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Rachel Fox was doing pretty well financially for an 8-year-old. She’d been making good money with a recurring role on Desperate Housewives as Kayla Huntington. She thought she was set for life and wouldn’t ever have to worry about money again. Then reality hit.
“As the years went by, I saw how as an actor work can fluctuate quite a bit. Some years you work a ton, some years you don't work at all. I quickly realized this sense of security I had may not have been as secure as I thought,” she said.
Rachel Fox
So, encouraged by her parents, she decided to get serious and learn about money. Now she’s 19, says she’s been a successful day trader since she was 15, and has launched a blog that preaches financial literacy to teens, “Fox on Stocks.” She’s also partnered with a tax preparation firm to help deliver messages about money to young adults and teen-agers, and is planning a live show about money that will stream on
“There is a basic set of skills that everyone needs to understand as they become financially independent, like budgeting and understanding credit scores. They’re two topics that are very deeply connected, but unless you had basic financial knowledge, you wouldn’t know that,” she says. “The only thing that can give people real security is actually having a financial know-how, and an ability to be in control of your money.”
Here, she explains in a Q & A what’s important for teens to understand about money.
What in your experience is applicable to “normal” teens, who are doing babysitting and ice-cream scooping jobs?
If you are earning an income, you need to understand how your decisions about money will affect you years down the road. Even if it’s a summer job scooping ice cream, if you are putting 20 percent of that income into a savings account, that could be your down payment on a house in 15 years or tuition payment for your sophomore year in college. Being able to understand a pay stub and build a budget around it are essential life skills. Waiting until someone enters the ‘real world’ before teaching them this opens them up to all kinds of financial liabilities.
What are your top tips for saving/budgeting for teens?
- Build a budget and live within it. You’ll want to make detailed account of all your bills, set aside money for fun with friends — and also save for the future. There are so many amazing budget apps available to us nowadays that connect straight to your bank account and can give you weekly updates on your bank account status.
- Saving is key. You should create an emergency fund within your savings, so you have something to fall back on for life’s unexpected costs, like car accidents or broken phones. One of the ways that I learned to encourage myself to save early on is by giving purpose to my savings accounts. For example, open a “travel money only” savings account. Put in $30 or $50 or $100 dollars a month and save up for that epic trip in future months. Giving the savings money an identity makes you feel like you’re giving that savings a purpose and not just saving into oblivion , which is not the best feeling—and you know you’re diversifying your savings. Set up an auto payment from your bank account to a savings account each month, so you don't have to manually do this.
- Get killer credit right out of high school by making payments (in full and on time) for something you’re obligated to pay off — whether it’s a credit card, car payment or apartment. Again, never miss a payment. If you're struggling to open your first credit card because you have no credit history and no cosigner, the best thing you can typically do, is save up about $200 and use that to open up a secured credit card. Once you show that you're paying off the balance on the secured card on time each month, you will start to develop a credit score.
- Contribute to a 401K, or some kind of investment account starting in your early 20s. When you start early, you have a better chance of saving a nice chunk of change by the time you retire. It’s always smart to pay your future self, in addition to your present self. There are some great investment apps like Acorns or Betterment, that allow you to do this in baby steps, putting aside a little at a time.
Have there been any financial mistakes you regret? What happened and what did you learn?
My biggest financial regret has to be this one time I completely overused my credit card. I was 16 and had a joint account card with my parents from a department store (this is how I developed a credit score early, definitely recommend it). Being 16 and still getting used to financial responsibility, I just kept spending and spending and didn't keep track of it. At the end of the month, my parents opened up our statement and, let’s just say, they weren't too happy… they definitely held me responsible and made me pay it all off. It was a great learning experience, I understood how paying off a credit card balance over a series of months works. I had to account for the interest added on each month, and I also got to see and understand how this would affect my credit score. Having this real life experience at 16 was kind of scary, but having my parents walk me through it, as well as hold me accountable, was well worth it.
Let’s face it, it’s boring to learn about finances. What are the tools you used to gain financial literacy?
Learning about finances can be difficult, especially when you’re young and taking care of yourself seems so far away. But teens today are aware that they need to know more.
I read this Facebook study recently that had shown in 2016, a huge spike in Millennials who are seeking financial information related to credit cards, student loans, and investing, but online instead of other traditional financial help sources. There doesn't seem to be the right financial content resonating with my generation available yet in places like Facebook or
