Q&A: Kara McGuire cuts through financial clutter in 'Teen Money Manual'
Why would an award-winning personal finance writer like Kara McGuire throw caution to the wind and attempt to convince teens to manage rather than mangle their money?
Self-defense, for starters. As the mother of three preteens, the longtime columnist for the StarTribune in Minneapolis figured it's better to prepare now for the difficult journey ahead than to attempt that adventure without a trail map.
McGuire's book, "The Teen Money Manual," covers the essentials of earning, saving, spending and protecting money in simple, teen-approved prose interspersed with pop culture visuals featuring the likes of Ice Cube, Amazon founder Jeff Bezos and rap team Macklemore and Lewis. As McGuire found out, explaining money to teens is harder than it seems.
KARA McGUIRE, AUTHOR,
'THE TEEN MONEY MANUAL'
Kara McGuire is a mom, a Minnesotan and money guru. As a finance columnist for the (Minneapolis) StarTribune, she guides readers through money matters. In her new book "The Teen Money Manual," she aims to prepare today's youth, including her own, for their financial future.
A: One of my guiding principles has always been that the industry makes things needlessly complex. That's one thing I've always fought against. The other thing I've always been frustrated about is, generally speaking, financial advisers and others typically wait until you've "made it" to start helping you. I mean, the first thing you learn when you're starting to understand personal finance is the magic of compound interest and how having time on your side is one of the real keys to success, right? I've tried to make things clearer and get people to start thinking about their money sooner.Q: How did you go about cracking the teen code?
A: When I began to think about how to put this book together, first of all, it's a book! (laughs) How many teens are sitting down and reading books about finance? So to even get their attention, I decided I had to make it really visual and cut through all of the financial noise to get to the basics that they really have to know.
Q: We can understand including Oprah Winfrey, Jeff Bezos and even "Thrift Store" rappers Macklemore and Lewis. But how in the world did Hank Williams Jr. sneak in -- unless as a cautionary tale?
A: (Laughs) I was trying to make the cultural piece relatable to the most kids. I'm sure Hank Jr. doesn't help there, but you never know!
Q: You begin the book with the essentials of earning. Why?
A: I think that's a failing of a lot of financial writing; we forget how things that seem really obvious to experts aren't to the rest of us. So rather than drop teens, as usual, into "Hey, you made it," I'm more about, "How do you even begin to think about being an adult?"
Q: Twenty years ago, a teen's first card would have been a credit card. Today, it's a gift card. What effect has that had on their card consciousness?
A: You're right. Many children, including my own, receive gift cards at a very young age. My son received a gift card at 3 that was attached to a Lego set, so his first card was actually attached to a toy! That's where you can provide guidance as a parent to explain to them how a gift card works. Start having that conversation. There are lessons to be taught with a gift card around security and responsibility and budgeting that can set kids on a better path when they start asking about a reloadable prepaid card, and eventually a credit card.
Q: Has the rise of online payment made it more difficult to explain money to teens?
A: I do think that as we move more toward virtual currency and using our phones to pay for things, we need to try to make payment more tangible. They may get some misperceptions about how modern finance works just because we're so focused on convenience and seamlessness and instantaneousness. You need to make sure they understand that there are dollars behind it.
[T]oday, in some ways, their biggest problem with credit is, they're not even thinking of it as a tool that they even want to touch.
Q: Teens today may carry a debit card long before they ever write a check or balance their checking account. How will that affect their money sense?
A: It's interesting. In the writing of this book, I had to consider what I would include and not include, and for a while, the balancing of a checkbook was on the chopping block. But I decided to introduce it because obviously the skills involved in balancing a checkbook translates into proper budgeting of a debit card.
Q: What's the biggest issue facing teens and credit cards?
A: If we had talked before a lot of the regulatory changes with the Credit CARD Act, I would have mentioned a lot of the stuff that we've always said around credit -- not realizing you have to pay it back, compounding interest where the proverbial $10 college pizza you charged winds up costing you $500 a decade later. But today, in some ways, their biggest problem with credit is, they're not even thinking of it as a tool that they even want to touch. My goal was to teach them that there is an important place for credit, that building a credit history is important, and to help them better understand how to manage that credit when, realistically, they might not touch their first credit card until they're in college if not beyond.
Q: You devote the final section of the manual to protecting wealth with insurance. How do teens today view insurance?
A: I can't think of another finance topic that is more confusing and intimidating to people. It's something most people don't want to talk about because who wants to put money toward something to protect yourself when you're hoping that that something never happens? That's a tough sell. I think that's one of the reasons that I devoted so much of the last part of the book to that subject. Because I think people put the blinders on for a long time -- maybe until they get married or have children or have an event happen where somebody who is close to them dies or becomes ill and can't work. I think it's important for teens to understand the role that risk plays in a portfolio, but also the role that you need to take to be sure you're not taking too many risks
Q: Will this generation be better prepared to manage their money than previous generations?
A: I certainly hope so. They do have the benefit, having grown up in the middle of the recession, of having to open their eyes to some of the financial challenges that could potentially be out there. I think that is probably a financial element of their life experience that is hard to unlearn, much like the Great Depression generation. So I do think that maybe we're going to see a more thoughtful, more risk-averse generation coming of age because of that.
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