My favorite thing (and I know this makes me just about the dullest person around): A money lesson with double bang for the buck.

So I was sitting here trying to explain to three teenagers why it’s important to reinvest money in your future — my newest euphemism for “Don’t spend your entire allowance and babysitting money. Put some in savings.”

Not happening. I got trumped by Jonas Brothers tickets. I never stood a chance.

And then one of the teens’ mothers came by. She works for an environmental non-profit. This woman does so many deeds that benefit society, just standing near her makes me want to run out and build affordable housing–or at least get my husband off the sofa to go rake the elderly neighbor’s yard.

The point is she was telling me the challenges of getting her grant money actually paid; they’re always late. But she still needs to pay her team on time. But they recognize the value of what she does, and the way she is growing the programs. Every year she grows the program, these grantors give her more money.

Bingo, the allowance saving lesson was born.

The great thing about a non-profit is it’s all about reinvesting money in the future of the organization. It’s about making the organization function well and grow, because additional money is usually infused only if the organization proves its merit. And the real differentiator between a non-profit and profit-based company: The money earned by the organization goes to pay salaries, fund programs, and pay all other overhead. There is no profit taken.

What exactly is profit? It’s the money left over after the overhead is paid. What is overhead? Every cost the company is liable for; all the expenses. Profit goes to the owners in a privately owned company, either as their only income, or as extra money, if they take a salary as well. In a public company, it goes to the owners in a manner of speaking as well. It goes to major shareholders, and Board of Directors members.

Profit can be a good thing, but it also causes problems. Sometimes corporations focus only on profit–which makes the maximum money for the executives, who are the major shareholders and Board members. Sometimes they want profit above all else, and the quality of what the company produces suffers as a result. Sometimes they produce a cheaper product, or decide to fire some employees so the profit is bigger. Companies can end up failing because they focus so much on profit at the outset that they don’t invest in creating a quality company.

(Disclaimer here: That’s of course not always the case, or even mostly the case. But it’s a danger, especially for newer companies.)

Tell your teen that they are like a brand new company just starting out. Bear with me here. If a brand new company is all about profit and doesn’t reinvest in the company, then it won’t have the means to produce quality goods and services and grow. A company that doesn’t grow folds.

A teen should be like a non-profit. Their financial lives are just starting out. If they take everything as profit–spending money– then they’re not investing in themselves for their growth. Growth goals for a teen: They need a car and insurance ones of these days, right? College money? Rent money for a cool apartment? Or bring it down a notch: Money for that ski trip that will enhance their spirit. These are things that help the teen grow.

Give it a try. I’m curious how your teens react. They tend to be socially conscientious, so the idea of functioning for quality rather than greed should appeal to them.

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Yesterday, I ran into a college student I know who is an extraordinary babysitter, because she is a lifeguard, too, and will watch up to five kids at a time. Everyone loves her. She had just come back from a trip to New York City. She asked if I knew of anyone who needed her because she just bought a $500 purse with a brand name I didn’t catch, and she wanted to make some of the money back. I tried not to stare. She giggled, telling me she had spent way too much money, as if that needed articulating. Then she joked that she should probably get paid by check for the rest of the summer.

“My Dad likes to deposit my checks for me.”

Yeah, I’ll bet he does.

Then I was at the grocery store and ran into an incoming senior at the high school where I sit on the Board. She’s also a babysitter, also great. She’s MVP in two sports at the school, and will play with kids until they drop. She was telling me that she had spent all the money she earned this summer seeing The Hangover over and over again. Had I seen it?

Both these kids are great kids—smart, reliable, hearts in the right place. And their spending habits drive me crazy. They’re not even my kids. When I went home and started planning for my first class of the college semester, it occurred to me that the teen babysitter should start a business, a babysitting dispatch and group-watch service.

The main goal of this business is to teach her about how entrepreneurship is formed, what the economics of running a business are, and hope that translates into more mature spending habits. Taking care of employees has that effect. Besides, when you run a business, you have little time for other things.

By tapping into the parent body at the school—which is pre-K through 12—this teen has a captive market with lots of qualified prospects. A substantial market is key to starting a business. Parents of elementary school and preschool kids always need babysitters.

In this economy no one can afford a lot. That plays into the teen’s favor. Teens are less expensive than other child care providers. And if the teen goes to the same school, there’s a trust formed–and it’s easy for them to pick up the kid at the end of the school day.

So here’s how the teen might form her babysitting business. I am going to get the teen I know to start doing it, see how it goes. Maybe she’ll write a guest column some day.

1. Have your babysitting teen get a list together of friends who are good babysitters, people she’d vouch for. This is an important question to ask the teen: Would you vouch for that friend of yours you call Crazy Carrie? You’ll be surprised how responsible your teen will be when the responsibility of vouching is theirs.

2. Then your teen should ask the people they babysit for if they know anyone else who needs help with childcare. But tell them to approach it carefully because most parents are very squirrelly about their babysitters, and don’t want to share them, because then they won’t be able to get them when they need them. Your teen should say up front that she has friends who are babysitters, very responsible, she’d vouch for them, who are looking for work.

3. Your teen should also tell the people they babysit for that she does group babysitting. Three kids at a time, or more with some notice, because she’ll bring another babysitter with her. When your teen tells parents about group babysitting, have a price ready for multiple kids. If she charges $10 for one kid, maybe $12 for 2 kids and $15 for three. $20 for five kids. Make the prices good, so parents can see the great economics of sharing a babysitter. Have your teen explain that it’s fun for the kids, too.

4. Then your teen should put up fliers at school, ask the school permission to send out a broadcast email to the parent body.

5. The teen should name her business.

6. The teen should have a cell phone with texting capability. When a parent needs a sitter, they should be able to text your teen, and if your teen is busy, the parent should get a referral. Your teen should follow up with both the parent and the referral, make sure the other babysitter has directions if they’re driving, calls back the parent appropriately, etc.

7. If there’s a group babysitting situation with your teen and another sitter, your teen should handle paying the other sitters, and be the one who gets paid by the parent.

8. Your teen should work on getting various skill sets into her arsenal of sitters: lifeguards, teens with cars, boys (hard to do, but many parents of boys like to have boys), etc.

Your teen will learn to manage money, people, and clients. Please share any stories of teen babysitting businesses, especially if the teen is doing something unique.

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There are many pros and cons on either side of this debate, and I have heard many horror stories about either scenario—paying teens, or not paying teens. So before we dig in I’d like to say, for the record: I’m writing this with great trepidation.

First, let’s go with the pros of not paying your teenager to babysit a younger sibling.

1. The siblings foster a bond not based on a business transaction.

2. You save money on child care.

3. Your teenager won’t expect payment for helping out with other family concerns.

4. You don’t risk the younger sibling’s feelings being hurt. If a kid finds out their brother or sister is only playing with them because they’re being paid, this can very hurtful, and in turn condition young kids to expect payment to play with others.

5. You don’t set a precedent of paying to be with the sibling. What if your teen starts to expect money to watch your toddler while you’re on the phone for 10 minutes? The “I’ve created a monster” is always my biggest fear.

Okay, now the pros for paying your teenager to babysit.

1. You can expect the teenager to do more. If you’re paying, you can add cleaning up after the kid to the deal without feeling guilty.

2. You don’t have to worry about taking advantage of your teenager. The teenager did not give birth to your other child. They are not guardians. If a teen is spending a lot of time watching a toddler, or eight year old, it can take away from their lives. If you pay them, it’s their side job.

3. You’re free to go out at night on a date with your spouse.

4. They learn the responsibility of taking care of children as a job and can do other babysitting for extra money. You can feel comfortable recommending your teen to other parents looking for babysitters, if your teen has babysat officially.

Usually, by the time I’ve made lists of pros and cons, I’ve decided what I think. But in this case, it’s just the opposite. The pros and cons are too even, the tradeoffs too hard to choose. So how about if we try both? I know, you think I’m nuts. How can we do both?

Try this, and please report back if it works. I test drove it and the pilot program is going nicely so far.

Here are a couple of choices for doing both, striking a balance:

1. Pay for nighttime babysitting, but not daytime. Nighttime, especially on weekends, is a teen’s most valued free time, time spent with friends or with their favorite electronics. And they need their down time as much as adults do. If they sacrifice this to do a job, and they’re paid, they’ll learn the lesson of sacrificing for money. Plus, you won’t feel like you’re taking advantage of them.

2. Expect a certain amount free, and then pay after that. You’re working late. You ask your 16 year old to pick up your 8 year old at elementary school and take care of her until after dinner. Oh yes, and please make her dinner, too. Maybe the pickup and the first three hours are free, but you pay for the time between 6 and 8 p.m. that involved dinner preparation, helping the 8 year old with her homework, and such.

This latter choice was suggested to me by a very enterprising teenage girl, who said: “Once it cuts into my phone time with friends, TV time, and homework time, I wouldn’t get cranky if I were also earning money.” She said she didn’t mind playing in the afternoon for a while for free. That’s just “hanging out time anyway.”

You can also set a certain number of hours watching the younger sibling that are free, and after that it’s paid. For example, the first six hours are free, and after that it’s paid. But before you set the number of free versus paid hours, use this formula:

Figure out how many hours of babysitting you need each week, compare it to your teen’s free time (time not in school or involved in activities). Don’t take up more than half their free time without paying them.

Please share systems that have worked in your house, or your experiences if you try these.
 
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