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Your Year-End Financial Planning Questions Answered!

Posted by on Nov. 24, 2014 at 11:05 AM
  • 29 Replies
1 mom liked this

We asked you to share your best questions on planning for the holidays - and beyond with our expert, Laura D. Adams.  Laura's answers are below!

Laura D. Adams - aka Money Girl - is a personal finance expert and the author of Money Girl’s Smart Moves to Grow Rich.  In addition to hosting the top-rated Money Girl podcast, Laura is a writer, speaker, and spokesperson. She has a passion for making money easy to understand. Millions of loyal listeners, readers, and students benefit from her advice. You can learn more about Laura here.


letstalk747 askedWhat percentage of my income should I save each month for the future?

Laura answered: How much you should save depends on your investment horizon, which is a fancy way of saying how much time you have before you'll need to start spending those funds, and the goal(s) you want to achieve. But for most people, I recommend saving a minimum of 10% to 15% of your gross income for retirement. So if you make $50,000 per year, be sure to invest at least $5,000 or about $415 per month. Investing just that amount over a 30-year period at at 8% return would give you over $600,000 to spend in retirement.

Beachdeprived askedOther than a 401K, where do you advise people to invest their money...a safe investment yet with a decent return? If I came to you and said I have $5000 I want to invest, where would you direct me? Thanks!

Laura answered: If you contribute the maximum to a tax-advantaged retirement account, such as a 401(k) or 403(b), and still have more to invest, it's time to open a regular brokerage account. Check out 2 options for where to invest here:

phmom3boyz askedMy husband and I are in our mid forties and have no savings. What would you recommend we save each month?

Laura answered: Start with a goal of saving 5% of your gross or pre-tax earnings, then move up to 10%, and then 15% over the next year or 2. If you can get up to a 20% savings rate by the time you reach your 50s, you'll be able to accumulate a nice nest egg for the future. Consider every way possible to cut expenses, earn more, and automate savings, so you aren't temped to spend it. 

TigerofMu askedWhat's your best trick for building the savings?

Laura answered: There's no doubt that automating your savings is the ultimate trick to save more. Ask your HR department or payroll administrator at work about depositing a portion of each paycheck into a separate savings account. That way, you separate those funds and will be less tempted to spend them. If you have the option to enroll in a retirement plan, such as a 401(k), that is the best way to automate investing and build a nest egg for retirement. 

k9l1c5 askedWhat exactly is a Money Market Account? Do they have any risks? 

Laura answered: A money market deposit account is similar to a bank savings account, but typically pays a little more interest. It may require you to maintain a higher minimum balance and will limit the number of transactions you can make per month. Opening one at an FDIC-insured bank means that it's protected up to $250,000 per depositor, just like a checking or savings account. But don't confuse this with a money market fund, a type of mutual fund investment, which is never FDIC-insured. 

SweetLuci askedHow do you help teens learn how to manage money? 

Laura answered: One of my favorite resources for teaching kids about money is I met the founder several years ago at a financial literacy conference. It's a great way for parents to help younger children and teens establish good financial habits as early as possible.

SweetLuci askedHow would you advise grandparents to save for a grandchild's college education? Are 529 plans a good idea?

Laura answered: A 529 plan is a great vehicle for family members to help pay for a child's college expenses. Funds withdrawn from one are taxed only if the amount exceeds the cost of qualified education expenses. Here's much more on what a 529 plan is and how to use one to pay for education:

SweetLuci askedDo you think it's a good idea to give a child an allowance? At what age? Should it be tied to chores?

Laura answered: I liked your question so much that I made it the subject of my recent Money Girl Newsletter!:

janessa27 askedOur boys have water jugs for banks- full of change. What age is a good age to actually start a bank account for them? 

Laura answered: An alternative to opening up bank accounts for young children is using a site like It allows kids to manage virtual accounts online, set goals, and make withdrawals for purchases with your approval. With, parents become the bank and a cloud-based software keeps track. So kids get the experience of managing their own money, but without opening up a real account. 

johnny4ever askedWe want to start saving for next Christmas already.Any pointers?

Laura answered: Many banks offer a Christmas Club or Vacation Club account for just this purpose. If your bank doesn't offer one, consider setting up a separate savings account and having your payroll or HR department direct deposit a portion of each paycheck into it. For instance, if you're paid bi-weekly, a $20 deposit per paycheck woud give you over $500 to spend on gifts after a year. 

mrswillie askedHow much of our income spent on Christmas?

Laura answered: I don't recommend setting a gift budget as a percentage of income. Instead, set a reasonable dollar amount for the number of people you want to buy gifts for and your discretionary income. Make sure that buying gifts doesn't derail bigger goals that you may have, such as saving for retirement or a child's education. 

yvonne37 asked: My husband is the only one working at this moment, I am going to college. I will be graduating this May and am planning on applying for a job a little before that... now I am in a crossroad. I wish I could open up my own business and not have to work for others, but this will make us incure in expenses and we have no idea how it will turn out. So I guess my question is what do you think, should I play it save and get a job before I decide to start my business or should I just dive in and give it my all?

We have lots of bills to pay and I feel my husband is getting burnt out being the sole provider.

Laura answered: This is a common dilemma that I've also experienced because I'm very entreprenureal and somewhat conservative with money. First, the most important thing is to have a supportive spouse that shares your vision and appreciates your passion. Second, working for someone else in the short term doesn't mean that you can't also work on your new business idea on the side. I was able to become a nationally-recognized personal finance expert, write several books, and build a great business, all while working a day job that I knew wouldn't be forever. You'd be amazed at how much you can accomplish on the side when you're passionate about it! 

delanna6two askedWhat is the lowest reasonable amount to save per month?

Laura answered: Saving something is always better than saving nothing. I would love for everyone to save a minimum of 10% to 15%, but if that's too much, just start with a small amount, even just a few dollars a month. Just the act of saving something begins to create a good financial habit. As your savings begin to grow, you'll get inspired to save even more. 

ablackdolphin askedDo you think a Roth or traditional IRA is better?

Laura answered: A Roth IRA is better in the long term and a traditional IRA is better in the short term. That's because you get an immediate tax deduction for the year you make traditional IRA contributions. However, if you don't need or want a tax deduction right now, the Roth gives tax-free withdrawals in retirement, which is a terrific benefit. Here's more on the differences between the 2:

ablackdolphin askedTips for saving for college? How much will we need for two kids in 15 yrs?

Laura answered: The good news for you is that time is on your side. The bad news is that the cost of tuition is likely to increase at a rate similar to what you might earn on your investment. I recommend starting now with a 529 savings plan. There is a great calculator at that shows how much to save using today's average costs for in-state, out-of-state, and private colleges.  

cjsjellybean askedMy husband recently found out about bit coins and has become obsessed with them. He wants to invest money in them and I'm not so sure.We live paycheck to paycheck and don't really have a lot of wiggle room so I'd hate to just through money away on something and then lose it. Do you think bit coins would be a smart investment?

Laura answered: Given your current financial situation, I would advise against investing in anything speculative. While these digital currencies can provide large short-term gains, they are very volitale and can result in large losses. Digital currencies don't have the same consumer protections that your savings account, investment account, or credit card has. They are also much more susceptible to security breaches or cyber crime where you may not have any recourse. Instead, consider setting up a savings account and work towards building up a financial safety net in the form of an emergency fund. If you already have a large diversified investment portfolio, I would be ok investing a very small percentage (<5% ) of your assets in something speculative, like a digital currency. 

More great questions and answers below!

by on Nov. 24, 2014 at 11:05 AM
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Replies (1-10):
Cafe Naomi
by Member on Nov. 24, 2014 at 11:14 AM

Bob192 askedDo you have tips on how to start saving for retirement?

Laura answered: If you are fortunate enough to have access to a workplace 401k, I always recommend starting there. The money automatically comes out of your paycheck pre-tax and typically also qualifies for a company match, which turbo charges your progress. If not, open an IRA and automate a monthly deposit:

melindabelcher askedWhen to start saving and buying for the holidays?

Laura answered: I believe in saving throughout the year. If that is too difficult, you may just want to spread your holiday purchases out over several months so that the amount you spend each month fits within your spending plan.

egyptian_mommy askedDo you think it's a good idea to let kids manage their own money? By that I mean, choose whether to save or spend their allowance, birthday money etc. 

Laura answered: With adult supervision and involvement, letting kids manage their own money is a powerful teaching opportunity.

splatz askedWe are thinking about trying to pay more on our car each month to pay it off quicker. Is that a good idea or would the money be better spent somewhere else?

Laura answered: If your car loan charges a low interest rate, then it's lower on the debt priority list for me. If you already have an emergency fund set aside equal to several months' worth of living expenses, and are contributing to your retirement accounts, by all means pay it off early. If not, I would start by building up some savings and creating the habit of saving for retirement first. 

NicLof2 askedWith three kids what's the best way to start college funds? 

Laura answered: I recommend making sure that your financial house is in order before saving for a child's education. First, make sure you have built up your family's emergency fund to a minimum of 3 months' worth of living expenses. Second, make sure you are consistently funding a retirement account. College is getting more expensive every day, so it is important to start saving early. The most popular investment vehicle for college savings is a 529 savings plan. In my book, Smart Moves to Grow Rich ( I talk about using a Plan of Thirds. Let's say you estimate each child's education cost to be $30,000. Consider making it a goal to save 1/3 of that cost or $10,000 for each child. Then he or she will need to earn $10,000 by working before or during school. And the final third can come in the form of student loans. If you can save more, great! Just don't jeopardize your own financial future in the process or you may become a financial burden to your children in your retirement.

copperswifey askedAre the Christmas cd's the banks have worth putting your money into?

Laura answered: I think establishing any kind of savings account for a future use is a good thing. Whether you do it on your own our use some type of savings vehicle from your bank such as a CD or Christmas Club type account, it is a way of taking control of your money and making a conscious decision to save for a purpose. You will also have the opportunity to earn interest on your money which might leave enough left over to buy yourself something.

copperswifey askedShould you have a holiday category in your budget and put money into year round?

Laura answered: I think having a "gift" category built into your spending plan is great idea. Consider setting up a separate savings account for "gift" category and transfer a set amount into this account each month. If you want, you could even ask your HR or payroll department to automatically deposit a small amount of your paycheck into this account each pay period. I can't stress how much I believe in automating your financial goals. You likely won't miss the few dollars and you'll be ahead of the game when the holiday season rolls around again.

copperswifey askedIs it alright to pay for gifts with credit cards?

Laura answered: I'm a big fan of using credit cards responsibly for purchases. Check out a recent post to find out why:

mrswillie askedI'm in my mid 40s. How much should I have in savings?

Laura answered: I recommend that everyone have an emergency fund equal to at least one month of your essential living expenses, and ideally 3 to 6 months' worth. That protects you from unexpected expenses or a loss of income. Emergency savings also prevents you from having to tap your retirement accounts or incur high-interest debt to get by. 

mem82 askedHow does one kick start a savings account when they don't make a ton of money nor do they receive a tax return of any real size? 

Laura answered: Start with a small percentage of your paycheck--even 1% or 2%. Ask your payroll department to direct deposit that amount into a separate savings account. Review this amount quarterly to see if you can bump it up by a few dollars. Getting started is the hardest part. Once you have this system set up, it's easy to save more when your income goes up or your expenses go down.

More below!

Cafe Naomi
by Member on Nov. 24, 2014 at 11:23 AM

mem82 askedHow do you feel about Christmas Club accounts? 

Laura answered: I think establishing any kind of savings account for a future use is a good thing. Whether you do it on your own or use a  vehicle from your bank, such as a CD or Christmas Club type account, it's a great way to take control of your money and save with a purpose. 

mem82 askedWould you suggest using an online only bank for savings? How hard is it to get to your money?

Laura answered: I use an online bank for the majority of my checking and savings. To access money in my savings account I can simply transfer it to checking, write a paper check, initiate an online payment, or withdraw it as cash from a local ATM. Here's one I recommend:

Miranda1127 askedWhat/where is a good place to start (investing) when you only have $100 or so each month to spare?

Laura answered: I'm a big fan of because they have no minimum investment amounts and very low fees.

Wish2Be asked: How wouldy ou suggest we make the most out of a family trip for the least amount of money?

Laura answered: Look for destinations close to home to avoid large travel expenses. Visits to see extended family can also help save on lodging. My nieces came to visit me in Florida a few years ago, and had a blast just swimming and playing in our lake. They told their dad that it was the best part of their vacation even though they went on to Disney World and spent lots of money there! Ask your kids what they want to do or what their favorite vacation memories are. Unlike adults, their fun can often be very inexpensive.

Wish2Be askedIf there is no way to save ....what would you suggest is a good way to start?

Laura answered: No matter how small, you just have to begin creating the habit of saving. I think most people worry that if it isn't several hundred dollars, that its not worth the effort. I would advise starting with whatever you can, even if the amount seems trivial. The important thing is not how much but the consistent effort. Can you save a dollar a day? Would you miss $10 less in your paycheck? Start small and build from there. Your good habits will be rewarded.

PennOhioBabe askedWhat % should your credit cards be kept at?

Laura answered: If your goal is to maintain the best credit score possible, always keep your credit card balances below 20% your available credit limits. It's better to have 2 or 3 cards that never go over this amount than one card that you consistently max out--even if you pay it off each month. Here's more about credit utilization:

Bob192 askedHow do you determine how much to spend on each child at Christmas?

Laura answered: It depends on whether they've been naughty or nice! No, seriously I think it depends on his or her age and your financial situation. Older children typically have more expensive wants than younger onees. On average, most parents spend about $250 to $300 per child. But that doesn't mean you can't spend more or less when it's appropriate. Just make sure your gift budget fits within your greater spending plan and doesn't negatively impact bigger financial goals like saving for retirement.

Bob192 askedDo you suggest a specific form or formula for determining a budget?

Laura answered: In my book, Money Girl's Smart Moves to Grow Rich (, I recommend an online tool at that offers a really simple system for tracking your expenses and creating a spending plan. It's free for the first 30 days and then $4.95/month if you like it.

Sisteract askedWhat's your thoughts re HSAs? (Health savings accounts)

Laura answered: HSAs are one of my favorite tax-advantaged accounts. They're one of the best ways to pay for medical expenses--but you must have a high-deductible health plan to qualify for an HSA. Although they're a bit more restrictive than they were a few years ago, you can still purchase prescriptions, eyeglasses, and pay for doctor visits with pre-tax money. Here's more about the tax-saving benfits they offer:

Wish2Be askedHow would you plan for a holiday trip with a child with specific dietary needs that cant be brought with us? Should we ask that the things he needs be there when we arrive ( it will be late in the evening ) ? Its at a family members home so I doubt they would mind, but I worry about being rude.

Laura answered: I can relate to your question becaue my niece had many special dietary needs when she was young. When she would visit me, her parents sent a shopping list in advance so I could have the right foods on hand. You could make this easy on them and phone in an order to their local health food store and prepay for everything so all they have to do is make the pick up before you arrive.

RobynS askedCan you give me some practical ideas for stocking stuffers? That may sound like a silly question, but I really don't want to blow a bunch of money on little trinkets that will be forgotten or broken in days or weeks. Thanks! :)

Laura answered: I always love the small, quality toys from my childhood, like a Duncan Yo-Yo, Rubik's Cube, or a pack of Uno playing cards, that won't get tossed aside or quickly forgotten. Personally, I don't think a stocking is complete without a little chocolate!

Cafe Naomi
by Member on Nov. 24, 2014 at 11:24 AM

Many thanks to all of you for your wonderful questions and special thanks to Laura for her helpful and insightful answers!

by on Nov. 24, 2014 at 12:36 PM

Thanks for answering!

by on Nov. 24, 2014 at 12:36 PM

Lots of great information and very insightful answers! I hope everyone feels satisfied with their answers.

by on Nov. 24, 2014 at 1:57 PM

Wow thank you!

by on Nov. 24, 2014 at 2:01 PM
by Member on Nov. 24, 2014 at 2:50 PM

Yay, thanks for answering!

by on Nov. 24, 2014 at 3:15 PM

Thanks for answering my question.

by on Nov. 24, 2014 at 5:41 PM
Nice to read the answers.
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