Friday, August 16, 2013

Teaching Your Teenager about Money: Part II

Last year I walked my kid through buying her first car. She wasn’t responsible for the cost of the car; she had some special savings that had been put away , but we did make her responsible for putting together a Quick Spending Plan before she got the car, and made it clear that she was going to be responsible for registration, a third of the insurance, general maintenance and all gas beyond the $70 monthly stipend we’re throwing in. If you’re old enough to drive a car, you’re old enough to do research on the cost of insurance for different types of cars, the mpg of the cars you’re considering, the estimated cost of gas and the cost of registration. 

The result, she chose a reasonable 10-year old starter car that costs her $200 a month (and only costs me $150); she put an earning plan in place to increase her $650 monthly income; she suffered through DMV; she is now officially a car owner and understands the costs that come with car ownership.

And then an interesting thing happened: her excess earning plan fell through. Instead of being upset about it, or railing about the unfairness of her plan not working, she moved right on to Plan B. Because she had put the plans together, she knew immediately what her hole was going to be, the unfunded part of her plan. And she immediately set about making a new Earning Plan. And that’s the value of teaching your kids about money. You've not given them a fish but instead taught them how to fish. She solved her own problem.

But wait, that wasn't the end of the lessons. The next lesson was for her, and for me too. As it goes with 10 year old cars, 3 months into owning the car she had a major repair. She discovered her brakes were worn down to the rotors. Total cost: $400. Ouch. A $400 car repair is a hard hit to many adults, and to a high school senior, well, ouch.

This is where my lesson came in. I wanted to rescue her. I didn't want it to hurt so bad. I felt horrible for her. I remember sitting at my desk that day staring out at the window and I just kept telling myself that the right thing to do is to let her weather this. It wasn't just the money; it happened on her way out of town for a holiday weekend at the beach with her friends. She had to turn around and come home. She had to wait to get the car fixed by a mechanic friend who could do it a little less expensive.

She was so sad. And I wanted to make it better.

In the end, I steeled myself and let her deplete her saving to repair the car, as hard as it was. It was a great lesson for me. I saw it as a fork in the road: I could be the kind of mom that financially rescued my (almost) adult child, or I could be the kind of mom that taught her to rescue herself. I scheduled our first "Teenage Money Date Night." We went to a favorite cafe, and I started teaching her about her overall spending plan and the importance of "savings silos." We calculated how much she should put in savings every month for car repair, because a 10 year old car will need repairs. I sure wish my dad had done that with me.

Oh, and I also gave her $50. Not for the car, but so she could have a "staycation" that weekend she and her friends were stuck in Sacramento while the rest of their friends were camping on a Mendocino beach. She felt a little better, and so did I.

- Stacey Powell

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