Adulting, Financial literacy, financial responsiblity-teens and young adults, Parenting teens and young adults

Disposable Income is the Devil

moneyIs disposable income really the devil?  Well, it depends on perspective. As an adult with grown up responsibilities such as paying for a mortgage and taking care of a family, disposable income is a wonderful thing which allows us to enjoy discretionary experiences and things.   How, then, could disposable income ever be a bad thing you ask?   Well, let me tell you!  When a teenager or young adult first begins to earn their own money, unless it is offset by some personal responsibility, they have a plethora of disposable income.   During this time of abundance, it is very easy to allow poor spending habits to take root.  These habits, if allowed to continue, can make them feel persecuted and victimized when real life responsibilities hit and they can no longer have a daily treat from Starbucks, eat fast food, go to concerts and movies or buy video games frequently. Following are some ideas to help them learn to manage their income while learning incremental financial responsibility:

  • Have them pay for items that benefit only themselves
    • College savings
    • Car
    • Car expenses (gas, maintenance, insurance)
    • Smart phones (including data plan and insurance)
    • Clothing
    • Personal items not required for basic care (ex. makeup, perfume)
    • Personal entertainment outside of family events (movies, dining)

If I had a teen or young adult who was fully engaged in school and study time, I would expect far less in terms of financial participation than if I had one who spent lots of time in non-productive pursuits such as watching TV or playing video games.

Now is a good time to work on budgeting together.  Obviously, it is a good thing if any working person has a surplus to spend on things that are enjoyable.  However, having too much cash can give a minimum wage worker a false sense of prosperity if the income earned is not balanced by a corresponding measure of financial responsibility.

While they might not be particularly thankful now, your young adult will thank you later when they find that they have been groomed to be more capable than most and when they are prepared to strike out on their own much sooner than their peers.  Then you can smile and take great satisfaction in knowing that you have done your job well!

life skills, parenting, Parenting humor, Parenting teens and young adults, parenting young adults

My College Educated Daughter Didn’t Know How to Mail a Letter

IMG_7726 (1)The recent conversation went something like this:

Her: “Mom, should I use THOSE stamps?”

Me: “No, your letter will not get very far with a 2 cent stamp!”

Her: “Then why do you have them?”

And that’s when I ran out of things to say.  We all get used to things being a certain way and hardly notice when they change.  You probably remember the time before the Forever Stamp came along when stamps had a specific value.  For a while, they were rapidly going up a cent or two at a time.  I purchased an assortment of one and two cent stamps so I could finish up my entire 100 roll of obsolete postage.

Her question led to a scintillating conversation about the history of stamps (which was pretty much summed up in the preceding paragraph).  It made me start to think.  Parents and Millennials are living in two different worlds and we have to somehow build a bridge between them.   Some of the things I grew up doing, such as mailing a letter, are not as common any more.  Regardless, the little necessities are still very important.  I know of another young adult who hesitated to mail some very important papers because she had never been to the post office and did not know how to mail a certified letter.

Anyone who has known me since the day of their birth knows that I like words.  I have a habit of occasionally using one that I assume they do not know so I can then subtly define it in the next sentence.  When asked for a definition to someone else’s obscure word, I would suggest the dictionary.  Despite my best efforts, no one but me would pick up a dictionary and hunt for a word.  In all honesty, I no longer enjoy it since the printing has shrunk.  Since I have been schooled in the wonders of the internet, I now look up all of my words the quick and easy way.

I tried hard to teach my girls to read a map.  They couldn’t have been any less interested.  I was concerned, on one account, that after first getting her driver’s license that she would never return home…not because she was a runner but because she was directionally impaired.  When she started to return home with regularity, I became acquainted with Google Maps.  If their phone goes dead on a trip and they don’t have a charger, they’ll wish they had participated in Map Reading 101!

I flip out when I watch someone use a calculator to count Monopoly money!  The calculator was an awesome invention, but I sometimes use my actual brain so that I don’t lose my ability to think. I want to make sure that if I ever had to work a cash register again that I would be able to correctly count back the change, no matter what the register told me it should be.

Before you think I’m being cruel in relaying this story, I have been given permission…only because the subject individual looked at me with pity when I admitted that I do not know how to set up a new email address.  We need each other.   Our Millennials are instrumental in helping some of us with all things technology.  They need us to help them experience countless small things that have to be done to navigate life. I had planned to do some decluttering tonight.  I think I’ll start with the two cent stamps!

Financial literacy, financial responsiblity-teens and young adults, parenting, Parenting teens and young adults, teaching financial responsibility

Borrowing From the Bank of Mom

The linked article by Dr. Charles Fay of Love and Logic rings true for me.  Their philosophy had a profound influence on my parenting style, partly because it made sense and partly because it amplified who I already was.  When my daughter was 17, she got her first car.  I decided to pay up front and then have her reimburse me for her portion.  Since I was always looking for an opportunity to teach a relevant financial lesson, I created a promissory note.

Principal Rate Time PxRxT Total due
Amount due if loan was from actual bank $750 14% 0.6667 $70 $820
Late fee $25 if payment is not made by the 15th of the month  
 Payment due Date Amount Due to Bank of  Mom Balance due
10/1/2010  $          100.00  $             650.00  
11/1/2010  $          100.00  $             550.00  
12/1/2010  $          100.00  $             450.00  
1/1/2011  $          100.00  $             350.00  
2/1/2011  $          100.00  $             250.00  
3/1/2011  $          100.00  $             150.00  
4/1/2011  $          100.00  $                50.00  
5/1/2011  $            50.00  $                       –  
 $          750.00


She didn’t like my idea very much.  In fact, her response was “You are not the bank, you are my MOM”.  Yes, that was true.  But I was not just ANY mom.  I was the kind that wanted to make sure that she had been provided with a real life education.  By setting up a plan that created a penalty for late payments, she chose to pay off her car early rather than risk having to pay any late fees to the money grubbing Bank of Mom!  My bank didn’t charge interest, but showing the interest rate that would have been charged by a different bank helped make The Bank of Mom more desirable than its competitors.  No late fees were paid to The Bank of Mom and for that I was grateful.  I wasn’t looking to augment my income; I was intending to create a self-reliant young adult.

The promissory note contained the components that would be evaluated in a regular bank loan.  It wasn’t always convenient to track the payments so meticulously, but I kept it up since I knew it would be good for the wonderful young lady I was trying to mold.  I took my job very seriously!  Following is the schedule used to record the payments along with additional terms of the loan.   The ending message was issued with the loan release to the borrower.  Unlike the real bank, the Bank of Mom dispenses a few words of praise and encouragement along with the title.


Payment History
                   Due Date 9/1/2010 10/1/2010 11/1/2010 12/1/2010 1/1/2011 2/1/2011 January
 Date Paid 1-Nov 1-Nov 20-Nov
 How paid? Cash Cash Cash Check Check Cash
 Car loan  $             100.00  $           100.00  $     100.00  $           100.00  $            100.00  $        250.00
 Insurance  $            54.00  $                54.00  $             54.00  $       54.00  $             54.00  $               54.00
 TV  $               7.00  $                  7.00  $               7.00  $         7.00  $                7.00  $                 7.00
 Cell phone  $            30.00  $                30.00  $             30.00  $       30.00  $             30.00  $               69.00
 License Plates  $            97.00  $          50.00
 Kelsey Paid  $          188.00  $             191.00  $           191.00  $     191.00  $           191.00  $            230.00  $        300.00
Borrower will pay on time each month or pay a $25 late fee.  Just like a bank loan, she is responsible to repay the loan even if something happens to make the car undriveable or if it isn’t her fault.  The payment is due on the 1st of every month.  There will be no reminders.  There is a grace period of 2 weeks before the payment will be considered past due.
 Kelsey-borrower Borrower signed under protest
Mom-lender Gleefully signed by Mom
Kelsey paid off her car 3 months early.  Congratulations for being a conscientious borrower!
Be proud and always remember how good it feels to earn what you really want.


I couldn’t be more proud of this young lady today.  She chooses to forge her own path in life and does not like to be told what to do.  Her life is not devoid of struggles, but she accepts responsibility for her actions.   Don’t be afraid to swim upstream and do what many parents are afraid to do.  If you do it with love, they will be better prepared to face the realities of life.  And don’t worry, they’ll still love you!

financial responsiblity-teens and young adults, parenting, Parenting teens and young adults, parenting young adults, teaching financial responsibility

Fixed Price Clothing Allowance Sharpens Budgeting Skills

I wish I had consistently done ALL of the things that are listed in the attached article written by Dr. Charles Fay of Love and Logic.  I did give my girls the opportunity to have a clothing budget for at least a year.   They were given a fixed amount each month and were told that they needed  to project what they might need from month to month.   They had to evaluate whether they would need a  new winter coat as well as be prepared for any other seasonal clothing needs such as shorts or a bathing suit.

Some benefits were the realization that they were able to stretch their budget if they chose some lightly used clothing.  They also figured out that they didn’t always need a new winter coat from one year to the next.  It turned out to be pretty useful exercise in budgeting.

Another useful tactic, in lieu of a fixed price budget, is setting a limit on what the parent will contribute to an item.  I always did what I could to remove the power struggle.  For example, if I offered to pay  $50 for a reasonable  pair of shoes, the girls could get whatever shoes they wanted if they paid the difference.  It’s amazing how resourceful and practical kids can be when they really WANT something AND they shoulder some responsibility for their choices!  I did have some restrictions though.  I HATE the thought of buying brand new jeans that look like they got into a fight with a starving moth (and the moth won).   I know it is fashionable to wear jeans that were “destroyed” prior to purchase.  I also know that these jeans are sold at a premium price.  I KNOW I sound old,  but I DO NOT LIKE THEM!!!  I didn’t forbid the purchase or wearing of those jeans; I simply stipulated that MY money wouldn’t be used to buy them!

It’s hard to read articles with good ideas and then  focus on all of the things I’ve done wrong.  But just for today, I’m going to fixate on the few things I got right!

financial responsiblity-teens and young adults, Parenting teens and young adults, parenting young adults

Financial Transparency: Five Life Skills to Teach Teens and Young Adults

I wonder how many parents are transparent when discussing their finances with their teens and young adults?    Although I can see arguments related to both financial transparency and secrecy, I’ve chosen to be open with my daughters about my own personal finances.  They know my annual salary, but most importantly, they have had a chance to see the real life costs that help to “absorb” the aforementioned salary.   If I only divulged my income but not the expenses, there would be no context to provide meaning and draw accurate conclusions.   If I told them that I made “one brazilian dollars” last year, that lone bit of information might give them the impression that we will soon be hanging out with Oprah or Warren!  However, a quick analysis of expenditures might show that last year, I spent “one brazilian one thousand dollars”.   That additional piece of information dispels the initial illusion of wealth and paints a bleak picture of debt instead!

Here are some ways that you can be transparent and help your teen or young adult learn practical and relevant life skills:

  1. Let them assist with planning the family budget. Including them in the process will help them learn to think through all the details of what “life” costs.   This will help them understand the difference between wants and needs, fixed and variable costs, and how to manage periodic costs.
  1. Give them exposure to health care insurance policies and help them to understand how insurance works.   My girls have both learned a lot about HMO’s in the last year or so.  They have personally lived the difference between a PPO and HMO and are now better equipped to evaluate which one they prefer.
  1. Let them pay for their own car insurance. Let them learn, firsthand, the impact that citations and accident claims have on their insurance rates.   Conversely, show them the positive effect that being a “good student” has on their rates.  Show them how bundling insurance policies can save money.
  1. Include them in meal planning. This skill goes a long way toward saving money on the food bill.
  1. Give them the opportunity to work with you to ensure that you are getting the best plan for your wireless carrier, cable and internet. Make sure they understand how the cell phone charges are broken down and exactly what happens when they have exceeded their data limit.  I let my daughters know what their data allotment is for the month.  They know that whomever exceeds it will be paying the excess data fee.  I’m very happy to delegate Data Policing!

By providing them with the opportunity to preview your personal finances, your young adult will become more proficient in evaluating how to spend their own money and will be more skilled in making real life, relevant decisions.