Devoted to understanding the basics and fundamentals of investing

Disability insurance typically pays out half to two-thirds of your gross income if you become disabled to the extent that you cannot perform your job responsibilities any longer (sign up for the two-thirds rather than the half, given a choice). Premiums, deducted pre-tax from your paycheck by your employer, are relatively cheap for such important coverage. Don't ever overlook it!

Long-term health care coverage for the family, on the other hand, typically costs a bloody fortune in premiums, and all but the very highest compensated employees may find themselves priced out of that market. (Unfortunately, I have been one of those who could not justify paying the premiums required for even minimal long-term health care coverage). Apparently, Larry has a policy arrangement with his employer which allows this tremendous health insurance benefit for his wife and himself at an affordable level of expense. He and Joyce are a very lucky couple to be offered this coverage at an affordable rate! There are few catastrophic situations which will bankrupt you faster than having to hospitalize a member of your family over a protracted period of time, or put them into a nursing home or hospice for long-term assisted care.

Leaving a legacy is a very nice idea, and certainly is a noble cause, which is probably associated with one's fundamental moral upbringing (and those deeply-held religious beliefs which may also motivate our souls into such humanitarian action). However, I am a big believer that charity begins AT HOME. After I have first provided for my family's comfort and needs, only then can I begin to focus upon affording the luxury of leaving a legacy. (Perhaps THAT's my problem!)

Larry,

What do you think about learning how to maintain and increase wealth over the generations? This has been stewing in my mind lately.

I've read that it's common wisdom (I don't know who says this or if it's actually been studied) that wealth actually dissipates by the third generation, when to my mind it seems like if you have more and more intellectual resources (more cousins, more nephews and nieces, grandchildren), you have even more of an abundance of ideas that can generate even more capital over time.

(For example, if you had a "family bank" and basically gave low-interest loans to your children or grandchildren to start a business or buy property, they could at least be inculcated with a sense of responsibility and/or management).

That said, I could see how feeling entitlement, being lazy or arrogant, or just not knowing about finances could very easily burn through any kind of opportunities that a family bank represents.

Still thinking on this... ;-)

Dear Monica,
My mom and dad had 7 children. Among us we have 49 children (my parents grand children.) Let's say my dad was very successful and made a fortune of $50 million. All of Dad's children are grown and making a living. He decides to leave it to the grandkids and divides it equally among them. They get a $1 million each and he leaves $1 million to his church.

Some invest conservatively in bonds and make an income of $60 thousand a year. Over their lifetimes, inflation reduces the buying power to the equivalent of $30 thousand (inflation would only have to average 2% per year to make this happen over 36 years.)

Some invest more aggresively and earn $120 thousand per year. They spend $60 and reinvest the balance to increase the principle to maintain its buying power. They have $30 million 36 years later.

Some invest foolishly and lose it all. Some don't invest at all and spend it on personal consumption.

Take this one more generation and you can see how it is hard to not have wealth dissapated. Add estate taxes to the equation and it happens even faster.

Larry