Housing Market in Flux: Should You Buy Now Before Prices Shift? (Plus: How Teens Can Build Credit)

18:15Sean Pyles:That's R-U-L-A dot com slash smart money. You deserve mental health care that works for you, not against your budget. We're back and answering your money questions to help you make smarter financial decisions. On this episode of Smart Money, we are joined by Kevin, who has some questions about how to teach your kids about money, including how to help them find the right credit card. And we're also joined by one of Kevin's kids, Simon.

18:37Elizabeth Ayoola:Welcome to Smart Money, Kevin and Simon. Thanks for having us. Hi, thank you. We want to let you guys know that you are very special because you are the first parent-child duo that we have had on the show before. Cool. The first. First of all, we'd like to know, how did you all's conversation about money start or when did it start? I don't remember when it started. I remember when I was quite young, I opened like a kid bank account and, you know, they'd send you like monthly coloring books and stuff in addition to like teaching you how money works. So that was the first time that I interacted with a bank or anything like that or managing money.

19:18So I assume we talked about it some then.

19:20Sean Pyles:How old were you? I think I was maybe 12. Okay. Quite young. Yeah. Coloring books seem a little bit immature for a 12 year old, but hey, if you can get a free coloring book, it sounds fun. And do you remember how you felt or thought about this checking account? Was it just another thing that your dad was putting on you or were you actually engaged with it? I mean, they sent like monthly mailing things. So like I knew it was there, but I wasn't super engaged with it. I remember like every couple of months we'd go over there to like deposit money. So I remember doing that, but I don't think I thought about it all that much other than just thinking like, okay, it's important to save money.

19:59So I'll put money in there to save it. It was a little bit hard to access as well. It was at a credit union. There was no ATM card. Everything had to be in person. But if I remember correctly, when you were about 16, we took that savings account and we opened you a checking account with that money.

20:20Elizabeth Ayoola:Simon, I'm curious to know, because I have learned many money lessons just by watching my parents manage money. So is there anything that you learned watching your dad and your mom manage money over the years? They both have a pretty frugal mindset. So I definitely noticed that and picked up on that, just understanding that it's important to save money and that the more that you let your money sit. I mean, I guess this isn't really the case for a checking account or even for most savings accounts. But the more you let your money sit, the more money you'll end up having later on. So it's best not to spend all of it and save it for something important.

20:58So I'd say like that is kind of the attitude that I picked up on as a kid and then ended up adopting.

21:04Sean Pyles:And Kevin, were those the lessons that you were hoping to impart? Or was there anything else that you really wanted to make sure that your sons learned about managing money from you? I think one of the most important things is to understand the difference between a need and a want. There's nothing wrong with wanting something. And you can want and then you can buy that thing. But you need to recognize that you want it. And it might not be needed.

21:29Elizabeth Ayoola:So, Kevin, what are some of the questions that you had for us? So what originally started this was my younger son is 18 and he's going to college. And I wanted to make sure that he had a credit card in his name, mostly to resist the temptation of opening a bunch of them. So I was just going to go to the bank and co-sign with a card. And he said, well, maybe there's something with better perks.

21:58Sean Pyles:Very savvy for someone so young. which kind of cracked me up because the limit's going to be what like two thousand dollars you're not going to rack up a bunch of flight points for that we did end up just opening an account last week and it was at the bank you know it's nothing fancy but for me it ended up being a decision based on convenience it's already a place that i have accounts i have the app i log in there a few times a week. So this is part of establishing and then eventually taking off training wheels for your kids financially. Right. Yeah.

22:37Elizabeth Ayoola:Well, Simon, I have a question for you. How are you budgeting now that you are somewhat financially independent and taking your finances on by yourself? How do you manage your money generally? So how did you decide how much I know your dad gave you some guidance, but how much you're going to invest, how much to save, how much to put towards expenses? Well, generally, I try to keep my expenses as low as possible. I don't really spend all that much. So what I have to worry about is mostly just rent and food and education type expenses. But we have a 529 for that. So I don't have to worry about that quite so much.

23:13So I just try to keep my expenses as low as possible. And of course, I live in a pretty big city. So that's not always the easiest thing. Rent is pretty high even for a studio apartment. So generally, I keep my expenses low, put what I can into savings. And then when the time comes during the year when I can put money into the Roth IRA, like this last year, I put maybe like half of the maximum in there just to allow that to start making money, start increasing in value. And then the rest of it, I just try to spend as little as I can.

23:44Elizabeth Ayoola:And if you don't mind sharing, how do you earn income? Right now, I don't have a source of income. I'm a student now. I've been a student for a few years, so I had a work-study job. I'm lucky enough to have this 529 that my parents have set up for me, so I actually don't really need to pay for most of my expenses like that money is provided for from the 529.

24:03Sean Pyles:One thing I'll flag with adding money to an IRA, a Roth IRA or traditional, you do have to have earned income in order to contribute. So even if you just have money sitting in a savings account, you can't put more in than you actually received from a job, essentially. So just make sure you do have that amount. Otherwise, you might run afoul of the IRS, which no one wants to do. So you're in college now. When are you expecting to graduate? I'm going to graduate next year. I actually, I already graduated, but I'm getting two degrees. I have a degree in psychology already, which I finished up last September.

24:31And then I'm getting a second degree, which I'm going to finish one year from August.

24:35Sean Pyles:It might seem like a long ways away from now, but have you thought about how your life financially and personally may change after that? Are you going to move somewhere? Are you maybe going to take on some new expenses, start paying off your student loans if you have them? At that point, my plan is to go to graduate school. My understanding is that all the student loans that I've taken have actually been subsidized loans. So that means that the interest doesn't start accumulating until I'm out of school. So if I continue to get an education, then I won't have to worry about paying those off until another six years in the future.

25:07but I want to end up moving to the West coast. I want to end up in California. So I know that like, it's quite a bit more expensive to live there in like the Bay area. It's just way more expensive. I'm in Denver now. It's pretty expensive, but it's more expensive there. So there'll be more expenses, but also, you know, if I'm in a PhD program, then they provide a stipend. So I won't have all that much money to say, invest or start managing, but I also won't really have to worry about that as much either because the stipend adjusts to the price of living.

25:39Sean Pyles:And Kevin, how are you thinking about this transitional period in Simon's life? Will you be pulling back some financial support? Will you be maybe trying to make sure that he has other means of support and set up with credit cards and checking accounts and all that? What's your thinking? He did apply for his own credit card, but I am still co-owner on the one that we originally took out six years ago. And I'm also listed on his checking account. He and I have talked about this. We're probably going to unravel that this summer. You actually may want to keep that connected for some reasons in case you want to easily transfer money back and forth.

26:16Sean Pyles:I still have the same checking account joint with my mom that we established when I was in high school. And I essentially only use it now to pay her my part of the cell phone bill. So even though I I don't really need it. And I have my own checking account elsewhere. Unless you're paying a lot in fees for it, it might just be a handy thing to hold on to. So you don't have to wait for transfers to go through over a couple of days if you use a payment transfer platform. My only worry is that if Simon has tied that account number to various things, if he opens another checking account, that's kind of a hassle to update all those other services.

26:51So for him to keep the same account number in his own personal use, That kind of makes sense.

26:58Elizabeth Ayoola:And then also I wanted to know, because you mentioned a joint credit card account as well, are you thinking of closing that too? Yes. Are you aware of how it might impact your credit score? Is that something you've thought about?

27:09Sean Pyles:I'm not personally worried about it. Simon might want to know. I don't know how it will impact him. Yeah, it may harm Simon's credit because it would likely reduce the amount of available credit that he has overall as well as the age of his credit. So if you aren't paying any fees to keep that account open, which you likely aren't since it's just a pretty early on simple credit card, it seems. Yeah, you can just kind of keep it sitting in the background. Best practices typically are to have some sort of regular ongoing charge like Netflix or Spotify, something kind of inexpensive that you have on there.

27:45Sean Pyles:So you have regular activity, but then make sure you have auto pay set up. So you're paying it off each month without having to worry about it too much. That way you can keep that older credit file on your report, which just looks good overall. Perfect. That's actually what's happening already. That's great. There you go.

28:01Elizabeth Ayoola:Simon, you recently opened a new credit card, right? I did, yeah. So what was your decision-making process in choosing a credit card? What were the most important things to you? I don't consider this credit card to be the card that I'm going to use for the rest of my life. I just wanted something with more credit on it and also a card that, you know, I actually don't know if this is true. I just kind of assumed it was. But I assume that if the account is actually only in my name, as opposed to mine and my dad's, then it's better for my credit report.

28:29Sean Pyles:Having it solely in your name, Simon, doesn't make a big difference. It's treated effectively the same as long as you're paying it off. And that can be sometimes a risk if you do have a shared account where if one person misses a payment, the other person who didn't miss that payment would actually pay the price for it on their credit report. So it's good hygiene. And And I think it's a good step toward financial independence to have your own account. How are you making sure you pay it off on time and stay within your credit limit and don't charge things that you can't afford all of that? What's your thinking behind that?

29:00I've tried to set it up so I don't have to think about it as much as possible. Every month at the end of the month, I have like a reminder that goes off on my phone and I go and I look at my statement and I pay off the card. And as far as actually exceeding the credit limit goes, I don't think that's ever going to happen because the expenses that I put on the card are paying for rent. each month paying for groceries, that sort of thing. Unless, I don't know, like I lose two or three trips of groceries somehow or something like that, or I just get really hungry, I'm not going to exceed the limit on the card.

29:32Elizabeth Ayoola:And I guess as your credit score continues to grow, one of the things that you do want to think about when in the future, maybe you're looking for a credit card is one that gives you the highest value. Some credit cards are best for grocery rewards. Some will give you rewards on gas, some on travel. So you just want to make sure, especially if you're paying fees, the value that you're getting justifies the fee that you're paying. So I think that's a way to approach looking for credit cards. Yeah. And actually, that reminds me, like you asked earlier why I chose this card in particular. And I remember I saw that it had points for both gas and for groceries.

30:03Elizabeth Ayoola:Smart. I don't know how it compares to other cards as far as how many points you get, but that was one of my considerations. Just like, oh, okay, you know, I'll actually get some points for using this card. Well, we have a cheeky plug, of course, on NerdWallet. We compare the cards and the different rewards you can get with the different cards, but it can also be helpful to understand how rewards work so that you can maximize the benefits and justify the annual fees, as I said. And at NerdWally, we have a rewards valuation that can help you with that in case you want to look at that to see really how much value you're getting out of these points.

30:31Sean Pyles:Kevin, I want to hear a little bit more about your younger son and how you're talking with him about managing his money and if there are any areas where you think you might need a little guidance to give him a little guidance. He's going to go to college in fall. He also has a 529 that's going to cover and he's living on campus. So most all of his expenses will kind of be hidden. And this is actually something I should talk to you, Simon. Like what are the first year college expenses that aren't related to room and board? Is there anything? Partying. Very important. Occasional trip off campus, that sort of stuff.

31:10He pays attention a lot. So early this spring, I was doing my taxes, and he was right next to me the entire time as I'm going through with all the papers and filling in the forms. We haven't yet had the formal talk about how a credit card works and how you should use it because he now has one. But we'll do that, and we'll go through the statements when they come in, show them what they look like.

31:35Sean Pyles:The weird thing about the American educational system is that you're 18 and you're suddenly expected to sign up for a massive amount of student loans. I know when I was taking on these loans back when I was entering college, I had no idea what paying them off was really going to be like. Now here I am in like my mid thirties trudging through lots of student loans. But I think it's a credit to your parenting that you've kept your kids so engaged. So pat yourself on the back for that and see if there are other areas where you might want to go deeper. Like Simon, the fact that you have a Roth IRA or an IRA at all at your early age 22 is pretty remarkable as well.

32:12Sean Pyles:So see, Kevin, how you can maybe set your younger son up with something like that too, just to kickstart saving for retirement. Last summer, I did take some of his savings account and we put in a robo investment account online. And it was kind of interesting because I've had him answer all the questions. What are your goals and how do you feel about risk and all these things. And, you know, we had to talk through some of that. And he was significantly more risk averse than I expected. Where do you think that came from? I think he just doesn't understand like risk over time. So this is not money he's going to touch for, I don't know, five years, 10 years.

32:52I think he was much more concerned about the downside than the upside.

32:58Sean Pyles:Well, that's actually a great learning opportunity because there can be a risk to being too risk averse when you are that young. The idea is that when you are younger, you have all these years for your money to grow, you can take on more risk. And if you do that, you have higher, greater potential for earnings. Whereas if you are really, really conservative with all of your investments at this early age, that may end up being a difference between having a massive nest egg and something that's much smaller in size. So I would recommend playing with something like a compound interest calculator.

33:28Sean Pyles:We have one at NerdBallet, we can drop a link in the show notes and just seeing how given a potential rate of return based on different levels of risk, what he's putting in might grow into one size or a different size. We have been checking it about once a month just so he can see what it's doing and we can relate it to the news and be a little in touch with that. So that's a great idea.

33:49Elizabeth Ayoola:Now that your kids are young adults, Kevin, how do you balance letting them maintain financial independence while also guiding them to make good financial choices? How are you balancing that? Yeah. So it's a tough question. I was thinking about buying like a helicopter, actually. A what? A helicopter. Oh, fantastic.

34:11Sean Pyles:Smart investment. A little one. Well, part of that is trying to like just let go, right? Let Simon make his own decision. But at the same time, I want him to know that I'm there to help if something goes wrong, right? So the engine in the car blows up, give me a call and we'll try to figure something out. But it's difficult to see them on their own because I'm used to just constantly being there all the time.

34:44Elizabeth Ayoola:I understand.

34:45Sean Pyles:It's a big transition having your kids be out of the house. But one of the best ways you learn your lessons is by the mistakes that you make, especially in your early 20s. I think it's actually good to make some financial missteps. I took out my very first credit card to buy an iPhone that I certainly didn't need, but I just wanted. So I ended up paying that off over time. And I learned about budgeting and needs versus wants through my own little misstep there. It didn't ruin me. I'm doing great financially now. So I think having that up and down is natural. But as a parent, I can imagine how creating that space where you can, you know, you could help if you just intervened can be so hard, but it's actually better for you to take that step back.

35:26Elizabeth Ayoola:And then Simon, what kind of support would you like moving forward from your dad as you navigate your finances on your own? I'm getting all the support that I, I need honestly and that i'm looking for because I think i'm going to be in school for a while longer and that's kind of an investment in its own way But I think having the space to say okay, like, you know If my car has some trouble then I won't have to worry about figuring out how i'm going to pay for that Is really nice because it gives me the chance to put my mind on other things Which I think are at least for me like me personally are more important to me right now So I think like having that kind of support is really nice and it's not like I'm going to take out a giant loan and then buy a sports car or something like that.

36:08Hopefully that's a lesson I don't have to learn by making the mistake first. You know what I mean?

36:13Elizabeth Ayoola:Yeah. In general, having the space to say, okay, you know what? It's going to be okay even if I end up overspending this month in the long run. It's going to be fine. It's really nice.

36:22Sean Pyles:And Kevin, if you could leave your kids with one piece of advice or one value to keep in mind as they manage their finances going into adulthood, what would you want them to know? Think about the future. Your finances are going to change a lot over time, and you need to recognize when those changes are going to happen. But at the same time, you need to have some fun. Go out on the weekend and have a meal or something. Buy that helicopter. Yeah, exactly. And the sports car.

36:51Elizabeth Ayoola:Perfect. Great.

36:54Sean Pyles:Well, Simon and Kevin, thank you so much for coming on Smart Money. Yeah, thank you. Thanks for having us. And that's all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdballet.com. Join us next time to hear whether robo-advisor accounts are safer or riskier than traditional investing accounts. Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.

37:28Elizabeth Ayoola:And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general, educational, and entertainment purposes, and it might not apply to your specific circumstances. This episode is produced by Tess Figlin and Anahel Hosky. Hilary Georgie helped with editing. Nick Karisamy mixed our audio. And we want to give a big, big thank you to NerdWallet's editors for all of their help.

37:52Sean Pyles:And with that said, until next time, turn to the nerds.

38:01Every Tuesday, we cover Apple News on MacBreak Weekly. Hi, this is Leo Laporte from the Twit Podcast Network, inviting you to join me, Jason Snell, Andy Anaco, and Christina Warren. We'll talk about the new versions of iOS and macOS that just came out, if you're on the betas. We'll also talk about what's going to happen in three weeks, including a new folding phone, maybe. And if you got a spyware warning from Apple, you're not alone. A lot of them went out. We'll explain what it all means. that's this week on MacBreak Weekly you'll find it at twit.tv slash mbw or wherever you get your podcasts

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