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Quill

Meta-Question: Why is it important for young people to manage their finances well?

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I’ve pretty much always been a conservative spender and have never been very prone to incur debt or waste money. I am teaching a co-op class this fall for teens about avoiding bad money decisions. Instructionaly speaking, I have more class ideas than ten weeks can fit, but I want to begin the class by examining whyWhy is it important not to accrue debt that then wastes more money servicing debt, other than obviously I personally don’t want to waste more money on finance charges for some doo-dad that is long forgotten? Suppose a student is well-appointed with family money or can expect to be in the future - what reasons might make sense to that student? 

I do have some ideas about what I would say, but I also would like to hear what others think on this subject. Why is it important to learn sound money management and good purchasing practices? 

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To build the character muscles of delayed gratification which is useful in most aspects of life. 

To learn to plan wisely and be good stewards. 

To put yourself in a position where you can help the less fortunate. 

To prepare as much as possible for future unknowns. 

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I would say the #1 reason is because no one has a crystal ball.  Even if your family has money, there are health issues, divorces, etc that can change "the plan".  The only thing they can control is themselves and their spending - they may not have a lot of control on their income - job losses, employment gaps, etc.  

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Also to keep others from taking advantage of you. This is something professional sports organizations try to train young athletes about. Just because you have lots of money don’t let a manager deal with your money without you checking up on him/her. They can milk one out of so much money if one isn’t checking up on finances.

 

was it Malcom Jamal warner who was Theo on the Cosby show? He said that as a 13-14-15 etc yo boy his mom forced him to go every few months to his finanacial advisor. He had it learn to manage his  Income. He HATED it as a teen but now is so thankful that she made him do it. It put him in a wonderful position for adulthood. He wishes all child actors had to do the same. 

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6 minutes ago, footballmom said:

I would say the #1 reason is because no one has a crystal ball.  Even if your family has money, there are health issues, divorces, etc that can change "the plan".  The only thing they can control is themselves and their spending - they may not have a lot of control on their income - job losses, employment gaps, etc.  

That is a very good reason! 

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It gives you choices.  Decisions made early on can have great effects later.  Saving a small amount monthly from age 18 makes a much bigger difference than saving a larger amount when older when it comes to retirement, etc.

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As you grow older, your obligations grow.

When you're young, and you're already making more money than you've ever seen, it is easier to set aside some of that money than it is when you are older and have habits based on your income and obligations like car payments, mortgages, kids...

We had a financial advisor tell us once to only ever "Take" half of any raise. When you are given a raise in pay, immediately, before you ever see the money, set up some kind of autodeposit into savings or investments. When you 'get' half of the raise - it's still a raise but it's a lot easier to let go of money you never had before than to trim it out of your budget later (once you take on that higher car payment, mortgage, gym membership, etc.). I thought that this advice was brilliant and wished my parents (Who are often terrible spendthrifts) had a) taken this advice and b) helped me to think about money this way.

 

Plus.. compound interest.

 

Edited by theelfqueen
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Discuss opportunity cost.  If you spend $500 on late fees / interest, you don't have that $500 to spend on something you would feel better about.  Even for a rich kid, it is preferable to spend $$ on charity or experiences than just hand it over to the bankers.

Also, discuss credit rating.  Just a few poor decisions can lead to serious restrictions on access to cash they may need.  Credit rating is also checked by prospective employers and perhaps others who matter.

Edited by SKL
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Because mom and dad don’t have money trees to forever bail a kid out of financial trouble and being poor sucks dirty prairie oysters.

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Nearly 2 years ago now, FIL passed away....MIL had passed about 6 years earlier.  DH and his sister were left to manage the estate with no will.

FIL had only 2 debts.  One was his mortgage and the other was a loan on the truck.  His truck was upside down.  He owed $10k, we were only able to sell it for $4500.  FIL had basically no liquid assets in the estate with which to settle the remaining $5500.  We had to sell the house before we could get the title to the truck to sell it.  Thankfully, a family friend bought it, and was a patient person who understood the whole situation AND...thankfully the house sold very quickly.  But, imagine if FIL had had credit card debt on top of that.  Imagine if there had been a loan on his boat.  A second mortgage.

 

And imagine if his house had been paid off.  It sold for well over $100k, but at least 3/4 of what it sold for went back to the mortgage company.  Imagine the sort of gift his children could have had in the end if his house had been paid off.  I actually have a particular reason for pointing this out.  

FIL and MIL bought their house in the very early 90s, on a 30 year mortgage.  Like, 91, 92, can't quite remember exactly from the paperwork.  When MIL passed, they were around 20 years into their 30 year mortgage.  About a year before she passed, she had gotten out of the hospital from an illness and was officially retired due to medical issues.  With no income she pointed out to FIL that had it been him in the hospital how would she have paid the bills.  BUT, instead of focusing on paying off the mortgage sooner, they refinanced....for another 20 years.  Sure, it lowered the payment, but it added to the debt.  If he had instead focused on paying down the mortgage in those last years, it may very well have been paid off when he passed, leaving his children with a much larger financial gift than he realized he could have.

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20 minutes ago, Murphy101 said:

Because mom and dad don’t have money trees to forever bail a kid out of financial trouble and being poor sucks dirty prairie oysters.

 

And even if Mom and Dad can afford to keep bailing the kid out, eventually they will die — and even if they leave the kid millions of dollars, that money won’t last forever if the kid doesn’t know how to manage his money. 

Learning how to manage your money is such an important skill, no matter how much or how little of it you have.

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56 minutes ago, footballmom said:

I would say the #1 reason is because no one has a crystal ball.  Even if your family has money, there are health issues, divorces, etc that can change "the plan".  The only thing they can control is themselves and their spending - they may not have a lot of control on their income - job losses, employment gaps, etc.  

 

Yes. This. Absolutely!

 

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I'm not sure this will be a question in the young people's mind.  I think it's understood that money management is like any other thing adults need to do for themselves.  (Or maybe I live in a bubble?)  You don't explain to teens why they need to learn how to cook, drive, or use an alarm clock.  (Or do you?)

What about asking the students to think of scenarios they have heard of (no identifying info given) where poor money management caused serious problems?  Or make up a case study?

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Life isn't random.  You will have short term and long term goals that you want to acheive.  To do so, you'll need to plan. You can't plan without understanding how money works and what options are available.  You have to know enough that you can be flexible to deal with the changes and opportunities the world brings while you work towards your goals.

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1 minute ago, SKL said:

I'm not sure this will be a question in the young people's mind.  I think it's understood that money management is like any other thing adults need to do for themselves.  (Or maybe I live in a bubble?)  You don't explain to teens why they need to learn how to cook, drive, or use an alarm clock.  (Or do you?)

What about asking the students to think of scenarios they have heard of (no identifying info given) where poor money management caused serious problems?  Or make up a case study?

i hope to start the class out with them having heard/thought about what can be bad about poor financial managment and why wise management is in their best interests. I do think it’s common for young people to think if money still exists, they “have enough money” for whatever. I don’t want to be in any way condescending towards them, though. 

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1) Compound interest!!!!

2) Security and less stress- we can't control everything so we just got to do what we can

3)Options- managing your money well gives you choices-

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those that understand interest - receive it.  those that don't - pay it.

it's about developing habits. those who are heedless about equating income with investing and spending, generally spend more than they receive and go into debt, and pay interest, or go bankrupt.  it adversely affects so many things.

 

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One of the basic economic rules of life is that there are always unlimited wants, but limited resources.  It's a very good idea from a young age to think about what type of life you want.  And as you make more money and are exposed to different facets of life, both you and your children are going to find that your wants are substantially different than what you might anticipate right now.

Most people think that they are going to have a satisfying career.  But most people don't have fulfilling careers, they have jobs.  Jobs that are a drag even if they go into the field liking the idea, even if it's their dream job. If you choose a high paying field and work to love their job rather than choose a passion initially and then be disappointed in it, you might end up much happier than if you try to find fulfillment in a job anyway. Those who do have careers often find they are all-encompassing and stressful, and possibly not worth it.

Similarly, if you purposefully live beneath your means, you can retire early and pursue whatever you want.  There are whole online communities devoted to Fat FIRE or Lean Fire (Basically, Financially Independent Retire Early, either fat - with all the trappings of wealth you desire, or lean- with a lower cost of living than you might want, but total freedom after only 10 years of work).

I'd have them do the math.  Lets say they go into one of the jobs that will get them a probable $60k+ after school in most areas of the country.  Like- a few higher paying blue collar jobs (these vary based on area, but electrician comes to mind), a few higher playing jobs that just need community college or tech school (welding, diesel mechanic, dental hygienist, nursing, computer networking), a few with a 4 year degree (accounting, engineering), and a few that require grad school (law, medicine, CPA, etc).  Use the figures from local colleges. Include probable average debt, as well as possible budgets if they live doable but possible lifestyles - saving 50% of income, 25%, 10%, 0%, 10% above their income, etc.  Include all facets of budget, including depreciation and emergency funds. Include various amounts of student loan and credit card debt based on their likely choices.

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My kid is heading off to college and has earned some money over the summer and will continue to earn more to help pay college costs. I'm trying to explain to her that you always want to have some savings--don't spend everything you make. When you graduate from college and get a job, you suddenly need first and last month's rent (or security deposit), a work wardrobe, possibly a car. If you have some savings, you don't have to go in to debt and play catch-up with new job earnings.

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Before you give them all the great reasons listed above, ask them. Some of them might already have ideas about this. I always start new discussions in class with questions. It helps me assess what they already know, what they think and they often teach their peers. I get ideas from them too.

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Maybe look at the other way around: when might it be okay to take on debt?

Never? College expenses? Housing?  Reliable car so as to be able to get to a job? Critical medical expenses? Basic food requirements? 

What could go wrong? 

 

Edited by Pen
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20 minutes ago, Pen said:

Maybe look at the other way around: when might it be okay to take on debt?

Never? College expenses? Housing?  Reliable car so as to be able to get to a job? Critical medical expenses? Basic food requirements? 

What could go wrong? 

 

^^This.^^

There seems to be a common belief on here that wealthy people eschew debt. IME that's far from the truth, and very well off/wealthy people are often not debt averse at all. They know how to use it effectively for their benefit. Poor people often don't.

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Because the less money you have the more things cost. (I know people disagree and think poor people get free stuff, etc and I hope to not derail arguing that.)

For example- my dd needed braces. There were three options:

1) pay in full with a 10% discount

2) pay over a year with interest free financing

3) finance with interest over 2-3 years

So the very same goods/services had three prices depending on how it was paid for. The less able you are to pay the more it costs.

Try financing a new car with good vs. bad credit. Could be 3% interest or up to 15%. The worse your situation the more you get charged. 

Same goes for having the funds to buy things in advance for an early discount (for me this is online classes).

So not only are you saving interest, in many cases you are charged less from the beginning.

Lots of other reasons such as those listed above but I am constantly pointing out to my kids when there is a situation where people with less are charged more. I say “being poor is expensive” and “the rich get richer” a lot. There is a lot of nuance there of course but my kids remember the catchphrases. 

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27 minutes ago, Pawz4me said:

^^This.^^

There seems to be a common belief on here that wealthy people eschew debt. IME that's far from the truth, and very well off/wealthy people are often not debt averse at all. They know how to use it effectively for their benefit. Poor people often don't.

Yes. But kids need to learn to figure out the nuances. Taking on 20K of student loans to become a whatever that makes 75K per year after 3-5 years of working may make more sense than taking on 20K in student loans to become a teacher/social worker/artist who's starting out pay is 30K and only goes up to 40K after a few years. 

And you can get certain degrees for less money at a state school whereas going into debt for ivy league school doesn't increase the pay grade/marketability. for some fields. 

So learning to research this stuff before signing on to debt is good.

Also, this is a side note that many young people have never considered "Know who's giving you financial advice." So, my dd's friend was told that he could make it (financially) in a certain field by the advisor in that department. This friend took it as gospel, but 1. Advisor has never worked out of academia. 2. Most people consider 2 incomes as a standard for most American families. If you don't want to live life as a single income family, then that field may not work for you. Also, college advisors may or may not give solid advice as far as marketabliity, student loans, etc. It's wise to go into those discussions knowing that you should verify all that the advisor is telling you. 

The best financial education my daughter got was working in a real estate office. She saw people's job titles, the amounts of money they made and HOW THEIR INCOMES AFFECTED THE KINDS OF LIFESTYLES THEY COULD HAVE. She knew "Oh a person making 60K in our area can live in a neighborhood like that." "A person making 40K will have to expect to live in a rougher neighborhood and have to do work on their new home." She also learned things like "To survive on one income, most families need to make over X amount in our area. "

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Something you could use to frame "Why do you need to learn this?" is the high rate of bankruptcies (70% I think) after winning the lottery. These are people who thought they had it made financially, a seemingly endless money train, but over half of them end up with less than nothing. Tell them that playing the lotto is not a great thing financially, but if they do play and win, they need to be in the minority who does well.

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52 minutes ago, Pawz4me said:

^^This.^^

There seems to be a common belief on here that wealthy people eschew debt. IME that's far from the truth, and very well off/wealthy people are often not debt averse at all. They know how to use it effectively for their benefit. Poor people often don't.

This is going to be part of how I do the class. So, for example, one of the topics I expect to spend one class period on is cars. One aspect of what I plan to discuss is having an auto loan. I am not *automatically* opposed to any auto loan ever (I actually have one now, after years and years without one). I’m also planning to help them think through Do I Actually Need A Car and Do I Need One Right Now? 

By the same token, I am not against credit card use, though I know another mom who has taught a similar class is against them, a la Dave Ramsey. I think it is much better to learn to use credit card to one’s advantage than to eschew them altogether, especially as society becomes increasingly cash-less. 

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Because the less money you have the more things cost. (I know people disagree and think poor people get free stuff, etc and I hope to not derail arguing that.)

 For example- my dd needed braces. There were three options:

1) pay in full with a 10% discount

2) pay over a year with interest free financing

 3) finance with interest over 2-3 years

Yes, this is one of my major points I want to express. More money, more options. Less money, fewer options, which often means paying more in the long run. I have seen that play out a thousand times in situations small and large.

Small: Don’t have the money available (or a big enough freezer) to buy $25/worth of frozen chicken; pay more (and also pay in time and effort) buying the same amount of chicken over a few months, one package at a time. 

Large: your braces example is an excellent one. 

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I haven't read all the replies yet.

 One huge thing I can think of is to not limit your future opportunities and choices by having debt.  This was illustrated perfectly to me by a thank you note our oldest (then 25) sent us after she got married.  She thanked us for many things, but one of the big ones was helping her with college in such a way that she was able to pay off her debt quickly after graduating. She said that allowed her and her husband to marry sooner then they would have if they'd had debt.  I realize not everyone is able to assist their child financially with college, but we also let her live with us a year after graduation and we didn't charge rent.  That allowed her to accelerate her loan payments.  She clearly saw not having debt opened her options for her future.  She thanked us for the pots and knives last?

Edited by Mary in VA
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he best financial education my daughter got was working in a real estate office. She saw people's job titles, the amounts of money they made and HOW THEIR INCOMES AFFECTED THE KINDS OF LIFESTYLES THEY COULD HAVE. She knew "Oh a person making 60K in our area can live in a neighborhood like that." "A person making 40K will have to expect to live in a rougher neighborhood and have to do work on their new home." She also learned things like "To survive on one income, most families need to make over X amount in our area. "

Yes, I would imagine working in real estate would be a great education for understanding that! 

I had an idea to play a monoploy-money game with the kids where I would give them imaginary jobs and salaries and then they have to fill out a budget sheet, pulling some info from real sources (for example, finding a place to rent on zillow that fits their budget). I have not decided yet which of these ways to do it: 1) randomly assign them “careers” and they have to work their budget in those parameters; or 2) Have them actualy give a few jobs they think they would like to have and then do the budget that way. If I do it option 1 way, I can control the range of salaries in the class; some people will be of lesser means and others of greater. Also, the option 1 way, nobody has to feel badly about what they think is a good job for them. But with Option 2, it would do more to zero in on the actual jobs they might be thinking of. 

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Because they need to be able to afford health insurance, health care and dental care when they get older.

Not that you need to add anything to your course, but it actually might be an eye opening assignment for them to find out what their own medical & dental care costs on a regular basis, including insurance, prescriptions, office visits, etc..

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2 hours ago, Ali in OR said:

My kid is heading off to college and has earned some money over the summer and will continue to earn more to help pay college costs. I'm trying to explain to her that you always want to have some savings--don't spend everything you make. When you graduate from college and get a job, you suddenly need first and last month's rent (or security deposit), a work wardrobe, possibly a car. If you have some savings, you don't have to go in to debt and play catch-up with new job earnings.

i have one doing finance. . . he loves people who spend and know nothing about money.  he's  assured of a job. (he's working for a cpa firm.)  I have peace knowing he will have savings and investments - despite his affinity for $2000 suits and $500 shoes . . . which he currently looks at, but doens't buy.

 

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1 hour ago, Quill said:

 

By the same token, I am not against credit card use, though I know another mom who has taught a similar class is against them, a la Dave Ramsey. I think it is much better to learn to use credit card to one’s advantage than to eschew them altogether, especially as society becomes increasingly cash-less. 

Absolutely. Both of our dd's got credit cards when they went to college.  They had very limited amounts available to them and they were instructed to pay them off each month - don't carry a balance.  That way they were both able to establish good credit ratings but not have debt. The oldest and her husband were actually able to purchase their first home last year because of dd's credit rating.  She had a full time job and no debt. Her dh is a medical student with loans for medical school.  They were able to purchase a house based on her job and credit rating alone. The mortgage was only $100 more a month then the rent they were paying for their townhouse.  It seemed like a good use of their money to build up equity since they plan to stay in the area after med school.

Edited by Mary in VA
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It would also be good to discuss saving for retirement.  Young people don't think they will be old and need it?.  Our younger dd is about to go on active duty in the army to get a doctoral degree in physical therapy (great deal - get paid to go to free school!) and asked me about saving and investments.  YEAH! I found that encouraging!! I explained about the army's Thrift Saving Plan (equivalent to a 401K). I told her not to turn down free money- to put in the maximum amount the government will match - you immediately double your money!!! She can take it with her when she leaves the army since she will be in over 5 years.

Young people should be looking at these sorts of opportunities with employers.

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Because being able to manage your money effectively gives you financial freedom.

Freedom from: staying up all night worrying about how to pay the next bill, or the dentist visit, or your rent.

Freedom to: meet your needs and have financial breathing room to have some discretionary spending also, whether that's to save for a home, to send in aid overseas, to travel or to start a side gig, take up a life enhancing hobby blah blah blah the list goes on. 

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Life is a lot less stressful when you can afford surprise medical bills, unexpected car repairs, and take out when your oven breaks down.

It’s even better when you can go on vacation, splurge on a fun activity and bless others’ lives.

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Can I raise the point that sometimes in the pursuit of frugality we tromple over other people who we should cherish? There is a balance. 

I used to freak out over my dh having the occasional lunch with friends (and it was important for networking). I would say no to a lot of things, a lot. I would get stressed when the kids ate things I had set aside to stretch for a longer period of time. When life is that stressful, bigger changes are needed for life to fit within the budget. People > things, always. Even if you are both splitting two cups of plain white rice for dinner...because dh unknowingly ate all of the lunch meat (that you hadn’t communicated you had set aside), be gracious about it. 

There is a balance, for sure. There are also people who are just jerks....but, generally speaking, most loved ones mean well and strict, harsh adherence to an unrealistic budget can bring on a lot of misery. 

I have met a number of self-righteous, debt is sin people who have ended up in divorce court. (Seriously, someone was rationing toilet paper to their spouse.) When lawyers say that most divorces are over sex or money issues...that was true with my clients.

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42 minutes ago, prairiewindmomma said:

Can I raise the point that sometimes in the pursuit of frugality we tromple over other people who we should cherish? There is a balance. 

I used to freak out over my dh having the occasional lunch with friends (and it was important for networking). I would say no to a lot of things, a lot. I would get stressed when the kids ate things I had set aside to stretch for a longer period of time. When life is that stressful, bigger changes are needed for life to fit within the budget. People > things, always. Even if you are both splitting two cups of plain white rice for dinner...because dh unknowingly ate all of the lunch meat (that you hadn’t communicated you had set aside), be gracious about it. 

There is a balance, for sure. There are also people who are just jerks....but, generally speaking, most loved ones mean well and strict, harsh adherence to an unrealistic budget can bring on a lot of misery. 

I have met a number of self-righteous, debt is sin people who have ended up in divorce court. (Seriously, someone was rationing toilet paper to their spouse.) When lawyers say that most divorces are over sex or money issues...that was true with my clients.

I want to piggy back on this.  A budget is NOT about trying to spend as little as possible.  A budget is just a plan for what to do with your money.  It is a different animal from being frugal.  Budgeting has nothing to do with rationing toilet paper, or saying no to having lunch with friends, etc.  Budgeting is just taking a look at the money you have and deciding where it's going to go.  And in terms of a marriage it should never be one spouse deciding where all the money goes and then getting mad when the other spouse doesn't put it where the first spouse said.  BUT...that's not really what I think the OP is looking for.

 

However, in terms of a class for teens about financial decisions, I think it's very important to make the distinction between budgeting and being frugal.  

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I imagine that most late teens will find a partner in the next decade. I think it’s worth mentioning. We certainly have talked about the impact that student loans have on later life. In college, I had roommates who literally wore outfits once, roommates who paid a dry cleaner to launder their clothes by the pound, and roommates who literally had never had unlimited access to food or their own money. It’s a wide microcosm, and figuring out how to navigate interpersonal spending (dorm room life: where to go on a Friday night, whether to get matching bedspreads, whether you buy the Charmin or the single ply) happens before marriage.

Edited by prairiewindmomma
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I love this topic and I’m glad for the food for thought in any case but I just got word that, sadly, the class is not going to go due to underenrollment. But I still plan to do this with my rising 8th grader at home. 

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32 minutes ago, happysmileylady said:

I want to piggy back on this.  A budget is NOT about trying to spend as little as possible.  A budget is just a plan for what to do with your money.  It is a different animal from being frugal.  Budgeting has nothing to do with rationing toilet paper, or saying no to having lunch with friends, etc.  Budgeting is just taking a look at the money you have and deciding where it's going to go.  And in terms of a marriage it should never be one spouse deciding where all the money goes and then getting mad when the other spouse doesn't put it where the first spouse said.  BUT...that's not really what I think the OP is looking for.

 

However, in terms of a class for teens about financial decisions, I think it's very important to make the distinction between budgeting and being frugal.  

And you’re absolutely right. A budget is not a way to brow-beat your partner. And the nice thing about going out with friends is that you can make your own meal less expensive if you want or need to (unless you are bill-splitting even portions). If your friend is sensitive to your need/desire to save money, he/she will be willing to meet at a coffee shop or a picnic rather than - whatever - a steakhouse or something. 

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the fact most teens are going to be finding a partner in the next ten years or so, is a good point.  they want to be aware - they NEED to know how their future potential partner handles money.   while a miser (as opposed to super frugal, or not spending because the money simply isn't there.) is stressful - a spendthrift is even worse.  a spendthrift can leave you in bankruptcy, it can lead to houses and cars being reposed, losing ability to have/get credit.  it can lead to lost jobs.

it needs to be taken seriously.

 

---mil was/is a spendthrift. . . . I can tell stories that would curl your hair.  dh had taken over the family finances after his father died - becasue they would have been on the street with the way she spend money. just as an example - one month when they were living on $400.  (yes - that's correct-  it was the 70s), he got a dept store bill for $600.  he still had to buy food, utilities, mortgage (becasue she'd taken  loan out on a house they owned free and clear).  he still has occasionally nightmares.

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1 hour ago, gardenmom5 said:

the fact most teens are going to be finding a partner in the next ten years or so, is a good point.  they want to be aware - they NEED to know how their future potential partner handles money.   while a miser (as opposed to super frugal, or not spending because the money simply isn't there.) is stressful - a spendthrift is even worse.  a spendthrift can leave you in bankruptcy, it can lead to houses and cars being reposed, losing ability to have/get credit.  it can lead to lost jobs.

it needs to be taken seriously.

 

---mil was/is a spendthrift. . . . I can tell stories that would curl your hair.  dh had taken over the family finances after his father died - becasue they would have been on the street with the way she spend money. just as an example - one month when they were living on $400.  (yes - that's correct-  it was the 70s), he got a dept store bill for $600.  he still had to buy food, utilities, mortgage (becasue she'd taken  loan out on a house they owned free and clear).  he still has occasionally nightmares.

It's actually very interesting to read this (OP, sorry to go off on a tangent.)

When DH and I got married, I had no debt, he had a lot (actually probably less than now but whatever.)  He had several medical debts that were in collections and he had no idea what to do about any of it.  As we were discussing ALL of this, he got a call from a collector.  They, being collectors, gave him whatever threats they do, and he gave them his checking account info, to make whatever payment they were asking, because he was scared.  He had NO thought for what other bills might need to be paid (like lot rent on his trailer, or electric bill) but he just wanted them to not call.....so he authorized whatever payment they asked.  

I had to basically teach him budgeting, regarding those things, from scratch.  And really, it's not like my ILs were total spendthrifts or anything like you are discussing here.  FIL actually was generally pretty good about money.  It's hard to reach a state where your only debts are mortgage and truck, without SOME knowledge.  They just NEVER taught any of it to DH.  I was honestly horrified and having second thoughts.  But, we started by having me take over.  And we gradually, over years of marriage, evolved to where we are now......cash envelopes only, going over the budget weekly.....sometimes DAILY...making all financial plans together, etc.

 

It was a process.  For sure...a process.  

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DS22 tells me, and I've read some articles confirming this, that pre-nups are becoming very common among young people. Even ones of modest income. At first I was kind of appalled by that, but I guess it does make a lot of sense.

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10 hours ago, Quill said:

I love this topic and I’m glad for the food for thought in any case but I just got word that, sadly, the class is not going to go due to underenrollment. But I still plan to do this with my rising 8th grader at home. 

Too bad! My degree is in finance (asset and corporate valuation), but a personal finance elective was one of the most helpful classes in my life. I think it should be required for all young adults. Some things though are hard to learn without living it yourself.

Beyond what everyone is suggesting (prudent debt use, expense management, income opportunities), I’d emphasize the time value of money. Others have mentioned compound interest - the classic example is the $2,000 in savings scenario. If a 22-year old saves money $2,000 every year and stops after ten years, she will have more money than someone who begins saving $2,000 at age 32 and doesn’t stop until retirement. This page uses $5,000 as the savings number; the principle is the same.

Treat buying individual stocks like gambling and never buy more than you’re willing to lose. Investment banks, pension funds, hedge funds, private equity firms, etc. - they employ thousands of people who work every day to search for under-/over-valued investments. The expectation that one person can beat the market consistently is unreasonable. I am a big advocate for index funds, especially those geared towards target date retirement so individuals don’t need to worry about asset rebalancing (moving assets from more-risky investments to less-risky investments as you get older).

Good luck to you! I think the most important teaching is what’s modeled and shared with your children. My siblings and I dealt with financial uncertainty (some due to bad fortune, mostly due to mismanagement) when we were young. My kids and I have ongoing conversations (age appropriate) on the whys and hows of financial decisions. I’m hoping they will know and live what I’ve told them.

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12 hours ago, Quill said:

I love this topic and I’m glad for the food for thought in any case but I just got word that, sadly, the class is not going to go due to underenrollment. But I still plan to do this with my rising 8th grader at home. 

This breaks my heart. Personal finance should be a required course all across the country. It is sad that with all of the student debt and other personal debt we have in this country that it is still an elective.

I taught a PF course for 8th-12th grades and I mentioned most of what was discussed here. (It was a six week class so I had to choose topics wisely)  I have no idea how many of the kids took to heart what I taught. Thankfully, mine did.

DS, when moving into his own apartment, said to me that he couldn't believe how expensive everything was to 'get set up'. Utility deposits, no-frills furniture (consisting of a mattress, bed frame, a couch, and a card table), rental truck/delivery fees, etc.

One thing I emphasized in my class, and with my own kids, is that all debt isn't bad, as pointed out above. Having a good credit score opens doors for people. We put both kids on one of our credit cards a few years ago as authorized users to help build their credit. DS had such good credit when applying for his apartment that he needed no deposit or first/last month rent... he only paid the application fees. His utility deposit was $70 (good credit) as opposed to $250 (bad/no credit). Even his internet deposit was waived (bad credit folks have to pay $100 up front for something). There were a few other things his good credit helped with, too, but they escape me at the moment. Oh, car and renter's insurance. His insurance (both car and renter's) was lower because of good credit. As an-under-25-y/o-single-male, he was happy to take whatever he could to lower his insurance!

Quill, enjoy teaching your ds about PF. I had a lot of fun with my class. ?

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3 hours ago, Pawz4me said:

DS22 tells me, and I've read some articles confirming this, that pre-nups are becoming very common among young people. Even ones of modest income. At first I was kind of appalled by that, but I guess it does make a lot of sense.

I have a friend who has left a bad marriage after 23 years - 18 of which she was a full time stay at home mom. She has not worked in 18 years. I think pre-nups should contain clauses that the primary breadwinner pay a set amount per year for each year the primary caregiver was out of work due to raise children. The lost years cannot be made up as far as progressing in a profession and the resulting salary that comes with that progression.

 

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Sorry the class isn't a go.  Out of all of my college classes the personal finance one was the most useful for my life.  Maybe I should audit one as I know things have changed greatly in 25+ years.

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