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 whether he had heard of the financial services titan.
Talk about tossing him a softball question.
Sure, he had heard of AIG. Any half-serious soccer kid knows AIG is a prime sponsor of Manchester United, which (as most parents don't know) is the New York Yankees of international soccer. My teen is reminded of AIG every day -- he has a floor-to-ceiling poster in his room of Manchester United's top player, in a red uniform with a white AIG logo.
As we talked briefly that night about what was going on with the stock market, my son was not the least bit interested in subprime loans or the Dow industrials but whether AIG's problems would spill over to Manchester United.
All of which, to my mind, points out the many slivers of youthful relevance to the turbulence in the financial markets. Indeed, the events of late serve as a prism for issues like living within your means, the importance of saving for the long-term, whether our children will get stuck with the $700 billion bailout bill -- and, yes, even AIG's future ties to professional soccer. Hey, whatever gets a teen to talk, right?
If you are trying to help your children come away with a better appreciation of the risks and rewards of investing and offer some guidance and reassurances about our financial system, there might not be a better time than now. Here are some talking points:
-- 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 especially -- 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. Kent Gasaway, president of the Buffalo Funds mutual fund company, brought this up in a timely commentary he wrote earlier this month for The Kansas City Star.
Many consumers, Gasaway wrote, were financially stretched to buy that first house or a new car and need to go back to the financial basics of making sure there is more inflow than outflow in the family budget. In other words, 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 with today.
-- New rules of engagement. Did the government just add to the tax burden our children and perhaps our children's children will face -- 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.