On Money & More – February 2025

AT CUTLER, teaching financial literacy is a priority. Our advisors aim to help our clients develop healthy money habits for positive financial outcomes. Financial literacy, however, should start well before meeting with a financial advisor. Parents and grandparents can play a pivotal role in fostering these skills early on. Financial literacy is one of the most valuable lessons you can pass to the next generation. Matt remembers the day his grandmother took him down to Jackson County Federal (where People’s Bank is located today) to open his first checking account and the lecture he received that day on how important it was to save money. In this case, pennies and quarters!

Here are some key pointers to help build a foundation of smart money habits.

Start with the Basics—Begin with concepts that are easy to understand. For younger kids, this might involve using a piggy bank to demonstrate saving or giving small allowances for chores. Encourage them to divide their money into three jars: saving, spending, and sharing. This simple system introduces budgeting and generosity. For teens, build on these ideas by explaining the importance of budgeting for larger goals. If they’re saving for new shoes, a phone, or their first car, help them create a plan to reach that goal without overspending. While not an endorsement, many parents of pre-teens will use a service called Greenlight to help their children save money and learn how to spend within their means.

Introduce the Power of Compounding—This is the most important lesson in finance. Warren Buffett calls compounding the “8th wonder of the world.” Did you know he has made 99% of his wealth after the age of 50? This just shows how small amounts of money can grow significantly over time through interest and investment returns. Early savings, especially in tax efficient vehicles like 401(k) plans, are crucial for long-term wealth.

Discuss Needs vs. Wants—We all struggle with this one! Teaching kids to differentiate between needs and wants is essential. Younger children can practice this while shopping, learning why groceries are a need, but a candy bar is a want. For older kids, this lesson applies to bigger decisions, such as choosing between a new car or a reliable used one.

Don’t shy away from discussing money with your kids. Although money is often considered a taboo topic, it’s okay for kids to know when certain items are not in the budget or when sacrifices today can lead to long-term success. With small, consistent lessons, you can empower the next generation to manage money confidently and responsibly.

All opinions and data included in this commentary are as of January 10, 2025 and are subject to change without notice. The opinions and views expressed herein are of Cutler Investment Counsel, LLC and are not intended to be a forecast of future events,
a guarantee of future results or individual investment advice including the asset allocation provided. Nothing herein should be construed as tax advice. This article is provided for informational purposes only and should not be considered a recommendation or solicitation to purchase or sell securities. This information should not be used as the sole basis to make any investment decision. The statistics have been obtained from sources believed to be reliable, but the accuracy and completeness of this information cannot be guaranteed. Investing involves risk, including the potential loss of principle. Neither Cutler Investment Counsel, LLC nor its information providers are responsible for any damages or losses arising from any use of this information.