How my 5-year old earned 20% interest last week.
What are you teaching your kids about
“Money and Success don’t change people, they merely amplify who they already are.” – Will Smith
“Kids are like sponges.”
It's a common refrain. A terrifying reality if we are honest and reflective about what our children watch us do and hear us say. But we are careful, right? We make sure to express how much they are loved, and how much their parents love each other (in two-parent households). We make sure to speak respectfully of those around us, and we try hard to ensure our children treat others with respect and dignity. We teach them about working hard, studying hard, practicing hard at their craft(s) – though they likely won’t play soccer or the trombone for the long haul. We teach our kids how to ride a bike, drive a car, do dishes, fold laundry, solve algebraic formulas (after we google it for a while), and hopefully how to change a flat. Everything else these days, they teach themselves. They Google it. They watch a YouTube video. (More terrifying realities?!) But what Google, YouTube, and even classrooms aren’t likely to teach your kid ...
Character. Wisdom. Self-control. Patience.
These things are what they are soaking up from us, as parents, every single day. FAR be it from me to write a blog about how to raise kids, so look elsewhere if that’s why you read this far! My intention is only to suggest a simple avenue through which we can teach kids the stuff that really matters.
That avenue is money. Not to get too religious on y'all, but one of the most common misquotes of out there is: “Money is the root of all evil.” NOPE.
The quote is actually "The love of money is the root of all evil.” The point is very different. Think about it, would you tell your children money (which buys your home, food, clothes) is bad? Would you teach them to stay away from money because it, in and of itself, will corrupt their little minds and hearts? Of course not. Money is a tool. Money is necessary. Money is a good thing. Yes, don’t fall in love with it. But other than “don’t love it”, what are we teaching our children about money? My experience would suggest “not much” is the answer to that question.
I’ve interviewed hundreds of individuals over the last 6 years about their relationship with money. I’ll often ask “what is the most important thing you learned about money growing up?” Common responses are “make more than you spend”, “save 10%”, or “we didn’t really talk about it”.
Why not?! Ok, let me scare you for one minute with some statistics and then we’ll get practical. In a recent study, only 16% of respondents said they save 15% or more of their income. Not surprisingly, statistics also reveal that the median 56-61 year-old American has about $17,000 saved for retirement. This is same “median American” expects to spend $40,000/yr. in retirement and will only receive $16,320/yr. from Social Security.
You don’t have to be a grown-up to know that math stinks.
So, let’s get started. And let’s make it fun! Books have been written and many more could be on this topic, so let’s just focus on one idea. The notion of “allowance.” Parents have debated for decades how to pay (or even if) an allowance should be paid to their kids as they complete chores, get good grades, or stay out of trouble. Here’s a new idea; let’s not just give our kids our kids money. Let’s teach them about currency, spending, saving, and interest. Yes, interest. My four-year-old (five now) held an interest-bearing account at the Bank of Mason Jar. And to this day she continues to accumulate currency (pretty, blue-translucent marbles) in her “account.” For the last 18 months, we have used the marble jar to teach Avery about saving, spending, interest, and most importantly – character. You see, Avery isn’t primarily paid for the chores she completes – she is rewarded as we see kindness toward her siblings. She gets a marble often when she does things around the house when no one has actually asked her to. She’s rewarded when she takes time to show compassion for others, or when she holds her tongue instead of complaining about the plight of cleaning up her room. Similarly, Ave can lose a marble (or three) if she displays a lack of care for others, “me-first” thinking, or a lack of integrity. Why? Why do I want her to associate reward and character? Because I want her (and my son when gets his own jar soon) to see that selfishness and stepping on others isn’t the way to climb the ladder. I want her to love others (instead of the money) and then apply that love when she receives real money as an adult. A self-centered approach to money will, without fail, lead to a great deal of dissatisfaction. “More” simply never becomes “enough”.
So what’s the fun part?
The fun part, if you ask Avery, is “the STORE.” Each Saturday Avery’s store opens for business. Toys, books, candy (don’t judge!), sticker books, and even certificates to trampoline gyms and theme parks, are laid out on our bed for Avery to choose from. Every item has a sticker with a price. Some cost as little as 2 marbles, some cost upwards of 25m’s. Yes, that’s like a $ sign for marbles. It’s legit. Avery receives 5 marbles at the start of the week “just because we love her.” She may arrive at the store at the end of the week with 10 or 15, or she may come with zero (she’s has a few rough weeks). Avery is allowed to spend all of her marbles if she chooses. If she doesn’t, she will receive a “free marble” for every 5 she saves until the next store day.
That’s a 20% interest rate for all those math nerds out there.
It’s been a total joy to watch her reason with herself as to how much to spend, how much to save, and how earning interest will help her save up for the big stuff that she REALLY wants. And all of this is not just teaching her how money works, more importantly, it’s teaching her how to work with money. How to manage her emotions while saving up weeks for the Jumpology trip, when staring down cheap and immediately-gratifying candy or new nail polish colors. And my heart grew three sizes when we added items for her to purchase as gifts for her little brother… and she immediately spent her hard-earned marbles on him.
She doesn’t know it yet, but she’s got a healthier relationship with money at the age of 5 than many 35 year-olds I know. These lessons won’t just lead to saving and investing well. These lessons, I believe and hope, will create in her a heart that values money but doesn’t love it. My prayer is that she will grow wise, patient, and generous. As parents, we know we can’t control all the outcomes, but I hope that teaching your children about money in ways that are fun and character-building will move them one step closer to the type of person you are hoping and praying they will become!