Author Topic: Best ways to impart good financial values on youth  (Read 1052 times)

frugalecon

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Best ways to impart good financial values on youth
« on: September 26, 2018, 07:32:48 PM »
I would be interested in hearing people’s suggestions about how best to impart good financial values on youth. I have volunteered for some time in a program for disadvantaged youth, and I recently completed a long stint with a kid from very modest circumstances. I was his mentor for 9 years. I tried to model good practices, not saying yes to everything, though I did pay for his cellphone plan for 4 years. He has graduated and is working at least for a year rather than pursuing more education, and I gave him notice that he would need to take responsibility for his cellphone plan. He did, which is good, but went straight for iPhone XS and unlimited data. Despite having a perfectly serviceable iPhone 7 Plus. I fear he internalized nothing from what I tried to impart in the financial sphere. Any suggestions about strategies?

Linda_Norway

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Re: Best ways to impart good financial values on youth
« Reply #1 on: September 27, 2018, 02:46:59 AM »
I would be interested in hearing people’s suggestions about how best to impart good financial values on youth. I have volunteered for some time in a program for disadvantaged youth, and I recently completed a long stint with a kid from very modest circumstances. I was his mentor for 9 years. I tried to model good practices, not saying yes to everything, though I did pay for his cellphone plan for 4 years. He has graduated and is working at least for a year rather than pursuing more education, and I gave him notice that he would need to take responsibility for his cellphone plan. He did, which is good, but went straight for iPhone XS and unlimited data. Despite having a perfectly serviceable iPhone 7 Plus. I fear he internalized nothing from what I tried to impart in the financial sphere. Any suggestions about strategies?

Maybe he now has some income and can afford to buy a very fancy thing for the first time?

It might be smart to introduce him to the concept of consumer debt. Talk about how low the money payment looks. But tell him the typical interest rate of such a loan and what you would have paid after all those money payments for 5 years have been paid. Then you paid 2-3 times the original price of the item. He should understand that items look very cheap and affordable, but turn out to be expensive in the long run.

RedmondStash

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Re: Best ways to impart good financial values on youth
« Reply #2 on: September 27, 2018, 12:01:22 PM »
I would consider making it a game.

"Let's compare the real cost of both phones. The phone that gives you the most flexibility and resilience wins."

"So here's the cost of the iPhone 7 Plus, monthly, in this spreadsheet cell. So let's set up some formulas to see what that cost looks like annually."

"And here's the cost of the iPhone XS, monthly, in this other cell. We can copy and paste the formulas for the other phone -- look, cool, now we can see the annual cost."

"Okay, here's the difference between the two columns. That's the savings you would have if you had the iPhone 7 instead. Now if you invested that at an average 7% return -- and here are the formulas for those -- let's see what it looks like in 5 years, 10 years, 20 years. So in 10 years, you could have either a phone and 0 dollars, or a phone and X dollars. You could use that X dollars to buy so many things, which gives you flexibility. If you were in a job you hated, you could even use it to let you quit that job because you wouldn't be living paycheck to paycheck. Or if you got laid off, you could use it to make sure you don't lose your home. Those give you resilience. So which lets you win more flexibility and resilience, the iPhone 7 or the iPhone XS? You can choose either. This just helps you understand where you win and where you lose."

"And btw, you can do this same kind of comparison with lots of other things. Salaries, car payments, mortgages, investments, etc."

When I was in high school, we actually learned a bit about finances: How to write a check and balance a checkbook, how to pretend invest in the stock market (we picked a few stocks in the newspaper and followed them for a week, I think). I'm sure I brushed it off at the time, but that stuff stuck with me. The magic of compound interest really can be very alluring when it looks to a young person like money can grow and grow.

Fishindude

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Re: Best ways to impart good financial values on youth
« Reply #3 on: September 27, 2018, 12:31:50 PM »
My best advice would be to not ever "give" them money, but provide them work so that they can "earn" money.

familyandfarming

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Re: Best ways to impart good financial values on youth
« Reply #4 on: September 27, 2018, 09:46:02 PM »
I have three girls. They all like clothes. I developed a shopping strategy early that has worked for every child. If they got clothes from a used clothing store or a thrift store, I paid for it. If they wanted something from a full-priced retailer, they paid for it. Rarely did we go to a mall.

They are now in their 20-30's. They either employ minimalism or thrifty-ness.

Laura33

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Re: Best ways to impart good financial values on youth
« Reply #5 on: September 28, 2018, 10:28:11 AM »
First, I would do a little research on the "poverty mindset" -- honestly, I was not at all surprised by the phone story, because that is entirely consistent and logical for someone from this kid's background.  Fundamentally, if your life experience is that good things always go away, then it makes perfect sense to enjoy it while you can now, before someone else grabs it or the good times fade away.  This is a society-wide construct, too; there is a very strong ethos that good times are fleeting and you need to rely on others, which means that when one individual is suddenly flush, he is expected to share it with everyone else, because they then do the same thing when the roles are reversed.  @WhiteTrashCash has explained the mindset very well and in detail in a number of posts. 

This is an important first step because you need to realize that the kind of arguments and logic that are intuitive and natural to you may not work for someone whose entire culture has been sending him these sorts of messages for his whole life.  Remember, it's not just this kid alone, it's everyone around him who is encouraging him to go for the bling to show his status, to spend it now, to share the wealth, and all that.  Perhaps the best thing you can do is help him understand that that mindset is not the only way to be -- that there is another world open to him where you really can get ahead if you choose NOT to blow everything right away, and that if you save something, it will actually be there for you in a month or a year or a decade. 

So, yes, by all means help him do the math to see the real cost of his choice.  But also talk about why it is better for him to forego the bling and shore up his future.  And then expect him to fail (at least by your standards).  You cannot completely overcome decades of 24/7 influences with a few hours here and there, even over years.  Look for the small victories where you can, praise him when he makes the right choices, and keep at it with the hope that those little victories will ultimately pile up over time so that he can see a better future and develop a better mindset himself. 

elaine amj

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Re: Best ways to impart good financial values on youth
« Reply #6 on: September 28, 2018, 12:46:06 PM »
ITA with the poverty mindset. It is real and people deal with it every day. It's definitely hard to comprehend when you've never had to live it though. There's a reason for generational poverty.

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Camp Mustache Toronto (Sep 21-23) is where all the cool Mustachians will be gathering for meatball parties,  karaoke in the bell tower and VolleyHockeyBall!


cliner

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Re: Best ways to impart good financial values on youth
« Reply #7 on: September 28, 2018, 01:11:11 PM »
This isn't exiciting/cool/interesting, but, now that he's working, have y'all gone over how to do a budget at the beginning of each month? Dave Ramsey says a budget is permission to spend. I think taht perspective can help most non-mustachians get into being more mindful about their money. If he goes into each month or paycheck with the mindset of, "OK, I pay my rent/utilities/insurance, put aside enough for fuel and food, then put a big fat chunk into my FIRE 'stash, and whatever's left over I can spend on toys/entertainment". I know most of us here would still cringe at a phone purchase like that, but the kid is learning. And hey, maybe once he sees how much is adding up in his Roth IRA, he'll move more money from his 'toys/entertainment' category into his 'stash. Or maybe not! Maybe he'll keep buying phones, clothes, blu-rays, video games with that category of his budget. But at least he'll be doing it AFTER he pays for essentials & puts aside a considerable chunk of his paycheck into his stash?

I'm glad he has a mentor like you! My parents taught me good money habits overall, but I didn't have anyone to hold me accountable once I left home. I wasn't able to put them into practice until just a couple years ago when I realized I was spending away all my income on cars, nice apartments, bars/restaurants, and amazon prime. He's a lucky kid.

EnjoyIt

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Re: Best ways to impart good financial values on youth
« Reply #8 on: September 28, 2018, 02:02:03 PM »
One of my friends teaches their kids responsibility at a young age by making them responsible.  At a certain age anything the kids want or need is bought by them.  School clothes, books, toys all are decisions made by the child via a fund they get from doing chores around the house. They get paid well for those chores. Some items they force the kids to buy like school supplies that they may scrimp on, but they get to choose how and where to spend it.  They very quickly began to understand the value of their labor and learn how to budget if they want any cash left over for toys and fun things. 

elaine amj

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Re: Best ways to impart good financial values on youth
« Reply #9 on: September 28, 2018, 07:30:44 PM »


One of my friends teaches their kids responsibility at a young age by making them responsible.  At a certain age anything the kids want or need is bought by them.  School clothes, books, toys all are decisions made by the child via a fund they get from doing chores around the house. They get paid well for those chores. Some items they force the kids to buy like school supplies that they may scrimp on, but they get to choose how and where to spend it.  They very quickly began to understand the value of their labor and learn how to budget if they want any cash left over for toys and fun things.

I really wanted to do that but neither kid cared about clothes at all (I cared more haha) and neither have come across any toy they cared to save up for. They were perfectly content with whatever they were provided with from birthday / Christmas presents. I did make them pay for their cellphones with birthday / chore money. When DD wanted a small actual plan (not just wifi), she paid the $50/year.

I just had a tough time with my thrifty kids who are content with handmedown, slow as anything laptops and just watching whatever is on TV. Toys generally came from birthday / Christmas presents or thrift store / yard sale finds.

They are 16 and 17 now and still have little reason to spend money. Guess I raised good little Mustachians :)

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Camp Mustache Toronto (Sep 21-23) is where all the cool Mustachians will be gathering for meatball parties,  karaoke in the bell tower and VolleyHockeyBall!