Students get a humourous lesson in money management
By Bill Rea

James Cunningham had a $50 bill for the student who could do the best impromptu dance at his talk on money management. Kyle Goggins, Kamila Dziuran and Rickey Bandesha were vying for the money, and Bandesha was the winner.

If you're in your teens, there's no time like the present to learn how to manage your money.

James Cunningham of Funny Money spent an hour at King City Secondary School Thursday putting on a combination comedy routine and lecture on personal financial management. He said he is touring the province with his message, which he basically capsulized into three easy steps, "Know your flow" - "Know what you owe" - "Invest some dough."

Although most of his presentation was taken up with cracking jokes, he made a lot of very serious points that kids in school don't really understand the financial world around them, or what they are going to have to deal with when they graduate.

"How many of you consider Texas hold 'em a major source of income?" he asked, also asking, a little tongue-in-cheek, how many of the kids do their Christmas shopping in the Dollar Store.

James Cunningham had both money and tips on how to manage it for students at King City Secondary School Thursday.

Young people in this culture, between the ages of 16 and 24, spend a total of about $100 billion annually, but as a group, they only earn about $5.6 billion.

"There's a bit of a discrepancy there," he remarked, as he said kids don't realize what their lives cost because they use accommodations and food they don't pay for.

But he warned they will soon have to face the real world, and "out there, there are a lot of financial traps."

Avoiding them is where the three easy steps come in, he said.

"Know your flow," he said, means budgeting, but there's more to it than that. There are people who maintain that budgets don't work, and others don't do it properly or give it time to work.

Cunningham asked the students to look into their wallets, adding the word they would use to describe what they saw (organized, clean, simple, messy, crammed) in some ways could be used to describe themselves financially.

He said the average adult carries two to four credit cards, three to seven merchant cards and two or three bank cards, and since each of those cards would mean regular statements being issued, that means a lot of paper coming into the home.

One of the most common crimes these days is identity theft, and Cunningham pointed out people have to get these statements, actually read them and understand what they mean before they find out if they've been victimized. People lead such complex financial lives that it could take more than a year to recover from such an incident.

Cunningham said adults need no more than two major credit cards; a primary one and back-up. Merchant cards, issued by certain stores, charge the highest interest rates in the industry, and he said they aren't needed.

Knowing of the flow means keeping track of what goes into and out of the wallet.

Most kids receive their financial training from their parents, but the problem there is today's financial world is a lot different from what parents graduated into.

Credit card companies are going to send kids material once they graduate, trying to get them to take their products, and these people have their marketing and salesmanship down to an art.

"You have got to get on top of your money before these companies start spending it for you," he declared.

Kids in post-secondary school have four main sources of money; part-time jobs, summer jobs, loans and what they get from their parents. And the top expenses they will face are tuition, books, schools supplies, residential rent, food, transportation, phone, cell phone or pager, clothes, laundry, internet or cable and entertainment.

Cunningham stressed the need for kids to start taking responsibility for their own finances as soon as they can.

"Start weaning yourself off your parents now," he said. "The earlier you start, the easier it becomes."

A lot of kids don't realize what kind of costs they will be facing. While some of them in the audience were pretty close when it came to estimating what they'll have to spend on school supplies (in the range of $200 to $500), Cunningham said the most common answer he gets is $50 for a year. The real answer is more like $350.

Some of the students estimated the annual operating costs for a car (gas, insurance, maintenance, parking, etc.) would come to a couple of hundred dollars, when it's more like $3,500.

All told, he said a kid fresh out of high school is likely to spend about $22,000 per year. "Where is the money going to come from?" he asked, pointing out that's why understanding the "flow" is important.

Addressing "Know what you owe," Cunningham said credit card companies make their money by having their clients get into debt, and then pay it off slowly. People usually say they're getting a credit card for emergencies. "That's the lie we tell ourselves," he remarked. But it doesn't take much for exceptions to be made, and soon the spending limit is reached.

He urged that people who get credit cards should use them responsibly, and "never leave a huge balance at your end."

He added paying off balances quickly is a good way to build up a credit rating.

A lot of people don't organize their debts. Cunningham suggested they draw a pyramid of debts, listing the smaller ones at the top and bigger ones below, then cutting out the pyramid and carrying it prominently in the wallet. That makes it a constant reminder of how much is owed.

"It's one thing if you don't control, it will control you," he warned.

In stressing the "Invest some dough" message, Cunningham said time is the most investment tool people have, but they waste it.

The saying "the rich get richer" is true, he said, because wealthy people put their money into things that increase in value. The stock market historically goes up, and that is expected to continue.

Cunningham advised them to take advantage of dollar-cost averaging, which consists of investing a little bit as often as possible. Mutual funds are good places to put such investments. He called them "a little investment club," and kids can get their money into them through a bank.

He put forth the hypothetical example of a girl who started putting away $20 per week when she was 18. By the time she was 65, that would have amounted to $48,880, but if the fund she put it into averaged 10 per cent annual growth, that would be a little more than $1 million.

"Time multiplies your money for you," he said.

He also advised the students to visit www.investored.ca, or to consult his own Web site, www.funnymoneyinc.com