Highlights of today’s show:
- Teenagers are not adequately prepared to handle money after graduating from high school
- How financial decisions today impact our finances tomorrow
- Importance of college and how to save and pay for it
- How to make it in the new job market
- How to develop an overall financial plan that works
According to a recent Charles Schwaub survey 81% of teenagers agree that saving money is important to them. However only 22% of teens say they know how to invest money and make it grow, and 1 in 4 teens say that since they are young, saving money is not important.
Today’s high school students are not adequately prepared for life after high school. They are not taught how to handle money, shown how debt works, or how to invest for their future. This is a problem because some of the biggest financial decisions they will make will be within 5 years of graduating from high school. Today’s show is a cliff notes version of a presentation I gave on January 14th at Groveport Madison Middle School to high school students and their parents about money.
The first topic we discussed was how financial decisions today impact our finances tomorrow. The best example of how today’s decisions impact tomorrow’s finances is through debt. We’ve been taught that the way to prosper in our country is through debt. However after the recent recession we have learned that debt equals risk and the only one who benefits from debt is the bank. Three of the biggest ways young adults get into trouble with debt after high school are through 1.) Credit Cards 2. ) Car Payments and 3.) Student Loans. Young adults are hounded by the credit card companies the minute they turn 18 and it just gets worse once they start college. Teaching your child to instead get a debit card and manage their money well is a better way to go. Car payments hold us back because we are investing in things that go down in value instead of things that go up. Student loans can seem like a good idea at the time. But ask any post-college 20 something or 30 something how paying those loans back is working out for them. The thing you have to remember is what happens with your finances in your 20’s doesn’t stay in your 20’s. If you make mistakes financially they will follow you until you correct them. However if you handle money well when you are young, you will carry those habits and decisions throughout your life.
Next we talk about the importance of college and how to save/pay for it. College is a great investment in yourself. However the way we normally do college is pick the school we like the best and if we don’t have the money we go ahead and take out massive amounts of student loans which will be paid back with our nice job and we will be set for life. Unfortunately life doesn’t work like that; instead our country is experiencing a student loan crisis. Instead of doing that, first find a school that you can afford and save up the money to go to that school via a combination of scholarships and working while in school. When it comes to college, the application of the knowledge you learn in school will take you further than the pedigree of your school. The best way to save for college is through 529 plans or educational savings accounts. Even if you don’t have time to save for college, you can still work your way through college. That’s what I did and it will teach your child good time management skills as well as look good on a resume.
Then we share ways to make it in the new job market and how that impacts YOUR Economy. There is a changing job market out there today. The old way of getting a job, working there for 30 years and then retiring is over. But the good news is that you now get paid for what you know, not your time. That is why education is so important. In addition, jobs these days are created, not advertised. If you are spending all your time online submitting resumes, chances are you are competing against 100 other faceless people for the same job. But you can improve your value by answering the following question about yourself, “Why would someone want to hire me?”
Finally we wrapped up by sharing how to develop an overall financial plan that works. The key to winning with money is to become intentional with money. So often, instead of being intentional with money, our money controls us and we feel like we will never get ahead. But the first step to becoming intentional with our money is having a spending plan. A spending plan allows you to tell your money where to go before the month beings. The first thing you want to do when you do a spending plan is to take care of your 4 walls first. This allows you to take care of your basic needs first. After that you can then take care of paying down debt and saving. There are three things we save for 1.) Emergencies 2.) Purchases 3.) Investing. We save for emergencies because emergencies will happen, so be prepared for them. Instead of using debt, save up and pay with cash for purchases. After those are taken care of, you can now invest. Investing at a young age is important because you can take advantage of the power of compound interest. A great illustration of this is the story of Ben and Arthur.
In addition to this podcast the following resources will help prepare your teenager for life after high school:
- Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parentsby Zac Bissonnette
- 48 Days to the Work You Love: Preparing for the New Normalby Dan Miller
- The Four Week Financial Turnaround by Derek Olsen
- The Millionaire Next Door by Thomas Stanley and William Danko
If you would like to work one on one with me and let me show you how to reach financial freedom, check out the two hour financial checkup.
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You can find prior editions of the podcast at the podcast archive page.