Teens and Finances
By: Leah Kackley
Money doesn’t buy happiness; money buys choices. There is no doubt that teens only have a youthful understanding of this concept. So, while they are still learning about adulthood and forming opinions of the world around them, this is the time to discuss financial matters with real intention.
Dr. David Pyles has a Ph.D. in economics and is a professional investor in many different types of investments. He is adamant about the financial training of young people. He says “There is no shame in teenager being 100% dependent, provided he is making preparations to care for others as others have cared for him. Every person’s goal should be to enable oneself to provide the best possible life for the future spouse, the children, the elderly parents, the poor, etc. One cannot achieve these goals without proper financial preparation and good habits.” Preparing kids to develop good financial habits to become financially ambitious starts early. Pyles believes: “The prospects of becoming wealthy will motivate almost anyone, and such has been the case for as long as man has existed.” He says that young people should be investors early in life. “It is extremely important that young people invest optimistically and aggressively. This means they should invest in stocks. They should open brokerage accounts with good investment companies. I recommend Fidelity Investments (www.fidelity.com): $1 is enough to open an account. I also I recommend that they buy shares in funds that invest in a broad basket of stocks.”
Dr. Pyles is in good company with this advice. The book P.I.G.G.Y. Plan-It: Prudent Investors Get Going Young by Anderson, McAdory and our own Mississippi Money columnist Ryder Taft echoes this “start young” advice, by providing a primer on personal finance that encourages early investing. The well-respected Financial Educator Dave Ramsey also highly recommends that people start investing at a young age, as well as avoid debt, that can negate all that careful investing.
According to Pyles, it’s never too early for an individual to have a savings account and an investment account, but checking accounts and credit cards should be avoided until good saving and investing habits have been established. As a general rule, each young person should be consistently “paying himself” first by putting 10% of all income immediately into a savings or investment vehicle. Once proven to be responsible, a checking account with a debit card can be opened, with parental oversight if possible. Again, after success has been shown there, then a low limit credit card can be opened so that the teen will have a positive credit history already in place upon graduation. Life’s necessities, like apartment leasing and car buying, will require this. However, bad credit is an albatross, so do not utilize that tool unless the young person is truly working on sound financial goals.
Pyles encourages parents to help their children with financial planning because “any young person who makes a habit of saving and prudent investing will likely be wealthy at a later point in life. A young person who does not do these things likely will not. Statistics show that most people who retire wealthy did not make exceptionally high incomes while working. Rather, their wealth was attained through a habit of saving and investing, and it was commonly a habit they developed in their youth.” So, as those kids get their summer jobs, require them to save Ten Off The Top and get them involved in thinking about their financial future. They won’t understand it all right now, but they’ll be mighty grateful later in life when they see the choices that money can buy.
This is part two of a special three-part series in helping teens transition into adulthood. Check out: Part One & Coming soon: Part Three.
Leah O’Gwynn Kackley lives, works and homeschools in the Rez/Fannin area with her husband Jason and their three kids. Many thanks to Dr. Pyles who is also her pastor at Grace Primitive Baptist Church!