Beth Kobliner is one of the nation's leading authorities on personal finance for young people. Her two books -- Get a Financial Life: Personal Finance in Your Twenties and Thirties and Make Your Kid A Money Genius (Even If You're Not) -- are widely acclaimed for their personal message and helpful advice to parents and kids alike.
In 2010, President Obama selected Beth to be a member of the President's Advisory Council on Financial Capability, where she created MoneyAsYouGrow.org, which has since been adopted by the Consumer Financial Protection Bureau.
Buck Hartzell recently sat down with Beth at Fool HQ to find out more about the importance of educating children about money, saving, and more.
A full transcript follows the video.
Buck Hartzell: Thank you, all, for coming! Welcome, Beth, to The Motley Fool! I'll give you a quick introduction, and then we'll get into some questions, and we'll help all of us that have kids in the audience make your kids money geniuses, I think that's a desire that we all share.
Beth Kobliner: Even if you're not.
Hartzell: Right, even if we're not. Hopefully we know some things, and we'll learn a lot more today from Beth. To give you a little bit of background, she's in New York Times best-selling author and personal finance writer. Her work has appeared in the Wall Street Journal, New York Times, and many other publications that I'm sure you've all heard of. She was also chosen, like most of us, by the president of the United States, President Obama, to serve on an advisory board on financial capability. Please join me in giving a warm welcome to Beth.
So, you wrote this book, How To Make Your Kid A Money Genius. I have three kids, and that's a topic that's near and dear to my heart. I was interested. We see this too, sometimes, in our group, a lot of parents that are comfortable talking about a lot of things with their kids -- it could be drugs or sex whatever else -- but money is a topic that's somewhat taboo. Why is that? Why are people so uncomfortable talking about money with their kids?
Kobliner: First, I want to thank you for that. This is the best 20-question -- there's so many good questions on this, you were joking that it's like 60 Minutes, like, OK, I'm really prepared. And thank you too Alison and to Tom Gardner, who I went to college with, so I can give you some good back story later. But, I think whether you have a lot of money, and I did speak at Google a few months ago, and the question that came up a few times was, "I don't want my kid to be entitled. I make a lot of money, and I don't want my kids to think that money grows on trees and they can get whatever they want." So, I think parents are afraid, in that sense, to talk about money. And of course, most of America doesn't have enough, and is worried their kids won't go on to the schools that they went to, or be able to afford a home. So, I think that on both ends, all parts of the spectrum, people are afraid. They're afraid that their kids are going to see how little they know, they're afraid their kids will find out how they messed up. And I think there are scripts written now, thank goodness, for how to talk to a kid about alcohol and sex and drugs, but there really isn't a script that's written about kids and money. There is not. And what I try to do in my book is look at all the research out there and figure out what is relevant to money. And there aren't tons of randomized controlled studies, but there are some good studies that get to the nub of the question of, what are the ways to teach kids about this topic?
Hartzell: Yeah. And that's great. When I look at some of the folks that come here to The Motley Fool for help with their finances, they have degrees, sometimes graduate degrees in certain topics, but they don't have a basic understanding of a lot of things that you mentioned in your book, whether it's a Roth IRA or a 401(k) or how much they should contribute. So, the question is, where did you learn about money? Was that something that you learned in school? Or did it come from somewhere else?
Kobliner: I definitely didn't learn it in school. I grew up middle class in Queens. My dad was a teacher and then a principal, and my mom was a chemistry teacher, but by the time I was born, a stay-at-home mom. My parents scrimped and saved to have enough money to send us to college. In fact, I was saying this before, I found a spreadsheet that my dad made in 1981, and my parents said, "You can either get into Brown," or a few other schools that I didn't get into, "Or you can go to Queens College," which was our neighborhood school that was basically free, because they felt like it was worth the scrimping and saving. He made a whole spreadsheet on what I would have to contribute, $2,000 a year, which adjusted for inflation was about $10,000 today. So, I think that, observing my parents, they're both Depression generation babies, they were both born in 1929, and my mom would only shop on triple coupon day and she would buy in bulk, and we had 20 cans of tuna fish in our basement because she would always buy when it was a big sale, if you buy a lot you save more money. So, they were really careful about money, but I never felt a lack of much. When I think that, except for once where I wanted a Lacoste Izod alligator shirt -- I never got one, and now I don't want one -- but other than that, I think, kids learn by osmosis, and I don't think you need to be a money genius to teach a kid to be smart about money. But I think, if you love to spend, or that's what you value, those messages come across a little to kids.
Hartzell: And you mentioned your parents. Harold is mentioned in there, Shirley is mentioned throughout the book. There were some great stories in there. One involved a candy shop. Do you mind sharing a little bit about that story?
Kobliner: Thank you. My dad is Harold, my mom is Shirley. Didn't make up those names, that's their names. My dad was born in 1929, and his father was an alcoholic. I don't think you called it that back then, but he didn't work throughout the whole Depression, and his mom was a seamstress. They had four kids. His brother, when he was born, slept in a drawer because they couldn't afford a crib. They were very poor. And my dad decided when he was 10 that he needed a job. So what he did was he sat in a candy store, the local candy store. He lived in this tenement. And every time the phone would ring in the candy store, the public pay phone, my dad would pick up the phone and run out to the tenement, because nobody had phones in those days, he would say, "Mrs. Jones, phone call!" And Mrs. Jones would come downstairs, he tells the story like, she had curlers in her hair and she would come down, and he would get a tip. He would get a nickel or a dime for telling her that there was a phone call. And he was sitting in a candy store doing this, and he used to say to my kids when they were little, "Do you think I bought candy?" And they were like, "Yeah!" And he said, "No. I saved that money, I never bought candy, and I gave it to my parents," because they were always fighting about money and he thought maybe if he could give them a little more money, give them a little bit, that it would make a difference. And that, to me, is the epitome of that delayed gratification, and that ability to be able to say, "I'm not going to spend it now, I'm going to think toward the future." And I do think that the Depression generation had that, and I would argue Millennials, who are always bashed, with avocado toast or whatever, I actually think the Millennials I've been talking to also have a bit more of trying to get a bargain and not getting into credit card debt, that similar kind of mentality.
Hartzell: Boomers not so much.
Kobliner: Boomers and Gen X-ers, forget it. [laughs]
Hartzell: [laughs] You mentioned delayed gratification, which appears throughout the book. An important topic. Carol Dweck talked about the effort effect, which I think aligns pretty well with that, and the marshmallow test, of course, which you talk about. Can you give us an example? How do you get kids, and I think, in a world where there's cellphones in almost everyone's hands, you have social media, you have video games, you have fidget spinners, I saw Tom over there with his fidget spinner, how do you get somebody to delay gratification?
Kobliner: Tom, are you going to take that question? [laughs] I think that there are different ways. You could talk to your kids about, "One day, we as a family are going to go to Disneyworld or Europe and we're going to have to save for that. And we have three or four years before we can go, and if we save this amount, we're not going to eat out as much," having concrete goals and examples, I think, is a wonderful way to make it clear, to start putting that message in kids' minds. Also, some kids who really like math, you can go to investor.gov, and if you plug in different interest rates and you save 20 years or 40 years, it's so fun to look at that number. "If I start at 16 and I save every year for four years with my summer earnings of $1,000, I'll have $100,000 by the time I'm 65." Or, if you save $1 a day starting at age 10, and you do that to age 65 and earn 7%, you'll have $200,000. Just, numbers like that can motivate, and anecdotes. I learned from my parents, my mom would say, "If you want to teach your kids a message, tell them a story." I was like, "What if I don't have a story?" She said, "Make it up." But, telling kids, "Our old neighbor, he didn't have a lot of money, but he saved $100 a month, because he always wanted a boat. And he was able to save up that money." That kind of concrete goal I think is really critical, and gets the message across to kids. You have to say it a million times. Just like vegetables, they have to try it eight times before they like it. You could probably say it 800 times.
Hartzell: I like the idea of having something fun, and a way to celebrate your savings, too. I think one of the things that some folks here, Robert Brokamp, some folks at The Fool talked about having different savings jars or buckets for different things. One of them could be college, and that's a longer-term goal, and there's another shorter-term goal, it could be, "I want to buy a new football," or, "I want to celebrate by buying something that I really like." And that's the way, I think, maybe, to get people delaying buying something today with buying something even nicer a little bit down the line. So, work ethic is a topic that comes up a lot. Certainly with your parents, Depression-era, and being around there, is an important thing. I'll ask this question, and I'll share an anecdote with somebody here. One of the Hartzell kids' favorite thing to do is, when we get snow around here, which isn't very often, they've realized that's actually money laying around on the sidewalk --
Kobliner: I made so much money shoveling snow.
Hartzell: Yeah! And there are a lot of people in our neighborhood that are old or don't want to shovel their own snow, so as soon as the snow hits they're out early, the crack of dawn, and shoveling snow in driveways. And one of their friends happened to be over and found out about this, and they were like --
Kobliner: Uh oh, competition.
Hartzell: "This is great, there's money out there waiting to be shoveled up."
Hartzell: So, they went out and knocked on door around their neighborhood, and one gentleman in the house came out and was so amazed, he said, "I've been waiting," he happens to own a business, owns a company, and he said, "I've been waiting for 10 years for some kid in our neighborhood to come around and ask me if he wants to shovel my snow. So, I'm going to pay you to shovel the driveway, and here's a $100 tip." And they were like, oh my gosh! This was unbelievable for them. So, the question for you is about work ethic. Are we making kids lazy today? Are we enabling them to be lazy? Or is that just my impression, that kids are different today than they were maybe a long time ago?
Kobliner: I love that story. That's a great story. I made a bundle. I remember so clearly. It was like, $5. They would ask how much do you charge, and we're like, "Well, whatever you think," and that was a mistake because people would say, "Oh, $2," and we were sweating. But, I think that today, take high school. If you look at the statistics, it's not that kids necessarily have that much more homework, at least according to the research I've looked at, although I think my kids have so much more homework than I did back in high school. But the pressures to do well, to take SAT prep courses, to take SAT II prep courses, all these things that didn't exist. When I was working, I had four jobs in high school, I worked at a diner, I worked at a grocery store, I worked at a pharmacy, and I think that there are more pressures and there are more demands on kids' time, the idea that you need to be on a team, all these resume-building items.
And, also, we know, in some ways, it makes logical sense, because research shows that if a kid works over 10 to 15 hours a week in high school, kids who work more than that are likely to not graduate from high school, they're more likely to not graduate -- in other words, it's OK to work around 10 to 15 hours a week, but once you pass that mark, that's a dangerous sign, if your kid is working much more than that, because they're not spending enough time on their school work. But I do think working over the summer, the internship versus paying summer camp job that your kids are doing -- I think it's smart what you're doing because you're starting younger. And I think when kids are in middle school and high school, having those summer jobs, it is important. But the year or two before high school, I don't know what you would do, if your kid either had an internship working in a lab with a scientist or whatever, versus working bagging groceries. As a parent, it's a tricky equation to figure out.
Hartzell: Yeah, it's definitely a balance, for sure. I know we're getting ready to go on a family vacation here in a couple of days to Europe, and our kid missed out on an internship that he got for going, because we're going to be away.
Kobliner: Can I come? [laughs]
Hartzell: But, you have to balance some of those things out. On investing, and you've talked about mutual funds and indexing and keeping your costs low, we totally agree with that and love that idea. You didn't seem as enamored with owning individual stocks for children, so I wanted to talk a little bit about that. My kids own stocks, they have their own portfolio, and I think it's fun to follow individual companies. You learn a lot of lessons around those. What are your thoughts on owning individual stocks versus an index fund or an ETF or something like that?
Kobliner: I think that for the vast majority of people, and certainly when I meet Millennials, they'll often say --not to clump them into one group-- but when I meet young people, they'll say, "You know what? I don't want to make a lot of money, I make want to have enough to live a life where I can make the choices that I want and live a lifestyle that I'm happy with." And I think the best way to do that long-term is index funds. We've seen them over time, Burton Malkiel's research from Princeton of the Random Walk. And we know that, on average, professional managers don't beat the index. So, over 30 or 40 year periods of time. And I also know examples of parents who say, "I gave my kid a little money to start buying stocks," but either they're a money whiz, look how great he did, he picked Apple and it went up, or, he/she is never going to invest again because they lost all the money and the market is risky. Your kids are lucky that they have you, so you can gauge and talk to them and engage them in these ways. But I think that indexing really makes so much sense. I just looked up the expense ratio for Schwab, it's 0.03% for the ETFs. And Vanguard is 0.04% and you can buy one share for as little as $100, basically. So I think it's the most easily accessible way for people to get into investing and make money.
Hartzell: Yeah. And low expense ratio, as you mentioned. You get exposure right away off the bat to all those 500 companies.
Kobliner: Right, diversification, exactly.
Hartzell: We also like the idea, and I think a fun thing to do, sometimes, for kids, when they own some stock, is go to an annual meeting and make that an event and have it fun.
Kobliner: Isn't he a fun dad? [laughs] Hey, kids!
Hartzell: Usually those annual meetings are on weekdays and you get out of school, so that's a bonus right there. And some of them actually serve chocolate covered strawberries and things afterwards, so there's some rewards in there. So, let's talk a little bit more here about, how can we make money just fun? I think that's one of the things, my oldest son is 16, he's taking a course online on personal finance, he doesn't exactly enjoy it. This is the same person who goes to an annual meeting. He'll tell you everything about Apple, he knows everything about them. But it's just not that fun. How do you put the fun back in finance, how can we do that?
Kobliner: That's my next book, Putting the Fun Back in Personal Finance. It's just one of those things that, it's hard to imagine it being fun other than, "We're going to have pizza night, and all of us are going to chip in, and we'll double your money, and you put in a little money, and we'll save for a goal as a family," or, "We'll save for a ping pong table," or making it having jars for little kids, and seeing it visually. I don't know if this is fun, but it's certainly better, I think, to use cash. There's so many apps now for allowance, and it just becomes meaningless. I've had so many parents say to me, "My kid is spending all this money on apps, and they're wasting money." And I say, "Do they have their own credit card?" "Oh, no, I give them cash. So I say, "How did they buy the app?" "Oh, I reimburse them when I use my credit card." And I'm thinking, that doesn't make sense. Parents have to take over the reins when it comes to money, and start using cash a little more as a grown up in front of your kids. You teach numeracy that way. And really, for many people, the fun is in the, how do I get what I want? That's my goal. If it is your way of life, I think kids pick up on that. And looking toward the future and thinking of what we really want and how we're going to save it, I don't know if fun is the right word, but it's more of a satisfying feeling or an achievement feeling. You remind me a little of my dad, not in age --
Hartzell: Thank you.
Kobliner: He's 87. But, that idea of, this is something that's important. And there's no question your kids are going to grow up and say, "This is something that's important. Lord knows he pretended to like all those annual meetings." [laughs] To make dad happy. But that's setting the tone for what you think is important as a parent, and that does so much, it goes such a long way.
Hartzell: Speaking of not real. College is one of the most expensive things most people will buy. To a lot of them, it doesn't seem like a real expense, a lot of them will borrow an immense amount of money to go there. You talk positively about college, too, about how important it is to get an education for your future earnings potential. So, the question for you is, how much is college worth? An Ivy League school nowadays is probably north of $300,000 if you want to do four years of school. As good consumers, as frugal coupon clippers and everything else, what's the amount that somebody should be willing to pay when they're looking around at schools? What's the right amount?
Kobliner: I think this is a huge issue, and more and more, hopefully, I don't think it'll happen in the next 3.5 to 4 years, but I think paying attention to the cost of college. One rule of thumb that I heard of from this guy Mark Kantrowitz, who's this guru on student loans, is, don't have your kid borrow more than the first year's income. If the kid makes $40,000, try not to have him or her borrow more than $40,000. Which is still a big chunk of money. The average right now is $37,000. The median -- it's hard to get the numbers exactly, which in itself is a crime, that we don't have really good statistics -- is $20,000 for kids graduating from college. And the reliance of private student loans, which is only going to get worse because the rules have already been loosened up, that private student loans are usually much higher interest rates than federal student loans, which are still about 4-4.25% right now. Private student loans can be double digits, 15-16%, and they're harder to pay back as well. And I think, we're getting to, I'll meet someone who says, "I'm a philosophy major." I mean was an English major at Brown, don't get me wrong. But I think there really was, back in the day, you could be a great writer and come out and get a job. Or start The Motley Fool. [laughs] What was your major?
Tom Gardner: English.
Kobliner: English! Woo! [laughs]
Hartzell: I was sociology.
Kobliner: Ah, there you go! But I think it's much more difficult now for kids, and grad school. So many young people are thinking, "I'm going to grad school, they would be like $200,000 to get my PhD in philosophy." And as much as that's brilliant, there are no jobs. Even if you come out of Harvard philosophy school, if there's such a thing, there's still one or two jobs in the whole country. So, you have to be much more pragmatic. It makes me so sad, I've met so many parents over the last year who say, "We scrimped and saved because our kid got into this school, and we thought it was so great, but after the first year our kid was miserable, we forgot to include travel costs, and we're going to send them to the local public school and we realized we had three more kids down the line." It's so expensive and so mystifying, the whole financial aid form. And I'm a little bit depressed by this because when I was on President Obama's Council, they really made an effort, and Arne Duncan, who's the education secretary, really tried to make the FAFSA form, the free financial aid form, a little simpler. And they really tried to take some steps. But, it's really hard for parents.
Hartzell: And a lot of kids get in -- I paid a visit to my financial aid office where I went to undergraduate school and asked them a little bit about what they see coming through the office, what are the challenges and problems? And they were saying, it used to be that parents would come in and co-sign for these loans, but now they aren't, because although the parents earn in plenty to co-sign, they have a lot of debt, so they're not co-signing. And I think a lot of the students don't necessarily realize, these aren't loans you can walk away from. They're going to be with you a long time. Over $1 trillion in student debt now, I think being pragmatic probably makes sense. You have a great point that I love in the book. It's called your 10 investment rules. I'm not going to go through all 10 of those, but if you could just riff on a couple of those I'd be interested to hear them. One is, you don't need to be a perfect investor to be a good investor. What do you mean by that?
Kobliner: I think it's something I've heard throughout my 30 years writing about personal finance. What? It's been 30 years doing this? I'd better be damn good at it. [laughs] But, I think it's that, if you have money in the market -- you need to have money in the stock market. And whether you feel like, "I'm really good at this, picking stocks," just putting some money in the stock market, ideally it might be in an index fund, you will do better than not being in the market at all. And as the saying goes, perfection is the enemy of the good, people are like "Oh, I don't know, I'm not sure, I'm not going to sign up for a 401(k) because I don't really know what investment to choose," that procrastination, life goes on and you miss out. So, I think just making sure you're in the stock market, and making a choice, and hopefully a low-cost one. We know, research shows, it's much better than staying out of it completely.
Hartzell: We see that with a lot of new investors, that fear of failure. And I think of it like the person who has all straight A's never want to get a B, they never want to fail. And the reality is, in investing, if you're the best in the world, you're going to be wrong 40% of the time. It's OK. It's OK to buy a stock that goes down or doesn't work out, because of the successes you're going to have over the course of your lifetime are going to far outweigh some of those losses. So, that fear of failure is something we talk a lot about here at The Fool.
Kobliner: At least, statistically speaking. We don't know, we can't promise for the future of stocks or the stock market. But we know, if we use past history, as a group of stocks, predictably, we think it will do better over the long time. I meet so many people who might get a financial, personal finance, in your 20s and 30s, and you meet people in their 40s and 50s, and now I met someone who was 60s, and they were like "I read your book when I was younger." I'm like, am I 112 years old? How does that math work? But people have said, they did put a little bit in. And I said, "Put 10%, just put 10%, I know you can afford it, just do it." And then they said, and I'm sure you get the same thing, "I look back and I have hundreds of thousands of dollars that I wouldn't have otherwise." And I think of it like, you drink three cups of coffee a day and you cut back to two, and the first week you have headaches and it's so hard, but after a while, it's OK. I think the same with money, you just force yourself, if you earn $20,000, $50,000, $200,000, you have to put 10% away. And your lifestyle, just live off the rest, the 90%, and your lifestyle adjusts, and you don't buy certain things, and it works out. And I think that mentality is just important.
Hartzell: Another rule is, be lazy and trade less. Does it pay to be lazy?
Kobliner: It does pay to be lazy. [laughs] Oh, you're not lazy. You're not lazy. One study found, if you look at the people who are the top 20% most active traders and the people who are the bottom 20% least active traders, the ones who trade least actively do a third better, they have a third more money at the end of the day than the people who are active traders, because of commissions and fees and all that, and also just jumping around and not knowing what you're doing. I think that's a comforting thought to a lot of people who feel that they want to get into the stock market and teach their kids about it. Just being in it, and going into a passive -- that's what I should have done. I was saying, Tom and I started at pretty much a similar time, you're a little younger than I am. And I'm like, "He built this big company. I wrote a couple of New York Times best-selling books. I'm proud of it. But if I were parlaying it into some financial thing," and I think it's just ... I forgot what I was going to say. I lost my point.
Hartzell: There's a great investor, he wrote A Zebra in Lion Country, he has a long-term track record, and one of the things he did he kept an investing journal which is interesting. 1987, the stock market went down around 25% in one day, it was a big drop in the market. What he did is pull all of his analysts off of what they were working on and said, "Give me the best companies that we always wanted to own but were too expensive, because the prices are coming to us, get them all." A very rational way. And they sold some stocks, and bought the ones they really wanted. And because of his journal, he was able to look back nine months, a year later, and say, how do we do? And he concluded, we would have been better off just doing nothing. And he did it in a very rational way, to get into these good things. And I think, when it comes to investing, we do overthink it, we do try to jump to conclusions and get to the next best thing, when sometimes it's just better to relax. Have a good list of stocks, they're going to go up and down, but over the long-term you're going to do fine.
Kobliner: I remember what I was going to say. I worked at Money Magazine for many years. And I started there when I was 23, I was a staff writer writing stuff like Pick The Best Stock Now. And for my books, I've looked back and said, "If I look back at all the recommendations we made, and compare it to an index fund, an index fund would have done better." And what I was going to say, teasing you, Tom, was the idea that, I feel like I've been preaching the gospel of index funds for 30 years, and if I were really smart I would have somehow hitched my wagon to the companies -- and you guys were always promoters of index funds, and the smarts involved with that. I think that's one of those best kept secrets, still, even though it's not really a secret and they've exploded, in terms of money pouring into Vanguard and Schwab, that has really low index fund fees. I think that's really something that, it's both easy and understandable, and also very important for people to learn. Any person who tries to build assets, or feels like they should be involved in the stock market.
Hartzell: Yeah. And one of the dangers of the ETFs now, which proliferate all over the place is, you can buy and trade them like stocks, which is a double-edged sword for a lot of us, because we see people trading in and out of sectors and doing all those things that hurt them in stocks, but now they can do them in ETFs and they feel safer, but it's not necessarily safer because they're doing the same thing, you're churning them, you're paying commission.
Kobliner: Not at all. You just buy the broad-based index, and you put maybe 20% of it internationally. I do think that money is one of those things that, you can be lazy. You can set it and forget it, putting whatever you can into your company 401(k) and making sure that over time that you put the maximum in, or putting money into an index fund. I think those are those set it and forget it things, and they're so beneficial for people. And it's counterintuitive. You think the smart people are actively trading. No, actually, they're doing worse.
Hartzell: There's one point in this book that made me a little bit sad. I have a daughter, she's in the middle, 14 years old. You mentioned that parents or more open and more likely to talk to their boys about money and finance than they are to their daughters. And one of the things we see when I go out and talk to colleges, if you go to an investing club, it's probably 80-90% males. We see, not to that great of a degree, across our services. We certainly see more males that are interested in money. So, my question is, do we just not talk to the girls about money and finances? Or is it that we need to talk to them in a different way, maybe, than we talk to boys about money and finance?
Beth Kobliner: I was surprised by this, actually. T. Rowe Price does a study every year, and they find every year that parents talk to boys more than they talk to girls. And the reason is, they felt their boys were more interested. But, maybe if you're talking to them more, they'll become more interested, and it'll be a which comes first equation. Also, someone I know who works for a non-profit, very progressive guy, he told me after he read my book, Make Your Kid A Money Genius, he said, "I realize I have a six year old daughter and a 14 year old son, and I tease my daughter about her shopping, even though she's a super bright girl, I always tease her about her shopping, and I talk to my son about the stock market." And he's like, "I don't know why, it's just, sexism through the ages." Is it the prince charming effect? The hope is your daughter -- I don't know what it is, but I think there's still a huge bias in terms of how parents talk to children. And you made a point in your questions about how women are better investors in some ways, they trade less and stick to it the long-term. But Fidelity just did a study and showed that, yes, women are better when it comes to not over-actively trading, but they're less confident that they'll beat the market. And I think part of it is also role models. The 2016 Federal Reserve study showed that, when it comes to households, dads are more typically the saver and investor. And moms are more typically the budgeter and the shopper. So, when it comes to role models, as moms and women, I think we have to make that extra effort to serve as a role model for our sons, but particularly for our daughters.
Hartzell: I have a couple more questions, and I want to do a short section on buy, sell, or hold, and then we'll take any questions from people in the audience. In your opinion, as an expert in this field, what's the most important thing that we can do as parents to teach our children? What's the most important thing? If you had to take one thing away, go home and do this with your kids, what would that be?
Kobliner: I would say, no matter your child's age, teach them that credit card debt is a bad thing. I just heard that Warren Buffett says that, too. I wish he would stop copying me. It's, the notion that, if you have a credit card, and there's certainly less credit card debt, like I said, among young people, because they couldn't get credit cards in high school, the rules changed in 2009, you had to either have an income or be 21, or have a parent co-sign to get a credit card. Which is a mistake, never co-sign a credit card with your kid. But, I think, teaching a kid, do not spend more than you have in your savings, do not buy things you cannot afford, is a concept that people still don't get. And I think that's a lesson that I knew, by osmosis coming from parents who were Depression-generation, and my father said, he's 87 years, so, I don't know how long he's had a credit card, but he never paid a late payment, he always paid in full. I think, if you have a credit card that's charging 15%, paying it off is equivalent of earning 15% guaranteed on your money after taxes. And that's still basically the best. You can't get 15% guaranteed after taxes anywhere, except a 401(k) with matching, which is 100%.
Hartzell: And stocks have only done about 9% over their history.
Kobliner: Right. So, don't get into credit card debt. Teaching it to kids. Because, I think kids see it as magic. "My parents swoosh this card and they get something." And it's very confusing for kids, and that's debit cards, but I think credit is really such an insidious thing, credit cards can be so problematic for people down the line, that I would say, that would be it, if I had to take just one financial lesson.
Hartzell: On the flip side, the mistakes. We all make mistakes as parents in different things. What's the biggest mistake that you see across parents that they need to eliminate in order to help their children be better with their finances?
Kobliner: I think it's lying. [laughs] Whether you have a lot of money and you don't want to confront it because you don't want your kids to know how you feel, or you have very little money, so you might overcompensate, and think, "I'm going to buy my kid that because I don't want them to miss out." I think both of those are problems. You don't have to tell your kids everything. You don't have to tell them your income, who makes more, mommy or daddy. I don't think you have to tell them how much you have in your 401(k). There are a lot of questions you don't have to answer, and I have a list of them in my book. But I do think we have to try to be someone honest about the things we do answer. As simple as, you walk in a store, "Can I have that?" "Oh, I don't have any money on me," and then you use your card and they see you using your card and they're like, "Wait, you don't have money on you." A woman I know told me a story where, just recently, she went out with her kids and forgot her credit card and she had cash and they went to the Gap and they went out to lunch and they said, "Can we go to the movies, mom?" And she said, "I ran out of money." And they were like, "Does that mean we're homeless? What do you mean, we've run out of money." They were little kids, they didn't get that concept of running out.
Hartzell: That's great. We'll take your questions here. I have a quick round. We call it a buy, sell, or hold round here. I'll throw out the idea, and you'll let me know whether you going to buy, sell or hold. The first one is autonomous driving vehicles. Would you buy them, sell them, or hold them? In our near future.
Kobliner: [laughs] I don't know! What's the expense ratio?
Buck Hartzell: Google, Apple?
Kobliner: Sure, I guess, it's a good thing to hold.
Hartzell: OK, she's a hold on that one. Bitcoin, or other blockchain types of new currencies are you a buy, sell, or hold on these new currencies?
Kobliner: I would only say buy because I think they've had such a bad time and they're probably down and probably eventually, maybe, so it's a value -- I don't know any of this. I don't know. Index funds. Ask me another one.
Hartzell: OK, the last one. A degree at the University of Michigan for $250,000. Are you going to buy, sell, or hold the Wolverines?
Kobliner: I would get a scholarship. My dad, I look back, he got a 0% interest rate loan from this thing called the Hebrew Loan Society. I don't even know what that is, but they gave a 0% interest rate loan for my college. He was a veteran, so he got a VA scholarship for me. I think getting creative and trying to really figure out how you can not get yourself or your kids into huge debt. I'm afraid of the parents who borrow for their kids' college, and the PLUS loan, the parent loan, which allows you to borrow as much as you can, as much as you need. It's really a problem. So, I don't know. I'm like a bad juror, I can't say guilty or not guilty unless I get to --
Hartzell: Well, I'm going to say that's a sell, because Andy Cross, our chief investment officer, went to Michigan, and Ron Gross's daughter, who sits right behind me, is going to Michigan. So I'm going to say it's a sell.
Kobliner: It's a great school.
Hartzell: No. My wife went to Ohio State, they're rivals. So, that's it for buy, sell or hold. Questions from anybody else in the audience about how to make your children money geniuses? Yes?
Audience: You said one of the biggest influences is osmosis, kids watching what you're doing. But if the osmosis is of the wrong kind, how could I as another relative try to overcome that, especially when they live on the other side of the country?
Hartzell: Let me ask that, in case they don't hear it. Sometimes kids don't have the right role models what if you're a relative, but not there with them all the time? How can you help out? What can you do to be a good role model from a distance?
Kobliner: Right, that's a great question. And you're right, that's an inherent contradiction. You don't need to be a money genius to make your kid a money genius. But it sure is helpful if you're good at money and responsible, to make that. I think, whatever chance you get, talking to the kid. You can't bad mouth their parents, because that's a disaster. But you can say, "I've been saving." Again, anecdotes and stories. And saying, "I'm going to set up a college plan for you," and the reason is, we know from research, and this is my favorite piece of research, that when you tell a child that you're saving for their college, they are seven times more likely to go to college, regardless of how much money is in that account. So whether you have $100 or $100,000, kids are more likely.
It's the expectation, that you know someone believes in you and is saving for your college. And that's very powerful, and I know of a lot of philanthropic efforts that are starting with that, the notion that the kid knows someone is saving for them and they're more likely to go. And hopefully, they won't get into debt in the process. But, I think, using that, whether, these kids are not in college yet, and encouraging them to, you're going to match, for every $1 they put in, you'll put in $1 or $0.50. Maybe that does go back to making it fun. Having it more like a game. You put in a certain amount and I'll match it. And I think that can be very motivating to kids, without making it like, "I think your parents are doing a lousy job."
Hartzell: Other questions. Tom?
Gardner: We have Foley these two days, she's a 10 year old --
Kobliner: I met her already. She's a little intimidating, but she's very nice.
Gardner: A soccer star. She's also somebody who saves what she earns. But, what about the child that saves too much, who maybe doesn't learn how to spend or what to spend on? [...] How do you encourage a child who's very thoughtfully saving, which is so rare, to also use that?
Kobliner: To spend it.
Hartzell: I should say, the question is, stop and smell the roses. Foley is a great example of somebody who's diligently saving all her money. How do we also enjoy it?
Kobliner: OK, can I just ask whose kid is Foley? I met her during my interview, my podcast. Do you know what you're saving for, Foley? Or are you just saving? Good for you, that's awesome. Hopefully you'll hire me one day. [laughs] I'll come to you and you'll be like, "No, I'm sorry." I've gotten that question a lot. My husband was worried about our own kids. I would bring them to talks since they were little. My little one was like, "Oh, I'm so worried!" I was like, "What's the matter?" "I don't know if I can afford health insurance, mommy, it's so expensive!" when he was like six. It really was that level. So, in the end, that instinct to save money, at some point, breaks. I think some little kids love to just save. And I don't think that they have to spend when they're little, because instinct kicks in at one point, whether it's when they're in college or out of college. So, I don't worry about that.
I look at all three of our kids, they were all voracious savers, and now, my oldest is 21 -- although, one thing that I think we did do well is, for college, we do pay for college for her, and she does work a very little bit in college, but, we've given her spending money, but it's a set amount, and we said, "This is money." And sometimes I'm very cynical about it, because I think, when I was a kid, I had four jobs, I worked at the Brown cafeteria, I worked in the Brown student agency doing dry cleaning and so on. And sometimes you have to step beyond yourself and say, "My kids, we're going to give them some spending money, but that's it. We pay for your books, your college, your healthcare. If you want to take an Uber rather than the New York subway or walk to class, that comes from your money. If you want to go on a vacation with your friends who live in Australia," which she wanted to do, she figured out the cheapest flights. So, giving kids ownership of some money as they get older, I think, it makes them -- this is sort of the opposite of what you're asking, but it makes them more careful about spending. But, I've never met a 30 year old -- I mean, I guess there's a rare case of the hoarder who never spends money. But, I think life gets so tempting.
Gardner: Why are we laughing in the front row?
Audience: Because she's here.
Hartzell: Next year is the year, Megan.
Kobliner: I think it's great. I would embrace your hoarding tendencies. If you're saving, you have a chunk of money that, one day, there will be a reason. Do you own a home?
Audience: No, not anymore.
Kobliner: Not anymore. But you will one day. I just think that, having a huge amount of savings is never a bad thing. I was just on a show, I was on ABC or CBS this morning, and the woman said, the host, she was so cute, she took off her shoes and like, "Look! $24, my shoes! And I got them 20% off!" And I was like, "Good for you!" And she said, "Do you know why my nail polish just chipped? Because I'm saving money!" I'm like, "Good for you!" We save money, and there will be something that comes along, and you'll know when you want to buy it. I don't know, I have a bias toward saving.
Hartzell: There'll be something you want, Foley. I trust you. It could be a shiny gold fidget spinner. Someday. OK, great. Thank you very much, Beth, for joining us.
Kobliner: Thank you! These were great questions.
Hartzell: And thank you all for coming today.
Buck Hartzell owns shares of Apple and Charles Schwab. Tom Gardner has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.
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