Financial lessons from my 15-year-old

I was caught off guard the day my son said, “All my money’s in inventory.”

I was going to write a money letter to my 15-year-old son. I thought I’d tell him about financial mistakes I’ve made, and the importance of saving, and how to manage your money wisely. How you should never put your money in something you don’t understand. Or give it to someone who makes vague promises and won’t explain the strategy.

Then Ned S. asked, a few weeks ago, “Dad, can you break a hundred for me?”

My husband and I looked at each other. We actually did not have change for a hundred on hand at that precise moment.

Clearly Ned S. had already absorbed one important piece of financial management: how to work your finances so the money is there when you need it, as well as when you want it.

Footwear fever

Take sneakers. Ned S. is a fan. Loves them so much that at age 13 he began asking repeatedly for new ones. Around this time, Ned S. was feverish and hyped about sneakers, as if he were on some consumerist drug that makes you want to spend every dime you have.

Since his feet were still growing, we couldn’t bring ourselves to sign off on super expensive ones, and we couldn’t justify more than a few pairs a year.

But we also couldn’t make him wear some off-brand cheap ones that he would have found mortifying. Thirteen’s an age when these things matter.

Ned S. clearly had to have new sneakers on occasion. (Those growing feet.) So we found some sites that sold desirable brands at a discount. I hit on the brilliant (to me) solution of tying sneaker purchases to the number of letters he wrote home from summer camp.

Summer camp came and went, and we got 3 letters. That fall, Ned S., then 14, got 3 pairs of sneakers. “Fine,” Ned S. said, with some exasperation. “I’ll buy my own.”

A few months after that, I was busy and distracted, and it didn’t sink in right away: Ned S. (now 15) had stopped asking for new sneakers. “Good,” I thought to myself. “He’s over this status-y footwear obsession.” But he seemed to be wearing unfamiliar sneakers and his bedroom seemed unusually crowded with boxes.

My son goes into business

“How come you don’t pester us for new sneakers anymore?” we asked, sometime last spring. He shrugged. Completely calm. The fevered excitement was gone, though the number of pairs on his bedroom floor had soared. “Oh, I’m selling sneakers now. I don’t need to keep every pair I buy.”

Ned S. patiently explained that he found it easier to use his own savings to buy sneakers (sometimes slightly used) through a Facebook group dedicated to sneaker fans.

Over the next few months we got used to the sight of Ned cleaning sneakers, setting them up on the coffee table for photo shoots. The bathroom floor now housed several bottles of special sneaker cleaner.

We were proud of him. He had married a passion to a way of paying for it.

Then came that hundred-dollar bill.

In one of those “wait, what?” moments that take place semi-regularly when you’re a parent, we asked Ned S. just how much he was making. And how much was he spending on sneakers? We handed him a little notebook and suggested he keep track of his sales. One day, we said, you’ll be glad to have a record of what you accomplished.

Ned S. filled a page with some highly un-detailed notes and announced he’d sold about 20 pairs. He started with a $50 purchase. Nothing special, he says. “I thought I saw a good deal on a Facebook group (for people to buy and sell sneakers). Air Jordan 3s. $50.”

They had cost $130 new, but that model sold out and are no longer available, he explained. Ned S. sold them for $100. Net profit: $50.

Sneaker resellers know their market and they get to know the territory. Ned S. likes lifestyle sneakers, not performance sneakers. “Usually these are a leather sneaker, better materials, usually $170 to $200,” he says.

He notes some changes in the Jordan market since the company started to go into mass production. “There are a lot of pairs out (on the market) at any given time,” Ned S. says. “They’ve tried to eliminate the game of reselling.”

Ned S. studies the market

“There are some extremely rare sneakers I just won’t know the value of,” he says. “But I know the value of most.” He assesses sneakers on their condition, rarity and demand, which he evaluates using Facebook comments. “If it’s high demand, it’ll be an easy move because a lot of people want it. (High-demand sneakers) do not have a dry market.”

His business model is simple:

* Look for a pair of sneakers that needs only light refurbishing.

* Soak the laces in a little dish of diluted bleach on your mother’s kitchen counter.

* “Clean the soles and the toe box — the outside of the sneaker,” Ned S. advises. “I think I’m above average in refurbishing.”

It seems Ned S. has also unwittingly learned something about the scarcity principle. When sneaker supply was limited because his parents refused to buy all the pairs he wanted, his desire was sky-high. Now that he’s opened a supply stream, his own demand has notched down.

Ned S. is still interested in sneakers, and he occasionally buys a pair he can’t part with. Now in late June, about 25 pairs of sneakers have passed through his hands over the course of 8 months.

A miniature stock market

How much does he have right now? “All my money’s in inventory,” Ned S. says. OK, how much is that inventory worth? About $800 for 8 pairs. “Oh — 1 pair’s going tomorrow.” This pair cost $100, and Ned S. has a buyer lined up, ready to pay $150. More cash is tied up in sneakers he wants to keep. “If they were for sale, my inventory would be about $1,000.”

Ned S. likes the speculative nature of sneaker resales, and he’s hardly the only one trading. One kid is rumored to have his own storefront, with estimates for his profits ranging between $10,000 and $50,000. “The best is far above the rest of us,” Ned says.

“It’s like a miniature stock market,” he says. “Kids get to toy with smaller amounts of money. Sometimes it works out, sometimes it doesn’t.”

Ned S. believes he is on track to hit his goal of $5,000 before he graduates high school in 2 years. “It’s exponential. I acquire more money from sneakers so I can use more money (to buy more). The more money you spend, the more money you’ll make.” As business people so often say, Ned adds, “It’s nice to have money.”