My 13-year-old has an $800 phone
04 Jul, 2021
The title of this blog post will have invoked a response in you or either: What an entitled brat! OR How did she afford that?
Stick around for the breakdown though and you might just learn something that you can use in your own parenting journey. Or not, you decide. But I’m pretty sure your teenager won’t want you to read this post!
Jonny and I have a 13-year-old daughter, she is a great kid and it’s fascinating watching her grow up. I refer to her as my ‘social experiment’ because really, as parents, we are all just experimenting with our kids and testing out all types of parenting styles. In many ways, she drew the parent lottery because we are in fact pretty awesome at parenting 😆, but in other ways, she lucked out completely.
I’m speaking “financially” of course.
Her phone is an example of this.
She got her first phone at the age of about 11, it wasn’t planned but an opportunity came up, so we took it. It was an iPhone because Jonny tells me we are an “Apple household” and as a Graphic Designer, this is the tech he has always worked with so that's what we all use, despite the extra expense.
Her aunt Liz, my sister, had an iPhone but it simply wouldn’t work. She’s a busy person, she didn’t have time to send it away for repair, so she was dumping it. We bought it off her for $150 and Jonny was able to fix it and get it going and it’s always worked fine enough but over the last six months, it’s been playing up, glitching and has poor battery life.
So, the idea of a new phone started to be talked about.
And she had the good sense to know that she would be contributing to its purchase.
I wanted to detail how we all went about it because I think it’s an important lesson in how to talk to and teach our kids about pūtea (money).
Here goes…
There is a rule for my daughter in our whare: she must invest 50c of every $1 she earns. There are pretty much no exceptions to this rule*. Birthday money? Yep, she has to invest half. Pocket money? Yep, she has to invest half. Income earned from jobs? Yep, she has to invest half.
Initially, this pained her greatly and there was some complaining, but she quickly realised that I don’t care for her pain about investing half because my point is this:
Adults who get to spend every single dollar they earn are commonly referred to as “living paycheque to paycheque”. Where do we think they learned this habit? Why, when they were children, of course, being given pocket money which they then went and spent in its entirety. So, it seemed like common sense to Jonny and I not to let that be the case for her. From a young age, we helped her learn that “a part of all you earn is yours to keep” (The Richest Man In Babylon) and that she must set aside a portion of her income. Always. When she does that then this portion will continue to compound and grow over time.
* She has worked out the exception to the rule darn it! If she asks for gift vouchers as a gift instead of money THIS is the exception to the rule. Her doting grandparents now ask her if she would like cash or gift vouchers! Not helping!
I know you will be interested to know where she invested this money and I covered this in this blog post: How I Help My Daughter Invest
The post is two years old now, but still relevant and these days whenever my daughter earns money she is logging onto her Sharesies account (which is connected to my own) and investing it in the Smartshares US 500 ETF (USF).
If you have any doubt about whether there is any benefit to getting your kids investing early, then you might like to take a peek at my 13-year-olds own investment:
Sharesies - Smartshares US 500 Fund +29.64% return
When she was little, her wants were little. But as she grows the things she would like to own are coming with larger and larger price tags. By far, the most expensive ‘want’ was a new phone and not just any phone, an iPhone. She has hung around me long enough to know that a conversation about money would be had pretty soon after the thought of a new phone was floated. And I didn’t disappoint.
Not a lecture I should point out, but a conversation about how we could make this happen for her.
What phone and how much?
First up I asked her to do a bit of research about what type of phone would be appropriate for her and exactly how much it would cost. From there we could make a financial plan. After bringing Jonny into the research as he is the tech person of this whanau they settled on a phone that cost $800.
Which made me baulk but there you have it. Phones are pricey.
Jonny and I agreed to pay half of this phone and we can easily cover this because on a weekly basis I set money aside for her and have done so for years. Although she thinks the idea of a new phone was entirely her own, I’ve been anticipating it for a long time. She on the other hand needed to cover the remaining $400, meaning of course, given her 50% saving rate that she needed to earn $800.
So, yeah, that didn’t go down so well.
She felt this was an impossible amount of money for an unemployed 13-year-old to make. And she is right in a way when you earn only $13 a week in pocket money, half of which you invest, that’s going to take you 123 weeks to save up - plus it means that ALL of your pocket money has to go towards the phone, no spare change to buy lollies I’m afraid.
When I offered her the chance to earn $10 she said “what's the point, Mum, that only gives me $5 towards my phone, it’s not even worth it!” She wasn’t being lazy as such (well, maybe she actually was) but the goal she was trying to achieve was just too massive, all she could see was the $800 target and that $5 she earned not even making a tiny dent in it. And that is just psychology at play really.
We needed to break down her goal into smaller, more digestible chunks. So I did what any personal finance blogger mother would do and I created her a ‘savings tracker’.
A poorly drawn, ugly and out of proportion savings tracker where she could cross off her money saved up in $10 chunks. Then I instantly coloured in $400 of it, showing that she was actually already closer to her goal than she realised.
The seed was sown.
She is very creative and I knew she couldn’t handle the thought of using my crappy savings tracker when she could design a far better one. A day or two passed by and out came her pens and paper and using my concept she began to draw her own tracker, one that was meaningful to her. I tell you, out of her line of sight I was doing fist pumps of celebration at watching her take ownership of her goal and begin to create a solution!
Left: My attempt at a savings tracker - Right: Her far better savings tracker
The Income Problem
The next thing was to focus on the income problem, the problem being that she had no income.
Personally, I think that at the age of 13 she is too young to get a job, I’d rather her be a kid for a while longer and focus on her schooling and I see that as her main job for now, therefore we had to tap into the employment options that we did have at our fingertips.
Her aunt unwittingly came to the rescue again here when she needed some help and was willing to pay for that help. Liz owns a campervan rental company called The Pod Campervan Rentals and due to COVID they have had to put their company on ice. They are taking this downtime as an opportunity to sell off a number of their campervans that they won’t want to put back into service when their company starts up again. She needed these vans prepared for sale and offered her niece the work. To which I instantly said YES - and then told my daughter she had a job!
The work needed an adult to help so we said to her that if she was prepared to work, then so were we. If she wasn’t, nor would we, it was up to her. A take it or leave it offer, which thankfully she took.
Take it from me, working outside preparing a vehicle for sale in a cold June in Central Otago ain’t much fun at all, but to her credit she got stuck in and the income showed up as a result and she started to colour in sections of her savings tracker.
But she didn’t stop there and we encouraged her to look for any other sources of income wherever she could. She sold stickers at school, and she sold off the bike that she never used. Her grandparents very kindly got involved and offered to pay her for every save she made during her hockey games (she is the goalie) and little by little, then chunk by chunk the money came in and every time it did, half of it went to her Sharesies investment and the other half went to her new phone fund.
Momentum built slowly at first and then rapidly sped up and when she focussed not just on the end goal, but on the incremental steps that would get her to it, she felt so much more confident.
This process is actually teaching her a lot of life lessons along the way.
$800 in two months…
Within just two short months she had earned $800 and was ready to buy her phone. But there was a hitch. She had achieved her goal too quickly and was actually quite shocked at her fast progress. She genuinely thought that it would take well into 2022 before she reached her goal. The result of this was that hesitation set in and she wanted to delay buying her phone, at which point I drew breath to give her a pep talk on how she was fine to spend this money because she had budgeted and prepared for the purchase AND she had invested for her future as well. But that was not the problem at all, her old phone while it had its glitches and reduced battery life did still have some life left in it yet, she felt she should use it till its last breath because it would be a waste of resources otherwise. Which is the right way to think of course!
She overcame this indecision when a friend at school offered to buy her old phone for $50, so the deal was made and you guessed it, $25 went to her investments and $25 into her bank account to be spent if and when needed on future purchases.
I thought that the fact that she saw her effort pay off so fast would no doubt have her thinking ahead to other goals, or so I thought until she mentioned the following:
“I don’t need to do any more work now Mum because I have my phone money”!
I love the logic of a 13-year-old but she probably doesn’t appreciate so much logic coming back at her from her 47-year-old mother! Because I pointed out that both her parents keep going to work. Why is that I asked? Because there is ALWAYS something that you need to buy, so the work can’t really stop, you will always need income. Welcome to life!
After much deliberation and korero, she did order the phone and there was great excitement when it arrived. But never one to miss an opportunity to teach (honestly, she doesn’t stand a chance) as she began to open the box I wanted to point something out to her and that was that the second she opened the box the value of the contents inside will devalue or drop and that is what happens when you buy consumer goods/stuff. They go down in value. But, because she showed discipline and has invested exactly the same amount of money into her investments, that money is already growing and compounding and working for her.
So, the lesson is to always do both.
What I find remarkable is the amount of money that comes our kids' way, $5 here and $10 there adds up over time and really, what do kids need all that money for? It’s much harder to tell an adult to invest half of their income because the draw on their money is just so much greater, but for a kid who has all their needs taken care of: housing, food, clothing, schooling etc this is the BEST time to teach them that habit of setting a portion of their income aside because as my daughter has found, as the snowball starts to gather momentum, you really don’t even miss that income that you set aside.
As I sat down to write this post I asked my daughter for her input about the experience and I wanted to end with some of the things she said to me.
At first, she felt like “I’m never going to make it, that is too much money to make, what do you expect from me!” And then she was like “it didn’t feel - after she got into it a bit - it didn’t feel like she was giving up a lot to get ahead, it didn’t really impact her goal” because she could see both sides of the coin so to speak. Saving up and paying cash for the thing she wanted now, and as I keep reminding her, setting money aside for her future at the same time.
For those of you out there with tamariki I would just say to you that for her it’s been a journey of many tiny lessons, many brief conversations and when necessary a firm bottom line, to build up her understanding of how money works. Her knowledge is growing in incremental steps. The journey is of course ongoing because from where I am sitting, looking ahead into the future, the next big expense is going to be a car and perhaps tertiary study. Crikey. But with her nailing down these skills early and with the likelihood that she will get a part-time job when she is a bit older, our whanau really do see these as achievable goals, all done with no debt.
It occurred to me as I wrapped this blog post up that I’d written on a similar topic before and I found this four-year-old blog post about my nephew and his ‘need’ for a new phone. For me, it’s interesting to refer back to as I can see that I did learn a few things from their situation: Teenagers and Phones!
