As a part of CNBC’s Invest in You coverage of Financial Literacy Month, CNBC + Acorns partnered with NBCU Academy to present a live virtual town hall for students. In a wide-ranging conversation about personal finance hosted by CNBC Senior Personal Finance Correspondent Sharon Epperson, students directly asked a panel of business leaders their most pressing questions.
Daymond John, founder and CEO of FUBU and a “Shark Tank” investor; Dr. Anthony Chan, Treasurer of the Skyhook Foundation founded by Kareem Abdul Jabbar; Lauryn Williams, CFP, founder of Worth Winning and three-time Olympic medalist, and Martin Cabrera, CEO and founder of Cabrera Capital Markets, provided the students with advice on credit, budgeting and saving, health care expenses and long-term financial success.
- Think of finances in terms of family
Viviek Patel is a first-year graduate student studying journalism at the University of Missouri. Raised by a single mother who immigrated from India to Mississippi, Viviek asked the panel what strategies he would need to adopt to achieve long-term financial success for both himself and his family.
Your parents may be more help to you financially early in adult life — Daymond John’s mother helped him get funding for FUBU after 27 banks rejected him. But that will change over time.
“Studies have shown that you will take care of your parents two times longer than they have taken care of you,” John noted. “The question becomes what long-term investments can you have that will have tax benefits on them that you can put away for your parents,” John said. “Save a small portion of what you have in long term so that in 20 to 30 years these things mature and they are there for your parents”
According to PWC, the average lifetime cost of formal long-term care is $172,000.
Government programs like Medicare can help but only pay for long-term care services up to 100 days. Medicaid is reserved for those who qualify under their state’s program.
Eldercare is expensive. According to Genworth Financial, the median cost for a private room in a nursing home was $102,200 in 2019. Assisted living facilities can be cheaper, with median costs coming in around $50,000. Costs are varied by state so be sure to research what state your parent is retiring too.
Long-term care insurance can be an option for those who can afford it. About 7.5 million Americans have some form of long-term care insurance. Like with most types of insurance the younger the applicant is the less expensive the policy typically is.
- Start investing
Shavanah Ali, an international relations major at the University of Maryland, wanted to know what steps her immigrant family needs to take to create a more secure financial future.
Martin Cabrera, a member of CNBC’s Advisor Council and a son of two immigrant parents himself, suggested that Ali start investing. “When immigrant families come here from around the world, it is a great opportunity to see the growth in the stock market, but get them investing. They are a part of that American growth and living that American dream.”
Cabrera pointed out that investing creates wealth and it is feasible that today’s investments could lead to parents being able to afford a house or pay for their children’s college.
- Build credit slowly and carefully
Tigist Ashaka, a sophomore studying journalism at the Hampton University, is worried about getting her first credit card. Growing up, a lot of the adults around her warned of the dangers of credit cards and how they can tank her credit score. “I’ve even heard stories of people going home for break and overspending on their cards, not being able to make the payments and messing up their score,” Ashaka said.
Many of the students had questions about improving their credit scores.
Anthony Chan, former chief economist at JPMorgan Chase, compared building a credit score to learning to ride a bike: “You don’t start by practicing on a motorcycle, you start on a bicycle, maybe with training wheels.”
Chan suggests opening a starter account with a secured credit card. Secured credit cards are backed by a cash deposit from the cardholder.
It is also important to set up automatic payments on your credit card by linking to your checking account, according to Chan. You also don’t want to open too many credit card accounts, as this could negatively effort your credit score.
Credit utilization also came up several times. Credit utilization is the amount of credit you use compared to your credit limit. The panelists agreed that anyone looking to build a strong credit score should avoid going over 30% of their credit utilization.
“Focus your efforts on that first starter card and you will be successful,” Chan said.
- Keep savings and checking accounts at separate banks
Chaniah Brown wants to start saving and investing but doesn’t know where to start. Brown, who is self-employed as a dasher for DoorDash, said one of the first steps she is going to take is to move a savings account to a different bank than where she has a checking account. “I currently have a savings and checking account at the same bank, but I plan on moving my savings account to an online bank.”
Lauryn Williams, a member of the CNBC Advisor Council, said that is a wise move. “I recommend moving that savings account to a different bank to create yet another guardrail. You have to know yourself. If you don’t know whether or not you’ll be able to keep your hand out of the cookie jar, and stop picking into savings, then you want to move that account.”
Williams pointed out that most online banks don’t have physical ATMs, adding yet another guard rail to your savings.
PUBLISHED THU, APR 15 20213:02 PM EDTUPDATED FRI, APR 16 202111:27 AM EDT
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.