regularly and who don’t have that many years left.  Some parents may continue to work longer than they expected before retiring because they are supporting adult children.  Others may need to cut their lifestyle, not get to go on the trips they planned to take, or do other things because of the drain from supporting adult children.  Is it really worth it to affect other people’s lives?

Realize finally that if they run out of money, your parents will have little choice but to come and live with you.  Right about the time you are in your late thirties or early forties and thinking about taking some nicer vacations, they may come knocking with their bags in hand.  Suddenly you’ll be buying extra meals and an extra room at hotels when you travel.  Your home office or bonus room might become their bedroom or your guest room will always be full.  You’ll need to buy a bigger car to haul everyone around.  Again, is that cell phone really a need?

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