Tag Archives: teenagers

Financial Worries Are Literally Making Young People Sick

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A study of millennials, those around 18 to 35 years old by Northwestern Mutual, found them to be anxious, worried, sick, and often depressed about their debts and finances.

The study found about 70% of this generation experienced anxiety because of their incomes, and 53% because of worries in losing their jobs. More than a quarter of them admit that their financial stress impacts their job performance. Of course it would! Imagine a lot of debt and barely being able to make it through the month. Now your boss wants to see you. What do you think is one of the first things to flash through their mind? Oh boy – I might lose my job. And what do you think the odds are that someone in financial stress will every stick their head above the crowd or would ever make any suggestions for fear of being targeted? No chance.

Their cell bill gets paid on their credit card, one paycheque is wiped out with rent, the other will their car payment, utilities, and other necessities. Then the credit card for spending money to keep up appearances while they’re sinking further into the hole.

It’s not a fun way to go through life – whether it’s older adults, or those just out of school and now working. That kind of stress leaks out. It’ll manifest itself in physical sickness or depression. But that happens when nobody is around. I’ve been there – I’m not making this up! To the world, and most often to their parents, they continue to put on their happy face as if everything is great.

There are solutions. They’re not complicated and won’t take all that long to implement – honestly.

First, get down to Mosaic, or go to Amazon, and invest the $20 in the Money Tools and Rules book. No, it’s not a cop-out for me to make a net of $4 from you. One-third of the book is literally targeted to millennials. Three chapters in there will give you the tools and confidence to change your life around. You may not do it – but that’s up to you. Here are a few steps that will decrease your financial stress in a hurry:

Pay out your cell contract and switch to a 2nd tier carrier like Koodoo or Fido for around half of what you’re paying. There’s $60 a month

If you have a credit card balance, switch it to one that’s 11% not 20% and no annual fee. On a $4,000 balance, there’s $150 or so a month

No more lunch, snacks, or coffee out until you get your finances under control: Your work has coffee – no it’s not the same, but it’s free! There’s probably $200 if you were to be honest with yourself.

$400 saved right there is the same as a $600 raise. Now get a no fee savings account and put at least $75 a paycheque in there. Within six months you’ll have $1,000 in emergency savings and $2,400 less spent that’ll show up in your lower credit card balance or chequing account.

There’s more – but just do this for a six month test drive. If you’re overwhelmed, email me off the back of the book at yourmoneybook.com

Helping Your Adult Kids Part II

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As we discussed last week, if you want to help your adult kids, you need to be super careful. I know it’s hard to say no, but I also know your kids will try you first. Now, this is assuming we’re dealing with adult kids, not living at home, and you’re not the rich parents.

What’s scary is that many parents in the survey admit they’re delaying their retirement as a result of helping their kids – that’s insane! The $500 (average, according to the survey)  you give them each month is $6,000 a year. But it’s not that simple: That’s $6,000 you’re not putting into your RRSP. As a result, it can’t compound! $6,000 turns to $12,000 in seven years, to $24,000 in 14 years and $48,000 in 21 years. So if you’re in your mid 40s, you’ve lost out on almost $50,000 of money with that $6,000 you gave them. If you do not have the extra money – do not do it!

I am a big advocate of giving your adult children money if you have it. They will inherit it in any event, and it’s much better to see the benefits and monitor their behaviour with money. That’s pre-supposing that you have at least one or two million dollars in liquid assets to draw on for your retirement. Liquid assets are investments and don’t  include the equity in your home. After all, you can’t eat your house.

You should do it – but only do it when your adult child has a full-time job and is already financially responsible and living on less than they earn. If not, you’re just feeding and reinforcing their bad spending habits and they will never learn the lesson. Maybe it’s $20,000 for a down-payment, given your married adult child the money to have one partner afford to be a stay at home parent, or paying off/paying down their student loans. That’s after you have seen at least a two year track record of on-time payments.

If you still have teenagers living at home, please start the money talk. It’s not a one-off conversation – it’s a lot of small conversations for years. Show them your $2,000 credit card bill, show them that it has right on the statement it’ll take 25 years to pay at minimum payments. Show them a basic budget of food, rent or mortgage, utilities, gas, insurance and all the things they had no idea actually cost money!

Tell them early and often that they can count on $2,500 (or whatever your fixed amount is) when they go to university or college. How would they get the rest? What kind of part-time job would they think they’d have? Could they get a bunch of scholarships? Would they live at home?

You need to take care of yourself before you can take care of others, and that includes your adult kids.

It’s Grad Season and Lots of Businesses Want to Meet You

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Your 17 to 21-year old has banks, car dealers and especially credit card companies salivating to meet them.

Those companies will do whatever it takes to get their business. Banks, and especially credit card companies, have THE best marketing minds in the country and want your teenager in debt to them – really soon and really deep.

We have a huge emotional attachment to our first credit card. It’s the reason they’ll do whatever it takes to be front and centre in your teenager’s wallet. Once they’re first, they own you and the memories and loyalties are way bigger than a teenager’s first boyfriend or girlfriend – and last a lot longer. On average, we keep our first credit card for over 15 years. It doesn’t matter the rate hasn’t been competitive for years, that the perks are junk or the fees they add on.

It’s not even important that they’re students and don’t have much of an income. For this group, the default rates are below average because, in most cases, parents will step in and pay the balance, or at least make the payments.

Why you? Because they can’t market much to your parents. Adults already have all the credit cards they need or want. So they can’t grow their business unless they get to you. It’s millions of fresh customers and bonus: You don’t know squat about credit and the dangers of credit cards, but you do love to impulse buy.

The same applies to banks wanting to get you hooked on an overdraft or line of credit once you have some income. That overdraft will be there for decades and it’s not like you know how to shop around for the best loan deal or rate.

Car dealers also can’t wait to meet you. How many cars are you going to buy in a lifetime? Three? Four? Five, maybe? Well, the average salesman sells maybe a hundred each year. So who do you think knows stuff and totally has the upper hand? It’s like bringing a plastic knife to a gun fight – you’re gonna lose, even if you bring one of your parents or a buddy.

So you’re all set. You’ve got your student loan payments for two decades, you got the credit card, an overdraft and that car payment. Grade five math says that most of your income is now going to pay all that. So someone telling you save some money is just a pipedream.

It’s Grad Season – But From School and Not Financial Reality

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If you’re between the ages of 17 to 21 or so, or have a son or daughter that age group, banks, car dealers, and especially credit card companies are salivating to meet them.

Those companies will do whatever it takes to get their business. Banks, and especially credit card companies, have THE best marketing minds in the country and want your teenager in debt to them – really soon and really deep.

We have a huge emotional attachment to our first credit card. It’s the reason they’ll do whatever it takes to be front and center in your teenager’s wallet. Once they’re first, they own you, and the memories and loyalties are way bigger than the teenager’s first boyfriend or girlfriend – and last a lot longer.

On average, we keep our first credit card for over 15 years. It doesn’t matter that the rate hasn’t been competitive for years, that the perks are junk, or the fees they add on. For this group, the default rates are below average because, in most cases, parents will step in and pay the balance, or at least make the payments.

Why do they target your age group? Because they can’t market much to your parents. Adults already have all the credit cards they need or want. So they can’t grow their business unless they get to you. It’s millions of fresh customers, and bonus: You don’t know squat about credit and the dangers of credit cards, but you do love to impulse buy.

The same applies to banks wanting to get you hooked on an overdraft or line of credit once you have some income. That overdraft will be there for decades, and it’s not like you know how to shop around for the best loan deal or rate.

Car dealers also can’t wait to meet you. How many cars are you going to buy in a lifetime? Five, or six, maybe? Well, the average salesman sells that many in a week! So who do you think knows stuff and totally has the upper hand? It’s like bringing a plastic knife to a gun fight – you’re gonna lose, even if you bring one of your parents or a buddy.

So you’re all set. You’ve got your student loan payments for two decades, you’ve got the credit card, an overdraft, and that car payment. Grade five math says that majority of your income is now going to pay all that every single month – forever. So someone telling you save some money is just a pipedream.

Now you’ll be thinking about how to get rich for the next 40 years. But you’ve already forgotten how easy it really is to actually GET rich, instead of just wishing it. When you were still in high school you probably had a summer job. You worked hard, had a goal of what you wanted to do with that money, saved like a dog, and paid cash for stuff. Plus, because you had so little money, you were careful how you spent it, right?

But that was when you were young. Now you have a paycheck and access to borrowed money, so you’ve forgotten how to get rich already and you’re just getting started. Let me remind you again and maybe, just maybe, you’ll do these things to actually get rich, instead of that coming 40-year dream:

Pay cash for stuff
Don’t buy crap you can’t afford and don’t need
Save at least 10% of your money right off the top

In your high school class maybe one or two people will do that. The rest will just be the people hoping to get rich, looking to the government to lend them a hand, or maybe the lottery will come through for them. I don’t know which group you’re in: The going to be rich, or the just ‘wanna be rich’ group.

Maybe someone in your family will print this out for you. Maybe I’ll see you at the top, or maybe I’ll get an e mail from you in 10 years or so to help you with some of your financial mess.

You’re an 18-20 something who is about to make a lot of financial decisions which will impact you for a lifetime – literally.

Graduate Your Teen As a Millionaire

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Let’s face it, often our spending today comes with huge debts and monthly payments in the future, and they’re the biggest killers of our dreams and financial freedom.

So how do we avoid those debt traps for our kids? 85% of teenagers never take a course on credit or finances. That means they haven’t got much of a hope of being financially successful from the get-go.

The first thing most teenagers do when leaving the home is to take on a car payment, get a credit card, pay rent, and often have a student loan. But if you have teenager that’s about to leave the home, here’s a deal you can make that’ll insure their financial freedom for the rest of their life.

If the deal works out, they can spend every dollar the make for life. All the credit card debt, the cool car and whatever, because they’re already rich! Your teenager can spend every dollar they earn for the rest of their life – anytime and any amount.

Sounds irresponsible? Not at all – because that’s only half of the deal. The other half is that in order to do this, the only thing your teenager has to do is to save $10,000 by their 20th birthday. Nothing more – nothing less. After that, without getting into debt, or touching these savings, they can literally spend every dollar they make.

It’s the magic of compounding and works with something called the Rule of 72. It’s critical to know this, and to use it to your advantage, no matter what your age. Simply take your rate of return and divide it by 72 – that’s how long it’ll take for your savings to double. So at a 7% rate, it’ll double every 10 years, while a 10% rate will double it every seven years.

Do some lateral thinking of how you can achieve this. Maybe you can charge them rent and keep that in a savings account for them. Some people match whatever the teenager saves to a certain amount. There’s all kinds of ways you can make them focus on it and make it happen.

Why can’t we this as adults? Simple: Because we didn’t save the money when we were younger. The longer you wait, the less time our money has to double up and double up again. If we want the money when we’re 65 years old and start saving at age 50, our savings will only double a couple of times, so we have to save a lot more.

But your 20-year old just has to sit back with all the time in the world and watch his or her savings double again and again until it reaches $1.3 million at age 67, using a 10% rate, and it all started with a one-time saving of $10,000.

Oh, if only we had done this when we were their age. But one more thing: Because they’re teenagers, I’d recommend there’d be two signatures on the account – just in case they get the urge to take some money out…

The Rule of 72: At 10% it’s 72 divided by 10 = money doubles every 7 years
At 11% it’s 72 divided by 11 = money doubles ever 6 ½ years

At age Amount now saved through compounding interest just at a 10% rate
20… 10,000
27… 20,000
34… 40,000
41… 80,000
48… 160,000
55… 320,000
62… 640,000
67… 1,280,000

THAT is the best graduation present I can think of, and it’s not hard to do at all.