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:

Too Much of a Hassle?

I was talking to a friend of mine recently about setting up an allowance program for her six-year-old daughter.  Six is the perfect age to get an allowance going.  Kids this age understand a lot about money and it’s time to start giving them some responsibility managing some so that they can begin to get into healthy habits.

“She’s not interested in money at all,” my friend told me.  “She doesn’t like to go shopping and never asks for anything.”

I was a little surprised since most of the six-year olds I know are pretty clear about what they want.  And then I glanced around their house.   Her daughter already had just about everything she could possibly want. 

“What happens when she wants a new webkinz?” I asked.

“Well, I’ll usually buy it for her.”

Hmmm, I thought.  No wonder she’s not interested in money; she doesn’t need any.   So I recommended that she stop buying everything for her daughter and give her a small weekly allowance.  That way, when her daughter eventually wanted something, she could buy it herself.   And if she spent all her money and wanted something else, she would be out of luck.    Advances are not an option.  That defeats the whole purpose.

I’m not sure I convinced my friend who, I think, feels the whole thing would be too much of a hassle.  Hmmm, again.  I wonder what kind of a hassle it might be to have to deal with a young adult who doesn’t know how to effectively manage her money?

A Win/Win

I can’t believe I have to add figure out Twitter to my list of things to do.  What the heck?  And I’m already behind the 8 ball, so the pressure is really on.

That’s when it hit me.  Ryan.  He likes spending time on the computer.  Why not have him do it?  I’ll even pay him.  And he can work when he wants for as long as he wants. 

So that’s what I did.  I showed Ryan my Twitter account.  And when we finally got the two Twitter accounts I owned figured out (I opened a Twitter account last fall??), he went to work.  I pay him 25 cents for each follower he gets me. 

But there are rules.  I’m very, very picky about who I interact with.  I don’t consider this a popularity contest.  This is not about amassing as many followers as he can get me.  He needs to read all the bios before clicking the ‘follow’ button.  I had already started the work for him so he could see the types of people I’m interested in following.  And if there’s ever a question, he can ask.

So far he’s made 75 cents.  That’s 3 followers.  Hmmm…this may be harder than I thought.  But then, who knows, maybe it’s just a slow start.  Hey, why don’t you help Ryan earn some money!  Become one of my followers on twitter.com/kidnexions. 

I feel great having that crossed off my list of things to do.  And Ryan feels great because he gets to “work” on the computer while earning extra money.  It’s a win/win.  Yea me for figuring this out.

Out of Sight, Out of Mind

For someone who is very interested in his money, mostly because he needs it to fill up his car with gas, Nathan does a pretty bad job of keeping his cash organized.  He’s got some in his bathroom drawer, some on the floor of his room, some in his backpack, and some spilling out of the cup holder in his car.  And who knows where else.

So he decided the other day to collect it all and see how much there was.  Over $300.   He was thrilled.  I was not.  That’s a lot of money to have lying around.  He put it all in a baggie and there it sits on the family room table.  Still.

But as he passed the table last night and glanced at the bag he said, “I need to get that money into my checking account.  I don’t spend it if I can’t see it.”

Ah, so true.  So maybe there was a lesson in this after all.

The Rubber Trees

Nathan and Ryan had a “job” over the holidays watching the neighbor Tom’s two cats and taking care of the plants.  They’ve done this job before, apparently well enough to get asked back.  Actually, they take the job seriously.  I know, because the rubber tree plants gave them quite a scare.

About two weeks into the three week stint, Nathan and Ryan came back from Tom’s house looking a little worried.  It had been unusually cold in our little town of Rocklin.  So much so that it actually snowed.  Enough for Ryan to run out that white morning and make a decent snowman.

Two days before the snow, however, the boys ran over to Tom’s to cover the plants.  Part of the job description included checking the weather forecast for temperature drops.  They were instructed to cover a section of the garden with plastic if it dropped below freezing.  I was proud that I didn’t have to remind them to do this; teaching kids how to be responsible is often difficult and, as a parent, you may not know if they’re learning this life skill until you see them running over to the neighbor’s house to cover the plants.

This particular day, the boys returned from feeding the cats and checking on the plants with definite concern in their eyes.  The rubber trees in Tom’s back yard were looking pretty “brown and droopy”.  Tom had asked that they water the trees every four days unless it rained.  Well it had rained so the boys figured the trees were fine.  Until they saw them that morning.

“You did what he asked you to do,”  I told the boys.  “We’ll just have to wait and see.”

“Yes, but we don’t want Tom to think we’re not responsible because their trees died,”  Nathan said.

It’s nice to see that kids actually care about things like whether or not the neighbor’s trees die…on their watch.  That’s what I love about having kids do small “jobs” such as this.  Jobs that don’t involve mom or dad, where someone else is boss.  And it’s been my experience that kids really like the responsibility.  They like knowing that someone trusts them to do the job and do it well.  Money aside, the confidence-building alone is worth it.

And the rubber trees?  Turns out each winter they turn brown and droopy.  They perk up in the spring.  Who knew?

Splurge. It’s Okay.

Nathan was headed out to Kragen’s the other day to buy some items for his car.  He loves his car and spends a lot of time…and money…on it.  I don’t know where this kid came from.  The rest of us look at cars as a tool to get us from point A to point B.

I asked Nathan why he didn’t get his supplies at Walmart which I was sure would be cheaper.  “Yeah, I know Walmart is cheaper.  But I love talking about my car to the people in Kragen’s.  They’re extremely helpful and know what I’m talking about.  They even installed my new windshield wipers the last time I was there.  For free.”

I’ve always taught my kids to be savvy shoppers.  Shop sales, I tell them.  Compare prices, I add.  Getting value for your dollar is important, I stress. 

But my little conversation with Nathan reminded me that sometimes spending a little extra in order to receive a little extra, is not a bad thing.  In fact, it’s a good thing.  We should splurge a little on the things that are important to us, as long as we don’t overdo it.  And most of us know where that line is.

Before Nathan walked away with his coveted car supplies he added, “Oh, and I love drooling over all the other stuff they have in the store.”  Made me think his (eventual) girlfriend is going to have to be a little understanding.

Investing 101

I just finished reading the book, Investing 101, by Kathy Kristof.  I consider myself somewhat knowledgeable about basic investing…enough to have a diversified portfolio.  And certainly enough to be able to have investing discussions with the elementary and middle school students I work with.

But continued education is always a good idea.  Besides, in the financial world, things change so it’s important to keep up with them.  After reading the book, I gave myself a pat on the back…not because I finished it, it’s actually an easy read, but because John and I have been doing many of the things she suggested.

One area that really made an impression in terms of things I should discuss with my students, was inflation.  Although putting money into CDs and bonds are great first investments for kids, over time they will not keep up with inflation.  And since kids have all the time in the world, getting them investing in mutual funds and individual stocks early on is a pretty good idea.

In the book, Kathy reminded us to keep our emotions in check when investing in the stock market.  “Have a plan”, she wrote.  “Decide what the price will be when you want to sell and then stick to the plan.” 

This reminded me of Ryan when he bought his Chipotle shares.  He had decided that when they reached sixty-something he would sell several shares and buy in to Costco.  And that is exactly what he did.

But what really amazed me about Ryan’s story was that after he sold his Chipotle shares, the share price continued to go up.  He seemed unnaturally okay with that.  But he had set his plan, followed through, and not looked back.  Wow.  If I was honest with myself I’m pretty sure I would have spent some time brooding about selling too soon.  Perhaps I need to listen more to my own lesson about not getting emotionally attached.  Seems Ryan is already one step ahead of me in that area…and a bunch of other areas…