As a longtime advocate of financial literacy, I believe solid financial decision-making skills need to be established early in life. That's the best time for parents to have a positive impact, since children learn from watching and listening to the role models they are with every single day.

I also believe that lessons learned early in life prevent problems later in life. Namely, my decades of experience interacting with people who lose their spouses to incapacity or death or divorce, I have seen the perils of insufficient knowledge when facing major financial decisions. The truth is that later life is a lot easier when foundational habits are formed early in life.

Efforts are improving on the national front for youth financial literacy, which I applaud. The Council for Economic Education's 2024 Survey of the States reported that 35 states now require students to take a course in personal finance to graduate (an increase of 12 states from 2022), with 28 states requiring a course in economics (tinyurl.com/3mz8hm4y). Connecticut, my home state, now requires a one-half credit personal financial education course, beginning with the high school graduating class of 2027.

Outside education efforts are helpful but not as meaningful as those made at home. Survey data tells us that the vast majority of children from ages 8 to 14 rely on their parents as the top source for advice about money (T. Rowe Price 14th Annual Parents, Kids and Money Survey -- tinyurl.com/38ud7sjj). T. Rowe Price is a global investment management firm.

Where can parents and teachers turn for help in teaching important financial concepts? Here are a few resources.

The Consumer Financial Protection Bureau website offers Money as You Grow, which is broken down into sections for young children, school-age children to preteens, and teens to young adults (tinyurl.com/2b38crnj). It also has the Money as You Go Bookshelf, which lists books for ages 4 to 10 and offers parent reading guides to help get the most interaction out of each book.

T. Rowe Price's Money Confident Kids website provides five simple financial lessons aimed at middle school and high school kids (tinyurl.com/4dzkkecs). Lessons cover goal-setting, decision-making, money and inflation, asset allocation and diversification. Guides, lesson plans and activities are available for free on the website.

The Federal Deposit Insurance Corp.'s Money Smart for Young People features free resources for educators and guides for parents and caregivers (tinyurl.com/3bkt6b6x). The resources are separated into four age-appropriate sections that span from pre-kindergarteners to high school seniors.

The Connecticut State Department of Education's Financial Literacy Course Kit helps teachers prepare to teach financial literacy curriculum, covering topics from behavioral economics and managing credit to paying for college and dealing with taxes (tinyurl.com/2j9nknz8). The kit also includes references to additional resources that schools and parents can access.

Also be sure to check out the National Standards for Personal Financial Education, which is created by the Council for Economic Education and Jump$tart (tinyurl.com/53z3dbes). Focus on Grade 4, in particular. The categories include earning income, spending, saving, investing, managing credit and managing risk.

In the end, the most important thing to remember is this: The sooner a child learns how to make sound financial decisions, the better he or she will be able to avoid mistakes in the future.

While you are working on your own financial planning, think about how to engage your children in a way that builds their knowledge and confidence in making wise financial decisions well before they are on their own. You are, after all, the best role model.

On another note, I'm in the process of putting together a program for widowed and divorced women who have not had a chance to become confident in making important financial decisions. If you have any interest in telling your story for the benefit of column readers or in attending such a presentation, please email me at readers@juliejason.com.

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If you own an S corporation that offers a 401(k), what are your rules when it comes to required minimum distributions (RMDs) if you are still working past age 73?

This is a question posed by a reader, who said she and her husband own 100% of an S company. "[My husband] will be 73 next year," she said. "Does he need to start his RMD on his solo 401(k) next year?" A solo 401(k) is a "traditional 401(k) plan covering a business owner with no employees, or that person and his or her spouse," according to the IRS website (tinyurl.com/2epc4j2b).

While I can offer a general overview, anyone in the reader's situation will need to consult with his or her tax adviser before taking action to be sure to avoid potential tax penalties -- each individual's tax situation is unique.

First, some background. Internal Revenue Code Section 401(a)(9)(C) sets out the rules for starting RMDs. The required beginning date (RBD) for employees to begin taking RMDs is "April 1 of the calendar year following the later of (I) the calendar year in which the employee attains applicable age, or (II) the calendar year in which the employee retires" (tinyurl.com/5b737t2d). That age is now 73, after the passage of SECURE Act 2.0 in 2022.

Translation: Even if you are 73 or older, you can delay taking an RMD from a 401(k) administered by your current employer as long as you are still working for that company -- but not in all cases; there are exceptions to this rule.

One exception affects the reader. Quoting IRS Pub. 575, "If you are a 5% owner [of the 401(k)'s sponsor], you must begin to receive distributions from the plan by April 1 of the year that follows the calendar year in which you reach age 73."

What defines a 5% owner? According to Pub. 575, "You are a 5% owner if, for the plan year ending in the calendar year in which you reach age 73, you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the outstanding stock (or more than 5% of the total voting power of all stock) of the employer, or more than 5% of the capital or profits interest in the employer."

The 5% rule applies to the reader's S corporation. Since the husband and wife together own 100% of the S corporation, the participant is considered as owning more than 5%. As a result, he must start RMDs at age 73 whether or not he continues working, according to Mark Luscombe, principal analyst at Wolters Kluwer Tax and Accounting.

The reason? "Ownership of the S stock owned by the spouses is attributed to each other," Luscombe explained. "Therefore, in this example, each would be considered to own 100% of the S corporation" for purposes of the RMD.

This rule applies to pre-tax 401(k)s. There is another exception that needs to be understood if the 401(k) is a Roth. "Under prior laws, RMDs were required to commence even for Roth 401(k)s at age 73," Luscombe said. "However, starting in 2024, RMDs are no longer required from Roth 401(k) accounts until the death of the participant."

Let me add a note on solo 401(k)s. A business owner "wears two hats in a 401(k) plan: employee and employer," quoting the IRS page. "Contributions can be made to the plan in both capacities."

Those capacities include elective deferrals (with a limit of $23,000 in 2024, or $30,500 if age 50 or over), and employer nonelective contributions. However, the total contributions (not counting catch-up contributions for those 50 and over) can't be more than $69,000 for 2024.

Again, for anyone in this reader's situation, consult your tax adviser. You don't want to be assessed an IRS penalty for failing to take your RMDs in a timely manner (up to 25% of the amount not taken; see tinyurl.com/yc7au55k for more details).

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Mortgage rates may be declining, which puts new homebuyers in a better position than just a year ago (tinyurl.com/5ykwr6cx).

The 30-year fixed-interest rate mortgage hit a high of 7.79% in late October 2023; now, we're seeing this type of mortgage at an average of 6.38% (forecast for the fourth quarter of 2024).

If you bought a home last year, it's probably too soon to think about refinancing, but have you considered the benefit of making extra payments to lower your interest amount and shorten the term of your loan?

The good news is that mortgage amortization calculators are available online, so you can test making extra payments to see the benefits that can result.

Thanks to the mathematics of compounding, you don't have to make big sacrifices to make a significant impact on your debt.

Here is an example, using an online mortgage amortization calculator (in this case, I'm using one found at calculator.net -- tinyurl.com/2a6ec225).

Say you have a 30-year fixed-interest mortgage at 5.5% with a balance of $250,000. Your regular payments would be $1,419.47. In 30 years (Oct. 1, 2054), you will have made 360 payments of $1,419.47 for a total of $511,010. Of that amount, you would have repaid the $250,000 loan and paid the bank interest of $261,010.

What if you added just $100 extra to that monthly mortgage payment each month, making it $1,519.47? You would pay off your $250,000 debt four years and five months earlier, saving yourself $44,877 in interest payments.

Of course, the more you add as an extra payment, the bigger your savings.

If you were able to make an extra payment of $500 a month ($1,419.47 plus $500), you would save 13 years and five months of payments and $129,580 in interest payments. Your total interest payments would be reduced from $261,010 to $131,430.

Another alternative is to make occasional payments. Say you receive an annual bonus check each January. For the next three years, each January, you pay an extra $10,000 to the bank. That cuts approximately $90,000 off your interest payments and saves you seven years off your loan, so that your loan would be fully paid by October 2047, using the Extra Payments Calculator provided by Freddie Mac (tinyurl.com/3h477rxa).

But, if you wait to use those $10,000 bonus payments until January 2034, 2035 and 2036, your savings will be about one-half less -- only $48,860, saving you four years and seven months instead of seven years in the earlier example, illustrating the time value of money.

You will probably find a good prepayment calculator at your bank's website. If not, you can call your bank to ask them to illustrate some prepayment options for you considering your particular loan.

Worth considering? Absolutely. Lowering your personal debt is the name of the game in today's financial marketplace. Making small sacrifices today can reap huge savings over the long term.

Who shouldn't make extra payments? Someone with high-interest-bearing consumer debt. If you are carrying credit card debt at high interest rates, pay that off first. Then tackle your mortgage.

Who else? If by chance you are not contributing to your 401(k) plan at work even though it has a match (I hope that's not you), it's better to put extra cash at work there first. If you think you don't have extra cash for your 401(k), but you get a tax refund check from Uncle Sam every year, send me an email at readers@juliejason.com. I'll show you how to claim that extra money (your match) without reducing your take-home pay.

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