On this episode of the Reinvent Rich Podcast, Irvin is joined by Christopher Mallon, Certified Financial Planner and Senior Financial Advisor at Pennsylvania Capital Management, for a discussion about alternative gifting options that can help your loved ones build wealth.
Lesley Buck:
Welcome everyone to our podcast. Today we’re joined by Irvin Schorsch and Christopher Mallon. Irvin is our founder at Pennsylvania Capital Management and Christopher is one of our certified financial planners here. The topic the two of them are going to chat about, we’re just going to eavesdrop in on their conversation. But the topic today is gifting. We’re coming up on the holidays. So Irvin and Chris are going to talk about gifting. Take it away for your podcast, Irvin.
Irvin Schorsch:
Good afternoon, everyone. This is a very exciting time of year. Our clients are all getting tuned up and excited about what to get for their kids for Christmas. Or Hanukkah. Or whatever part of the year. The holidays that they celebrate and the old traditional gift giving has got to get a remake. There’s got to be a better way. Chris, what are you thinking about for your child?
Christopher Mallon:
Yeah, I’m smiling because my office is also [00:01:00] slowly becoming more and more of the playroom slash office here. We have a, she’s almost two, Addison. So yeah, as we accumulate more and more stuff. And as holidays come around, it’s phase one is to, you know, do a little bit of purging of some of the old toys that she doesn’t play with anymore and then make a room for some new ones. Yeah, that’s the process we’re going through here. And then obviously thinking of some longer term gifts too, that could hopefully benefit her in the future.
Irvin Schorsch:
Chris, how do you and Ashley decide, look, there’s thousands of gift alternatives for a child at his age. Yeah. Now, as you think about that, what goes through your mind? Are you getting useful things? Are you getting toys that are just going to get broken and thrown out? Where do you stand, at least at this age?
Christopher Mallon:
Probably a combination of both. Some, try to lean into the educational stuff that she finds fun, lots of books, all things like that. And then there are definitely the as, we define them as loud plastic. So we [00:02:00] got plenty of those that she’ll play with for, a couple days and then we’ll be cast aside and not mess with anymore. But yeah, a few things and then as she gets older, I think it’ll get a little easier of Things that’ll, last longer. But yeah, right now it’s a lot of trial and error to see what she’s into and, they’ll end up playing, she’ll end up playing with the boxes and the wrapping paper and stuff more than anything else at first. More than the gifts, the wrapping paper in the boxes.
Irvin Schorsch:
Exactly. All right. I’m going to challenge you today. All right. You know, from being a certified financial player, that there are better things in life to buy for your kids than toys they’re going to end up filling up the closet. You were talking about your office slash playroom and then get broken or thrown out and, the money went down the drain looking at it from our standpoint, what’s a better way to go? And when do you see starting it?
Christopher Mallon:
Yeah what we do and then what we’ve been doing with her too is buying some shares of stocks and companies and [00:03:00] everything a little too young to probably appreciate it. But I think in a few years, once she’s oh, like this toy you do like playing with, here’s the company that owns it. And here’s what We paid for originally now it’s worth this. I think kids can figure out money a little bit. Every kid’s a little bit different, but it’s a little bit earlier on than some people think. So just getting them used to thinking of the value of things, seeing, hopefully appreciate if mom and dad pick right in terms of the, the companies that are in the account.
But yeah, just some alternative things to think about is what we always add to try to, you know, it’s not always perfect, but try to match up the two. So if we’re spending, 250 bucks on gifts, like material gifts, then we’ll do, 250 odd into the account. And then grow over time. It’s a little math problem. we do sometimes to figure it out.
Irvin Schorsch:
Very generous. They, it’s funny hearing how you’re dealing with Addy and her growth that Roughly two years of age. I think about my [00:04:00] Mary who I started at age seven with the gifts, like you were talking about in stock and we started with Disney because I know she’d understand Disney and we bought her a share just one.
And then we decided that for every birthday and Christmas, she would get one more share of two different kinds of investments, again, that were relevant to her that she would appreciate eventually, because at age seven, she barely knew what they were, but that seemed like a good time where she at least went, Hey, dad, what’s that?
Christopher Mallon:
You got her gift certificate that we had made up for, right? Yeah. I know you’ve you work with Nancy on our team on getting the certificates made up. Yeah, honestly, I’ll probably do that too. In a couple of years, once Addy can hold it and find it interesting. It’d be funny to almost give her one now and see how she reacts to it, but I’ll probably color and draw on it, but it could be, yeah, right now for Addy, we have some Amazon, Apple, and then I can’t remember the other.
I think those are the main two. [00:05:00] Driving the ship right now, but she could be familiar with Apple a little bit cause she, kids figure out phones and iPads so young now she sees them and goes phone, right? Yeah, exactly. So in a few years, but Hey, this is an Apple phone.
Irvin Schorsch:
Definitely see Nancy. She’s very good at gift certificates and she gets the logos on there and it’s an exciting time for the kids. Now they expect the gift certificate to see what’s it going to be, because this is a trend, which. I’ve done with Marilyn for, since age seven and up. What’s interesting, and obviously you know about my book, Reinvent Rich, how to make more money, more moments, and more meaning in life, but chapter 14 is called Child’s Pay.
And I would encourage any of our listeners to check out that book. It was an Amazon number one bestseller and there’s 12 pages there to talk about how to encourage your children by either [00:06:00] matching the money that they earn once they’re old enough to either get a 1099 or a W 2, as tiny as it may be, matching that money that they put in a Roth until age 59 and a half and we put it in the car savings account so that they win both ways but you also see the charts in the book that show if they just save a very small amount each week from whatever they earn, they can work toward becoming a millionaire over 40 ish years, assuming merely an average rate of return.
So I think that’s really important to be able to instill into the kids that if they work hard and they’re diligent savers, meaning saving before they. Right. Spend out of every dollar that they earn, they’ll absolutely achieve some significant financial success. I know I’m probably teaching early.
Christopher Mallon:
Yeah, no, it’s cause we think about it too, like what different things should we [00:07:00] be doing for, you do the five 29, that’s somewhat in my mind separate in a sense where I’m not probably going to talk to Addy that, Oh, we’re adding money into your 529 today. She’d be like, cool dad. Don’t care. But if it’s like, Hey, here’s like your stock account, see it moving every day. That kind of a little bit more, connection to it especially, the sooner to get them involved with the, the investment process or selling different things in there, say, there’s a big trip in college that she wants to go on down the line to go. Okay, can I take, 1000 bucks out of it? Look at it together, different things like that just to get them used to the money.
So then when you eventually enter the working world, it’s not all it’s not all brand new. A lot of friends leave college and everything and they go, I don’t know what any of this is getting a little bit of a experience and it really does give a huge head start for anybody coming out of college or high school or wherever to just have that general knowledge.
Irvin Schorsch:
I think it’s not only a big head start, but I think it’s a confidence builder. You come out of college and [00:08:00] you’ve been saving since you were 7. You got a good size pile of money there. And that gives you freedom. It gives you autonomy to make decisions and decide what’s important in life next and earlier. Yes, you’re being a teacher, but teach in strong ways that really help build the self confidence of your kids.
Christopher Mallon:
And one thing I’d read about, and something we’ll probably do with her as well is the, there’s some kind of meant like a, Financial psychology around it. Just naming the accounts, different things. I think you did this with your kids like education account, like you said, car account or different things like that. And that kind of changes how we think about the money. It’s okay, this is for that. Even if it’s all, the same registration or whatever it might be, it can be like, we change our thinking about it and how we behave with the money, if it’s specific. Which I think, will be something we’ll do with her too.
Irvin Schorsch:
Chris, that’s a great idea. I like it. I like it a lot. That by compartmentalizing the different [00:09:00] kinds of money, it’s not just money, it is a purpose. Very simple.
Christopher Mallon:
Yeah, it doesn’t feel like you can just, grab it, so to speak. Feels more like a piggy bank that just has the little the slot to drop the coins in and then, and the plug on the bottom makes it a little bit more difficult.
Irvin Schorsch:
Actually, I’m thinking in our family, we took it a step further. We said for each dollar, it’s going to be split into three different pieces. And one of the things that goes through my mind is if you can start your child with, responsibilities, which they might do anyway. Some of them for pay where whether it’s loading the dishwasher, clearing the table, walking the dog whatever you choose, but you get paid for it that way. Then they begin to think about part of this goes in my car savings account. Part of this goes for my future. And part of it goes to charity. So I’ve got, again, like you were saying, [00:10:00] pick me up on this. The money is different purposes. So I hope that our viewers here can get some good takeaways to help them inspire their own kids. A lot of good ideas.
Going back to where we started, with the holiday, with all the holidays upon us here very shortly, we recommend strongly that you think twice about buying more toys to fill up the closets and end up in the trash anyway. Do more stock certificates and also build the relationship with your older kids, where at some point, at least I’ll use my kids as an example.
All three of them came to me and said, dad, you’re a professional, but can you tell me more about this? All these pieces of paper you gave me at Christmas and birthday time and actually one of them hasn’t gotten there yet. The other two, I’m hearing from almost daily saying, Hey dad, what do you [00:11:00] think about this? Think about this stock certificate that you bought me years ago, but I don’t think I like it. My answer is you make the decisions. I’m not making them for you. Now’s the time to make mistakes when the dollars are small, right? So that later on in life, you’re more experienced and two out of the three are already very active. And the last one is now becoming more active or inquisitive and wants to know more about it.
But in a sense, you’re really building the family relationships as they get more involved with understanding about life. It’s been my experience.
Christopher Mallon:
Makes sense. I like it.
Irvin Schorsch:
Chris, thanks for spending the time with me today. I think this was useful and fun and I hope that our our viewers got a lot out of it.
Christopher Mallon:
I agree. I think they will.