Many people give monetary gifts in multiples of $18 – symbolic of giving “chai,” or life – to celebrate a bar or bat mitzvah becoming a Jewish adult.
The day after the religious ceremony and subsequent party, these teenagers often wake up with a good chunk of change.
According to Karey L. Edwards, a senior financial adviser for NCA Financial Planners in Mayfield Heights, 13 is the perfect age for young adults to lay the foundation for good financial behaviors that, hopefully, will be carried into adulthood.
On the topic of helping a child or teen decide what to do with their mitzvah money, she recommends carving out a third of their money for spending and two-thirds for saving. Each third should further be broken down into time frames.
“So a third of it’s for short term goals, and that might just be, ‘I’m going to go out and have fun and do something for myself,’” Edwards says. “A third of it is more medium term – maybe when they’re 16, they’re going to buy a car, or maybe there’s an experience that they want to have or trip that they want to take – and they can start putting some money away for that medium term purpose.”
A longer term purpose might be college. Edwards says at bar or bat mitzvah age, young adults might be ready to speak with their parents about “‘how much mom and dad are contributing to college, or am I going to have to have some skin in the game?’ and start thinking about that as well.”
“If college is going to be paid for,” Edwards says, “It could maybe turn into, ‘Well, when I graduate, then I have a little bit of a nest egg to get started in life.’”
Edwards notes another good concept to touch on is paying oneself for the future first.
“That comes into play later. For example, when you’re working and you have a 401(k) and you start saving for your future, and you just don’t even think about that,” Edwards says. “That goes back to what I said about, you know, they do get a portion of that money now to spend on whatever they want, but then start setting that stage of paying yourself first in terms of saving.”
The financial adviser says goal setting and budgeting are other important lessons to consider. It’s also a great time to start teaching young adults money basics and concepts such as compound interest. She refers to “the time value of money – meaning putting a little bit away over time, if you can capture that compound interest, it will grow to a larger sum later.”
And for parents who would rather not gift children and teens cash, Thomas Lockshin, Israel Bonds executive director for Ohio and Kentucky, says if a parent purchases an Israel bond of $100 or more for their child’s bar or bat mitzvah, Park Synagogue in Pepper Pike and Cleveland Heights, Temple Emanu El in Orange, B’nai Jeshurun Congregation in Pepper Pike and Anshe Chesed Fairmount Temple in Beachwood will match it with a 5-Year Mazel Tov Savings Bond, a $100 Israel bond for that child.
The time following the bar or bat mitzvah also could be beneficial to start letting children and teens figure out some money-related things for themselves – with a parent’s guidance, of course. This is something Edwards already does with her 8-year-old daughter.
“I was in the store with my daughter over the weekend and she had decided that she wanted to get a purse,” Edwards recalls. “She had a gift card, but the purse was more than what her gift card was for.”
Instead of telling her what she “should do,” Edwards said she started asking questions “to get her mind thinking about different things and coming to her own conclusion.”
Edwards notes, at young ages, getting comfortable with money should be an ongoing process and conversations about it often boil down to “needs versus wants.”
“You can start this type of conversation even when they’re younger, and then keep it moving all through their teenage years,” Edwards says. “I think at that point, it is about teaching them the things that they need versus the things that would be nice to have, and also linking things that they’re ‘wanting,’ with goals.”