Can I Get A New Toy?

On a recent trip to Target I heard several kids asking their parents if they could buy a toy, a shirt, a game, and so on. The kids were relentless in their pursuit of acquiring something, anything. Their parents were equally relentless in the denial of their children’s wants. This is a battle that will be waged for years to come.

My daughter wasn’t immune to acquiring new toys. She had a strong desire to own as many My Little Ponies and Breyer Horses as she could. Her mom and I had to tell her no quite often. When she’d get upset, we called it the Green-Eyed Monster from the Bernstein Bears Book: The Bernstein Bears and the Green-Eyed Monster.

When she was five years old, we gave her a weekly allowance of $1. When she received her first dollar, she wanted to visit the toy store to buy a very large Breyer Horse. I knew how this was going to turn out as her dollar was going to fall about $45 short of her goal. She was not going to be happy. When we arrived at the toy store, she pointed to the horse she wanted to buy and together we looked at the price tag – instant tears. She was upset because she couldn’t buy the horse, and, worse, it would take her months to save enough money to buy it. It was a great learning experience.

Her allowance taught her how to save money for buying things she wanted. More importantly, she stopped asking us if she could get a new toy every time we went shopping. If she had the money, she could buy what ever she wanted. In addition to saving her money, she started to give some of it away to her Church. She was learning the gifts of saving money, living within her means, and giving money away to help others. As a young adult, she has kept these important habits.

Here are a few suggestions to help you turn your child into a super-saver and smart spender.

  • Give them an allowance. A few dollars a week will allow them to start saving money and give them a sense of ownership.
  • Establish a savings account. It’s easy to open a savings account. Since they’re young, you’ll need to be listed on the account as well. They will, or should, get excited to see their account balance grow. I still remember my first savings account at a local bank, I was thrilled to see it climb above $60.
  • Let them spend their money. If they have $50 in their wallet, let them spend $50 at the store. At some point, they’ll get tired of spending their own money on things that won’t last. It will also be painful for them to see their bank account get depleted.
  • Encourage them to give money away. Let them decide on how best to donate their money. They can decide when and where it makes sense to help others. The joy of giving brings happiness to all.
  • Teach them to invest. After they have saved a few dollars, teach them how to buy a stock or mutual fund. Let them identify a few companies they have an interest in owning like Apple, Facebook, Coke, Pepsi, McDonald’s, etc. They’ll take pride in their ownership. They’ll also learn about the stock market, the economy, and investor behavior.
  • Invest for growth. Young investors should invest 100% of their funds in stocks or growth-oriented investments.
  • Open a Roth IRA. Once your children start working and earning income, open a Roth IRA. A summer job might pay them a few thousand dollars, so contribute a portion of their salary to a Roth. Kids can invest 100% of their income or $6,000, whichever is less, per year to an IRA. Contributing to an IRA at age 18 will pay huge dividends when they get older. In fact, your kids can let their money grow tax-free for more than 50 years! Investing $1,000 per year in the Investment Company of America Mutual Fund (AIVSX) for 50 years is now worth $2.14 million![1] Not bad for a summer job.

It’s unlikely your five-year-old will ask you to open a Roth IRA or set up a dollar cost averaging program. However, giving your child money to spend, save and give away will establish lifelong benefits. It will change their narrative and make your trips to the store more enjoyable.

Don’t let anyone look down on you because you are young, but set an example for the believers in speech, in conduct, in love, in faith and in purity. ~  1 Timothy 4:12

July 9, 2019

Bill Parrott, CFP®, CKA® is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation.




[1] Morningstar Office Hypothetical: June 30, 1969 to June 30, 2019.

Not A Good Toy Story.

Toys “R” Us has filed for bankruptcy protection due to its crushing debt load.  Toys “R” Us was taken private in 2005 by KKR & CO, Bain Capital and Vornado Realty Trust in a massive $6.6 billion leveraged buyout and this mountain of debt has finally caught up with this famous retailer of toys.[1]  Toys “R” Us has been trying to payoff $5 billion in debt with annual payments of $400 million in interest each year.[2]

As a kid, I went to Toys “R” Us on special occasions and it was awesome.   When I walked into the store I was met with sensory overload because the enormous store had thousands of toys piled high from floor to ceiling.   I usually had enough money to buy one toy so trying to decide between a board game, a Lego set or a frisbee was a challenge and almost too much to bear.  After spending an eternity, or what felt like it, in the store my mom would take me to Farrell’s to devour some much-needed ice cream.

Debt is a four-letter word when it comes to financial planning.  Too much debt can deliver a blow to your financial dreams.   How much debt is too much?  I’d recommend keeping your total debt payments to 38% of your monthly gross income.  If your monthly gross income is $10,000, then your total debt payments should be less than $3,800.

What does total debt payments include?  Everything!  Your mortgage payment, car payment, credit card payment and so on.   I’ve completed many financial plans for clients and I’m always amazed when people tell me they don’t have any debt except for their home and car.  I remind them their mortgage and car payments are debt and they must be paid.

What should you do if you have too much debt?  Here are a few suggestions.

  1. Take an inventory of your spending habits. Review your last three to four months of bank and credit card statements to identify where your money is being spent.   After you’ve highlighted a few problem areas, try to remove them from your circle of spending.
  2. Turn off automatic payments. I helped a client with her budget and she wasn’t aware of all the items she was paying for because of the automatic drafts.  She had set up the payments when her children were young and she forgot to turn them off when her kids were no longer using the services.  The payments were out of sight and out of mind.
  3. Sign up for a service like to help you with your spending and budgeting. Mint is a great resource and it can help you make better spending decisions.
  4. If possible, refinance your high interest rate debt. Interest rates are at historical lows so take advantage of these rates to reduce your interest payments.
  5. If you have a high level of cash, use this money to pay off your debt obligations. Cash is still earning close to 0% interest so you can use this money to pay off high interest rate debt.
  6. If your debt level is too much of a burden and you don’t have any other options, contact a credit counselor who can possibly help you with your budget and spending habits.

Toys “R” Us was founded by Charles Lazarus in 1957 and maybe this bankruptcy protection will help this once great retail chain rise from the dead.

“Lazarus, come out!” ~ John 11:43

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.  For more information on financial planning and investment management, please visit

September 20, 2017

Photo Credit LPETTET, stock photo ID = 458677325.

[1], Jessica DiNapoli and Tracy Rucinski, 9/20/2017.

[2] Ibid.