Parting Thoughts

“IT HAS LONG BEEN important to us to help our children and 12 adult grandchildren learn some of the fundamentals of saving and investing,” wrote Henry “Bud” Hebeler in a Feb. 26 email to me. “I sent them each a booklet that I wrote, illuminating the key elements that I have talked about in the past. To test their comprehension, I sent the following message.”

Bud died in August, nine days after his 84th birthday. Trained as an engineer, he rose to become president of Boeing Aerospace Company. In retirement, he turned his considerable analytical skills to financial issues, launching the site AnalyzeNow.com and writing two books, including Getting Started in a Financially Secure Retirement. This year, he even wrote two blogs for HumbleDollar, one on tax complexity and the other on health care costs.

What was the message that Bud sent to his family? It was a quiz with “a dozen questions that I expect our grandchildren to answer correctly.” Below is a slightly edited version of the quiz.  Not sure you know the answers? Check out Bud’s 20-page booklet, which is jam-packed with financial wisdom.

1. What is one of the biggest threats to your savings that you can’t do anything about?
2. If you get a 9% return, pay your financial firm 1% and are taxed at 25%, how many years does it take to double your money using the rule of 72?
3. When is an employer’s savings plan that has no employer matching contribution better than a Roth IRA?
4. Is it better to pick particular stocks or buy low-cost, broad-based index funds for the stock allocation part of your investments? Why?
5. After a long period of inflation, which is likely to be worth more, a bond that pays a fixed interest amount or a broad index stock fund?
6. What are good investments for emergency funds?
7. What are some examples of “investments” that you should avoid?
8. Is it better to buy a car with cash or credit? Why?
9. Is a vacation home liquid?
10. What is a REIT? Is it liquid?
11. What does the IRS say your life expectancy will be at age 65?  (Hint: See RMD.) What is the probability that you will live longer?
12. Have you determined how much you need to be saving for retirement? Yes or no.

A few days after his initial message, Bud sent me a brief followup email. By then, he had reviewed the answers from his grandchildren: “All of the responses so far show that they read my material carefully and, importantly, have learned something.”

Follow Jonathan on Twitter @ClementsMoney and on Facebook.

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