Kids & Money: A 15-yo’s Financials

Posted on | January 23, 2008 |

To my regular readers or those reading through my posts in a chronological manner, I apologize for not following a more linear path when discussing how I’ve handled my approach to children and finances.  Events happened recently to bring our current financial policies for The Daughter to the forefront of my thinking.  I thought, too, that this current “snapshot” might provide some balance to last week’s Kids & Money post:  Putting Baby on a Budget?.

As I wrote last week, due to my educational philosophies I chose to delay my children’s exposure to financial matters.  To recap, we waited until our children were 7 before starting an allowance and we waited until they were 8 before allowing them opportunities to spend money.

Let’s fast-forward to what my now 15-yo daughter’s financial education and exposure looks like.  Is it still delayed?  Are the strong lines of “adult” and “child” still in place and still so defined?

Her financial assets: 

The Daughter currently has a checking account with a checkbook and a debit card, a savings account earning 4.75% APY, and a traditional CD earning 4.95% APY.  Between these three accounts, The Daughter’s cash assets are approximately $2,500.00.

All three are co-owner accounts since The Daughter is still a minor and I couldn’t find a bank that would let her open her own individual accounts.  In fact, it took a bit of looking to find a bank that would even allow co-owner accounts instead of custodial accounts.

Apart from a savings bond we cashed out 1-1/2 years ago for ~$850.00, The Daughter’s cash assets are solely the result of her own income (see below) and savings habits. 

Her revenue streams:

The Daughter has three main income sources –

1. Her Allowance:  The Daughter receives $6.00 per week, paid monthly.
2. Her Job:  The Daughter is paid $10.00 per week by the church to provide child care during the adult services.  The arrangement is that she gets paid every week whether there are children to watch or not.  However, on the weeks when she doesn’t go to church (happens occasionally, I substitute), she doesn’t get paid.  The Daughter landed this cushy child care position last summer.
3. Gift cards and cash on birthdays and holidays.  Cash gifts are a rare occurrence (in fact, I can’t remember her receiving a single cash gift over the years) but gift cards are frequently at the top of her wish list and family often obliges.
4. Sometimes, though rarely, The Daughter earns extra cash by babysitting.  Her extracurricular (sports) schedule and homework workload preclude her from being able to accept most of the job offers that she receives.  She does babysit more frequently in the summer than during the school year but summer vacation’s only 2 months long and last summer she was gone for half of that time.

A fifth source of “income” that at this point involves no cash is The Daughter’s monthly clothing allowance.  The current arrangement is that she gets $100.00 per month to spend completely at her discretion.  Whatever she doesn’t spend in one month carries over to the next month.

Her financial responsibilities:

I do not place any savings requirements on The Daughter.  She is free to spend as much or as little as she chooses on, for the most part, anything she chooses.  And she is not required to tithe or make charitable donations.  Almost without exception, she is free to spend her cash, her gift cards, and her clothing allowance in whatever manner she chooses.

The Daughter is responsible for paying for all gifts she purchases for friends and family.

At the beginning of this school year, The Husband and I signed a permission form that allowed her to go off campus during lunch.  If she chooses to walk with her friends to the coffee shop or local Mom & Pop grocery store, she’s responsible for funding those forays.

She pays for her own music downloads and for any books purchased for leisure-time reading.

She pays her own library fines and most of her independent recreational pursuits (ie, if she sees a movie with her friends, she pays; if we see a movie or go to a concert as a family, I pay).

Although her clothing allowance is still hypothetical (it exists as a budget category), she alone is responsible for making all clothing and clothing-related purchasing decisions.  Anything that she puts on her body has to come out of that allowance including all athletic gear (shoes, ankle braces, warm-ups, etc), intimates, and the daily-grind practical stuff (winter coat, socks, etc.).

Her financial awareness:

In addition to being comfortable with bank statements, checks, and debit card usage, The Daughter is generally fiscally savvy.

She understands the difference between a debit card and a credit card.

She knows what an NSF charge is and how to avoid ever having to pay one.  She is aware of the difference between the interest her money is earning and the rate of interest she’d have to pay if she borrowed money or used a credit card and didn’t pay the balance in full.  She does not view credit cards as evil but, then too, she does not view credit as free money.

The Daughter knows what a mortgage is.  She knows how prepayment works and she knows that some loans come with a prepayment penalty.  She’s familiar with home inspections, closing costs, broker fees, ARM’s, interest-only loans, VA loans, market value, appraisal value, and sweat-equity.

She understands compounding interest.

She knows about income tax, sales tax, and Social Security.

She knows what a payday loan is and why she should never get one.  She knows what usury is.

Tallying her financial score:

In all honesty, I couldn’t be happier with The Daughter’s financial attitude and awareness.  She has, thus far at least, succeeded in finding a balance between frugality and the strong attraction she feels to clothes, fashion, and all things bling.

She has an excellent grasp on the difference between her wants and her needs and seems able to derive long-lasting pleasure from small indulgences.

She appears to be developing a strong sense of when to buy for quality and longevity and when she’s better served by going cheap.

She’s extremely generous and is a first-class gift giver.  She isn’t extravagant but never pulls her punches when it comes to giving quality and meaningful presents to friends and family.

She has, quite independently (though I take credit for giving her that first strong taste for watching her interest earnings grow) set up an aggressive savings plan with her target being to save 50% of all earned income.

Although her good financial habits are no guarantee of future fiscal responsibility, I have every reason to expect that she will continue on her current path.  There will, in all likelihood, be mistakes made along the way.  All of us eventually have a financial mis-step or two.  Still, I find her natural financial acumen to be comforting and encouraging.  I believe that her current financial habits result from a combination of nature (her own personality) and nurture (the examples set by The Husband and myself) and I feel fairly confident that when she heads off to college in just over two years, irresponsible financial behavior will not be one of my main worries.  

Although I might well be deluding myself, I believe that despite our delayed introduction to money and spending (or, in my personal estimation, quite possibly because of it), at 15 The Daughter is way ahead of her peers regarding personal finances.  None of my peers’ children are as responsible for their own personal finances as my daughter is.  And from what I’ve learned about her current classmates, she’s light-years ahead of them in this regard as well.

Related Posts for Further Reading

• $$: Allowances
• $$: Surrogate Spending & Lessons Learned by a 16-yo
• Day 90: Gutter Balls!
• $$: Christmas Shipping & Shopping
• $$: Meat and Potatoes
• $$: Dec 9 — Recycling on the Cheap

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