Among the attendees at my recent workshop, one was an avid reader of Morningstar analyst reports. Another was thinking about investing in Nvidia. While fully aware that the stock has already appreciated more than 1,000% over the past five years, he is confident that the company still has more upside potential than downside. I was impressed with all that I heard that morning, especially since the participants were students at a nearby middle school!
A teacher invited me to speak about money and I jumped at the chance because I’ve long believed that this is one of the most important topics typically not taught in schools. While I hope the students learned some helpful lessons in our brief time together, here are four lessons I learned.
Kids understand more than we may assume.
My own kids demonstrate time and again they can handle more than I may think they can — more responsibility, and more teaching delivered in grown-up terms. Meeting with a large group of middle schoolers taught me this lesson once again.Their teacher had them post questions on Google Docs, starting a couple of weeks before the first session. While a few students acknowledged they didn’t know much about money, far more had questions about investing, 401(k) plans, and taxes. Several wanted to learn about cryptocurrencies.
Kids know a lot about their parents’ finances.
After the first session, the teacher emailed me this student comment: “My parents always have credit card debt, and they always have car payments. They haven’t been able to dig out of that hole. I will have to save for and pay for my own college, and I know I will come out of college with some debt. I hate starting out behind, and want to know what to do to not end up in the cycle like my parents, but it’s hard to get ahead. I don’t get an allowance or money at birthdays like a lot of my friends.”That note was heartbreaking but showed remarkable maturity. I asked the teacher to forward the student a couple of recommendations, such as reading the book, Debt-Free U. I also mentioned some local employers that offer tuition assistance.
The note was a powerful reminder that our kids are watching how we use money and listening to how we talk about it. We are our kids’ primary role models, which should motivate us to get our financial houses in order!
The best teaching is real, not abstract.
At this school, most sixth graders are introduced to investing through an online game in which they have $100,000 to invest. They build a stock portfolio and the student who generates the highest return by the end of the school term wins.While I’m sure the students learn some helpful investing lessons through the game, the short time-frame can’t help but teach the kids to swing for the fences instead of learning the importance of a long-term perspective.
Also, it’s far easier to take risks and accept losses with play money. I encouraged the students to invest their own money and showed them how they could get started.
With their parents’ help, they could open a no-minimum custodial brokerage account at Fidelity (the Fidelity Roth IRA for Kids and the Fidelity taxable custodial account also have no required minimum to open), Schwab, or another broker and invest in a widely diversified S&P 500 fund for as little as $1. It’s never been easier or less expensive to get started investing. If they have any earned income (even mowing lawns or babysitting count), they should open a custodial Roth IRA.Youth is entrusted to the young — and their parents.
At the beginning of the first session, I gave the students a sense of their financial potential. I showed them that if they earned $50,000 at their first full-time job and received a 2% annual raise, by age 70 they will have earned over $4 million. That represents an incredible opportunity!I told them the financial habits they establish now, at a time of life when they probably don’t have much money, are hugely important. That’s because those habits will be magnified — for better or for worse — when they start earning a full-time salary. If they get in the habit of giving, saving, and investing portions of every dollar they receive, they will be on track toward an unusually meaningful, successful experience with money. But someone has to come alongside them to teach and demonstrate those habits.
A comedian once quipped, “Youth is wasted on the young.” A better word is “entrusted.” But youth isn’t just entrusted to the young; it’s entrusted to the parents of young people and others who have influence on them. I came away from this experience more mindful of that, and more committed to helping my own kids, and perhaps their classmates, move in the right direction.
