Loading summary
Transcript57 lines
- [00:00]
A
WNYC Studios is supported by Odoo. When you buy business software from lots of vendors, the costs add up and it gets complicated and confusing. Odoo solves this. It's a single company that sells a suite of enterprise apps that handles everything from accounting to inventory to sales. Odoo is all connected on a single
- [00:19]
B
platform in a simple and affordable way.
- [00:21]
A
You can save money without missing out on the features you need. Check out Odoo at O D O o dot com. That's O d o o dot com. This is all of it on wnyc. I'm Alison Stewart. We're closing out this season of Broadway on the Radio with a visit from the cast of the Outsiders. In little over a week. Next Thursday, June 11th at noon, the stars of the Tony winner for best musical will be right here in the WNYC green space performing. Now this is special. It's a free event. You can RSVP by going to wnyc.org events. Please note the event is a first come, first serve and RSVP does not guarantee entry, by the way. Now, if you can't make it in person, you can always watch the performances on our live stream as always, or you'll be able to hear it on the radio. Go to wnyc.org events for for more information. Now let's get this hour started by getting a financial life. It's graduation season. Millions of students are contemplating the next steps in life. That could mean starting a job or moving away from home for the first time. But one thing is certain, this transition comes with a bill or two or three. Financial journalist and author Beth Koblener offered guidance to young adults when she published her book Get a Financial Life back in 1996. But a lot has changed since then and she decided it was time for an update. The stakes are different for young people entering the workforce today. Application pools in some industries are more competitive than ever. Rents continue to rise and the average age of a first time home buyer is now around 40. Then there are challenges every generation faces. Savings managing credit card debt, repaying student loans, and finding the right insurance plan. The fifth edition of of Get a Financial Life Personal finance in your 20s and 30s offers practical advice for navigating these obstacles. It is out now. Financial journalist and author Beth Koblener joins me in studio. It's nice to meet you.
- [02:41]
B
Oh, so nice to meet you.
- [02:42]
A
I met you a long time ago, like 30 years ago.
- [02:43]
B
I just saw her on your own. I know. And we both look exactly the same.
- [02:47]
A
Exactly the same Listeners call in, tell us how did you know you had your financial life under control? What were some of the biggest challenges, challenges you face, whether it was credit card debt or student loans or insurance, How'd you learn to manage your money? That's a good question. And if you're the parent of someone in their 20s or 30s, what is the one thing that keeps you up at night when it comes to their finances? Our Phone number is 2124-3396-9221-2433 wnyc. You can call in, you can join us in the conversation, or you can text to us at that number. So recently you said when the fourth edition of Get a Financial Life came out, 917 states required high school students to take a course in personal finance.
- [03:36]
B
Yes.
- [03:37]
A
Have things changed?
- [03:38]
B
Yes, there has been an increase in that, and I'm happy to say New York State just announced that they'll be requiring personal finance in New York starting this coming school year. I've actually written a curriculum for that and have been going to New York City high schools and talking to high school students about what they need to know before they graduate to juniors and seniors. You know, the very, very basics, credit cards and debit cards and starting to save a little and of course, college costs. So it all is very important. And the earlier you start, the better.
- [04:13]
A
Do the kids, do they understand how important it is?
- [04:16]
B
They are amazing. I've been to about 35 New York City high schools, a lot of them in Queens, my hometown. And I have to say, kids are so interested. They really want to know. They feel like, wow, this is something we're going to really use. And no matter whether they're going on to college or credentialing program or a job, they understand this is the time to make sure they know some of the basics that they probably, maybe they didn't learn it at home, maybe they didn't learn it. They certainly didn't learn it in school. So they want to know how they can get themselves started off in a smart way.
- [04:51]
A
What was something you knew that had to be in this edition of Get a Life?
- [04:57]
B
Well, there's so much, there's so much that has changed. I think the probably number one thing is this notion of frictionless finance. It sounds so great, frictionless finance, but really it means now, you know, we used to know when we used cash, we spent half as much as when we used a credit card. Now when we just tap to pay, we're spending more. We are. So it's so easy to spend Money. And I think that notion has become embedded in young people's lives and they were born with this. They never had to. I mean, I met some young people recently, really young, who hadn't seen coins before. So we're at a point now where we have to put a little friction between us and the payment. You know, there's this new kind of payment plan called buy now, pay later, which again sounds really good, but really what it says is if you buy something for $100, oh, you only have to pay $25. And you think, oh, that's a good deal and they're not going to charge you interest. Oh, even better. The problem is you feel like, oh, I'm affording something I can't really afford. And also I have this extra $75 to oversp. So I think that there's so many financial products now that make it seem so much easier to spend our money. And that's something that young people, although they're aware of it, they were born into it, so they don't really know much difference.
- [06:20]
A
It reminds me of when you used to get money from your parents and you'd come back and your mom would be like, where's the change?
- [06:24]
B
Right, right.
- [06:26]
A
And you better have change.
- [06:27]
B
Right, Exactly. I mean, we used to have to pay for something and if you get to the cash register and you don't have enough, you have to put something back or you run out of money. It's so different now and I think it makes makes it a lot harder for young people to really think about this. I also think for young people in their 20s, there's this trend toward these neo banks or cash apps or like Venmo and all these sort of fintech like institutions that seem like good ideas and in some ways they can be very useful. They usually have great websites and easy to maneuver. But there are a couple of things about these. Often they are not themselves federally insured. They usually have a relationship. They have pass through federal insurance. So that's something to be aware of. But also I think again, it makes it very difficult to sort of dissect, okay, this is my bank account. Am I getting savings on it? Something like Venmo, you keeping your money there and you're using it to pay friends and family. But if you're the money that's sitting there isn't getting interest, so am I getting interest. And also when these companies start sort of soliciting me for, oh, well, why don't you try this cryptocurrency, Then it gets very confusing in our day. You go to your bank, maybe you have an emergency cushion in your bank. Hopefully you get a higher interest rate on that. And then when you start to want to invest, you say, I'll go to a diversified mutual fund. Now, this is obviously in the best case possible scenario. Not everyone did this, but there was a separation and there was a pause we would take to understand what our goals were and what our money is. And I think now there's a little bit more impetuousness. You know, particularly we have gambling websites now, prediction markets that young people are spending a lot of time putting their money into those, too.
- [08:22]
A
We're receiving a couple of tips on how to navigate personal finances from author and journalist Beth Kobiner. She just released the revised edition of her book Get a Financial Personal Finance in youn 20s and 30s. Am I saying your last name right?
- [08:34]
B
Perfectly.
- [08:35]
A
Okay, I'm glad. Listeners, when did you feel like you had your finances under control after leaving the nest? What are some issues you struggled with? Give us a call. 2124-3396-9221-2433. WNYC. If you're the parent of someone in their 20s or 30s, what is one thing that keeps you up at night worrying about their finances or do you provide any assistance? Give us a call and let us know what's going on with you. Our number is 2124-3396-9221-2433. Paint a nice picture. You, you graduate from high school, whether you go into the job market or you want to get a good house, have a family, a little white picket fence, maybe a dog.
- [09:18]
B
Yeah.
- [09:19]
A
How has that changed for people in their 20s and 30s?
- [09:21]
B
It's so hard. First of all, like you mentioned on the top, you know, when, when I wrote the book 30 years ago in 1996, the typical age for a first time home buyer was 28 years old. Now it's 40 years old. So that makes such a huge psychological difference. I think that a lot of young people are assuming they'll never be able to buy a home of their own. And one of the issues that comes from that is, you know, there's some economists who have been talking about the fact that they kind of have given up. So they'll say maybe I'll take a flyer on some prediction market, which I will, chances are, lose money. Because now we know that those are usually most of the people on these prediction markets are trained professionals who are looking at the data. So you have much more of a chance of Losing. But I think that in the best case scenario, when you start that job, some of the basics of just saying for everything that comes in, I start a job for everything comes in, I'm going to put 10% away. Hundred dollars comes in 10% away. And this is what I talk to the high school students about too. It's very clear guid. Ideally you get a high rate savings account. They're banks that are paying say 3.5% and building up a savings cushion of a few months is a good start. Then you can start looking to if you have a 401k at work. One thing about this generation that's great, they're much more likely to put money into a 401k than my generation was 30 years ago or even more than millennials were. So they are caring about their futures and knowing it's important. Also the Secure act of 2.0 and required employers to start putting money in for that's the defaults that employees have money put away for them. So there are benefits of technology when you're saving automatically, when you're having your paycheck automatically put into an account for savings. Those are all great ways to use technology to get a financial life.
- [11:26]
A
Let's talk about home ownership because I'm
- [11:28]
B
curious
- [11:30]
A
if I'm a 22 year student or I'm 22 years old. I've been in the workforce for a little while. How do you approach the goal of getting a home now compared to back when 28 was the average?
- [11:44]
B
Oh, it's so different. I mean back then I would say, well, you might want to move back home now. I'm saying you probably should move back home. A lot of young people are moving back home, you know, saving a year or two to just try to come up with some nest egg because renting, like you said, is so expensive. Then when you get out, your first rental is probably going to be a couple of roommates or what. We're seeing a trend toward people moving to other cities and they work remotely. So you live in a cheaper city, but you're working somewhere maybe, you know, a larger city like New York City and it's more expensive. But if you can work remote, that's a way to save money. I mean, I think people are coming back, becoming very creative and then the. And you know, I think it's like 70 to 80% of young people who purchase a home, have a parent help with some of that. It's a down payment or you know, coming up with the monthly mortgage payments. And that wasn't allowed 30 years ago. It used to be you have to come up with that down payment yourself. Now parents or relatives or friends are kicking in because it is so difficult for young people to get started.
- [12:54]
A
I heard of a young couple that said, forget the wedding, just give us the money that you would spend on the wedding for a house.
- [13:00]
B
Yes, I've been seeing that a lot more. Some sort of, you know, account, some savings account or some sort of cushion that people are doing. Because it's true. I think this generation is really smart. I think they are savvy in many ways, despite the fact they were kind of born into this technological world. And now, of course, with AI, they're all very concerned about getting jobs and the fact of no one know how jobs will end up replacing them. So in many ways, a couple of years ago, if you were a computer science major, it's like, oh, you got the golden ticket. You're perfect, you'll get a great job. Now it feels like, ooh, maybe that wasn't the right decision. Maybe I won't be able to get a job or the job that I wanted or the job that I thought I was qualified for. So it is a difficult time. But I do think in difficult times, we are seeing, there's some strategies that people are putting into place. And the biggest one I think is just taking a pause and taking a minute and saying, okay, yes, I'm seeing this advertised or that advertised. I see a lot of young people, 70% of young people get their financial advice from social media now and finfluencers. And some of that's very good advice, but a lot of it is paid advice. There was a time when you get unbiased information from magazines. 100 years ago I worked for Money magazine and there was a separation of church and state and we would never, you know. And so I think it's important to realize for young people, even though they know it, sometimes in the moment when you're asked to, you know, you see something and you just tap your phone and you get it, it takes, it's a little bit. It's so tempting, it's hard to resist. And I think just sticking with fundamentals, starting to save automatically, making sure you pay your credit card on time. This generation has, has very high credit card debt, and that's because they're having a hard time making ends meet. But it's really important to pay those credit cards on time and try to pay them off as quickly as possible. You know the famous example, if you owe $1,000. You only make the minimum payments. It'll take you 13 years to pay it off. But if you pay just $10 more than the minimum, you could pay it off in four years. And that particularly now, I mean, credit card interest rates, it makes me crazy. They're 22% on average. When I was doing this years ago, like 10%, 11%. You know, the high rates were 15, 16%. It's really, really tough if you're just starting out now or for people of all ages. And I think that being aware and making sure to pay your bills on time but pay off that debt as quickly as you can, that's something I think is very worthwhile, very smart thing to do.
- [15:52]
A
Some text here. I'm in my 30s and I do okay paying for bills and such. I've recently found that paying for things in cash means that I do significantly less purchasing, especially online. Also, if you were, if you were places to take cash now, that's one less thing for me by so many places don't take cash now.
- [16:12]
B
Exactly.
- [16:13]
A
This said, I'm loving this interview. Can you explain, can your guest explain how to negotiate a bill appropriately?
- [16:22]
B
Well, it depends what kind of bill it is, you know, and there's certain things, for example, if there's a bill that you got and there's a mistake, certainly calling the company now, it's so much harder to get people on the phone anymore. But when you do get someone on the phone, it's almost, you know, a very strong position to be in to explain very clearly, look, I didn't pay this bill. I was away on this day. If you have a high rate credit card, it still works sometimes to call and say, you know what, the interest rate is much higher. Look at my credit score, it's excellent. I want to go to a lower rate card somewhere else. Could you lower my rate? Just talking civilly and calmly with the facts in front of you I find continues to make sense. It is hard to get someone on the phone though. You're going to be waiting on hold for a long time.
- [17:19]
A
We are talking about get a financial life, Personal finance in your 20s and 30s. It was written by journalist Beth Koblener. We are also taking your calls. When did you feel like you had your finances under control? What are some of the issues you struggled with? Was it credit card debt, student loans, figuring out insurance? How did you get a sense of how to properly manage your money? Or if you have a question for Beth, she's willing to try it. Our number is 2124-3396-9221-2433. WNYC. We' after a quick break, You're listening to all of it on wnyc. I'm Alison Stewart. We're talking to Beth Kopiner about her book, Get a Financial Personal finance in your 20s and 30s. It's in its fifth edition. It's been updated for young people today. Let's talk to Richard, who is calling from Long Island. Hey, Richard, thanks for calling all of it. You're on with Beth.
- [18:22]
C
Hi, Alison. Nice to speak with you again. Yes, Beth, I was just curious what you're advising people that are, you know, graduating high school, getting into college, graduating college relative to buying a car versus leasing. You know, with the leasing option, you're kind of in a perpetual buying mode. You're paying off the, you know, the depreciation on the vehicle right up front. And then you're basically in a forever buying mode on cars. You know, you always want to have the next and the greatest. So I'm curious what your advice is.
- [18:53]
B
100%. 100%. Well, I would say if you need a car, you buy a used car and there are all kinds of ways to figure out is it good, what the mileage is. And there are all kinds of specifics to look into. But leasing a car is only makes sense if you want to have the nicest, flashiest car out there. And I'm not sure what that reason would be. So I would say it makes sense to buy a used car. Used car will cost half the price of a new car. And it's you know, as we as people may or may not know, when you get a new car and drive it off the lot, it immediately depreciates, that is suddenly it's not worth it's worth so much less than what you paid for it. Whereas a used car if get a good used car, it's a very, very smart thing to do and you could drive it for years. Leasing does not make sense for young people, and it's hard to figure out why it makes sense for any people, honestly.
- [19:56]
A
This is an interesting text. This says, does it make sense for me to try to buy a property for my kids when I croak? I don't think they'll be able to afford it otherwise. So that's a parent calling in who's got a kid in their 20s and 30s and thinking like, well, if they can't afford until they're 40, should I do it now?
- [20:15]
B
Should I help them now? It's a great question. My Question back would be more about are you sure they'll want that property? Are you sure they're going to want to live in that city? And it's a wonderful idea. So maybe putting that money in some sort of investment like an index fund, a very low cost index fund or low cost ETF at a company like Vanguard or Fidelity. And I don't get any kickbacks, I don't work for any financial firms at all. But something that's a low cost index fund that, you know, historically they've done very well and then they can take the money and use it for what they want to use it for. But it's a nice, nice thing to do as a parent.
- [20:58]
A
This is a more family oriented question for your guests, but would she still recommend a 529C for kids? College seems so uncertain and potentially a financial misstep years from now. Is it feasible to think of a future your IRA for kids? Or does it make the most sense for a New Yorker to get a New York fund or shop other states funds?
- [21:17]
B
Right, Great question. I would say first of all, if you have a 401k at work that has matching, that would be your first stop. Then if you qualify for a Roth ira, that would be your second stop because that would be money that you can use. Particularly if It's a Roth 401K, which is becoming more common after a number of years, you might be able to borrow that money or withdraw some of that money without paying interest on the principal that you put in for the Roth IRA. The 529 is an excellent plan and New York's is an excellent plan. So I think that sticking with New York's makes sense. If you're sure your kids want to go to college and there are provisions. If you don't use all that money for college, you can turn that money over to your kids at a certain point. So I would say if you've used up those other options, then the 529 plan in New York State's a good place to be.
- [22:19]
A
We got a great text that is specific to you. This says, 20 years ago I was a poor grad student, but after reading Beth's book, I scraped together a couple thousand dollars every year to put in a Roth IRA in a Vanguard fund. Recently I looked at it and it's grown 20 times. And what I learned from the book influenced my money management in all subsequent years. A huge thank.
- [22:42]
B
Oh, that's so nice. Wow. Thank you. Yeah, you know, it's been kind of wild. I Am certainly a one trick pony. I've been doing this for many, many, many years, 30 years. And I think that I meet people now in their 60s and even 70s and they'll say, you know, I didn't think I've had, you know, I really didn't have any money because no young person is. Very few young people think, oh, I have so much, I can't do it. But if you just put a little bit, a few percentage points that you know, of whatever your income is, that over long periods of time, historically that's grown. And they say I have hundreds of thousands that I wouldn't have had otherwise. And I feel so great about that. You know, my parents, my dad was a principal in New York City and my mom was a chemistry teacher. They did not have a lot of money, but man, were they good at like putting it away in the retirement plan. And I grew up hearing about it all the time. It was like such a big part of my childhood hearing about putting the maximum they could into the plan. And I think that notion of small amounts can make a difference. I find that does resonate with the young people I'm talking to now in New York City public schools. And it really is something that when you're young, you have that advantage of time.
- [24:00]
A
Let's talk to Lisa, who's calling from the Upper west side. Hi, Lisa, thanks for calling all of it.
- [24:06]
C
Hi. I have a question. My grandson just graduated high school and he has a credit card. But my question is the following. The family has a goal of keeping an excellent credit score. Is it better for him to have all of his purchases on one credit card and pay that off, or have two or three credit cards which would only be one or two purchases a month, and pay all of those off, which looks better?
- [24:43]
B
It's a great question. It's a very, very good question. So generally speaking, I guess my first question to you would be, is it in his name? Because if it's in his name, he's able to build up credit in his own name, which is a very good thing to do. A lot of times young people have an authorized card that it's actually in their parents name and they're getting to use it. So first and foremost, I would say if you, if he's had an authorized card and he's shown that he's responsible, then he can have a credit card in his own name, apply for one and start using that regularly. Now, people get really complicated with the gaming of the whole credit card thing because credit cards look at what they call your utilization ratio. And they want you to stay basically if you have $1,000amount that you could use a maximum, they want you to stay to 30% of that. So they only want you to to use $300. But in his case, since he's paying it off in full every month, that's the best thing you could do. A lot of people get confused. They say, oh, I heard to build my credit score I have to carry debt and pay interest. That's not true at all. Paying it off in full every month is good. So in his case, technically, if he had a couple of credit cards, maybe that's slightly better for his credit score. But I would say he's a high school kid, he's going off to college. Let him start with one credit card in his name and make sure he pay pays it off in full every month to start. Then after a couple of years he could get another couple of cards.
- [26:16]
A
Let's talk about student loans quickly. What has changed about student loans?
- [26:20]
B
Right. Well, if you take out a loan after July 1st of this year, you are left those new loans will be paid back under two different plans. It's been limited, it's less generous, but it's simpler. And you either do the standard repayment plan or there's another kind of plan which is basically more like an income contingent plan. So if you make a lower income, that plan would be good to look into. Go to studentaid.gov to look at all the details. If you have older loans, you have more choices of paying it back. It is so complicated, but it's important to do it. And if you just graduated, you have a six month grace period before you have to pay back those student loans. But still as soon as possible, once you get home and you celebrate and you open your graduation presents, then go on studentaid.gov and make sure you know what you owe, where you have to make those payments. And in five plus months you'll have to start paying that back. And that's very important again for your credit score. You want to make those on time payments. There's also public student loan forgiveness. So if you qualify, if you live in, if you're working in a certain area, you're a teacher or a nurse, look at that. Because that could be a real boon for you. After 10 years, your student loans get forgiven. So there's still some options to choose from and it's important to make sure to once again make payments on time.
- [27:57]
A
And you said that you can never be too young to save for retirement.
- [28:02]
B
That is true. I mean starting with small amounts. Now if you have a job and if your company doesn't have a 401, then open, opening a Roth IRA is a great thing to do. But if your company has a 401k and it has any kind of matching, that's free money to you. For every dollar you put in, they'll put in 50 cents or a dollar. That's an immediate 50% or 100 return guaranteed after tax rate on your money. And you can't get that anywhere. So that is absolutely a very important thing to do.
- [28:35]
A
I'm going to take this book and I'm going to give it to my soon to be graduating son. It's a really good book. It's terrific.
- [28:42]
B
Thank you.
- [28:43]
A
The name of it is Get a Financial Life Personal Finance in youn 20s and 30s. It is written by Beth Koepliner. It's her fifth edition. Thank you so much for taking our listeners calls.
- [28:53]
B
Thank you. Thank you so much.
- [28:55]
A
When you switch to geico, you've got claims reps available around the clock. So whenever you need, you'll have people around to help. It kind of feels like having the TV on in the background when you're home alone. Isn't that soothing?
- [29:07]
B
It feels good to have support. It feels good to Geico.
- [29:10]
A
Tired of overpaying with DirecTV? Dish offers a reliable low price every month without surprises. Get the TV you love and start watching live sports, news and the latest movies, plus your favorite streaming apps all in one place. Switch to DISH today and lock in the lowest price in satellite TV starting at $89.99 a month with our two year price guarantee. Call 888, add dish or visit dish dot.