“Working to help parents raise money-smart kids.”
Hello, friends!
Welcome to Issue 104 of “3 Ideas to Share & Save.”
If you’re counting (which you probably aren’t 🤪), that’s 312 ideas over 104 weeks. And at 52 weeks per year, that’s two full years of Money-Smart Monday goodness that I hope is helping you and your family on your financial wellness journey.
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The Gambler’s Fallacy: 52 refers not only to the number of weeks in a year but also to the number of playing cards in a standard deck. It’s impressive that only 52 cards offer us an almost infinite amount games: Rummy, Bridge and Kings in the Corner (a family favorite when I was young), to name a few. But the list goes on!
Of course, we can also use 52 cards to play Poker and Blackjack. In other words, to gamble. A few weeks ago, I asked, “Have you talked to your kids about gambling?” I’d like to revisit this subject not because I want your kids to go all in, but rather to point out an important cognitive bias we all experience: The Gambler’s Fallacy.
Have you ever witnessed a coin-flipping run? You know, when you flip five heads in a row. Then Six. Now Seven. The longer the run continues, the more you think, “The next one has to be tails!”
This is The Gambler’s Fallacy, which leads us to believe there’s a greater power guiding probability. “Lady Luck” is on our side, so that tails we want or Jack of Spades we’re counting on is “due” to appear.
Of course, when we step away from the table, we realize this is a basic misunderstanding of probability. The next flip of the coin is just as likely to be heads as tails, regardless of the run that preceded it.
What matters is that we are aware of this cognitive bias and can point it out to our kids when it’s guiding their thinking. Teaching our kids about probability is important because, as I wrote in this post, they are otherwise almost certain to make poor investment decisions.
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More Than Money: Jeff Bezos looks for “missionaries, not mercenaries” to hire at Amazon. For Bezos contends that while a business certainly needs to make money, money shouldn’t be a reason for running a business.
Several of my Art of Allowance Podcast guests touched upon a similar idea. While this newsletter and everything we do at The Art of Allowance Project is designed to help you raise money-smart kids, many lessons to be learned that involve money have implications far beyond the green stuff.
Here are just a few short video excerpts from my discussions that illustrate this point:
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New Goal Tactic: I think you’ll enjoy this Inc. Magazine article about how parents can teach their kids goal-setting using four tactics, three of which I’ve shared with you previously.
The piece even begins in a way that aligns with our mission in this newsletter. It also underscores the point that we’re talking about more than money:
“One of the best ways to feel you have a healthy work-life balance is to feel you’re succeeding as a parent; to feel you’re helping your children grow up to be happy, fulfilled, independent, and successful. After all, feeling successful — in whatever way you choose to define ‘success’ — is a key factor in overall happiness and fulfillment.”
Successfully achieving goals is a wonderful life lesson for our kids, and I’d like to emphasize the one tactic described in the Inc. Magazine article which is new to this newsletter:
Share your goal with someone. Those of you familiar with goal-setting will likely have heard this advice. Telling friends or making public commitments can help us achieve our goals because we want to follow through with our pledges.
We can easily implement this tactic with our younger kids because we know they’ll be excited about their goals. They’ll probably want to share these goals with anyone they meet, not just with friends or family.
This strategy is also a good one for those of us with tweens and teens, for the adolescent world revolves around friends. So when older kids want to save for a goal, we can remind them to tell their friends what they’re saving for to help them goose the probability that they will achieve it.
What’s more, this approach has an added benefit in that it goes with rather than against the grain of typical teen advice. We are often telling our older kids not to worry what their friends think. However, this tactic allows us to leverage teens’ natural bias to worry about their friends’ opinions.
The Inc. Magazine article also outlines three steps we’ve discussed before, but which are worth reiterating:
Write down your goals. Committing a goal to paper helps ensure its achievement. We even created a handy-dandy digital tool to help, although I recommend including some physical writing, drawing or coloring of the goal to help imprint it on the young brain.
Create an action plan. Of course, we want our kids to set S.M.A.R.T. goals, ones that are Specific, Measurable, Achievable, Relevant and Time-Based. This post can help you kick-start this process. And again, try to incorporate pencils, pens or crayons to help personalize a goal.
Share weekly progress reports. When you distribute weekly allowances and your children have set their goals, you have a wonderful opportunity to incorporate the concept of weekly progress reports. (Though I might avoid using such corporate speak. 😉) Each week, for example, gives you the chance to suggest that your kids move money from their Spend Smart jars to their Save jars to help them achieve their goals faster.
“Research has shown that people who track their progress on goals like losing weight, quitting smoking, and lowering blood pressure are all more likely to improve than those who don’t.”
-James Clear, Atomic Habits
Until next week, enjoy the journey!
John, Chief Mammal
P.S. Please consult with a financial or investment professional before engaging in any decisions that might affect your own financial well-being.
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