Happy Friday! I got signed up for a volunteer gig through work: to mentor 7th grade girls on the topic of financial literacy on Tuesday evening. How cool is that!! I will try not to look too old or geeky. In the spirit of this development, I am posting up the 6 other tips for teens I had advertised in the previous related post.
- Real costs for things you have never had to pay for. ER trip: $150. Cell phone: $50+/month. Car insurance: $400+/year. Doctor copay: $15+. Student loan payment on $30k loan: ~$280/month. Gym membership: $30+/month. Groceries: $200+/person/month. Cable/internet: $100+/month. So many things we take for granted as adults but I was clueless about as a kid. Life can seem very expensive when you don’t know what to expect.
- Saving for advanced teens: Roth IRA. When I was a kid, everyone was telling me to put my money into savings. But savings seemed so boring: your money did nothing once you put it in there. I may have been too impatient to grasp the concept of saving, but I also was not taking advantage of a more fun alternative: the Roth IRA. Even kids can contribute up to $5500/year of earned income. As long as the invested mutual funds do well, you will see money appear in your account that you didn’t even have to put in there.
- Student loans are for tuition, not Toyotas. Or purses, or anything else that’s not tuition or room & board. While applying for graduate school I learned that the federal government will offer you way more student loan money than you need. I was working full time and lived in a cheap apartment, and just requested $10k for the semester of classes. But I was given $20k and had to reject the extra $10k. It takes discipline but you have to think about just what you need and skip the rest. I have heard the statistic that a standard repayment period of a student loan quadruples the original value. So you take out $10k, and if you let it play out, you pay $40k including interest.
- Finacademia, Part 1: Tuition is a product colleges are trying to sell you. When you’re in high school, good grades and academic success are your currency and where you go to college feels like the culmination of all that effort. But you have to think about it financially. Public schools cost a fraction of private schools. And if a school will accept your AP credits and allow you to graduate early, that is a good thing. And the traditional, linear theory that “the better the school, the better your job prospects” is no longer true. Your job prospects have to do with your performance, your major, and your zestfulness in the job search. College is a thing you pay for to open up a range of opportunities, not an intellectual compliment from an admissions letter.
- Finacademia, Part 2: Pick a major that won’t leave you homeless. First, a totally important Youtube video: http://www.youtube.com/watch?v=oBIxGjSHzF8 Yes, I was a Philosophy major, and it was a crazy pain in the ass finding my first job and figuring out a career. Just like the insane difference in public and private school prices, so goes it with the utility of majors: some majors lead to a job, and some don’t. Quick tip: if your major has a keyword in it that would show up in a Monster search, it probably leads to a job. 🙂 And remember, the singular purpose of college is to prepare you for the working world!!
- If you’re selling your blood, you’re doing it wrong. Perhaps the oddest of my college jobs was a gig to help people test something by jogging on a treadmill with my arm hanging out in front of me so they could occasionally take blood. And they wanted to give me $100 just for 1 hour of that! I couldn’t believe my good fortune… So BTW, majors that lead to jobs also lead to paid internships that keep you out of the blood-drawing gym-lab during school. A fringe benefit.
So I think I have a thing or two to offer kids. Mostly it’s about good habits and having a plan, but there are a lot of financial changes during the teen years that can derail you. I am curious about what kids think and know about money these days.