This week, I volunteered at my kids school for an event they hold twice a year called, The Reality of Money. There were two sessions in the morning and two in the afternoon which covered about 400 participants total. Each session was just over an hour and followed the same format.
The kids find their seats in the bleachers and listen to the MC talk about real life stories of financial ruin and triumph. (Truly, most kids seem unimpressed). They were asked where they get money today and how do they spend it. The usual answers came up, get money from a job or their parents and promptly spend it on food, shoes and clothes.
Then the MC tells them that for the next hour they will all be '25' years old and given a profile telling them if they are married, with/without children, single/dual income household, college or HS educated, type of job, pay, etc… They are to go around to each of the stations (I was assigned to housing) and decide what they could afford for each of life's needs. Once they went to all the stations there final stop was the Next Payday station. (No cheating and stopping here if they ran out of money too early – of course some tried. 😉 )
At housing, there were 3 options to ‘buy' and 3 to ‘rent'. If they came with ‘bad' credit, they were only allowed to look at rent. If they came with ‘good' credit they could look at buying or renting BUT that would be decided by how much income they had. On a side note, one of the renting options was to move back in with parents for $325/month.
As they would come by I would encourage each of them to 1. use a pencil when balancing their checkbook and 2. they could always go back to any of the stations and pick a cheaper option if they “ran out of money” due to paying too much for wants.
Now, there were a couple of twists that made this even more fun (at least, for the adults). One, there were two teachers wandering around picking kids at random and hitting them with “stuff happens“. The selected kid would pick one card from the “stuff happens” pile and add it to their checkbook. Flat tire? Kid sick? oh no! The flip side was you could always make ONE trip to the Dollars and Sense station to “earn” extra money. (Though there was that one kid (there's always one) who somehow went to the Dollars and Sense station FOUR times! lol! Hey man, if you can… why not? ha!)
The second cool thing was the Questions station. There kids could work out different options for how to get housing, day care, car payments and groceries to fit on a $1,100 monthly net paycheck. They were offered a few different options including a second job to make ends meet.
My son was one of the participants. His profile was a single (no kids) bank teller with a high school education. Good credit but only $100 in savings. His net pay was $1,625. He did pretty good, covering all of his expenses and had $309 left over at the end of the month. (Yes, he made ONE stop at the Dollars and Sense station and earned an extra $50!) When asked what was his big lesson in all this, he replied, “That I can never afford kids!”. LOL.
As the kids would come by our station, it was interesting to see where, in their order of importance, housing fell. Because really, the only station they could not go to (until the very end) was the Payday station. Some kids would visit housing at the end, only to figure out they would have to go back to the Clothing station, return their designer clothes and shop at a thrift store. Or go back to the Transportation station and have their family live with only 1 car (and a bus pass).
Most kids were willing to live with their parents for another year or two. Some said “No way I will go back to living with my parents because they say, “my house, my rules”, and I am an adult!”
One kid said his parents have put him on notice, once he turns 18 he is on his own. So that option of living with his parents was very off the table.
At the very end, when most of the kids were sitting back in the bleachers teasing each other about their checkbooks and plight in life, this one kid came back to housing. The profile he got was married with no high school diploma and 1 kid (1yr old) earning $2,000/month between him and hi wife.
He was working really hard to make ends meet and figure it out. I have to say I was really impressed at his dedication. He had all kinds of things crossed out on his checkbook. It was obvious he had gone back to most of the stations twice. Pointing at housing he looks at me and says, “I would like to change my housing from ‘renting apt' to ‘move in with parents'.”
Before I get a chance to go into my talk about how ‘moving in with parents' when married with a kid is really not a slam dunk option. It would require a long, serious sit down talk with your parents. I don't know that they would be willing to have THREE people move in especially when one is a 1-year old … you guys know where I am going with this… anyway, he cuts me off. I don't get a chance to say any of that.
He continues to say, “If we can move in with my parents, I can go to night school and get my GED. Then if we can stay for 2 years, we can go to college and get our Associates so we can get a real job and support our family. If we could live with my parents, we can save the money to put towards having a better life.”
Holy poop! I was blown away with this kid's thought process. I sat there staring at him for a few seconds. I could hear all the other kids on the bleachers, chatting and laughing. Finally, I said the only thing that any parent could say…
“If you were my son, I would let you and your family move in for 2 years because you have a plan and the drive to execute it. I believe you when you say you will go back to school and make it work. Yes, you can “move in with the parents” for $325/month which would make your budget work with a little extra cash left over.”
The Big Secret
The big secret in winning the game has nothing to do with your income and everything to do with keeping as much of it as you can.
I shared stories with some of these kids, of doctors and lawyers with huge incomes but spend it all – giving them a net worth of zero, or worse, having a ton of debt. Then I told stories of teachers with a less than a modest income, retiring with no debt at all, not even a mortgage and living a wonderful life in retirement affording all the things they love.
I reminded them that this is just a point in time nd to not be crushed by their small income, but to focus on spending little of it and always paying themselves first. If they can master this one skill they will be further ahead than most. I told them to grab their slice early in life!
If you could go back and give yourself that one piece of financial advice, what would it be?