For our second America Saves Week spotlight for 2019, Liz Frazier Peck shares how forming an early healthy relationship with money thanks to her parents led her to explore her deep interest in people and finding her passion for financial planning. Her advice, personal stories, and deep knowledge in this spotlight are a must-read.
Parents influence their child’s relationship with money
Talking about money in Liz Frazier’s family was never a “sit down moment.” It was an ongoing discussion, treated like any other important conversation such as safety and nutrition. Her mother, Deborah, was and still is a financial planner. She played a key role in Liz’s understanding of money and finance way before she went off to college. “She was always good at simplifying complicated topics and making them relevant and easy for us kids to understand. [W]e discussed all aspects of finance,” Liz explained.
Both of Liz’s parents helped her form a positive relationship with money. They taught her that money wasn’t everything, but that it was important and can be used to reach your goals.
“They influenced my attitudes around money in two very different ways. My mom came at it from a practical point of view. I learned how important it was to have money saved for the future and for the ‘just in case’ fund. She taught me the value of money was to provide security and freedom, not to gain status or wealth,” Liz reflected. “My father on the other hand, lives life to the fullest and has limitless passions. From him, I learned that money can be used to reach goals, fulfill your passions, and create new experiences.”
The importance of working and financial independence
Along with those values, both of her parents taught her the importance of working and financial independence.
“The biggest lesson my mother taught me beyond the financial basics, was the importance of financial independence. She encouraged me to continue to add ‘tools to my toolbelt’ by always learning and advancing myself personally and professionally. She taught me that with every experience, good or bad, you learn and gain ‘tools’ like knowledge and relationships. This is something I still apply today,” Liz shared.
“My father also instilled the importance of working to better yourself. He grew up poor and worried about money as a child,” she said. “As soon as he could, he worked to change that. He always had multiple jobs and was extremely smart, so he applied that same work ethic to school. He was never given anything and showed us we can do anything if we put in the work. It was really important to him to create a better life for himself and his family.” Liz’ dad put himself through college and medical school, eventually becoming a psychiatrist.
Giving is as important as earning
As kids, Liz and her brother had chores and a weekly allowance. The money from their allowance served as ‘tools’, so they could have their own money to spend, learn from, and make mistakes with. But that didn’t mean that they weren’t encouraged to spend on each other:
“… [O]ne Christmas, my parents told us that we had to spend at least $2 on each family member. I was 7 years old, back in the day when you could actually buy something for $2. It wasn’t a ton of money to us [kids], and my mom didn’t want us to overspend. But, she felt it was really important for my brother and I to spend our own money on each other. Having always been the spender, that wasn’t a problem for me. My brother, on the other hand, was a saver. The thought of spending $6 of his hard-earned money was a hard one to swallow, even at the age of 5,” she shared.
“On Christmas morning, my parents and I unwrapped our gifts from my brother. It was obvious that he hadn’t spent the required $2 on each of us. Although my mom appreciated what a saver he was, she explained to him that it was important to share and spend a little bit on the family. He felt so bad that he told us to ‘hold on’ and took all the gifts back upstairs. He came back down with taped quarters to each gift so each could equal $2. My brother may have missed the point, but he remembered the lesson!”
Work for anything ‘extra’ that you ‘want’
Once they got older, Liz and her brother were encouraged to earn money outside of the home. They started their own mini businesses as kids: lemonade stands, yard sales, selling tickets to neighborhood talent shows, and even creating a detective agency to solve neighborhood ‘crimes’ like litter in the neighbors’ yard. They started working “real jobs” as teenagers like babysitting, cleaning their neighbors’ houses, and working in ice cream stores – Liz’ favorite job at the time. “My parents never had to pressure me into working. Because we already understood that if we wanted extra things, then we had to work for them,” she explained.
Fun does not have to cost a lot of money
One of her favorite memories were the“girl trips” she and her mother would go on as a child. It also became an important financial lesson. Liz couldn’t remember where they went, only that they had fun swimming in hotel pools and exploring new areas. “I asked my mom where we went, thinking we must have been traveling to exotic places, and she responded: ‘Every few months, I would take you to a hotel in a nearby town and call it our ‘girls’ trip.’ You were so young that it didn’t matter to you where we were. What mattered was that we spent quality time together and it was treated as a special occasion.’”
“That stuck with me as an adult. It perfectly illustrated that you don’t need a lot of money to be happy. “You certainly don’t need an experience to be expensive for it to be special,” she shared. Liz now takes her daughter on “exotic local girls’ trips” every other month. And, they are “just as special to us as they were to me and my mom.”
Exploring passions will lead to careers, not jobs
“As I got older, my parents were extraordinarily influential in my career. They both had their own businesses and had careers they were passionate about. That put some pressure on me in a positive way, to never settle for just a ‘job’ as an adult but to find my passion,” Liz explained.
So as a young teenager, Liz began exploring what her passion was. “People was something I always had a deep interest in, so I originally wanted to be a psychiatrist like my dad. I loved talking with him about different personalities, how people develop, analyzing social interactions, and family dynamics.”
“I wanted to work with people to help them solve their problems and live better lives. One day, I was telling my parents that I felt like being a therapist would be a natural fit. My dad said ‘Liz, I’m not sure you’d be happy as a therapist. Relationships are so important to you. If I see a patient on the street, they run the other direction because I know their deepest secrets. It’s the opposite of your mom; when she runs into a client in town, they hug her and introduce her to their entire families.’
“It was an offhand comment from my dad, but it led me to ask my mom about her business,” she explained. “I remember very clearly her telling me that money and finance are extremely personal. She said that financial planning was all about helping people use money to reach their goals. She said that 90% of financial planning is therapy. That’s what planted the seed.”
Financial planning: Understanding where you are, where you want to be, and how to get there
Up until she graduated from college, her finances were a project that both her and her mom worked on. Once she got married and started preparing for a family, she went into “full planner mode.” She created at least 10 spreadsheets filled with budgets, goals, retirement, investments, and college funds.
“I loved playing with the numbers, figuring out different scenarios and how we could reach specific goals,” she recalled. “That’s when it really clicked for me. Then, I fully understood what financial planning was all about: understanding where you are in life, where you want to be, and how to get there. I immediately put a five-year plan in place with my mom to work for her. Then, I would get my CFP, and become a financial planner myself.”
Investing: Define your goals, your cash needs, and understand your risk tolerance
Liz first learned about investing from a stock game her mom had created for one of her classes. But, her first experience as an adult taught her an important lesson. “I don’t remember what my first ‘real’ investment was as an adult, but I remember what my mom told me. I had saved about $1,000, read something about the next ‘hot stock’ and wanted to invest in it,” she recalled. “My mom always believed in letting me make my own mistakes; she said that it was my money and I could do whatever I wanted, but she cautioned me by saying that if I was going to invest I should do my own research on the company, plan to invest long-term, and never trust a ‘hot stock tip.’ I think I lost about 50% before I sold that investment; an expensive lesson learned.”
“Before investing, create an investment strategy,” she explained. “To do so, first define your goals, figure out your cash needs, and understand your risk tolerance. Then you can determine your appropriate asset allocation and diversification strategy, and start to fill in the pieces.”
“A simple way to get into the market is by investing in an index fund like an S&P 500 fund, because it provides diversification, which minimizes risk by allocating money across a range of industries, company sizes, and geographic areas,” she explains.
Saving and spending: Accept who you are, be realistic, and watch out for triggers
When it comes to her savings habits today, saving for retirement and emergency funds are important to Liz; however, she admits that she is someone who always needs a project, and finds herself overspending on the supplies, membership, and gear needed. No one is perfect, she says. “The most important step is accepting who you are, so you can be realistic and watch out for triggers.”
“My issue is that I go through a lot of projects,” she explained. “It’s a work in progress, but what works for me is allocating a dollar amount for ‘extras’ each month which I can spend however I want, but once that money is gone, it’s gone.”
She recommends that people automate their savings, so that each month they automatically have 10-15% come out of their checking and into a separate savings account. “That way, you won’t miss it, and it’s not factored into your monthly budget,” she explains.
Financial literacy is important for kids, and especially for girls
When it comes to kids, Liz believes it is a necessity for them to learn about finance, as most people graduate high school and enter the world with little understanding of basic finance, which can lead to mistakes that will impact their entire adult life. “However,” she continued, “it’s especially true for girls.”
“While women are catching up, men still dominate the financial field and are typically the ones who manage the household finances. Women still too often depend on their husband to manage their money, which leaves them vulnerable should something happen. In order for women, or anyone, to be independent and empowered, they have to have a basic understanding about finance,” she explained.
Liz’ daughter is already interested in the topic, because they talk about it often, having started with needs versus wants. “The other day, I was talking to myself, saying that I needed a bigger yard, and she said to me, ‘Mom, you WANT a bigger yard. You don’t NEED a bigger yard.’ So she’s obviously paying attention!”
In her book Beyond Piggy Banks and Lemonade Stands: How To Teach Young Kids about Finance, and in real life, Liz starts with the financial fundamentals. “I want my children who are 3 and 5 years old to first understanding the basic principles behind money. I’m currently teaching them about wants versus needs, and priorities,” she shared. “We also have the three piggy bank system set up for my oldest, and she splits her allowance each week between the save, spend, and share jars. Though she may not understand exactly what each one means, she’s building a healthy habit that will carry through adulthood.”
Advice for future homeowners
“The most important piece of advice I can give for someone buying a home is to consider all costs associated with your new house before buying, not just the mortgage,” she continued. “this includes HOA, maintenance, utilities, etc… Do not buy more house than you can afford; this is the quickest way to get into financial trouble.”
Liz Frazier Peck is a Fee-Only, Certified Financial Planner providing financial planning for families and working professionals through her family’s firm, Frazier Financial Consultants, which was founded by her mother Deborah. A mother of two boys and a five-year-old girl, she also has an upcoming book called “Beyond Piggy Banks and Lemonade Stands: How To Teach Finance To Young Children” which focuses on the importance of starting financial education early and provides plenty of real-life activities, fun games, and easy conversation starters for parents of elementary-aged kids. She holds a CFP, an MBA, and is a member of NAPFA. She is also a contributor for Forbes.com.