What This Child Star-Turned In­vestor Wants Teens To Know About Money

ForbesWeekly - - NEWS - BY VANESSA MCGRADY, CON­TRIB­U­TOR

Rachel Fox was do­ing pretty well fi­nan­cially for an eightyear-old. She’d been mak­ing good money with a re­cur­ring role on Des­per­ate House­wives as Kayla Hunt­ing­ton. She thought she was set for life and wouldn’t ever have to worry about money again. Then re­al­ity hit.

“As the years went by, I saw how, as an ac­tor, work can fluc­tu­ate quite a bit. Some years you work a ton, some years you don’t work at all. I quickly re­al­ized this sense of se­cu­rity I had may not have been as se­cure as I thought,” she says.

So, en­cour­aged by her par­ents, she de­cided to get se­ri­ous and learn about money. Now she’s 19, says she’s been a suc­cess­ful day trader since she was 15, and has launched a blog that preaches fi­nan­cial lit­er­acy to teens, called “Fox on Stocks.” She’s also part­nered with a tax prepa­ra­tion firm to help de­liver mes­sages about money to young adults and teenagers and is plan­ning a live show about money that will stream on Face­book start­ing in June.

“There is a ba­sic set of skills that ev­ery­one needs to un­der­stand as they be­come fi­nan­cially in­de­pen­dent, like bud­get­ing and un­der­stand­ing credit scores. They’re two top­ics that are very deeply con­nected, but un­less you had ba­sic fi­nan­cial knowl­edge, you wouldn’t know that,” she says. “The only thing that can give peo­ple real se­cu­rity is ac­tu­ally hav­ing a fi­nan­cial know-how and an abil­ity to be in con­trol of your money.”

Here, she ex­plains in a Q&A what’s im­por­tant for teens to un­der­stand about money.

Vanessa McGrady: What in your ex­pe­ri­ence is ap­pli­ca­ble to “nor­mal” teens, who are do­ing babysit­ting and ice-cream scoop­ing jobs?

Rachel Fox: If you are earn­ing an in­come, you need to un­der­stand how your de­ci­sions about money will af­fect you years down the road. Even if it’s a sum­mer job scoop­ing ice cream, if you are putting 20% of that in­come into a sav­ings ac­count, that could be your down pay­ment on a house in 15 years or tu­ition pay­ment for your sopho­more year in col­lege. Be­ing able to un­der­stand a pay stub and build a bud­get around it are es­sen­tial life skills. Wait­ing un­til some­one en­ters the ‘real 15 | FORBES WEEKLY world’ be­fore teach­ing them this opens them up to all kinds of fi­nan­cial li­a­bil­i­ties.

McGrady: What are your top tips for sav­ing/bud­get­ing for teens?

Fox: Build a bud­get and live within it. You’ll want to make de­tailed ac­count of all your bills, set aside money for fun with friends, and also save for the fu­ture. There are so many amaz­ing bud­get apps avail­able to us nowa­days that con­nect straight to your bank ac­count and can give you weekly up­dates on your bank ac­count sta­tus.

Sav­ing is key. You should cre­ate an emer­gency fund within your sav­ings, so you have some­thing to fall back on for life’s un­ex­pected costs, like car ac­ci­dents or bro­ken phones. One of the ways that I learned to en­cour­age my­self to save early on is by giv­ing pur­pose to my sav­ings ac­counts. For ex­am­ple, open a “travel money only” sav­ings ac­count. Put in $30 or $50 or $100 dol­lars a month and save up for that epic trip in fu­ture months. Giv­ing the sav­ings money an iden­tity makes you feel like you’re giv­ing that sav­ings a pur­pose and not just sav­ing into obliv­ion, which is not the best feel­ing—and you know you’re di­ver­si­fy­ing your sav­ings. Set up an auto pay­ment from your bank ac­count to a sav­ings ac­count each month, so you don’t have to man­u­ally do this.

Get killer credit right out of high school by mak­ing pay­ments (in full and on time) for some­thing you’re ob­li­gated to pay off—whether it’s a credit card, car pay­ment or apart­ment. Again, never miss a pay­ment. If you’re strug­gling to open your first credit card be­cause you have no credit his­tory and no cosigner, the best thing you can typ­i­cally do, is save up about $200 and use that to open up a se­cured credit card. Once you show that you’re pay­ing off the bal­ance on the se­cured card on time each month, you will start to de­velop a credit score.

Con­trib­ute to a 401K or some kind of in­vest­ment ac­count start­ing in your early 20s. When you start early, you have a bet­ter chance of sav­ing a nice chunk of change by the time you re­tire. It’s al­ways smart to pay your fu­ture self, in addi-

tion to your present self. There are some great in­vest­ment apps like Acorns or Bet­ter­ment that al­low you to do this in baby steps, putting aside a lit­tle at a time.

McGrady: Have there been any fi­nan­cial mis­takes you re­gret? What hap­pened, and what did you learn?

Fox: My big­gest fi­nan­cial re­gret has to be this one time I com­pletely overused my credit card. I was 16 and had a joint ac­count card with my par­ents from a de­part­ment store (this is how I de­vel­oped a credit score early, def­i­nitely rec­om­mend it). Be­ing 16 and still get­ting used to fi­nan­cial re­spon­si­bil­ity, I just kept spend­ing and spend­ing and didn’t keep track of it. At the end of the month, my par­ents opened up our state­ment and, let’s just say, they weren’t too happy… They def­i­nitely held me re­spon­si­ble and made me pay it all off. It was a great learn­ing ex­pe­ri­ence; I un­der­stood how pay­ing off a credit card bal­ance over a se­ries of months works. I had to ac­count for the in­ter­est added on each month, and I also got to see and un­der­stand how this would af­fect my credit score. Hav­ing this real life ex­pe­ri­ence at 16 was kind of scary but hav­ing my par­ents walk me through it, as well as hold me ac­count­able, was well worth it.

McGrady: Let’s face it, it’s bor­ing to learn about fi­nances. What are the tools you used to gain fi­nan­cial lit­er­acy?

Fox: Learn­ing about fi­nances can be dif­fi­cult, es­pe­cially when you’re young, and tak­ing care of your­self seems so far away. But teens to­day are aware that they need to know more.

I read this Face­book study re­cently that had shown, in 2016, a huge spike in mil­len­ni­als who are seek­ing fi­nan­cial in­for­ma­tion re­lated to credit cards, stu­dent loans and in­vest­ing but on­line in­stead of other tra­di­tional fi­nan­cial help sources. There doesn’t seem to be the right fi­nan­cial con­tent res­onat­ing with my gen­er­a­tion avail­able yet in places like Face­book or Twit­ter—the places where they are look­ing. It’s im­por­tant to fill that gap. I don’t think peo­ple look at fi­nan­cial ed­u­ca­tion as bor­ing any­more, it’s be­com­ing a ne­ces­sity and we know that. We’re will­ing to take ac­tion, and it would def­i­nitely help if there was more re­lat­able and un­der­stand­able con­tent avail­able.

JOHN M. HELLER/GETTY IM­AGES

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