Lorna Hegarty: Educating teens about money
June 2, 2016
By Sheryl Smolkin
Today I’m interviewing Lorna Hegarty for savewithspp.com. Lorna has been the President of LCH Resources Ltd. for almost a decade. She has an international consulting practice in human resources, executive coaching and training as well as being a published author. She co-authored The Wealthy Teen with her daughter Carly when she was 15 (she is now 24), and the third edition was recently released.
Q: Writing a book is a serious undertaking. What motivated you to write and update The Wealthy Teen twice?
A: The reason for writing The Wealthy Teen was that as I was raising my two boys I noticed there was such a difference between how the two of them handled money. One would rush and spend his allowance as quickly as possible and the other one would save it. We had conversations around how to handle money and how to save money. I always let them make their own choices. When my daughter Carly came along, there was another way of looking at money and values and how to, as a parent, influence her to think about saving and spending money. I started taking some notes and ended up turning them into a book.
Q: What does wealthy mean to you? Is it all about the money?
A: Not at all. There are so many different ways to be wealthy. The true meaning of wealth is to be grateful and respect the gifts that you have. You can have wealth if you’ve got happiness, health and great relationships, spiritual connections, or creativity. If you are a teen that is wealthy, you understand and appreciate these gifts.
Q: Your book is not a traditional personal finance book. In fact, you don’t really start talking about accumulating, managing, and earning money until the second half. Why do you begin by having parents and children work through their attitudes about money?
A: Well, money is a really personal concept and it begins with the history of how you were brought up to view money and how money conversations happened in your home. That’s why the first part of the book is dedicated to why you think the way you do, where it came from in your history and what assumptions you have that could be correct or incorrect. I offer an opportunity for parents or mentors to write down where their views and thoughts about money came from to help them work through the book with their teenager or any other person.
Q: Kids often resist direction from their parents. How can parents engage their children in a dialogue in order to educate them about good saving and spending habits?
A: Well, for me, the best way to engage my children was to tell them stories of how I grew up with money. An example was when I was 10 years old I wanted to purchase a dog from my neighbor. They had a litter, and the dog cost $70. My parents were smart enough to say that I could have the dog but only if I earn $70. So I joined Regal Gifts. I got a few catalogues and pretty much through selling cards and wrapping paper door to door and to friends and family, I was able to raise enough money to buy the puppy. This approach is something I taught my children — they need to really work hard to get what they want.
Q: How soon is too soon? At what age can parents start teaching their children about money?
A: Well, I like the physical aspect of money. I like that I can hold it, I can put it in my wallet, I can see how much I have left on me. For example, if a child does a chore, something easy like cleaning up, you can reward them with a little bit of cash. When would that be? When they’re three or when they’re four. I’ll give you an example.
As I was growing up, we had a stone driveway and it was a really big task in the spring to take the stones that had been shoveled out with the snow onto the grass and put them back onto the driveway. From a really young age, I would say three or four, my parents showed me what to do to take the rocks off of the grass and put them back onto the driveway, and I would get paid 25 cents for doing that and for other little things that did.
I could see the money that we put into a jar and I could see that it was growing. I think the earlier the better when it comes to teaching children about money.
Q: How important are goals? When should young people start setting goals and objectives?
A: Well, I’m going to say pretty much the same thing as the last question you asked — as early as possible. Also, it’s really important to make goals fun. As an example, let’s just say Father’s Day is coming up, so we’re going to set a goal of spending $10 and we’re going to make something special for father. That would involve a trip to the dollar store to look for materials so the child can have some fun with the adult and make a gift that says “I love you.” When a realistic goal like this is achieved, the child and the adult can celebrate the accomplishment.
Q: You discussed developing “E” potential in your book. What does that mean and why is it important?
A: Well, “E” potential is gaining entrepreneurial capability which is really open to anybody. Some of the examples that come to mind are setting up a lemonade stand or selling books or babysitting at a young age before a teen can get a regular summer job, but being aware that they have the potential to earn money. It doesn’t mean they’ve got to work Monday to Friday, 9:00 to 5:00.
Q: Tell me about the principle of the five baskets. How can it help kids to manage their money?
A: Okay, well, savings is 10%, fun is 10%, charity is 10%, investment is 20%, and essentials are 50%. In the book, I suggest having separators or little baskets to put their money in. Of course, young children may not have all the baskets, because they don’t have to pay for essentials like shelter, food or utilities.
Again, I think it’s so important for kids be able to actually handle money when they are younger so they can see physically where it’s going and how it’s being accounted for. Now, for older teens, obviously, bank accounts are ok.
My daughter still uses five different banking accounts to manage her money so obviously, it isn’t sitting in jars at home. After all these years she finds that it is a really good way of watching how her vacation fund is growing and planning where she will go.
Q: How successful have the strategies you describe in your book been in educating your own three children about money?
A: That’s a good question too. They’ve pretty much followed the rules and the principles from The Wealthy Teen. Carly is very, very disciplined. All three of them have always got their eyes and ears open for something they could do that would be fun, exciting, and interesting but also earn them some extra money.
Over the years, I would say that they’ve all pretty much taken the pieces they really believe in and they’ve had fun doing it, seen results, and incorporated them into their own and their partners’ lives.
Q: What reactions have you had from both mentors and young people who have read your book and worked through the exercises?
Well, I’ve had really good feedback. I’ve had couples tell me that they’ve used The Wealthy Teen as a discussion guide before they got married, to have a conversation about money. I’ve had feedback from readers who have used the system for saving money for school, for a trip to Europe, or for a car. It works if you have the ability to stick with it and save to reach your goals.
Q: If you had one message for adults who want to educate their teens about money, what would it be?
A: My favorite question. I strongly suggest that adults be careful with what and how much they give to their children or their teens so youth will appreciate things much more when they have skin in the game or when they’ve learned something.
In the past, I’ve seen family with children, teenagers, young adults, and they shower their children with designer clothes and the best phones. I would tell them to make sure they are living within their own means and as adults, teach their teens to understand the value of money and let them earn it when they want to purchase something.
The third edition for The Wealthy Teen can be purchased from Amazon in paperback editions and for Kindle.Amazon, LCH Resources Ltd, Lorna Hegarty, The Wealthy Teen