YOU are Your Investment

Nathan and Ryan came home a little dejected.  They had spent three hours working for Tom and they didn’t get paid for the work.  

Tom is our neighbor.  He’s retired and does a lot of stuff around his house.  The boys work for him from time to time and love it because Tom pays them $13/hour.  But they have to earn it.  When they come home from a day at Tom’s, they sleep well that night.

Last month Tom and his wife Margie skipped around Europe for two weeks.  Nathan and Ryan were tasked with feeding their cats while they were gone  in addition to a few other minor things like covering the patio furniture if it rained.  So when Tom returned from his trip he paid each boy $50.  Yowza.  The kids thought they hit pay dirt.

But Tom mentioned, as he handed over their earnings, that there were some minor things the boys could do for him and then they’d be even.  So on Saturday, the boys went to Tom’s to finish up their “cat sitting”.

Three grueling hours later, they returned sans any compensation.  “I knew Tom wanted us to do a little extra for the money he gave us feeding his cats, but I had no idea he would put us to work like that,” said Nathan.  “That’s a total of six hours of work we did for him.”

I felt a lesson coming on.  “Tom’s been good to you.   Sometimes we need to do a little extra without feeling like we must be compensated for it, as hard as that is to do. Even if that little extra turns out to be a big extra.   It’s like investment in your future.  You may not see it now, but the habit of extra effort will pay off in the long run.”

“What do you mean?” he asked.

 “When you least expect it, something good will happen that was a direct result of your extra effort.  Like the time your self-portrait was chosen to hang in the school office because you went above-and-beyond the assignment.  It doesn’t happen all the time, but when it does, it’s nice and can lead to other things.  The trick is not to expect something every time you put in the extra effort.  Put in the effort and one day it will pay off.”

These life lessons are sometimes hard to teach kids.  It requires them to trust you because the results aren’t immediately apparent.  That’s why it’s important to look for opportunities to make connections for our kids.

For example, the next time you see your children do a little extra, tell them that you’re proud of their work and the extra effort they put in.  And when they receive recognition for going above-and-beyond, make the connection between the effort and the “reward”.  Then when they come home from the neighbor’s house a little miffed that they didn’t get paid, remind them to be patient.  Investments take time to grow and much can come to those who are willing to wait.

Bumper Sticker: I Break for Lemonade Stands

Okay, this one’s too cute.  John walked in from work this afternoon holding two teeny paper cups.  And I mean teeny.  The ones really young kids use after they’ve brushed their teeth.  The ones that hold maybe two ounces of liquid.  He held them up to me and said, “I stopped for orange juice.”

We are big believers in kids getting a chance to exercise their entrepreneurial spirits.  And it usually starts with the infamous lemonade stand, or in this case, orange juice stand.  I’ve seen kids who I would never consider the lemonade stand type out on the corner selling their brew.    

I really feel that kids are born with a desire, and the gift, to do something constructive that can earn them a little extra money while having fun.  Somehow, slowly over time this desire disappears. 

Kids are optimists.  Because of this they tend to think they can conquer the world.  That’s not a bad thing.  But often, parents need to bring kids back to reality.  I’m not sure how to help you build a teleporter is one time I remember having to do a reality check on Nathan.  How do you explain to a first grader that having voices travel over the airwaves is a little different than having a person travel through space and time.

But because kids are optimists I also think we need to take the time to help them think through some of their ideas.  Maybe if we do that, kids won’t slowly give up that entrepreneurial spirit they seem to be born with.  Not all their ideas will come to fruition, but you may find that you’re pleasantly surprised.  Like I was when Ryan decided to start a soda-making business.

So the next time you see kids having a lemonade/orange juice stand… stop.  And when their little hands submerge the teeny cup into the pitcher then hand you a sticky, dripy cup…smile.  That quarter you just handed over could be the beginning of a huge empire.  Maybe one that will one day teleport you to your next business meeting.

Deadbeats Rule!

While watching In Debt We Trust with Nathan and Ryan, I found out that those who pay off their credit cards each month are called deadbeats by the credit card industry.  That makes me a deadbeat.  Deadbeats rule!

I’m not a big fan of the credit card industry.  Just because you can doesn’t mean you should.  Well the credit card companies did, and a lot of people are suffering.  And although a tad bit behind…change is a comin’.   Congress just passed new legislation.  No longer will credit card companies be allowed to change rates willey nilley like they’ve been doing. 

Don’t get me wrong.  I love my credit cards!  Last year I “earned” over $600 in cash just because I used them…and paid them off each month.  

But there is a dark side to credit cards.  And our kids need to know about it.  Remember, habits are formed when kids are young.  Bad habits are hard to break.  Let’s form the good ones.

Good habits:  saving, spending wisely, sharing, living within our means, setting personal financial goals, having a money game plan.  If we can instill these habits in our kids at an early age, they’ll have the skills to use credit cards wisely.

So here’s the low down:  A revolving credit card balance is really the same as a high interest loan.  If we can have kids agree how ridiculous it is to take out a loan on a Rise Against CD or a new pair of Ambercrombie and Fitch jeans, then we have a chance of preventing what has become an addiction in our young adults.  But won’t kids eventually need to use credit cards to begin establishing credit?  That was a question I got asked by one of the mom’s in my money class.  The answer.  No.

Remember in the olden days those green American Express cards…the ones you had to pay off each month?  They’re still around, we just don’t hear a lot about them.  Probably because they don’t generate enough money for the card companies. 

They’re called charge cards and they’re the way to go for young adults and perhaps many adults.  They don’t allow revolving credit.  Ya don’t pay the entire balance at the end of the month, ya can’t use the card.  Well, you can try, but it’ll be closed for repairs.

There is usually an annual fee associated with charge cards but for a young adult who is learning the ways of the charging world, it’s a small price to pay.  And the fee for the green AmEx card is only $25/year.

Now how about someone like me who pays off my credit cards each month and loves getting free money because of it?  You know your child.  If you feel he/she can responsibly pay off the card each month, then, when they’re old enough, have at the freebies.  It’s like being a savvy consumer.  But it requires discipline.

You know what’s one of the best things about being a kid?  They’re starting with a clean money slate.  How many under-15-year-olds do you know who are in credit card debt?  Probably none.  My goal is to keep it that way.  Let’s help them establish healthy money habits and raise a generation of deadbeats!

The Red Ink Flows

With absolute seriousness, Ryan glanced up from the kitchen table and wanted to know what ‘red ink’ they were talking about.  After all, he said, he has only ever seen the morning paper covered in black ink.

On his quest to find the comic section this morning Ryan stumbled across the title of an article on the front page, The Red Ink Flows, from which came his query.  Even if he had read the words that followed…deficit could hit $21.3 billion… it probably wouldn’t have made a difference.   How could he know that red ink (in the red) refers to a loss?  It’s not exactly intuitive.

Which made me think about other money phrases, or idioms.  Things like money doesn’t grow on trees, saving for a rainy day, made of money, penny pinching...  As adults, we’ve been saying them so long we tend not to think too much about the literal meaning.  But taken literally, they’re hilarious.

Which then gave me an idea for a fun lesson to do with my money students…having them represent a money idiom of their choice through a drawing.  Not only will it be fun to draw something ridiculous, but it’s the perfect opportunity to introduce the meaning behind the phrases.  There’s wisdom, or at the very least some interesting conversation, to be found in those words. 

See if you can guess some of these “illustrations”:

  1. a pot cooking on the stove filled with books
  2. fingers squeezing a penny
  3. a nicely dressed penny
  4. a lady at the checkout counter handing over an arm and a leg (okay…maybe this one won’t make the list…)
  5. a baby with a spoon in it’s mouth
  6. a mouth filled with bills and coins

Did you figure them out?

  1. cooking the books
  2. penny pinching
  3. pretty penny
  4. costs an arm and a leg
  5. born with a silver spoon in his mouth
  6. put your money where your mouth is

 Do you have any favorites?

Discipline Required

Here’s the thing about the stock market.  Rarely can it be timed.  I may even go a step further and say that never can it be timed.  But I’m not an expert.  What I do know is that over time, the stock market seems to do pretty well.  Statistics say that it averages a gain of about 11%…over time.

There’s the key.  Over time.  And that’s exactly what we talked to Ryan about when he decided to plunk down about $250 of his own money for 5 shares of CMG back in September.  Unless you’re a professional and will spend your days scouring information about companies, trends, and P/E ratios, the best bet is to do your research, invest, and then forget about it for awhile.

So when CMG (Chipotle Mexican Grill) went up to $82 a share recently, and Ryan was visibly upset because he had missed an opportunity to put even more money in, we had to sit him down again and go over the if you’re going to invest in the stock market rules.

Ryan had been waiting for CMG to drop so that he could buy more shares.  His original investment of 5 shares cost him $47/share.  When he last looked it was around $73/share.  The market’s been so wacky lately that he figured it was bound to plummet again and then he’d go back in.

But that’s not what happened.  He was shocked and mad at himself that he had not put in the other $250 that he’d been holding on to.  Especially after I reminded him about two weeks ago that he shouldn’t try and time the market.  A lot of people think they can out-smart the market.  It does happen.  But mostly it doesn’t.  

It took a little bit to help him recover.  The stock market is such an emotional thing.  That’s why it can’t be timed.  And frankly, I’m glad he’s learning this lesson when he’s 14. 

He’s okay now.  He should be.  The value of his stock increased by 74% in a short period of time, for crying out loud!   At least, that was the case a few days ago.  He’s not interested in taking a peek.  Best let it sit for awhile.  He’s got lots of years ahead of him.  Even at $82/share, one day that’s going to be a bargain.

Soda, Anyone?

So this is how it starts.  5 flavors,1 carbonating canister, 3 bottles and 117 dollars.   It’s the creation of Ryan’s first business venture.

Ryan’s paper route has earned him a lot more than just his $41 paycheck each month.  It’s taught him life lessons that only having a job can do.  Being accountable to a “boss” that’s not your mom, giving customers that extra special service, pounding the pavement for new subscriptions, planning ahead, being prepared, and the latest one…clipping coupons.

Ryan actually reads the paper he throws on driveways.  He’ll often come in from the garage saying, “Hey, mom, did you know there was a bomb scare at Sierra College yesterday?”  or “Whitney High did a real car crash simulation to show kids about drinking a driving with a funeral and everything.”   That story made quite the impression.  

And now he’s reading the coupons.

Ryan’s a big fan of taking care of our planet.  He earns extra money collecting recyclables with Nathan and doesn’t waste anything.  So when he saw the coupon in the paper that said Make soda.  SAVE MONEY.  Clean planet.  he was sold.  He wanted to do all those things.

The coupon was actually a mail-in rebate worth $20 off the purchase of soda stream, a home soda maker.  He figured he could save the planet while making a little extra money by setting up a home-made soda stand.  (He’s not going to save the planet at home because we don’t drink soda!)

So we went out to Kohls after running his paper route yesterday and bought all the supplies.  He’s learning things like initial investment, recurring expenses, profit, etc.  

Before we left for Kohls he spent some time really thinking everything through.  After all, he was spending his own hard-earned money on this venture.  When kids pay for their own stuff, it has more meaning.   And because he has now sunk a lot of money into this, he really wants it to succeed.

After firing up the carbonater and making his first liter of root beer (it was actually pretty good) he started crunching numbers so that he knew exactly how much it cost him to make one soda.  Here’s an example:  the flavors cost him $2.99 each.  Each one makes 12 liters.  $2.99 divided by 12 is approximately 25.  Each liter, therefore, costs 25 cents.  He’s working on how many “cups” he’ll get out of each liter, then needs to do the same with the carbonation, the cost of the cups and ice. It’s a great math lesson.

He’d have it all figured out but I stopped him at 9:30pm because he hadn’t finished packing for his honor band trip to Disneyland.  Maybe he’s working on it right now on the double-decker bus.  Probably not.  He’s on a double-decker bus with his friends!

His first real test will be the Kids’-Only yard sale coming up next Saturday. After that he plans on having soda stands and selling at the soccer games he refs…when he’s not reffing.  He wants to donate 10% of his profits to charity.  I told him I thought that was a great idea.

At some point he’s going to have to square with the fact that selling the soda means he needs to buy cups which means the cups will need to be thrown away…

Ryan has learned a lot having a paper route.   And the interesting thing is that working for somebody else has introduced him to the idea of working for himself.

Nathan’s First Bike – Flashback

Nathan got his driver’s license two weeks ago.  He thinks he’s a free man but what he doesn’t realize it that it’s me who’s really free. Not free from the worry when he’s out there on the road.  Just from the many trips back and forth from all his many activities.

But it made me think about his first set of wheels.   Nathan had all the little trikes kids usually get as they’re learning the ways of the road.  But his first real bike was a sleek silver and black two-wheeler fully equipped with a horn and training wheels.  And he paid for it himself.  He was four years old.

Nathan was always a saver.  Not that he didn’t buy anything; he simply waited until he found something he liked and then bought it.  The idea of KidsSave never occurred to us with Nathan.  KidsSave had to wait for Ryan.

So, knowing Nathan’s personality, I used the new bike as an opportunity to teach him how to set his first personal financial goal.  Being four, it was important that the goal be achieved in a relatively short period of time. Even kids like Nathan can’t wait forever.  I also knew that I would need to help him become successful if I ever wanted him to set another goal.

The bike cost $60.  I decided not to bring up the notion of tax.  That lesson could wait.  Using the $60 price tag we set up a goal (we didn’t have KidsSave then so this was all done on a piece of lined paper). Nathan had already saved some money and was willing to put some of that towards the bike.  That left us about $40 shy.  That’s a lot of money for a four-year old.

That’s when I decided on starting an allowance.  Since I knew that starting an allowance would shift all those extras that I’d been paying for into his little hands, I started him with $5 a week.  John thought that was way too much but conceded after realizing all the things I planned on having Nathan do with the money.  Like buy his first bike.

And buy it he did.  Within a month, using some of his saved money, his allowance, and money from doing extra stuff, he was the proud owner of his first two-wheeler.  There is absolutely nothing like the feeling of achieving something you set out to do.  And there’s absolutely nothing like the feeling of watching your child’s eyes light up as he zips away on the bike he earned through patience and hard work.

And now Nathan has come full circle.  He wants a new set of wheels.  He’s already saved the money, it’s just a matter of fitting the car-hunting escapades into his busy schedule.  I’m in no hurry.  Seeing the excitement in his eyes as he zipped off on a spiffy new bike with training wheels was one thing.  Seeing the excitement in his eyes as he zips off in a swanky “new” car is entirely different.