The First Job & Behavioral Economics (S4E2)

Wednesday, December 6th

Sheri and Kris talk about what to do with that first paycheck & the Nobel Prize in economics. 
00:28:16

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

Today on her money the podcast we're gonna take you from minimum waged a first bank account to behavioral economics and no other financial podcast because we do here today. Her money is sponsored by Carol financial. Hi this is in line at some financial advisor with Carol financial retirement may seem like a long way down the red but the Sunnis start the better off you'll be in the long run but you're starting a family. Buying your first ten or simply want some help figuring out where to start doing this fact is simply saving series this fall at a Mecklenburg prairie on Tuesday October 24 at 530 we'll walk Petri easy ways to save and the things you should be doing to ensure you're on track for retirement to register for our complementary workshop please visit our website at its aero financial dot com it's Carol financial. It's retirement simple. My daughter has her first job and she just got her first paycheck. And what she said when she opened it won't make QLO. Well. I'm Sherri Lance Chris Carroll and this is how money the podcast today we're going to be talking about com. What to do with that first paycheck and the Nobel prize in economics hoot what I guess can bring those two things together after this one people Herman the podcast so. My daughter has her first job and I just like saying man out labs and so for him and a wake up and it was all a dream. Since her first job and she is earning minimum wage nice. And the company does she works for she's a tutor the company as she works for withholds the first weeks page. And so she got her first paycheck for two weeks pay and she opened it up and she wouldn't look at this. 120. Dollars after taxes. And I didn't even have to clean up the kitchen and. I am amazed in the money now and I was all I had to cover my basically my hand there. Because I wonder to have that glorious moment Curtis you know. As an earner which he did mourner to think about the fact that the jacket she's wearing cost a modern toys dollars in June the two weeks' work it through the window to these serious effort to pay for the jackets which is super. A 120 dollar sensible how much to the government take off for taxes and she looks just goes. Not got much sleep thirty dollars which sounds about Reagan's funeral for the tax bracket that she's an. And she said we have to go and open a bank account so that I can have a debit card. And I simply couldn't pops. No you do know that you will overdrafts that debit card in the warm into the weekend. T know what happens when you overdraft a debit card if she goes. Yeah and how wall. Other you do to a boy that's a. But depending on what thank you which you also pay a fee you know he's you overdraft by five dollars but the fetus forty dollars us you know. Great now let's start doing the math how many weeks would you have to work and she's Alex stop you're ruining everything for a that's self. Little impression your daughter I hunt. Let's quality they speak to me lake Catholic click I just stumbled out of a crawl space somewhere and I know nothing. World if you look at me with such. Haiti moved on my person my dad used over all the time that he didn't just fall off the turnip truck. Because he said that's what I looked as I looked at him like he's just fell off the turnip truck you didn't know it was important to the derby you're die crazy because your dad is slick a financial. Genius and it really successful businessman and you're all like what's up pops you don't know anything you want anything. So every teenager thinks that's their right that's normal let's talk first paycheck I she's had a little savings accounts as she was a baby month. But now she wants to have the a direct deposit bank account and debit card what strategies do you recommend. For that first job First Financial. I don't really just just she was just born on paper this is Shia married team he choose yes she is so if. They're under eighteen. Then when you open the bank account either I would open it as a miners. Bank account noon which means you're the one here's are list. Susan how would you like to tell us a little let's have so it's did you know it's it's your daughter's name. But believe it's really your name to it's attached to my sons are we. There series. To do their guardian for in the that would mean there. Notice cursed in adulthood when the worst party is being directed at you it's never fun start ruling party. Over the you're responsible hard users' files you'll party SO view over the bank account for minor. Usually WG rare UTE mail account are you from just miners are you beautiful treacherous miners. Great so it's really the guardians names that matters not the food child's name. And so if you do that you can do your bank the bank that you already have a relationship or your Chinese soundness you can open a separate account for her. I would make her pay the fees if there are any although we'll tell you a lot of banks including in its way you've fees reminders comparing just like they waive it if you had a direct deposit setup or something like. So you go in the you've you've spoken the camping you're the responsible party and if you're the responsible party that means you can check him on it. And I would explain your daughter that while it's great that she's earned her. Because she's still a minor that means your name has to be on the account and that means you have to have access to the count. And that means that if she overdrafts. You're going to know. Yeah unfortunately it also means that that forty dollars that they might charge you would probably get charged to your other counting the reactors they're gonna get paid to her kids Ehrlich commodity. They hate page firstly Israel first last. So I bet you know I got. I think it's good for kids have preferred children have their own accounts. I think it's as much as you might now on here this. You might be good for your daughter to overdraft on account. And to see all the fees in just get taken to the cleaners for a cup and then for her to get that next paycheck confuse you say well this monies are. That it's gone ski asked you know. I agree with you I think that I don't think that's the worst thing some life lessons on the you know if you can learn them with bumpers on them yeah. Great when you're sixteen instead of 122 and then when you're out on your own up and the feast is ate up the tires that you need for your Cartagena safely dork not truly earth it's really. It's really challenging. On because her idea of the tall cotton that she's currently living in with her 120 dollars for two weeks work. And it's a wonderful job and she really enjoys it. And Dick it's not super labor intensive she's not standing on her feet and she's literally working with kids and tutoring center there it's a great first job. But her idea that has allowed any easy money. I don't know where to beat kids with I'll take some. Do we do when we go in and taught to middle school Ers. We do this or experience where and India's should be great for you do with your daughter I paid her to do this because it's this it's that important. I'd say look let's sit down and figure out what your life would be like if you do this child full part. Qaeda so. Take that paycheck for however many hours are lost some say OK what if instead for those two weeks she works full time. Eighty hours student math here's what's left over to yet. Okay that means you're gonna have this much money per per month and and it's pretty common for that number to be. Fifteen or 16100 dollars. After taxes and stuff per month right and wish you would think she understands powerball territory of RA forebears so we could do that that's more than minimum wage sorry we do this example with them making you could do more than that yeah I can chart. But and then you say OK see you have this much money per month to spend and and her and her Lavoy route that would be less but. Indonesia say okay let's see what apartment you can before. Now a co according to when you do housing gracious and things your your apartment shouldn't cost more than 28%. Of your gross income right so okay sir this is how much money Gershon rake in a month this is how much net you make. Tony person of this numbers commenced. OK let's see what kind of apartments we can find in Charlotte for 340. Dollars a muscle really bag on our driveway yeah. You can have four right but I actually think it's a great way for somebody that age should count I think thorough we do this we do this with the eighth graders. And people. Really wake up Q how expensive resist a little soft and generally what you do is you figure out what cures what it would cost for. Brent. Gasoline food. Thrown well yeah Foley yeah. And right and then yes yes yes you actually have to have water and gas that your apartments here pay those bills to your right they say oh I don't meet. I don't mean TV who's gonna have. You know I'll just out of gym shoes on Netflix and our current king live fire appears you gotta have watched president Sherri nationally live you sooner Internet allowed to steal the neighbor when speaking to neighbors that's fine but which is still got to figure out the Z do selection as he takes about thirty minutes an hour to come right on the numbers down. Is there is no money left if you make if you even if you make twice man who arranged. There is no money left for clothes and furniture. Q you'll get through. Like you'll be able to find a place that you could rent will be able to find enough money for utilities and maybe again. I'm not signal a mix in the and then you're look at what's left hearsay okay that leaves us. 250 dollars a month and you say OK now how much you need to lose well how much fruit. Well if you lose cheap. You can spend 250 dollars a month sponsors and and make you by just fine and then here's all the things that were not on the list we just didn't. He never even by Newburgh new item of clothing no concert smack me there's an there's none of that count Friday night you can't go out you can afford to there's nothing in the budget for that right. I think it's a great experience I think it's something good to do right around that middle schoolers join me at their first. First paychecks a good time to do it. She was telling me about a kid at her school who. Has and no allowance it's a credit card it's right he's a card and they're allowed to spend I forget how much I thought it was insane. We just kids allowed to spend 400 dollars a month on the visa I don't spend 400 dollars on links on activities Monmouth around my scarcely like oh my he's a so at any Emily Hughes like. That's like a pretty good idea because you don't have to worry about managing cash a show like this sounds like a terrible idea because you don't have to manage cash. If money is always abstract. Here you don't. You don't comprehend what it's like to be running out of money on you not run your car doesn't get smaller as the month goes high grade. Although here's what I would say I don't mind the what's what's that kid's parents are doing if they're making him pay. All of his own stuff. You know they're giving you and and and I mean sees Seattle mind. And the like are saying no we don't pay for anything. You want me I'm OK so you watch 200 dollar air jordans that's on your thoughts on year when I don't buy you clothes you know I don't buy I don't pay for your trips though you ordered music lesson jeweler tuba will go buy two books that you. You are staying. You need school supplies that's on YouTube now for her arsenal slow solution same because in my mind now and also be. You'll pay for your record your car insurance you're gonna pay for your car payment. You want you know like you yeah everything. You know I would do one all inclusive number. I'm trying to build my kids source because there really do think that. Like you said do we when there were doing when there's training wheels because I had never had a budget money in July went to college that was the first time I had a bunch of money. And I think you know make this screw up when you're sixteen or seventeen you know find out that you don't have enough money left to buy cursed presence for anyone. And harrowing when you're sixteen and sit Winger Tony owner Tony three year okay. My own and I grew up really run a really poor and really tough and was independence. So mean and the work he cents us for Tina I was independent and a really financially independent at a really early age. Financially independent in the sense that nobody was giving me any help run any kind. And so my daughters said to me one time mom I just somehow you did it well here's how I did it I always worked in a restaurant. Because hole was I didn't have to budget for food so mindset if I worked in a restaurant. Because my daughter's of course they wanna work in record source. And I'm like that's great number one good luck finding one number two good looking eating one horrible thing part of the reason and that starving artists and students work in restaurants is these are guaranteed to be fed at best wants. I read her shift right. And there's something to be said for. From having to figure that out without. No it was hard to you without training wheels. You know there's a certain kind of person and I guess I was definitely one who if you threw me out of the boot. And my only choice was to swim I was gonna figure out swimming you know. I'm kind of glad that I got thrown out of the boat because if if I have been allowed to float I think I might afloat it yeah. And it's one of the things I worry about with my kids who are high high high injured it's twenty dollars for a few weeks word has looked at me. You know that's a hard lesson learned what do you think about it on bank accounts in general for kids is of the sort of staying that we should teach them and before their first job and how do you teach a kid how I checking account. Works. I think I think the timing around the first shot was about right I think you need to have conversations with your kids about money at younger ages but it's. Somewhere in the middle school years is probably about right of the new experience bank account for the first time. So my son is nine years old his main Q stool under the bed registration there's a lock box under the no no but many listeners you just come out from my house I've wrestled lock box or circuit and had just 38 and always. There's insure that these were charged that. You know both. Some time in little swatch things are right time to introduce using your bank account must songs. My goodness my son's right at that age where I thought about this last year and decided to wait until next year. Next summer to open a bank kept. It's sad that our kids have heroes and so many fields but no. There's no financial hero I mean I feel you only thing we girl with his kids is the banker from monopoly and that's not really anything you aspire to. And you and I before we mom started today we're talking about the Nobel Prize announcement he and then Nobel prize in economics this year went to someone that you actually think everyone can disagree Richard talk and Richard. Sailor is like mighty economic hero. Okay heat. Even when I was studying. You know when I was studying finance house ways and you really didn't like economics may be used to stab the wrong kind of economics professors. And I got turned on. Probably ten more than ten years ago are now. To a paper by Richard Taylor and as opposed everything else I read in economics he was funny and engaging in just a really. In trusting writer. So so what does Taylor sort of macro belief in economics did you hear about you know Adam Smith I guess various titans Baylor is and Steelers a specialist in behavioral economics and even more than that and why people make the decisions they do. And any really focuses Armey and senate supporter people's incentives and how they responded difference announced. And he is he has made more difference in in the average person's life there may be unique economists. In modern history death toll Booth but maybe more than any economist period. That's fascinating because it's at eighty he's not a household may end. And yet you're saying he's made his work cast singing star clusters gives an exam you. You sign up for 41 K right when he when he signed a cure for Boeing K at work. The day. There's there's like this sign up period when you first UN and they're all these G fault options. Do you remember that yes Joseph are your information. And then you sir filling out. What investment choices you honor what percentage to put away and things like that well all of the deep fault options what happens if you don't. Put something in there. Were basically driven by Taylor's work and dealers study of how forward k.'s work and how people investments are forewarned case. He's made a tremendous. Difference in ever retirement plan out there. So you say behavioral economics. Get is that what it sounds like that the science some of why we behave in certain ways with money you got pretty and it's not even just money it's it's. Why we make this sort of decisions we make soon pursue his most famous book is that probably this book nudge. That I wanna say is about ten years old. But nudged talks about the the very minor things that changed the way we make decisions like we are on our guru Sri shelf certain things are. And he he talks about. Changing the behavior of the country. By nudging people certain ways so like maybe you can. Make it less common for people to start smoking in the first place by these little behavioral lunches that you give people early are. Maybe you can and encourage them to eat healthier. By putting the sugary cereals are on the top shelf and the ones that are at Iowa more than shredded or the health credit lines have. And and he basically says look Q do we have we have. We are recent in this country to warn people behave certain ways. And we give these nudges all the time the government views she nudges all the time is sort of his point. Why shouldn't we nudge people. In other directions as well. So classic notice that the government gives. You know they're talking about taking away these different tax benefits what's one of the tax benefits and they're never gonna take away. The home mortgage a mortgage because does the government want should own once. Austria does it make you more stable and make sure good worker makes you more productive there's a whole long list of why the government wants your own house so they nudge you. Her toward homeowners homeownership with the staff cookbook with this tax incentives but Richard there's also famous for changing how NFL players. Get paid. A few years ago and they reworked. During that the draft during movement to draft of the NFL couldn't top that they put a cap on what they can pay the first few picks yeah. Yeah yeah L draft that's all based on Taylor's work that basically said we're grossly overpaying these guys before they prove that they can do anything. And because were grossly overpaying them we're giving them these incentives that we don't really want to give them. You were doing here we're giving them these hot these incentives only worry about how high they're going to be drafted and not worry about. The how well they've softened Arnold on the war deal that's so interesting I wonder how he got their eyes still how many of those guys this people who were first round picks are very even first picks overall turnout to be complete bust. Well basically what he was saying is part of the problem and reason that these people end up being complete buses can give them so much money they never have to work beginning anyway. So they're not hungry for and there's no there's no reason there's another site motivation yeah. Until there incentives and insert sailors really fascinating guy. There's a great book I think you group called misbehaving. Which is like this the history of behavioral economics. He's supreme dirty books I understand that but. For an economist he really writes in a way that you can enjoy heading kind of chuckle I mean. They're not for everybody but if if you're you're ever gonna sit down and read any economics booked reserves of one yeah these are these are pretty get. That's fascinating idea is that also the same mechanism that drives people to buy something because it's on sale Ole. Is that why we have the point 99 instead of calling some six dollars yet say that I'm accurate. That's all behavioral economics not Taylor isn't sort of the father of that he's he's sort of the second generation more of the modern. But the modern behavioral economist. But he's. He should truly an interesting guy and it is it's all about. That the the short cuts that we made we take to make decisions are give your great example from behavioral economics show like this so you go into your closet in the morning. Right how many shirts do you think you have in your closet well that are just black orange juice. Just just just pick your number let's say I'll say I let slip 6060. OK and how many different pairs of pants do you have your clocks. None. Twenties but I have Tony fox. OK so so that's that's that's not too bad so here here's what here's what one of the things through its face as you go in your Peralta shame you can. You go in your closet you look at these sixty shirts. And stormy five pairs of pants okay well there should 15100. Combinations. Of shirts and I I don't have anything to where. He but that's not what I was getting you have the that's also hey. Hello and seduced 15100 combinations. Of the shirts and pants that you could choose. But you do not on any warm morning sit there and well let's start with the first shirk. Anger through each different pair pair you know loan no no no that would take forever right because if you thought through the 15100 different combinations every morning. Even if you only spend a few seconds on each one Q it's been your entire day in the closet. Trying to decide what shirt and in pants two where okay. Which sometimes my wife does but don't tar set that check this is I just keep trying to see you hated him over the Bloomberg and but basically you have to have a short cut don't cheer yes yes Deborah shortcut and what are sure are shortcuts or things like oh what just like this topic these pants together. Right or I just you know I go there I'm like who I love despair paths and so there's like a couple pairs pins are they're clean I'm always gonna. The right track first and then they'll be dirty and Julian no there there could go where we get right thumb salute so you have these shortcuts or culture wrist sticks I love that word nobody else like to her word Burleigh I love your sticker I love that. So it's it's these short 'cause that your brain makes it that you'll have to think through every single possible thing. We'll do short answer absolutely vital because otherwise everywhere this would spend all day. You are trying to decide what current toothbrush to usually good read on the shoulder and Cooper on the usually we be frozen right yeah I lecture but by it by very simple decisions we have to have short cuts to make all the decisions we make him a day. And basically solar shortcuts are perfectly good and reasonable and some of the merger is wrong. 999. What's the short cut we take well let's listen under its boxy and it really under ten bucks now. I am the person that all of that stuff works on extra 25% off sale items I don't think that I believe on Monday. It's enabled or not buys on their way I end up dead neediest soccer for all of that stuff. And on and all of its driven budget short cuts or brain takes. I wanna go by. Paper towels. I don't care which kind of paper towels on by a right but once I get a brand that I know I like I just always buy that bring because it's easier than thinking about it right rate so what happens. They change the pricing the brand to life in notice now because you don't ever have our price tag exactly because I'm Marty got a short cut I'm not gonna go back and start to rethink battle for again because of her and made that decision and you can expand that out from paper towels all the way to kind of specific car that you jive that's is that all right lay out all of us make short cuts all the time to make our decisions easier. And and this is just. We're used to this cold curious sticks there are ton of different ones. But as human beings we have to make them. And we make them based on any number of things he can be things based on what we've seen before he could be based on sometimes we make a decision that something's better because it's more expensive us. That's a really common one I mean isn't that what drives a lot of the luxury market it does but I am I'll tell you that I'm terrible about it with like toilet paper. Why there I do get what exactly are because in my mind I have it that's one of my little purest X I've saved spend more money on toilet paper it's better when you are. Our business I was. We're fine with a corn crops and do you expect this is did you see it and some sharp mid or some there was some you know go but I'm ready. You do if you were if you were in another country let's say let's say you go somewhere that you all speak the language so you dirt. I don't know Eastern Europe somewhere and you'll speak the language. And and you can't sing in the toilet paper in her hotel but there's a little Hershey store across the street and you've never seen any brand in the air before. What are you buying. The most expensive and most extensive elevator yeah right because you've RD because that's in your head there's some little thing that says look this is something even if it's more expensive it's worth so I'm just gonna get it. I will tell you people. Only to her money podcast could start at a first paycheck hopscotch to the Nobel Prize an end on eastern European tour and the thing for her trip. That's what we'll keep you here thanks for downloading and joining us for this episode of her money. This holiday season is among us it's approaching and so we're gonna have some cool holiday financial stuff for you coming up in later episodes of her money to podcast. Hate if you want more information about what we talked on today's show or if you just have other questions about money. Is our website it's WWW Doug Carol financial dot com. Or you can only shoot me an email whether it's through the podcast or through my website I'd be happy to help if I can't. Curb money is sponsored by kuril financial. Hi this is in financial financial advisor with Carol financing. Retirement may seem like a long way down the red but Cassini start the better off you'll be in the long run but you're starting a family. Buying your first ten or simply want some help figuring out where to start join us for our new simply saving series this fall and of Mecklenburg prairie on Tuesday September 24 at 530 Slovakia three easy ways to say and thinks you should be doing to ensure you're on track for retirement. To register for our complementary workshop please visit our website at Carol financial dot com it's Carol finance up its retirement simple. They're her mind my guess is just a tiny Sherry lynch and meet Chris Carroll. Our executive producers or new trial but. Jonathan Mooney and Carol Poteat our producers had to refer an hour technical director and editor is Billy black special thanks Emily Nestle and Marion has roots confirmation from this episode ornaments and other episodes and subscribe to this podcast visit. Her money podcasts dot com. Determining podcasts is now on Twitter. Follow us tweet us at her money podcast email us your questions at questions at her money podcast dot com. 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