I have a love/hate relationship with one of the most popular parent quotes on personal finance.
If you are under the age of 18 you probably hate it, and if you are a parent like me, well, I am confident it is your “go-to” when your children ask for money. If you haven’t guessed it yet, let me tell you;
“Money doesn’t grow on trees.”
Now, with this basic principle out in the open, let’s assume for now, that it doesn’t. Another day, another article, I will argue the opposite.
Talking to kids about money is important but not always easy
My two daughters mean the world to me, and there isn’t anything I wouldn’t do for them. Of course, there are boundaries and rules, but I am still a sucker for any request, and I will move mountains to make it happen on their behalf.
We have a great relationship, and we speak openly about most matters. I started discussions around money with them, as far back as I can remember, and no topic was off-limits. We talked about credit, debt, savings, investment, and why all of these items were important, and what role they would play during their life.
As with any two people, they are very different in how they act, think, and their approach to life.
In my last post, we talked about my oldest and her lessons on hard money lending and interest working against you. I am happy to say at age 17, she is a saver by nature, an active investor, and understands most financial principles.
But my youngest — well, that’s a different story. As hard as she tries, and she is only 13, money still burns a hole in her pocket. Another “oldie but a goodie” financial saying from the past.
How to teach your child the value of money (maybe)
She talks a good game, but she is still under the belief that my money is her money, and well, that tree outback, it is evergreen and always will be. My focus today will be on her, and helping her understand the value of money, the cost of money, and the time value of money. And of course, that money doesn’t grow on trees.
This past Christmas all she wanted was an e-bike, which seemed manageable, and it was the obvious craze in our community due to Covid 19 restrictions. It seemed at times, there were more e-bikes on the road than cars. On the face, it seems to be a reasonable request, but that has to be measured against the other requests from her and then ensuring a proportional balance to my oldest requests. We like to keep things balanced in our home, which leads to less arguing about who got more, or who is the favorite in the family. Funny how kids think sometimes. And in case you were wondering, the cost of the bike was $999. Remember that, I’ll reference that number again.
Compared to other bikes on the road, this seemed beyond reasonable for my youngest, and to be honest, I had kind of a “proud papa” moment because she had chosen one of the least expensive models, which is NEVER her style.
Remember, she still firmly believes my money is her money. What I can afford, she should be able to buy. But I truly thought this was a break-through moment, and I happily purchased the bike she wanted, put it together Christmas eve, and had it waiting under the tree the following morning.
Problem solved, lesson learned; I’m the greatest Dad ever…right?
Then that little voice inside my head said, “Slow your roll big guy. Just wait, it’s coming.”
And it did.
It didn’t take long…
Less than three weeks on the road — and after all the discussions around safety — my youngest drives into a parked car on the opposite side of the road she was supposed to be on, at top speed (20 mph), and smashes the driver’s side tail-light and back panel.
Now, to her credit, her immediate thought was to inform the owner, and not her own health (she had a few scratches), and not the condition of her new bike. It had a few busted items as well.
Once she was through with her hysterical stage, wait for it, she then inquired about how fast I could get her bike up and running, and when I could pay for the car she hit, so that she could feel better about riding again.
Our conversation went like this:
Me: “How much money do you have?”
Me: “Not even Christmas money?”
Her: “No, I wanted to buy more hoodies and vans.”
Me: “Great, you haven’t learned anything.”
Does money grow on trees?
After much discussion around the cost of the bike, her safety, and the fact that money doesn’t grow on trees, I had to go speak to the owner of the car she hit, which happened to be a brand new 2021 BMW, that he had leased for his wife.
He was grateful that we owned up to it, and he would provide me with quotes to fix the damage. He was gracious in speaking with my daughter, and she of course said thank you, and “my dad will be happy to cover it.”
Yeah, you heard me, I would be “happy” to pay. As much as I wanted to talk about cash, credit, debt, and what I could do with that extra money, I waited until I had the final quote in my hands.
The final quote arrived: $1,500. My daughter’s response? “That’s good, I thought it would be more than that.”
I then walked her outside and asked her to tell me which tree she would like me to pick the $1,500 hundred from, and if she didn’t one, how would she like to pay for it.
My youngest currently receives $15 a week for allowance, and if her chores are completed. And if I am being honest, she should receive it at most, five times a year, but I am softy, and she gets paid each week.
Now at $15 a week, per year, it would take her two years to pay it off. So, I made an offer to lend her the fifteen hundred at 3%, which would be my minimal cost if I took the funds from a savings account, never-mind losing 25% in the market on that money in the current market.
I thought it was more than fair, and besides, she never found any money outside on any of the trees. She didn’t agree with any of my logic and said she would figure it out.
Fast forward a few weeks. Of-course I paid the gentlemen for the damage she caused, and I would never make her pay. It was an accident, and she was healthy. That’s all I cared about. Money can be replaced, but she cannot.
But she needed to learn the importance of not having money when you need it, not having to borrow and paying interest, going into debt, and that my money is not her money. I am confident she didn’t learn much, but at least she is thinking about it, and she now knows the new cost of her bike is $2,500, versus the original $999 price.
An expensive money-lesson for kids
But a lesson none-the-less. I will continue to teach my children about money because it’s important and foundational to growing up. It might take her a little longer, but she will always be worth it, and in the end, everything worked out — almost.
I would be remised if I didn’t tell you how the story ends. Two weeks after paying for the damage and repairing her bike (I managed to fix it, and the cost was a few hours of my time), I caught her riding her bike with 2 passengers and no helmet.
I told her to immediately ride home, park the bike and hand me the keys. She had violated the most important rule on the road, and she knew the penalty. I’m happy to say my wife is the proud new owner of an e-bike, and that my youngest is protected from doing any damage to herself because she was too cool to wear a helmet.
My only hope is she is plotting to earn more money and saving for a new e-bike to call her own.