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Use Wall Street crisis to teach important lessons to your kids
By Steve Rosen - 10/06/2008
KANSAS CITY, Mo. Leave it to a teenager to provide fresh perspective on Wall Street's financial meltdown.
On the day when the federal government opened its vaults with an $85 billion bailout of American International Group, I asked my 16-year-old if he had heard of the financial services titan.
Talk about tossing him a softball question.
Establish the savings habit. With so many people living paycheck to paycheck, this would be an opportune time to instill in your children young ones espec-ially the need to scrimp and save for the future.
As I've said many times before, saving is a learned experience that comes with practice. Help your youngsters open a savings account, for example, or set aside money for a goal.
With older children, introduce them to the stock market, and the values of investing for long-term growth.
The other piece to this discussion: Point out the risks of investing, that there are no surefire get-rich-quick formulas, the dangers of not understanding what you're investing in (think adjustable rate mortgages), and cutting corners for the sake of greed and profits.
Live within your means. Keep spending under control.
If your high schooler or college student is clamoring for a credit card, make sure they realize the plastic is not free money, that it is not a way to extend their income and buying reach, and that they are borrowing and will be charged interest if they don't pay the balance in full each month.
My rule: Don't use plastic to purchase anything that will be consumed before the monthly statement arrives.
The world is not coming to an end. No less an authority than John Bogle, the legendary former chairman of Vanguard mutual funds, cautioned against comparing current economic conditions with the Depression. According to Bogle, the country is in the midst of the "worst financial crisis" since the Depression, but not the worst "economic crisis." I was reminded of Bogle's comment as I watched professional and college sports on television last weekend. True, these are tough times, but then again, the stadiums were packed with people who had shelled out serious bucks for entertainment. Is this the picture of financial calamity that would rival the Great Depression? Think about it.
If you have a family member or friend who lived through the Depression, here's an opportunity for them to share with your family what it was really like growing up in the 1930s and how it compares to today.
New rules of engagement. Did the government just add to the tax burden our children and perhaps our children's children will face down the road on top of Social Security, health care, the war, and who knows what else? That's what my 23-year-old wanted to know. "Somebody has to pay for all this," he said.
Agreed. Part of living in a very wealthy society is that we've come to expect certain services, rights and privileges from our government and institutions. Our children may have to get used to paying more for those privileges down the road.
(Questions, comments, column ideas? Call Steve Rosen at (816) 234-4879, send an e-mail to srosen@kcstar.com or write to him at The Kansas City Star, 1729 Grand Blvd., Kansas City, MO 64108.) (c) 2008, The Kansas City Star.
Visit The Star Web edition on the World Wide Web at http://www.kansascity.com.
Distributed by McClatchy-Tribune Information Services.
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