Savvy Frugality at an Early Age

My 13-year-old son is actually pretty shrewd when it comes to money. He likes to save it, he doesn't like to part with it, and he's great at saving his birthday and allowance money to purchase the little luxuries he enjoys, such as his video games. I guess that's why I shouldn't have been too surprised when he told me he wanted to renegotiate his allowance.

"I want more money," he said, "and I want to invest it."

At the time, I was paying him about $20 every two weeks, depending upon how good of a job he did with his chores around the house. I thought about it for a day or two, and then sat down with him for a talk about his financial future.

"You're going to graduate high school in about five years," I told him. "You'll need money to go to college, and for other things if you decide to move away from home. Investing is a great idea."

The deal I made with him was this: Each month, instead of the $20 I had been paying him every two weeks, I would put $50 into an ING Sharebuilder account instead. He could pick his own stocks, but he had to have a good reason for picking them, and if he wanted help with his investments I would assist him. I would still give him some "pocket money" that he can spend on "junk", but the investment cannot be withdrawn or touched until he is 18 years old. He agreed.

He picked just two stocks for his Sharebuilder account (so much for diversification): Wal-Mart, where he loves to shop, and Devon Energy. OK, I helped him pick the Devon Energy stock. There were a few reasons we went with Devon. They are a local company to us here in Oklahoma, they have experienced tremendous growth the past few years and have big plans to expand even further. Devon is even planning to build a new skyscraper in Oklahoma City. My son went along with this pick.

We'll check our picks every once in awhile just to make sure our money isn't evaporating, but we have a five year window, so for my son this is a "long term" investment. He'll continue to receive a total of $600 a year to invest in his automatic Sharebuilder account. When he starts working when he gets older he can add even more money to his investments.

I'll keep you updated on how my 13-year-old son's investments are doing. I sure wish I had his forsight when I was his age. I could have gotten a great deal on Apple 30 years ago.