Teaching Teenagers About Wealth

Suzanne has two teenagers whose father passed away earlier this year. Suzanne wants to know the best way for them to learn how to invest. How can she best help them with this money?

QUESTION: Suzanne in Lexington has two teenagers whose father passed away earlier this year. The kids are responsible, and Suzanne wants to know the best way for them to learn how to invest. They’re each getting $240,000 in life insurance in addition to whole life policies worth $2,200. They have a Roth IRA worth $4,000. How can she best help them with this money?

ANSWER: I would cash out the whole life policy. The IRA is called an inherited IRA. You just roll that into their names. The 16-year-old does not have control of this money legally until she’s 18. You’ve got some training to do there during that time.

The first thing you need to do—and I have a feeling you’re already doing this—is remind them over and over again that this money is not a privilege. It’s a responsibility. When you say someone of wealth is a person of privilege, what it means is they have the privilege of serving the community with their wealth. What happens to immature people whether they’re 52 or 22 when they get a bunch of money is they somehow think it’s all about them. Instead, wealth is a responsibility. Yes, you have the benefit of doing some things for yourself when you have wealth, but that’s a very small part of the equation. They have to learn how to handle this money well and do good things with it to honor their dad’s memory. I would pound them with that.

If you look at it as a responsibility, then you’ll do what you’re talking about, and that is learn to handle the money. Learn to invest it well, make these decisions, be in a constant mode of personal improvement and education, because you see this as a responsibility—as a duty. That’s where you want to get their heads on this.

After that, the first thing you need to learn to do—and everyone needs to learn to do this with money—is surround yourself with financial people who have the heart of a teacher, not the heart of a salesman. I would guess that 85% of people in the financial world are salespeople and about 15% of them are teachers. You need the teacher because this 16-year-old needs to be able to have somebody who teaches her and she trusts them because they teach her. She doesn’t trust them because she trusts them. You need a mutual fund person you trust because they teach. You need an insurance person you trust because they teach. You need an estate planner—an attorney to do a will—you trust because they teach. But if any of these goobers ever drop their glasses down to the end of their nose and start telling you to do something because they’re so smart, get away from them. There’s a level of arrogance that goes into this business that you’ve got to stay away from. That’s why I don’t tell people which mutual funds to buy because they’d all go buy it just because I said to. I don’t want you doing that. I want you learning about mutual funds and you learn how to choose a mutual fund. That’s why I refuse to even tell you the ones I put money in. I don’t want you doing what I do. I want you doing what you do. You’ve got to learn.

Responsibility and continuing education. I would go to daveramsey.com and click on “Investing ELP.” That’s an investing ELP who has the heart of a teacher or they wouldn’t be my ELP. They will sit down with your kids and begin to teach them about mutual funds. Duplicate that over and over and over again. Let’s put them through Financial Peace University and let them learn how to handle money. These are the ways wealthy families think. Now you are one. It sounds like they’ve got a great mom. I’m sorry you guys have gone through this horrible thing.

Just be gathering people around you who teach you, not sell you. As the mom, your job is just to continually pound into their minds that this is not a, “Woohoo! I hit the lottery!” Instead, this is a responsibility. It’s a duty to do well with this money.