Debt Sucks

I help prepare kids for their eventual financial futures.  Which means, I get them when they’re young and teach them how to stay out of debt and build wealth.  So being confronted with young adults who are already thousands of dollars in debt is a bit sobering for me.

I was asked to work with a group of foster kids (they’re actually 16-23 year olds) and teach them stuff about money.  So on my first visit, I played a little game to see what they already knew.  I was impressed that most were aware of the perils of credit card debt.  But they were surprised to hear about the importance of credit scores and the power of compound interest.  When I left, I handed them a tracking sheet so they could write down all of their expenses for the next week’s class, which was today.

Not one kid filled out the tracking sheet.  So I found myself punting.  I did a quick review of needs and wants.  One girl showed a pack of cigarettes as one of her wants.  Great.  Another one had a coffee from Starbucks.  And yet another was sitting there with a bag of Pepperidge Farm cookies and a large soda.  “Lunch?”  I asked.  “Nope.  I had to get cough medicine and it was there at the checkout.”

My goal for the day was to have them look at their tracked expenses and see where they were spending money that they could cut back on.  Apparently we didn’t need the tracking sheets because I had physical samples sitting right in front of me.

So I showed them how much their oh, it’s just a few dollars spending habits cost them over a year.  Cigarettes:  $1264/year; Starbucks coffee:  $1440!!

As expected, they were all shocked, and that includes the social workers who were there.  Somehow this led to some pretty interesting discussions about debt.  Specifically, their debt.

One has $120 in debt.  Another isn’t quite sure but it’s in the hundreds.  All owed to family and friends.  And one, owes, she thinks, a whopping $6000.  “Credit card debt?”  I asked?  “Nope.  Fines,” she says.  “Everything’s gone to collections.  And you have to pay interest on it.”

I asked her how it happened.  It started small with not paying the cable bill, then utilities.  “It just kept snowballing,” she said.  She’s so overwhelmed she can’t see a light at the end of the tunnel.

The next time I meet with them it will be in a smaller group.  They will put together a concrete plan to get out and stay out of debt. 

For so long I’ve been working with kids before debt.  Today was my first real exposure to a group of kids after debt.    My goal is to one day soon work with a group of kids post-debt.  This group of kids.

5-Year Olds DO Get It

I had the pleasure of a phone conversation with my 5-year old niece, Olivia, the other night.  We were chatting about her first weeks in Kindergarten.  Apparently, Ian had brought in a pretty nifty coin collection because she talked about it for about a minute, which, if you know anything about five-year-olds, is a pretty long time for any one topic!

So that led to a discussion (albeit, short) on money.  I asked her what she knew about money.  “You buy stuff with it.” 

“If you could buy anything you wanted, what would you buy?” I asked her.

“Bubble gum, candy, and toys,” she replied.  Hmmm, I was thinking.  Time to get her mom to put her on an allowance program using KidsSave.

I knew I didn’t have much time left with this topic so I if I was going to only get one more question in, this was it:

“Do you save any of the money you get?”

The answer was priceless (pun intended!).  “Yes!  One day I want to be rich.”

And there it is.   Five-year olds know what money is for, they know it’s important, and they know that if they want to be rich, they’re going to have to save some of it.  And just when I was going to ask a follow-up question, she says, “I’m done talking about money.  Let’s talk about Halloween.”

A $300 Lesson

I’d heard about stuff like this before but this was my first real exposure to it.  $300 in overdraft fees.

In response to my question, “What are some of your experiences with money?” Josh, a 19-year old in my young adult money class answered, “I cut up my debit card.” 

 That’s when he told us of his overdraft experience.  He didn’t realize that the bank would continue to pay for his debit card purchases even though there was no money in his account.  Enter the fees.  And a very lucrative way for banks to cash in.  

Josh is one of seven kids in my group.  He, along with the others, grew up in the foster care system.  He doesn’t have a lot of money.  So it really irks me when I hear these kinds of stories.  It’s expensive to be poor, I tell the kids.  And it stops now.

My goal is to give these young adults the information they missed growing up.  And to help them set up personal plans for financial success.  I’ve never worked with “kids” this old so this is all new to me.  I’m not sure what my own plan to get them there is, but you can bet that when I hear stories like Josh’s, I’m going to figure it out.

They were all fascinated by the power of compound interest.  Not one of them had heard of it before.  But they all want in.   And that’s the power of knowing.  It gives us choices.

These kids have jobs.  And checking accounts, and some savings.  One of the girls even has a little 4 month old.  I read a statistic this morning that said it costs around $221,190 to raise a child to age 18.  Here’s another stat:  The average personal wealth of a 50-year old American including home equity is $50,000.

Yup.  $50,000.  Including home equity.

Ever heard a high school kid ask, “When are we ever going to use this stuff  in real life?” 

If the subject is personal finance, the answer is, “Every day.”

Driving home this afternoon really made me think about why kids are not learning these things and what we need to do to make it happen. I’m not sure.   But if we don’t want our kids to pay $300 before they learn how to keep track of money in a registry, we’d better figure it out.


One of the hardest things for me to do as a parent is to deliberately allow my kids to fail.  It’s so hard that sometimes I need to walk out of the room so I don’t end up intervening and bailing them out.

Of course, I would never, ever allow my kids to fail if it puts them in any sort of danger.  That’s just a no-brainer.  But making mistakes is a part of life and, if viewed from the perspective of learning how to make life easier the next time, then making mistakes becomes a powerful learning tool.

As a result of having to walk out of the room several times this past week, Nathan has learned to register his soccer reffing availability early in the week, not on the last day. 

Nathan needs money.  Gas money.  He loves the freedom that a car brings but there’s a price that comes with it.  A real easy way for him to earn a lot of money is by reffing soccer on Saturdays.  He can earn upwards of $20 for each game he refs by choosing the right games. 

But before he can ref any of the games, he needs to sign in online and choose the games.  Ryan had picked his games on Monday.  As a result, he had first pick of pretty much any game he wanted.

Although I reminded Nathan to pick his games, as well, he procrastinated.  All week I was sending mind vibes to him because I knew he needed the money.   The longer he waited the greater the chance that he wouldn’t have any games to ref.

I also knew that if I kept reminding him, I would be putting myself in the position of always having to remind him, and he would come to expect it.  That’s why I found myself walking out of the room several times when soccer somehow entered the conversation.

It wasn’t until Thursday night at 9 p.m. that Nathan finally hopped on the computer to sign up for games.  And low and behold, there weren’t many games left that needed refs.  Not only that, they were spread out during the day, unlike the back-to-back games that Ryan had signed up for.

Ryan made $70 reffing on Saturday.  Nathan made $35.  In addition, Nathan spent a lot of gas money driving from one field to another and “wasting” time in between waiting.

It’s Sunday today.  Nathan has already signed up for games next week.  And I never had to say a word.  Sometimes being a parent is really hard.  But sometimes it’s the hard parts that end up making it really easy.

1 in 1,592,937

I use my husband and kids as guinea pigs.  That’s what I was doing one evening during dinner when I handed everyone a post-it note.  I was practicing a lesson I was planning on teaching the next day to a group of fifth graders.

“Write down five numbers from 1 to 47 on your post-it.  You can use your favorite numbers or simply choose random ones.  It doesn’t matter.  If you match any of the five I write down, I’ll buy you a soda the next time we’re out.    If you match all six, I’ll give you a $50 gift card for itunes.”

I was pretty sure no-one would match all five numbers, but I didn’t want to clue them in by saying something like I’d take them on an all-expenses trip to Hawaii.

My family loves competition.  All it takes to get them 100% involved is to throw in an incentive.  So they got busy writing down their numbers.  That actually took a while because my oldest, Nathan, is such a deliberate worker.  He has to know that each one of the six numbers he was about to choose was carefully thought through.  Not that it would make a difference.

So when we revealed our numbers and they saw that I had written the consecutive numbers 1, 2, 3, 4, and 5, Nathan about had a tissy fit.

“No-one ever chooses those numbers!” he said.

“I did,” I countered.

“Yes, but no-one else does.  It’s silly to choose the numbers one through five.”

“Really?” I asked.  “Don’t I have the exact same chance of winning as you do with your five numbers?”

He knew I was right.  That’s why it really bothered him.

My lesson the next day had to do with unwise things to do with our money.  I put buying lottery tickets near the top.  Not that buying an occasional ticket is bad.  But a lot of people do it a lot, and they’re the ones who shouldn’t be doing it, at all.

When I was researching the lesson (since I don’t buy lottery tickets I had to read about how the whole thing worked) I discovered a popular lottery game in California is called Lucky Lotto.  Players get to choose five numbers from 1 – 47 and then a mega number from 1 – 27.  I decided to have the students only go for five numbers because it would make the lesson easier to teach.  (Believe me, I’ve been doing this for a while.  The probability of there being at least one kid in the class that would choose a number greater than 27 for the mega number was pretty high.  I wasn’t going there.)

The probability of matching all five (and not necessarily in the same order) is 1 in 1,592,937.  By the way, to match all five and the mega number:  1 in 41,416,353.

Sure people win.  But most don’t.

Isn’t it wiser to put that money in an investment that, over time, would earn ridiculous amounts of money?

The problem is, people don’t want to wait for 20, 30, 40 years.  They want it now.  Which means in 20, 30, and 40 years, they’ll still be playing the lottery.  Someone needs to make them pick the numbers 1, 2, 3, 4, and 5.  Then maybe they’ll understand how silly the lottery is.

And as for my husband and kids?  No-one matched a single number.

Double Bonus

Here’s the thing about kids working outside of mom and dad.  They get a different exposure to the world.  And I’m all for having kids be exposed to all kinds of experiences.  Especially if it’s going to help them as adults.

Nathan and Ryan began “working” at eleven years old.  They had a once-a-week after school paper route.  It was the perfect first job.  They were responsible for getting their papers wrapped and delivered by 6:30 pm.  If they needed supplies, like rubber bands, they had to make the phone call into the office.

If a customer had a complaint, then they needed to take the phone call from the office and deal with it.  But they were also rewarded with customer tips for providing great service.

During a competition for a brand new ipod, Ryan learned how to go door-to-door (with me not far behind) and sell subscriptions. Ryan won the ipod – then proceeded to sell it on ebay.

Their years of throwing papers earned each of them their very first glowing letter of recommendation.

Although Ryan still has part of his original paper route, Nathan gave his up several years ago due to school.  But they both discovered another perfect job:  reffing soccer on the weekends.

Since they’ve been reffing, I’ve noticed a new life skill they’ve learned.  Dealing with angry adults.

Personally, I’m not sure if I was ready at 13 years old to handle irate coaches or parents at a soccer game.  But the boys come home with some pretty interesting stories of adults behaving like immature teenagers.  And bottom line is, as the refs, they have to effectively deal with it.

Sidetracked by the fact that the boys were earning extra money reffing, these other benefits never occurred to me.   But solving problems on the field has given them confidence in dealing with people who are significantly older than them.  And besides their paycheck, I consider that a huge bonus.