MONEY MAKEOVER
Learning to save early pays off

By Deborah Adamson
Advertiser Staff Writer

Malia Marks and Sharon Valdez are typical Hawai'i teenagers: They enjoy hanging out with friends, going to the mall and dancing hula.

Sacred Hearts seniors Malia Marks, right, greets a passing friend as she and Sharon Valdez walk to class. They're trying to save money. Jeff Widener • The Honolulu Advertiser

Too often, shopping wins.

"You see a cute top and you want to buy it and the idea of saving never goes into effect," 17-year-old Marks lamented. "My paycheck is not big enough for all I want."

Her parents gave her $1,000 to kick-start her savings. But she's been dipping into the account, so it's now down to $800. That's in addition to the $300 she spends a month — her salary as a part-time salesclerk for Roxy Quicksilver.

Valdez, who lives in Waipahu, makes $400 a month from her job at Zippy's. She manages to save, but not consistently.

"My mom advised me to save $20 per paycheck. But I'm not constantly doing it," the 18-year-old confessed. "When I didn't have a job, I saved more. That's my problem."

One major expenditure: $80 a month on her Nextel phone. Why Nextel? It's the rage, she said.

"If you buy into it, your paychecks will never be enough," she told them. "I'm here to tell you, 'You're OK' now."

Teens have more money than they think. The average teen has $5,000 a year "just to blow" since their parents are paying for nearly everything, said Karen Ho, a financial educator at the Hawaii State Federal Credit Union.

Not too many adults can say they have $400 a month to spend on themselves, Ho said, "so what are you buying with that?"

Her advice: "Don't be brand- loyal. It will cost you 50 to 70 percent more. You just want to show off — that's just immaturity."

Brey wants the girls to focus on the habit of saving because they will reap the rewards later on. But to change behavior, it's important to alter attitudes and perceptions as well.

Case in point: Marks purchased a blouse for $29.50. She earns $6.50 an hour.

"A top is about 4 1/2 hours of work — and that's (your income) before taxes," Brey said.

"I never thought about that!" Marks said with a laugh.

Brey pressed her point: "Have you ever had a new top that changed your life?"

"I probably have one at home that looks exactly like it," said Marks.

The earlier kids start saving, the less painful it will be to build wealth.

Let's say at 16 you start saving $3 a day — that's $1,000 a year — for 10 years. Put it in a mutual fund that earns an average of 8 percent a year. At 26, you would have put in $10,000. If you never saved again, by age 50 your money would grow to $131,000, Ho said.

If you wait until you were 26 to start saving $1,000 a year, even if you put away money for the next 25 years at a total of $25,000, at 8 percent you'll end up with $85,000 at 50. The bottom line: You put in more money and you get less back if you start later.

To make it easy to save, set aside the money before you spend it, she said. Keep track of your spending by balancing your checkbook or going online to check your account. Set up a budget. Better yet, give yourself a cash allowance weekly and put away the debit card.

Be wary of the temptation posed by credit cards, Brey said. She advocates not giving the teens any credit cards, even for emergencies. In the age of electronic banking, it's not difficult to send money if there's an emergency, the financial planner said.

Once the teens learn the value of saving and the pitfalls of credit card debt, they start out unencumbered as adults.

"We're trying to prepare the girls for the future. One of the essential items is they have to be financially literate," said Betty White, the principal at Sacred Hearts Academy in Kaimuki, which is holding a free financial literacy conference for girls on April 17. As women, "They have a good chance of making less than men and they're going to live longer. They must start planning now" for their financial future.

Here's a way for teens to have $1 million by age 55:

Step 1: Save $50 a month for four years, through college. Invest in mutual funds that earn an average annual return of 8 percent. That's $1.67 a day — or about three pork hash at the 7-Eleven.

Step 2: After starting work, save $250 a month for the next five years. That's $8 and change a day or the cost of a plate lunch plus drink.

Step 3: Save $500 a month for the next 15 years, as the careers get rolling. That's $17 a day or the cost of eating dinner out for one or two people.

Step 4: Save $1,000 a month for the next 13 years, until age 55.

Marks wants to be a psychologist and Valdez a pharmacist. According to the U.S. Labor Department's Bureau of Labor Statistics, the average income for psychologists was as much as $73,000 in 2003. The average wage for pharmacists was more than $81,000.

The two teens say they've made up their minds to crank up their savings.

"I have great determination," Marks said.

Added Valdez: "My parents have always taught me to save."

Reach Deborah Adamson at 525-8088 or dadamson@honoluluadvertiser.com.