15 yr old and no concept of savings interest...

[greedy4chips]

We just spent the night at our friends house. Their 15 yr old daughter babysat our kids while her parents went out with us.

Earlier today, I was talking to her about school and possible college choice. She mentioned she was saving for college. She puts all babysitting money into a savings acct. I asked her what her current interest rate was. With the most perplexed look she said, "what is that?" OMG, she has $2200 in her acct and has no clue what interest rates are. I remember knowing my 5% savings acct was making me a couple free dollars each yr in my savings book from our bank and I was no older than 7 when I opened my first savings acct. The bank used to stamp my book with the rubber number stamp for deposit and withdrawal amounts.

I spent the next 5 minutes explaining to her CDs and online savings interest rate benefits. I mentioned to her about ING Direct's savings acct and also the referral bonuses. So, in a nutshell she is super excited to open her own acct and then start earning referral bonuses.

I know her parents do not mind advice like this being given out.

Would you mind friends talking to your kids about money?

Does this undermine the parents in anyway?

What other option(s) would have been better to suggest?

I would really like to see her parents foot the bill and allow her to put that money towards retirement! What a great start to have around 5-6k by the time she is 18 into retirement accts. 5-6k is not much for her parents to come up with either.

[yellow heel]

I had no concept of interest rate when I was a child. Until now I didn't realize the importance of retirement account (although I have been maxing out the 401k). I just did it because everyone told me to. I will probably be thanking them when I retire.

It is important for parents to teach their kids at some point. I would probably be in a better place if they would have taught me more about retirement account and how to invest.

[Diolla]

I think you did fine, but I wonder, is it possible the parents don't know any more than their daugther, or maybe not much more? I didn't know about online savings accounts until about a year ago. In fact I didn't know much about investing at all. I was frugal but not very money savvy.

It seems like lately I am more and more telling grown people, in their 30's, about better ways to use the money they have saved.

[Ima saver]

I knew all about savings and interest rates when I was a child. I remember going into the bank with my bank book and getting it stamped. I was always kind of embarrassed because i did not have much money to put into my savings. Now I know that tellers don't mind small deposits at all.
I talk to every teenager that I come in contact with, about savings and mutual funds, roth ira's , etc. I think it is a great thing to do!
I try to use myself as an example. People use to say, buy you are only a waitress, how come you drive a corvette and wear diamond rings? Cause I save my money!!

[greedy4chips]

Originally Posted by Diolla

...but I wonder, is it possible the parents don't know any more than their daugther, or maybe not much more?

I would say they are not money savvy and certainly the online accounts portion. That does not mean they do not do well with their income and retirement accts. I would say they are more old school in their approach to money, which is get debt, get bills, pay bills, and save the rest.

[PrincessPerky]

So long as you arn't dissing the 'rents I tdon't see anythign wrong with giving money advice..

Talking about money shouldn't be taboo..it is too important to avoid!

[Joan.of.the.Arch]

Don't most kids get some instruction on interest in their math classes? (We did simple and compound interest problems in grade school, both with respect to earnings and debt.) Seems like interest on her savings account should not have been a total surprise to her. After all, she did open a svaings account rather than a checking account.

I probably wouldn't mind another parent chatting with my kids about these things. But there is the possibility of bumping up against issues in which your values are different than the parents' values.....An example: In my kids' school one of the teachers ran one of those stock-market games. My kid put a portion of his pretend dollars into a company that produces goods that we his parents (and even himself) are morally opposed to. He explained to his teacher in his teenage sarcastic judgemental way why he thought this company's stock would be going up (related to war in Iraq. US had just entered at the time.). The teacher was really encouraging that he applied his curretn events knowledge to picking a stock. The teacher just acted so excited about his cleverness....Now really, I don't think in the real world my son would wish to make money like that. And I can assure you I did not appreciate the teacher getting all excited about encouraging even a pretend investment like that. There are more honorable ways to make money, and honor is important to us. But the teacher was unaware of the conflict in values.

[DivaJen]

Originally Posted by Joan.of.the.Arch

Don't most kids get some instruction on interest in their math classes? (We did simple and compound interest problems in grade school, both with respect to earnings and debt.) Seems like interest on her savings account should not have been a total surprise to her. After all, she did open a svaings account rather than a checking account.

I always touch on it when teaching percentages and later exponential growth.

Originally Posted by Joan.of.the.Arch

I probably wouldn't mind another parent chatting with my kids about these things. But there is the possibility of bumping up against issues in which your values are different than the parents' values.....An example: In my kids' school one of the teachers ran one of those stock-market games. My kid put a portion of his pretend dollars into a company that produces goods that we his parents (and even himself) are morally opposed to. He explained to his teacher in his teenage sarcastic judgemental way why he thought this company's stock would be going up (related to war in Iraq. US had just entered at the time.). The teacher was really encouraging that he applied his curretn events knowledge to picking a stock. The teacher just acted so excited about his cleverness....Now really, I don't think in the real world my son would wish to make money like that. And I can assure you I did not appreciate the teacher getting all excited about encouraging even a pretend investment like that. There are more honorable ways to make money, and honor is important to us. But the teacher was unaware of the conflict in values.

That's a tough one - it could have just as easily gone the other way, with the teacher expressing disapproval and finding out the parents were thrilled at their child's initiative. Or the teacher could have shown no interest either way and been accused of being apathetic and uninspired. Can't seem to win with some situations.

[Joan.of.the.Arch]

Yep, that's right. That was just one example.

Another example might be in advising the teen to always go for the greatest interest. Maybe the parents have decided that they would choose the greatest interest available from among all banks except X. Or may they believe they should choose from among the community credit unions. ...You never know when you will bump into issues that others strongly care about. But if you are a close family friend, you are more likely to know.

I don't mean at all to discourage talking to teens about money. Just keep in mind that it is possible for issues to arise.

[PrincessPerky]

One reason why I tend to keep most of the education at home, never know where a value issue might crop up, but in the case of advising a family friend you are not 'sneaking behind thier back' nor are you suggesting she do the same, nor are you paid to get her to do things without parental involvement (as in a school)

So she is leanring from you but you arn't saying 'do this or your grade suffers' nor are you even offering her a grade, merely advice.

[nanamom]

If my 15 year old doesn't understand interest then I failed miserable along the way in that area. I don't believe giving advice is undermining them but if you suggest something that involves online to a teen you should explain what it is to the parents. Online can (and should) cause BIG red flags in the ears of a teen parent.

[cicy33]

Originally Posted by greedy4chips

I would really like to see her parents foot the bill and allow her to put that money towards retirement! What a great start to have around 5-6k by the time she is 18 into retirement accts. 5-6k is not much for her parents to come up with either.

I think that it is great that she is saving and possibly her parents don't know much about interest rates themselves but what do you mean by "them footing the bill" Do you mean that they should be paying her way for retirement? and I also agree anything that involves the internet needs to have her parents involvement. There are way to many things a young, impressionable teenager to get into to. and I also believe that she is too young to have an actual online banking account. Don't you have to be 18?

[TinyFish]

Joan,

Well, perhaps the teacher's enthusiasm was a bit misguided, but it sounds like your kid has his ideas straight anyhow, and even tried to teach the teacher a thing or two with his pretend investment.

On the other hand, apart from the 'stock market game' such as you mentioned, which I'm not sure taught us very much that was useful, it was more like an exercise in gambling for most kids, I didn't get much instruction in school on financial matters. I think we computed interest once in school, but the only thing I remember about it was 'MAN, computing interest by hand is HARD'. Now I thank goodness for the internet to compute it for me!

So far as the deeper lesson of compounding interest, we were not taught anything about how it can make or break you. We didn't even learn to balance a checkbook!

Perhaps potential issues with teaching another person's child could be circumvented by saying. 'You know, Jennifer, you could be making a lot more money using interest, let me ask your parents if I can teach you about it sometime'.

-TinyFish

[joseblanco]

Community banking is passe unfortunately in our modern age. When I went to school the local savings and loan had a special program for children to become savers and they came to the school and gave us a seminar on interest, the importance of saving etc. They were visionaries knowing we would someday be full service customers. The gave us a special pass book and the first dollar to put in the account. That local savings and loan is gone now. Bought out by a big out of town bank. Schools do not teach much about the basics. How do I know? The Army now incorporates maintaining a checking account as part of basic training. The needs was due to the large number of bounced checks by new recruits, resulting in military disciplinary action which in turn tarnished their military careers at its early stages.

On the flip side credit card companies seem to be omnipresent in marketing college students to open credit card accounts and further bury them into debt that is added to huge education loan debts and no savings of any form whatsoever.

So I'd not think twice about giving advice to any youth about savings and assume that the system has failed several generations, i.e. that the parents are more likely than not also unenlightened in the world of savings. If anything your helping the child for the long term and helping to stem the tide of red ink and insure the child has a full life by being financially proactive and strong thus removing money as a limitation upon their future plans and life.

Kudos all around!!

[greedy4chips]

Originally Posted by cicy33

...what do you mean by "them footing the bill" Do you mean that they should be paying her way for retirement?

I sorta meant they should help with school. The daughter is super responsible and the parents could give her a great gift by helping her pay for college. I do believe in students paying their own way for college, but she seems to have the concept of earning money and responsibility.

Originally Posted by cicy33

and I also agree anything that involves the internet needs to have her parents involvement. There are way to many things a young, impressionable teenager to get into to. and I also believe that she is too young to have an actual online banking account. Don't you have to be 18?

Trust me when I say her folks know the pitfalls of the internet. I talk to them all the time about it.

She can have a joint acct where one of her parents are the cosignor and she is the acct owner...ING Direct emailed me as to how she could do it.

I also told her I would help her show her friends how they can do the same and hopefully they can make some referral money along the way!

Joan of Arc... I also think teacher's enthusiasm may sometimes be misguided such as when talking politics or sensitive issues. In your example though, I think the teacher may have been happy that the student could look at what current events drive stocks higher and to use that knowledge to pick a stock. Investing in stocks without regard to personal feelings helps one make rational decisions based on the data available.

I worked for Coca Cola and purchased Pepsi stock because it was a good performer and I knew it had the potential to grow much faster than Coca Cola due to its diversification.

Thanks for all the replies.!