Teaching our kids about investments

So not everyone who reads this blog have invested in real estate as we have, but you have made some sort of investment in your life. Whether you have purchased a bond, a stock, contributed to a 401k, purchased a home you live in, paid for college, whatever it is that you get a return on or even potentially lost money on is an investment.

Our kids learn all sorts of things in school, but they do not learn the things in life that will make them financially secure. My husband has made every one of our children read “Rich Dad, Poor Dad”.

In this book, Robert details the ways of thinking that made one dad rich and kept the other man poor. He provides a lot of introductory concepts that if you follow, you also can thrive financially.

As we have learned, we have tried to teach our kids about what we do. Our middle daughter graduated from college and moved in with us after while she looked for a job. When she was ready to move she started looking at 2 bedroom apartments that were $650 a month. We encouraged her to instead consider homeownership. It happened that we were getting ready to flip a small brick rancher that was going to retail for about $100,000. We calculated the mortgage, taxes and insurance to come out to be just under $600 per month. So, she could pay rent for a little more, or she could start building equity while she was young in a 3 bedroom house.

Since we were at the beginning of the process, we were able to share with her the process. She spent a lot of time there with her boyfriend getting sweat equity. Because we were saving on labor, we were able to provide some nicer finishing options.

This is our daughter in front of her new home (INVESTMENT) on the day they became engaged here.

And now, as our son finishes his last year of school we have been fortunate enough to engage him on a different opportunity.

He actually runs his own lawncare business, and during the summer months earns over $1,000 per month mostly mowing.

This is our son on his first job.

Anyway, he had been able to save about $5,000 working. We recently acquired a flip that we only were going to have short term. We paid $37,500. The repair costs should come to about $20,000. It needed siding, a roof, some exterior paint, a new garage door, refinished hardwood floors, and carpet/paint in the bedrooms. Typically, when we flip we do the full thing – new kitchen, new bathrooms, the works. But, on this particular one, we felt that we would keep the price under $100,000. It should sell somewhere between $89,000-$94,000 when we are finished. With the nice yard and that much finishing it should still compete very well in our market at that pricing point.

We decided to make our son partial owner of the house. With the amount of money he had to invest, he became 7% owner of this flip. When we sell it, he will receive 7% of the profits on the flip. So, conservatively, he should make somewhere in the neighborhood of $1,800.

Now, we probably would make noone else a deal like that. However, him seeing that he just turned $5,000 into $6,800 – do you think we got his attention? Do you think he will go into his life knowing that his money can work for him while he is doing other things?

Not everyone has that extreme of an example they can provide. In fact, we didn’t have any of those tools for our oldest daughter at that age. The best we could do is say “Read this book”. But, had we been thinking this way more deeply, I am sure we could have come up with a way we could have provided a more attention getting example. Luckily, she did read the book and does understand the concepts and she will apply them as soon as she is able to do so.

Being creative and thinking of win-win scenarios is part of any relationship. Whether it’s your marriage, your children or your business relationships, or even when you combine any of those things together!. But, we have to get ourselves going on the creative first so we can see the possibilities. Educating ourselves on these things, and trying out the concepts even on a much smaller scale can help us not only improve our situations but provide others withthat same knowledge.

Here is that diamond in the rough. This investment will conservatively yield $27,000. And, my son will experience his first windfall on his $5,000 investment. Increasing his net worth to $6,700. Yes, I used my 17 year old son and net worth in the same sentence!

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