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:

Advertisements

Teaching Kids to Set Financial Goals

Long story short, kids who know how to delay gratification tend to grow up to be adults with higher paying jobs, have happier relationships, are physically healthy, and are persistent in their pursuits. Let me know if you want the details to this longitudinal research.

Using money, we have an unbelievable way to help our kids learn to delay gratification. It’s all about setting personal financial goals.

There are three types of goals kids can set:

~to purchase a specific item
~to save a certain amount of money
~to reach a certain account balance

Giving kids a reason to set a financial goal is important. This gives them an incentive and a concrete reason to save. Goals, like saving for a coveted toy, are more tangible to young kids. Tweens and teens can begin to work towards saving a certain amount of money which is can then be used as their investing money. Kids LOVE the idea of doing something as grown-up as investing. And if they see how much money can grow over time due to compound interest, they’re usually quite excited to get saving.

Goal duration should be short for young 5-6 year olds, maybe a week or two. These kids need to be successful in reaching their first goal because it will encourage them to set another one. As they get older, increase the time. You may even want to consider matching them dollar for dollar. Not only is this a good motivator, but it allows them to reach “pricier” goals faster.

Another strategy for getting your kids to reach their goal is to introduce them to some Above-and-Beyond jobs. These are jobs that your kids can do around the house to earn extra money. This has the added benefit of teaching kids the value of a dollar as when they work for money, it tends to have greater meaning.

Having kids set financial goals is the foundation needed for them to be ready to set goals such as saving for a car, or for college, or (it’s baaack) saving for a down-payment on a house. That’s a lot of delayed gratification! But it’s so worth it. You’re teaching your child life skills so necessary in today’s society!

And achieving a financial goal that they set out to do gives kids such a sense of personal satisfaction. It’s a joy to watch as a parent. Let’s not deny our kids (and us!) this opportunity.

Selling on Ebay, A Teenager’s Message

I asked my son, Ryan, to write about his experiences earning some additional money by selling things on ebay. Here is what he wrote, unedited by his mother!

~

Ebay can be a great tool to making money, anyone can do it, too. Kids, adults, it doesn’t matter! I’m Ryan, 15 years old, and I have used ebay since I was 12 to make money, mainly because I was too young to get a job.

Ebay is extremely easy to use and can be used to make yourself a small fortune. For example, I have bought and sold items that I’ve gotten from my friends and garage sales and sold them for much more than what I paid for. I recently bought an Ipod Touch for $100 from one of my friends, and sold it on ebay for $150. That’s a 50% gain! I have also sold items I’ve purchased from garage sales for almost 4 times what I paid for them. In all, I have probably MADE about $300 from ebay, and plan to make much more in the future.

It’s really quite simple to make an ebay account and get started on the road to success. Just click “register” on the ebay homepage and punch in all the info. That’s required. Then, you’re ready to sell! To sell your first item, on the homepage, go to “sell”, “sell an item”, and then find, and describe your item in a way to try to sell it, list features, accessories, etc. I strongly recommend setting a reserve price, the amount of money you’re least willing to sell the item for. To do this, you must be in the advanced settings of the description process. It’s considered an upgrade so you will have to pay a little to do this, but it’s not much.

Also, I highly recommend having a “buy it now” price, a price that you’re willing to sell it instantly, without the auction process. It is always good to have both.

After you’re done, you’re ready to list your item and make some money!

When you earn money from ebay, it is always great to save your money, you do not have to just spend it. I have already invested in mutual funds and the stock market, plus I have a savings account. Save away!

BTW, if you purchase something from someone on ebay, it is always good to leave feedback, good or bad. People rely on having positive feedback, so make sure you leave them feedback about what you thought about buying from them.

Personal Finance for Kids?

So it happened again to me today, and it’s happened enough that I decided to write about it…and solicit your help.

I was chatting with a woman I just met about this, that, and the other, when, inevitably, the question so what do you do? comes up. She’s a stay-at-home mom, nice, and I told her I was a kids’ personal finance educator.

“You can teach personal finance to kids?” she, and just about everyone else, asks.

Now don’t get me wrong. Until my youngest, Ryan, began to exhibit extreme carefree spending tendencies, the idea had never really occurred to me, either. At least, not beyond giving him an allowance. But if you think about it, setting up an allowance system is most definitely a form of personal finance.

At least it should be.

It’s not enough that kids get money. It’s important that we teach them what to do with that money. Things that we do with our own adult personal finances: save, spend, share, invest, borrow, budget. We need to do it in a way that gives kids real, hands-on experiences with their money so that they’ll get the practice they need before we send them out into the world.

And the good news is, it’s not that hard to do. Even if you don’t feel “qualified”. And while we’re doing it, we need make ‘personal finance for kids’ a recognized phrase.

So I’d love to have your help. It would be great if you could help spread the word about the importance of teaching kids money while they are still young.

In addition, I want to be a resource for parents. My Raised for Richness Facebook page is filled with all kinds of tips and research studies. It’s a great place for parents to start.

I am also working hard to make our website a resource, as well. We’ve included a bunch of free stuff recently.

And then there are the Beyond-the-Piggy-Bank Challenges filled with the specific steps needed to begin teaching personal finance. I do these periodically and if you email me, I’ll get another one scheduled soon.

So let’s start a movement! Let’s get the word out make ‘kids and personal finance’ just a regular part of our everyday language. Together we can make a difference.

Teaching Kids to be Wise Consumers

Teaching kids to be wise consumers requires that we have them reflect on their purchases…before they spend the money. And an easy way to do this is to teach them the Three Money Questions:

Do I need it?
Can I afford it?
Does it add value to my life?

Do I need it? This gives kids practice in thinking about the difference between needs and wants. If the item is clearly not a need, and for kids this is the majority of their spending, then at least they have acknowledged that they are pursuing and willing to plunk money down for a want. Which leads us to…

Can I afford it? This one is simple – if you don’t have the money, you can’t afford it. This is a good opportunity to help your child create a goal and work towards it.

Does it add value to my life? This takes time to learn. Most kids will insist that they can’t live without the particular item/experience and will move forward with their purchase. Revisit their decision after several days or weeks by having them reflect on whether or not their choice truly enhanced their life.

The key to the Three Money Questions is to model them with your kids. When considering a purchase, talk through the questions out loud so that your kids can “see” how decision-making happens. It may seem silly at first, but if we want our kids to learn how to problem-solve through a potential purchase, they’re going to need to hear how that happens.

If your child is considering an expensive purchase, a good strategy is to have her create a pros and cons list. This helps to clarify her thinking in a very visual way. And it’s an unbelievably wonderful tool that she’ll be able to carry with her beyond simple money purchases. Should I marry this guy or not? Let me make a pros/cons list. Okay, I’m kidding, but you get the idea. 🙂

The Power of Relevance in Teaching Kids Money

Relevance is an unbelievable teaching tool. That’s because it’s much easier to learn something when it’s relevant to our lives. And, often, it’s more fun.

Consider a child studying a unit on growing plants in her third grade class. When the teacher starts talking about how healthy plants grow, her little ears perk up. This year, her dad put her in charge of he family vegetable garden, so learning about soil, watering, and weed control was meaningful to her; it had become relevant to her life.

The power with relevance is that it establishes a purpose for the learning. And when things have purpose, the learning becomes more powerful. So if we can connect the learning that kids are doing to their every day lives, in other words, if we make it relevant, then deeper learning and understanding will take place.

The Money Connection: If we want our kids to learn about and understand money – how to save it, share it, spend it, and invest it wisely – then we need to find a way to make it relevant to their everyday lives. And the best way to make it relevant? Give them the responsibility of managing their own money.

When they’re in charge, all of a sudden, learning how to effectively manage that money becomes meaningful and, by default, relevant. If they want to buy that really cool cell phone, then learning how to create a personal financial goal becomes relevant. If they want to invest in their favorite clothing company, then researching the company has now become relevant. And if they expect to save enough money to bring with them on vacation, then learning how to make good spending choices has become relevant.

When it comes to teaching kids about money, there’s no better lesson than to use the power of relevance. When it’s your money, it’s not that important. When it’s theirs, it’s a whole new story. And this story has a happy ending.

You Can’t Do That Yet

I was back in Michael’s picking up glitter stickers for a money activity I’m doing this weekend. As I was deciding between the funky flower stickers and something a little more “masculine”, a little boy, about the age of 4, appeared at the end of the aisle. He was looking at a wooden train that was packaged and hanging on display.

He stood in front of the train just staring at it. I love 4-year olds and how they “do” life. He was obviously taken by the train even if he couldn’t use words to explain it. Then he reached up to touch it.

“You have to paint that. You can’t do that yet,” came grandma. She said it so matter-of-factly that I was a little taken aback.

I felt a little for the boy who kept staring at the train. It looked like a cute little painting project that the kid would have fun doing that afternoon.

Grandma took his hand and walked down the aisle I was standing next to. I went back to contemplating stickers when the boy showed up again next to the train. I looked for grandma. She was still at the end of the aisle. When she discovered he was back with the train she said, “You have to paint that. You can’t do that yet.”

That’s when I surreptitiously grabbed a piece of paper from the bottom of my purse and wrote down her quote. She had said the exact same thing twice. And that’s when I started thinking about it.

The kid was four years old. Unless the grandma expected him to come out of the gate painting like Picasso, he was going to need practice. And the train project was perfect practice, one…because the boy really, really liked the train, and, two, because that train would be the cutest thing ever when he finished with it. It would make the perfect gift for…a grandma.

I was getting a little annoyed with grandma.

So the kid leaves again with grandma and…a few minutes later (I’m really glad I was having such difficulty deciding on the stickers), he comes back again. This was the third time this kid stood in front of that train. I was SO TEMPTED to buy it for him myself.

Then back tromps grandma ready to rain on his parade once more. Which is precisely what she did. Just like a broken record I heard the familiar refrain, “You can’t do that yet.”

It’s not my place to interfere with grandma’s “raising” of her grandchild. After all, she wasn’t being abusive in any way. Grandma loved him and simply didn’t think he was “ready” to paint a wooden train.

But as I was standing there, all my child development training came flooding in…as well as my natural instincts. How in the world is this kid ever going to learn how to paint if he’s not given the opportunity? But what really got me was the fact that this little boy wanted to paint the train. He was interested and motivated. That’s the PERFECT opportunity to teach someone a new skill. Unfortunately, it was a missed opportunity for this little guy.

And it got me thinking about expectations for our kids. If we don’t think our kids can do something, then chances are they won’t be able to do it.

I used to see this a lot when Nathan and Ryan were little and we were at a playground. It always surprised me how many parents would not let their kids climb on certain equipment because they didn’t think their kids were “ready”. With support and guidance and a hand to reach out if necessary, it’s really amazing at what our kids can really do.

So my thoughts then turned to kids and money management. If we don’t think our kids can learn about money when they are young, then the chances are they are going to grow up without the skills needed to effectively handle money. And just like learning to paint well, learning how to manage money takes practice. Lots and lots of practice.

Like the boy and his fascination with the train, kids are fascinated with money. Not in an obsessive way but in a curious kind of way. It’s the perfect opportunity to tap into that interest and teach them money.

I was a little sad as I left the store with my stickers; I chose the glittered flowers because they were a little bright spot in an otherwise rainy day.