Make Your Kids Rich!

Our 18-year-old, a high school senior, will get an eviction notice on Friday if he doesn't pay us $300 rent by the end of business today. We're tough, huh?

Here's the context: he moved in when he was 14 and had known our family for several years before. A year ago, he had more than a dozen brand new running shoes in his closet. He didn't tell me how he got them except to say he had "connections".

He was getting everything he wanted handed to him. He also was doing poorly in school even though he's very talented.

I got him a job this past March at our local Home Depot generating leads for windows and roofs. He makes $10 per hour and bonuses when a salesman closes an order. So he was raking it in - and spending it all.

He also had social security money coming in to him at the end of summer (since his mother had died some years earlier) but that went through his fingers, too.

He finally made a budget after I told him and I heard him say to a friend how he was paying for "everything".

"Really?" I asked. "Like what? We don't charge you rent, you're not paying for food or utilities . . . you don't pay gas for us taking you to school and you don't pay us travel when we drop you off at work or pick you up."

He meant to say he's paying for his senior pictures, a cell phone bill - which had reached $90 per month - and jewelry he bought himself - a $300 necklace.

He still works about 10 hours per week and he's going to receive $700 a month in social security until February.

My wife and I, and our family counselor, sat down with him last Friday and showed him if he paid us "rent" then I would deposit that in a mutual fund we set up for him. He was worried that he wouldn't be able to pay.

But I did simple math. This is how much comes in . . . and this is how much you spend. See, "you still have money left over or you should." And then I showed him how much he'd have in his mutual fund if he did $300 per month until June . . . I'm thinking he's going to move out in July or August . . . and if he doesn't he's going to pay us real rent money!

I explained to him how he could become financially independent during the next 20 to 25 years if he gets in the habit at age 18 or 19 (he turns 19 in December) and sets aside a "small but consistent" amount each month. I wrote a post about starting to save for retirement in my mid-20s and believe it was the smartest money move I ever made.

But his model is this: there are other teens getting social security payments at his school for one reason or another. And they spend every last penny. It's so sad because they could afford to set aside $25 to $50 monthly and enjoy the benefits of compound interest.

Yes, our kids - even those who come from lower class neighborhoods - can become "rich" if they'd learn the simple process of saving and investing.

Perhaps our schools should teach a basic course in the power of compound interest.

So how do you "make" your kids rich? You can't force them to save, but you can help them understand why they should, how it benefits them and try to build into them a picture of what the future will look like if they take action now.