TEACHING KIDS THE ABCS OF PERSONAL FINANCE
Parents’ goal to pass along their money know-how turns into helpful how-to book
When Miami attorney David Bianchi and his wife realized their 13-year-old son, Trent, was not learning anything about money, personal finance or investing in school, they thought about buying him some books on the topic. But most of the ones they found seemed too textbook-like for a teen.
So Bianchi, who has invested in start-up companies and has an undergraduate degree in economics from Tufts University, decided to write down some basic information about finances to share with his son. What began as 10 pages turned into 100 topics with illustrations that have been published in his new book Blue Chip Kids: What Every Child (and Parent) Should Know About Money, Investing, and the Stock Market.
USA TODAY talked to Bianchi about his book:
Q YOU RECOMMEND KIDS BE DISCIPLINED SAVERS AND CONSERVATIVE SPENDERS. HOW DO YOU GET THAT MESSAGE ACROSS TO THEM?
A: The most important lesson from the entire book is teaching kids that they must live within their means, to save some of what they earn and to avoid the temptations of having to buy every new thing they see or everything their friends may have.
I tell kids about the satisfaction they will have from building up a savings and investment account and knowing that they have a financial cushion in life. Even at a young age they get it.
Q WHAT IS THE HARDEST CONCEPT TO GET ACROSS TO KIDS?
A: The hardest thing is getting them to understand why they need to spend time learning about money at a young age. They often want to know why they can’t just wait until they are older. I tell them they need to learn it now for several reasons.
First, the better money management skills they have by the time they graduate from high school the better off they will be in college and later on.
There is over $1 trillion of student debt outstanding in the country, and most of it was taken out by teenagers. If kids were better educated about money, they would be more careful about taking on student debt.
Second, they need to understand the power of compounding investment returns at a young age. The book talks about the power of compounded returns over time and has examples of that.
I explain to them that they will have much more money over their lifetimes if they learn to save, invest and watch what compounding can do to their money from day 1.
Third, I tell them that we live in an increasingly competitive world, and for them to get ahead and compete they need to know how to earn, manage and invest money sooner rather than later. Kids from around the world are learning about money right this minute, and America’s kids need to be money smart as soon as possible.
Q WHAT IS YOUR POSITION ON ALLOWANCES FOR KIDS?
A: An allowance is fine if two things happen. First, there should be an understanding that they don’t get the money for doing nothing. Requiring some work in exchange for an allowance helps show kids that when they work they will get paid, but money does not grow on trees. They have to earn it.
Second, they need to either save part of their allowance and have a plan to ultimately invest what they save or at least be required to spend some time talking to their parents about the benefits of saving and investing in exchange for getting the allowance.
Q WHAT ARE SOME PRACTICAL WAYS TO TEACH KIDS ABOUT MONEY?
A: Learn from everyday experiences and expand on what you already know. When the restaurant bill comes, play “guess the check” before looking at it. It quickly becomes competitive and teaches kids what things cost, and they soon get quite good at it.
Tell your kids you want to leave a 15% tip and have them calculate the number in their head.
When credit card bills come in, show the bills to the kids so that they can see the relationship between handing the card to a store clerk and actually having to pay for what was charged. We do it, and our son is now cautious about spending money. He has no problem telling me, “Dad, don’t spend your money on that.”
When a “20% sale” sign is in a storefront window, ask your child what an item would cost if it had been $200 and is now 20% off. It helps them think on their feet and perform quick calculations.
Q ANY OTHER IMPORTANT POINTS YOU THINK KIDS SHOULD LEARN?
A: I have spoken to my son about the fact that the only money we have to spend is “after-tax” dollars, and boy does he get that now. Whatever I may be buying he knows that I had to earn about 30% more than what we are spending in order to have the money to pay for what we just bought.