Teens, parents get financial prep course

By Harriet Johnson Brackey
Knight Ridder News Service

MIAMI — He has a fabulous academic background, a Miami Herald Silver Knight award for mathematics, and he's starting at Harvard.

But this Miami teen has plenty to learn, both about Massachusetts winters and living on his own, far from home. "I have no clue what a long winter jacket costs," Matthew Winston said.

He has never paid a bill, either. Or created a budget. Or had to get by on a student-sized budget that by semester's end might be pretty tight. How many nights in a row can that pizza last?

A Miami financial planner, who typically spends her days helping clients position their investments or plan their estates, felt that families have a special need this time of year. So she developed a way to teach teenagers how to handle their financial responsibilities.

"It's a rite of passage. It's time," insists Kathleen Day, who heads The Enrichment Group. "Once they go off to college, they're adults."

The Enrichment Group offers a service called life planning, in which nonfinancial issues and services, such as family counseling with a professional social worker, are intertwined with the core business of certified financial planners advising clients on how to handle their money.

The firm operates on a fee basis, charging clients up to 1 percent of assets under management per year for its services. The teens-and-money sessions are part of its package for those who need them.

To the teens, Day says it might feel strange to be responsible for paying your own way, but you can do it. To parents, she says to let go of the purse strings, and watch the kids grow.

Day consulted recently with Winston, 18, and his parents, and another high school senior, Craig Rosenkranz, 17, and his parents.

Rosenkranz had a summer job as a camp counselor. He plans to find a part-time position as soon as he gets settled at school.

"What do you do with your money?" Day asked him.

"I have a girlfriend," Rosenkranz said, without a trace of humor. "Lately, we've been going to a lot of Marlins games. Or we go out with friends."

Addressing his parents, Day asked Neil and Babs Rosenkranz if they buy their son clothing whenever he wants. Their answer was yes.

Her suggestion: The parents should decide on a clothing allowance, then turn the money over to him. They should not dole it out each time he goes shopping.

"The idea is to let him decide how to use it," Day said.

And, if he uses it wisely, he gets to keep any unspent money.

"Some people go out and buy $200 tennis shoes," Day said. "When you do that, you make a choice to spend the money that way. If he chooses not to spend a lot of money on clothes, he should be rewarded for that."

Rosenkranz earns enough money for entertainment expenses, and he pays for gas for the 1996 Olds 88 that he bought with his parents' help.

For other teens, Day would have also proposed an entertainment allowance. "We don't call it a budget," she said. "It's more like a spending plan."

She urged Rosenkranz to open a checking account in December when he turns 18 and learn how to handle it by using Quickbooks.

Credit-card offers will start arriving then, too. Day suggested Rosenkranz pick one and learn about that, too, while he's still under the watchful eyes of his parents. Pick one that offers frequent flier miles or cash back, but always pay off the full balance each month, Day said.

Day's idea is to set up a system in which teens have bill-paying responsibility while parents still maintain some control by having bills sent to the parents' address. Parents can then forward them to the student, and the student can pay it from his or her budget.

She tells parents to not open the monthly bills regularly. But every once in a while, Day says, they should check to see what's inside.

If the parents find the teenager has broken the rule to never run a balance on a credit card, then they have to discuss that.

"The people I wind up counseling that are in the deepest debt hole started while they were in college," she said.

What's more, "You should have all the money you need to do the stuff you want to do," with the cash that your parents have allowed you.