“Working to help parents raise money-smart kids.”
Hello, friends!
I’m glad you made it to this week’s “3 Ideas to Share & Save.” So let’s get right to it!
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No Sunk Costs: We want to be flexible with our plans. So if a certain strategy isn’t working, then it’s totally ok for us to course correct or abandon a direction entirely. For example, if our kids start making consistent money with a steady job, then we can ratchet down an allowance or even move away from it altogether.
In a similar light, writer Jason Zweig marveled at Nobel laureate Daniel Kahneman’s ability to toss out entire versions of work they’d completed together. “When I asked Danny how he could start again as if we had never written an earlier draft,” Zweig remarked, “he said the words I’ve never forgotten: ‘I have no sunk costs.'”
The Psychology of Money author Morgan Housel also touches on the subject, explaining:
“They [sunk costs] make our future selves prisoners to our past, different, selves. It’s the equivalent of a stranger making major life decisions for you.”
So don’t let a stranger keep you from making changes you need to make. For example, if you get laid off, then it’s perfectly ok to adjust the allowance you’re providing to your kids.
In fact, you can leverage the open communication you’ve established by setting up an allowance in the first place to let your children know that you need to make a temporary change until your situation improves.
And, of course, doing so gives you a chance to be a model of resilience for your kids when you’re back on your feet and able to resume an allowance.
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The World We Live In: The following line from Malcolm Gladwell’s wonderful TED talk about consumer preferences cracks me up:
“To a worm in horseradish, the world is horseradish.”
-Howard Moskowitz
It also reminds me of the David Foster Wallace commencement speech in which the fish asks, “What is water?”
Just like the worm and the fish, we can be blind to the environment in which we’re immersed. For instance, we give our kids an allowance to help them learn money smarts. But if they’re growing up in a world of conspicuous consumption, then the allowance’s effect may be muted.
And as I wrote in my book, The Art of Allowance, consumption offers fleeting fulfillment:
“Stuff can provide only momentary jolts of excitement—not happiness in the larger sense. Understanding the power that stuff holds over us is critical as we begin the process of raising money-smart, money-empowered kids.”
Which is why I like the idea of controlled consumption. Perhaps this slider I’ve shared with you before might help:
The point, of course, is not to promote minimalism, as I recognize that we all consume differently. However, I think we can agree that moving our slider away from outrageous consumption, which I playfully refer to as “Kardashianism,” and towards minimalism benefits us and provides a good model for our kids.
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Digital Money Is Real Money: During a recent live Q&A session for parents courtesy of our partner, Louisiana Federal Credit Union, one mom asked if she should consider giving her kids debit cards or pre-paid cards to teach them healthy card habits.
If you’re a frequent reader of this newsletter, then my suggestion to think about doing so won’t surprise you. As my friend and co-conspirator in the money-smart movement, Bill Dwight, told me when I was contemplating a similar transition with my own kids a few years ago, “Digital money is real money.”
And just as I recommend starting an allowance early to help your kids learn to use money via their own experiences, providing your tween or teen with a pre-paid card like that offered by FamZoo (created by the aforementioned Bill Dwight) seems sensible. Debit cards like Greenlight or Current are also tools you can use to help your children on their money-smart journeys.
Remember, though, that these cards are tools only. For just as with a physical allowance, your kids will need your guidance navigating their digital allowance.
For example, if your child has already established a habit of saving a portion of her allowance in a physical “Save” jar, then make sure to help her continue that practice in the digital realm. In the spirit of James Clear’s “Atomic Habits” program, you can support her building an identity: “I am the kind of person that saves a portion of any money I receive.”
I hope you appreciated this week’s “3 Ideas to Share & Save.” And, as always, please 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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