How Does a 15-year old Save for a Car?

Ryan just bought a car. And she’s a beauty, too. 2002 baby blue Toyota Prius with only 57,000 miles. Owned by a 91-year old grannie who used it mostly to drive to church and back. No kidding. Problem is, Ryan can’t drive it; never mind he doesn’t have his license. He barely has his permit. And taking an online course to get his permit happened after he bought the car.

How does a 15-year old with no permit end up with a pretty snappy car sitting at the bottom of the driveway? It starts with a plan.

When Ryan was 11 years old he got his first job. He delivered papers once a week after school. Most of that money went directly into his savings account. Although he was responsible for all his discretionary spending, there wasn’t a whole lot he spent money on. John and I customized his interest rate (KidsSave was a great help in this area), so that the more he saved, the more he ended up with. This was a great incentive. But an even greater incentive was the offer his grandmother gave him. She would match him dollar for dollar on his first car.

Over the years he added soccer reffing, teaching math centers, and yard work for our neighbor to his list of jobs. He also did the occasional lemonade and root beer float stand. Then there were his buys and sells on ebay. Again, most of it went into his savings account. Although I have to mention here, just in case you may think he never enjoys spending money, he bought his own $350 mountain bike, an ipod touch, golf clubs and other pretty pricey items. He knows when to save and he knows when to spend.

But my main point is that, when you have a goal in mind, when you know what you want and have figured out the steps to get there, it’s easier to keep your eyes on the target. That’s the power of goal setting. It keeps us focused. Even when you’re eleven years old.

Four years later the perfect opportunity presented itself. We live near a community college which doubles as a used car lot on the weekends. Nathan and Ryan, just playing around on the computer one day, discovered that a used Prius would be on the lot. A Prius is exactly what Ryan wanted. He’s my little eco-friendly kid.

The stars seemed to be aligning for him. About six months ahead of when he had planned on buying a car, it was an opportunity not to be missed. An opportunity on a variety of levels. This was his first major negotiation and he wanted to do it himself. So John and I prepped him. He needed to know exactly what his maximum offer would be. Start low, move up.

The owner, through her grandson, was asking $10,000. Ryan went in at $8800. They came back at $9200 which was exactly what Ryan had hoped. He had just made his first deal.

After registration and taxes, the total came to $9796. Split with his grandmother, Ryan’s share was $4898. He paid in cash. That’s how a committed 15-year old buys his first car.

Teaching our kids to set personal financial goals when they are young is so important. It starts with the little things…a video game then a bike then an ipad. They learn it’s possible and begin saving for the bigger things. To see how it’s done, check out this video:

Spend to Make? But, of course!

I hung out in a second grade classroom last week to talk about saving money and then have the students make their own Money Jar.  It was a fun lesson and the Money Jars turned out unbelievable.  Kids and their creativity never ceases to amaze me.

While we were discussing money issues, I asked the students how they got money. Of course, the usual answers came up…allowance, chores, birthday money.  Then one little guy raised his hand and volunteered, “You have to spend money to get money.” 

Wow.  It took me a second to let his comment sink in.  If I was with a group of adults, I probably wouldn’t have skipped a beat.  Adults spend money on investments all the time in the hopes of making that money grow.  But I was in second-grade-mode, and the thought of a second grader coming up with this took me by surprise.

But he’s absolutely right…even on a second grade level.  Think about the good old fashioned lemonade stand.  Before you can make a profit, you first need to purchase all the supplies.  The same goes for making and selling crafts which a lot of kids like to do. 

I am always impressed with the kind of thinking that kids do if we allow them the opportunity to share their thoughts and reasons.  Who’d have thunk that a seven-year-old would get the concept that, yes, sometimes to make money you need to spend it.  Sheesh…with this kind of thinking, it’s hard to be smarter than a second grader.  🙂

Divots and Entrepreneurs

“How much do you think I could get for this on eBay?”  Ryan was holding up a  chunk of sod and grass that, in golfers lingo, is called a divot.  It’s what’s left after a golfer takes a hard shot at a ball lying on the grass.

We were at the President’s Cup in San Francisco and all the big names in golf were there with us:  VJ Singh, Phil Mickelson, Mike Weir, Ernie Els, Fred Couples…and, everybody’s favorite, Tiger Woods.

It was Tiger’s divot that Ryan was holding.  Normally, spectators don’t get to pick up after players.  There’s a rope that keeps us on one side and the players on the other.  Professional golfers usually hit their tee shots right down the center of the fairway.  But, as good as he is, Tiger has been known to veer off in either direction.  And that’s exactly what happened to us yesterday.

“It’s coming our way!”  That’s what I heard right before I looked down and saw a small white ball roll right past my shoes.  Tiger’s ball.  For a second, it was a little surreal.  This had just happened two holes before with Ishikawa’s tee shot.  His ball rolled right beside me, as well, and we were within several feet of him, watching him take his second shot.

And now, Tiger’s ball was literally inches from my toes.  Well, you can imagine what the crowd was like.  And I wasn’t moving until someone made me.  Which is exactly what happened.  But even so, I was feet away from the ball, and then, feet away from Tiger, watching him size everything up.

And then, just before he took his swing, I saw him close his eyes.  He was visualizing.  This is a powerful technique used by a lot of athletes to see the play in their minds first.  And it’s a technique that is used a lot for anyone who has a specific goal in mind.  Seeing the goal in your mind can help you as you work towards attaining it.  It’s a great thing to teach kids, for whatever goals they may have.

But back to Tiger.  He was about 240 yards from the pin.  The pin couldn’t be seen from where we were standing because of several trees.  I was wondering how he was going to play it since it wasn’t a straight shot.  And that’s when I learned the true meaning of a pro.  He didn’t need to take a straight shot.  When I watched his ball sail into the air and then make a left turn towards the pin, well, I’m not sure I can describe the sense of awe I felt.  I didn’t know that could be done.  I sure as heck haven’t seen John or Nathan do that.

Ture to form, Ryan had staked out that divot as soon as the shot was taken.  He had it in his hands in seconds and I was looking for a second baggie to put this one in. (Ishikawa’s was already in our fanny pack.)   

That’s when Ryan asked me how much he could get for the divot on eBay.  I love the way he thinks.  Even though I’m pretty sure the answer is ‘zilch’ the fact that he’s looking at the potential of a piece of dirt means he’s open to being presented with possibilities where the answer may not be ‘zilch’.  And that’s the sign of a true entrepreneur.

And for anyone who’s interested, we have Tiger’s divot off the first tee at The President’s Cup.  I’m sure we can negotiate a good deal.

Gas Money

I don’t like to interfere with the business dealings Nathan and Ryan have.  I am confident that they can handle them effectively and ethically.  A year ago I probably wouldn’t have included the word ‘ethically’ but given what’s happened since then, focusing on ethics has become pretty important.

Nathan has a little side business where he drives kids to and from school…for gas money.  If you read an earlier post where I wrote about two empty seats in his car – he has filled them both.  He no longer has to shell out any of his own money to fill up his tank.  Nice.

When it came to deciding how much to charge his passengers, he decided to leave it up to them to pay him what they thought was reasonable.  This has worked both for and against him.

Like a lot of kids, Nathan has a pretty good sense for fairness.  And he can pretty much back up his fairness arguments which he did for me when he was describing how he thought that the payment of one of the passengers was unfair. 

“I have to drive out of my way to pick him up.  That takes gas and extra time.  Besides, I’m saving his parents so much time; they don’t have to drive 13 miles to pick him up and then drive 13 miles to bring him home.  That alone should cost a little extra.”  He’s paying Nathan $5/week.

On the other hand, one of the other boys is paying $10/week.  I thought it was too much and actually talked to his mom who is a friend of mine.  She insisted, saying that the time she saved not having to drive him to school and not having to work her schedule around him was worth the $10.

And that’s how Nathan thinks, as well.  It’s not just the miles driven, but there’s most definitely a time factor involved.

Then there’s the kid who still hasn’t paid Nathan a cent since the beginning of school.  He’s a friend of the kid who’s mom pays Nathan $10.  I told Nathan he might want to get on top of that before the “bill” becomes too overwhelming.

“I’ll just keep bugging him about it every day until he pays.”

Really?  And how’s that going?   “It’s kind of awkward, but eventually he’ll get it.”

Hmmm…not so sure this is the best strategy.  But he’s got to figure that out on his own.  And because gas money is so important to him, it’ll be interesting to watch how this all unfolds.  Besides, he’s learning how to deal with people when there’s money involved.  And those two combinations can make for some pretty interesting discoveries.

Nathan’s Taxi Service

Keeping gas in the tank is painful for a teen when it’s their money that’s being sucked dry.  But it’s also a very important life lesson.  Teens need to learn how to manage money before we send them out into the world.

So Nathan was thrilled when he came home yesterday with yet another opportunity to drive one of Ryan’s friends to school every day.  Besides Ryan, this is his fourth passenger.  Paying passenger. 

I told Nathan I would pay him the Ryan’s school bus fare if he drove Ryan to and from school each day.  That cost me $265.  Nathan was thrilled.

Then one of Nathan’s friends asked if he could be driven home from daily cross country practice.  He’d pay $5/week.  The same happened with one of Ryan’s friends who also needed a ride home and was also willing to pay $5/week.

So far I’m thinking Nathan’s ahead.  And he’s doing it without hestitation so I’m pretty sure he’s figured out he’s ahead.

But now it’s turning into a business.  Last week another one of Ryan’s friends asked if Nathan could pick him up on the way to school.  It’s a little out of Nathan’s way but for $25/month Nathan was willing to take a slight detour.  Then a friend of Ryan’s friend asked the same thing.  Since both of these boys is being picked up at the same place (they go to morning seminary) Nathan figured…what’s one more if he’s getting and additional $25/month.

I think the whole thing is great.  Nathan is a very safe driver.  We did ask that he talk with the parents to work out details and so that the parents have a chance to meet him.  He’s actually doing these parents a huge favor.  The school is 13 miles away.  That’s a lot of driving time.

And I know how Nathan thinks.  He has room for one more passenger to and from school.  That’s even more gas money.  I’m not much of a gambling gal, but I have bets that within a few weeks those seats will be filled.

The Risk Continuum

Nathan finally did it.  He bought his first shares of a public company.  Not the company he was orignially looking at.  That was Pacsun and those shares have tripled in value in the few months he waited. No, instead, he bought several shares of Walmart.  He likes how environmentally conscious they are and believes that they can have a big impact in this area.

I like that he’s given serious thought to his investment.   And I like that it is in concert with his value system.  He’s concerned about the environment and sees that Walmart has taken climate shift seriously.  Although, no doubt, the bottom line plays a role here, we still all benefit.

Buying his first shares was a big deal.  He’s a pretty conservative investor because he works hard for his money.  And we all know that on the risk continuum, stocks are at the risky end.  It’s all about how much risk you’re willing to take on.

Mutual funds are less risky and the boys have been steadily adding to their Vanguard 500 Index fund since 2005.   But after one of my money classes last year, they have both been interested in testing the stock market waters.   The trick is to decide the balance. 

Since the boys are still in their teens, their time horizon is longer than it is for me and John.   So they can take bigger risks than we can.   Although Ryan’s company stocks take up 13% of his portfolio and Nathan’s only takes up 8%, they both only recently began investing this way so they are taking it slow.  

But, as Nathan learned, taking it too slow can mean lost opportunities.  What they need to do now is decide how much of their portfolio will be in individual stocks and begin the balancing act.  This will give a pretty clear picture of where each sits on the risk continuum. 

But what a great position to be in.  Teenagers armed with information that can shape their financial life 30 years from now.  If only I knew then what I know now…

A New Discovery

Ryan’s been bugging me for years if he could sell stuff on eBay.  I’ve always given him permission but he needs my help to get him started and we never got around to doing it.  So last week, when he asked me yet again, I decided it was time I put down whatever I was doing and help him out.

He’s made $61 in the past week selling two items.  Subtract the shipping and listing costs and he’s still up over $50.

I’d write more but I’ve got to go scour my closets for things to sell on eBay.

It’s Just That Easy

Ryan and two of his friends were hanging out the other night.  Earlier in the day before either friend came over, Ryan had been MySpacing one of them about buying baseball cards on ebay.  His friend had bought a Willie Mays card several months ago as an investment.  According to him, it has already increased in value.

That’s when Ryan’s little ears perked up.  Ryan is all about investments.  He knows he has time on his side and he’s willing to wait.  He wanted in on this baseball card investment thing.  I told him to make sure, as always, that he does his research before putting any of his hard-earned money on the line.  I trust him to do that.

True to form, Ryan spent some time researching a baseball bat signed by Willie Mays.  He was tempted to plunk down $300 and wait it out.  But after emailing the seller and discovering that the sale was final, he decided not to do it.  It just didn’t sit right with him.  And $300 is a lot of money.

$4.25, on the other hand, is not a lot of money.  When his two friends came over later that day they checked out several other baseball cards.  I was busy doing something else and figured they were having fun discussing cards, ebay, and investments.

That’s when Ryan came to me and asked me for my paypal account number.  Excuse me?  Apparently, his friend decided to add on to his collection and Ryan allowed him to buy his card using our ebay account.  In all fairness, we’ve done this before for one of Nathan’s friends but have long since retired that habit.  Ryan did not know this.

I now found myself in an awkward position.  I didn’t want to embarrass Ryan in front of his friends.  Unfortunately, I was so shocked that they had bought the card, I forgot to check my comments at the door first.  “Are you kidding me??  Absolutely not,” I blurted out.

All’s well that ends well.  I tried back peddling which never works, but paid for the $4.25 using my credit card.  Then I had Ryan pay me the $4.25 in cash.  I’m pretty sure his friend is good for the money, but I’d rather not be the one waiting around for it.

This little incident got me thinking about how easy it is for kids to buy stuff online.  Especially if they know their parent’s password.  But password or not, what are kids thinking about money when either they or their parents place orders on line?  Is there a connection between the hard work done to earn the money and the item that was bought?  Has technology made things so easy for us that it’s really making things harder?

And should parents be filtering their children’s access to “spending sites” just as ferverently as they filter their access to “adult” sites?

Some things are just too easy.

Life’s Pleasant Surprises…and Lessons

Nathan wanted cash for the movie, Transformers 2, that he and a few friends are going to see this afternoon.  They’re going to the early show to save money but  Nathan still didn’t have enough cash on hand, so he and Ryan just returned from bringing the recycling to the recycling center.  These are the times I really like the fact that Nathan can drive.

We’ve been recycling for as long as I can remember.  The boys are pretty used to it being a part of our routine and have even encouraged some of their friends to do it, too.   And apparently really buff football-player types also recycle.

Nathan was recounting his recycling experience of this afternoon to me when he got back.  “Mom, I saw three kids I know from school at the recycling center.  They were seniors and just graduated.  It was two guys and one of their girlfriends.  I couldn’t believe they were there.  I mean these guys are really huge.  They’re the type of guys you don’t mess with.  And they were recycling.   They had a TON of stuff!”

I could tell by the way he was describing them that he was in awe, probably because of their size and the fact that they were seniors who now had diplomas.  But also because they were bringing in their cans and bottles.

Then Nathan goes on to tell me how one of them offered to help him put his stuff in the bins.  “That was so nice.  I mean he just said that I probably had better things to do with my afternoon and he helped me.  This really buff guy.”  I think he was impressed that buff don’t-mess-with-me guys can be really cool.

So Nathan walked away with $25.53 and a lesson about judging people before you get to know them.  He’s on his way to the movies, but first he’s going to stop off at the lemonade stand just up the street.  I wonder if those little kids will look at Nathan, who’s been spending a lot of his summer time at the gym and looks pretty buff himself, and be in awe that a buff older kid would stop at their stand for lemonade.

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.