Financial Lessons from a Teenager

Congratulations to all the graduates!

There was a great article recently on The Columbus (Ohio) Dispatch’s website about an 18-year-old named Lindsay Binegar who pulled the trigger on a purchase many people older than her can’t manage.

She bought a house. And paid cash. The lessons from her story are priceless.

I can’t do the article justice, so I recommend reading it when you get a chance, but the gist of it is that Lindsay started earning money for showing pigs beginning when she was 4 years old. She saved and saved her money, planning on using it for college.

When she started looking at schools, however, her parents offered to pay for college if she stayed near home. So she had her college fund now available to invest. Her father, who runs an auction house, suggested she buy a house at auction.

She paid $40,000 cash for a house, according to the Dispatch article. She spent a little more on new paint and carpet and rented it out to an aunt and uncle.

The first big lesson Lindsay showed is that frugality pays off. How many adults would like to be able to save $40,000 in 14 years? The power of compounding interest – earning interest on your interest – over the years, along with Lindsay’s resisting temptation to spend the money, gave her quite a bit to invest.

Which brings us to the second lesson: Once college was paid for, she didn’t take the money out to buy a new car or a new wardrobe, she invested it. Turning it into a rental property and assuming, conservatively, that she can earn $8,000 a year in cash flow (after taxes and maintenance), she could have her original investment back in just five years.

The last big thing to take away from the story is the fact she took advantage of today’s market, buying a house at auction at a low price and only having to add paint and carpet. Paying cash removes any debt obligation. There are plenty of deals to be had in today’s real estate climate, and she found one PLUS bought it the most ideal way.

If you think about it, this is the way our parents and grandparents became homeowners – they saved and saved and didn’t get in over their heads when they purchased a home. It was the smart, responsible way to own a home.

There’s plenty we can learn from the teenager who did the same thing.

To all the teenagers out there graduating from their respective schools, including my youngest son Wyatt who is graduating from high school, I hope you will glean inspiration from this tale and nurture it for your own measure of success!