Arizona

Boys & Girls Club of Tucson, Arizona
The Magic of Compounding Interest

For the casual observer of youth culture, it would seem 17-year-olds are more interested in how to get the “it” bag they saw Lauren sporting on The Hills  than how to save their money and make it grow.The reality is quite the opposite. According to Charles Schwab’s 2007 Teens & Money* survey, 89 percent of teens say they want to learn how to invest their money to make it grow, and many are looking for hands-on learning opportunities.

Michaela, 17, admits she hadn’t heard a great deal about money management at home before taking the Money Matters: Make It Count program at her local Boys & Girls Club in Tucson, Ariz. She surprised herself when she found that she not only enjoyed the course but also chose to sign up for a second round of the program as a teen mentor to her peers.

As Michaela’s interest in the subject compounded, so did the money in her savings account. She started the account with a $50 stipend she received when she completed the Money Matters course last year, and now she has grown it to more than seven times that amount through diligent savings from earnings at her part-time job at the Club.

An added benefit of her expanded knowledge and interest in money management? Her family’s interest is compounding as well.

“I’ve been able to give my mom tips and help not just my savings but my family’s savings as well,” says Michaela. “My mom was very thankful that I taught her about budgeting and saving. I helped my mom get organized with her bills.”

While Michaela’s savings are certainly enough to buy a starter designer bag, this teen has much more strategic goals in mind. “I’m a senior, and college is coming up,” says Michaela. “I have to budget. Money Matters helped me get an outlook on how to budget for my life, my spending, how to keep it organized, and know what money is going where."

George Yslava, youth development specialist at the Club, is thrilled with the effect the four-year-old program has had on the teens at his Club. “This program truly does work,” he says. “We have so many kids from homes where moms are the sole provider. College is a question for many. When they go through the Money Matters program, they learn to think about and plan for the future.”

Michaela and George credit Schwab volunteer instructor Rick Kelley with igniting an interest in money management among the teens. “He’s like a father figure,” says Michaela. “He has two kids of his own and is able to relate to teens well and me personally. He keeps it interesting, and it’s fun to be in the class.”

Kelley, CFP^®, a vice president and financial consultant at Charles Schwab & Co.’s branch in Tucson, says he focuses on what the kids are most interested in about money and careers, and lets them lead the way. “It’s dynamic and different each time,” he says. “My goal is for the students to share what’s important to them at their level during class time. I want to guide them in their thinking and feelings about money and to help them grasp two to three things to take with them through life—that is enough for me.”

Kelley says budgeting and career development are two hot topics in his classes. After discussing career goals, the class heads to the computer lab to research salaries for their chosen occupations. “We utilize the research throughout the rest of the class,” says Kelley. “I ask the question: ‘Who wants to have their own apartment someday?’ We talk about how you need to have a good salary and good credit to have your own place.”

Kelley says he faces some tough questions from kids asking how to avoid traps that their parents or relatives have fallen into. “For young children it hits home,” he says. “They sometimes share sad stories about lack of budgeting.”

He says he is continually impressed by the kids and their interest in learning about financial topics.“I hear really insightful comments from young people about areas of investing,” he says.“In one class, we talked about why some companies grow and others don’t. One kid raised his hand and gave a basic answer that boiled down to supply and demand. I know that lesson stayed with them.”

Even at a young age, though, some teens are already involved in risky financial behavior. “I remember one class in which students were talking about rim loans. I’d never heard of a ‘rim loan’ so I asked them about it,” says Kelley. “It turns out it was a loan for rims on a car. They were giving up ownership of their vehicle to get loans for the rims—and if they didn’t pay they lost their car.”

Kelley enlists volunteers from the community to visit his classes and talk to students about their experiences in the business world. Recently, a former Boys & Girls Club member and former professional sports player who now owns a successful mortgage lending firm talked to the kids about building credit and keeping a good credit score. “He inspired them to think about goals and budgeting,” Kelley says. Kelley has also hosted other entrepreneurs, including a woman who started her own care-giving firm in Tucson. “Her life story was inspiring,” Kelley says. Despite growing up and being told by a relative that girls should not go to college, the woman pursued her dream of higher education following a divorce and today is a successful businesswoman.

“To have money, you need to develop an interest in life, set goals, go to college and pursue your dreams,” says Kelley.“The kids are all intrigued about being successful, and it’s exciting for me to be a part of it.”

The program’s success is compounding interest throughout the Club as well. The Boys & Girls Clubs of Tucson Money Matters program currently has a waiting list of 20 members for the next program.

*2007 Charles Schwab & Co. Teens & Money Survey

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