“Working to help parents raise money-smart kids.”
Hello, friends!
Juneteenth National Independence Day, which commemorates the emancipation of enslaved African Americans, became a federal holiday in 2021. As we enjoy our day off, let’s take some time to appreciate our freedom.
Also, I hope you find this week’s installment of “3 Ideas to Share & Save” helpful.
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We All Want to Be Cool: “The cool stays cool, and the hot stays hot.” Or so went the ad for McDonald’s short-lived McD.L.T. burger.
This scheme, perhaps concocted by styrofoam sellers, didn’t last long.
Seriously, though, humans are a bit like the McD.L.T. We run hot and cool. Or, as Walter Mischel, the man behind the famous marshmallow study, explains, we have both hot and cool systems at work in our minds.
We can probably all conjure up mental images of kids who capitulated to their hot systems, the ones that are fueled by desire, gobbling up marshmallows. Of course, some test subjects were able to circumvent their hot systems by using strategies to tap into their cool systems, thus delaying gratification:
“They made up quiet songs…hid their head in their arms, pounded the floor with their feet, fiddled playfully and teasingly with the signal bell, verbalized the contingency…prayed to the ceiling, and so on. In one dramatically effective self-distraction technique, after obviously experiencing much agitation, a little girl rested her head, sat limply, relaxed herself, and proceeded to fall sound asleep.”
-Walter Mischel
While the predictive powers of the original study have rightly been called into question, Mischel’s continued research suggests that we can improve our abilities to delay gratification at any age. And delaying immediate gratification is at the heart of treating our future selves better.
So we give our kids an allowance to help them learn to recognize what ignites their hot systems, and then we guide them with tactics to switch on their cool systems.
We’ve discussed cool system strategies like “The Waiting Period” and using nudges at allowance time so our kids learn to “pay themselves first” by depositing money in their Save jars. Also, setting goals, one of the core money-smart skills, is a wonderful way to help our kids tap into their cool systems.
And for those of you who want to dive deeper, Mischel goes into more detail about both systems in this episode of The Long Now Foundation’s podcast.
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Education Verses Learning: Seth Godin has written one blog post a day for well over a decade. That’s over 8,000 posts in all! His consistency was an inspiration for this newsletter, a COVID baby, which I started on March 25, 2020. (I opted for weekly versus daily consistency. 😉)
Godin is also obsessed with education, and he urges us to distinguish between education and learning in this conversation with Tyler Cowen.
Specifically, he explains that education is often about validation: getting the diploma, the certificate or the gold star. But it’s learning that we should really be after when we seek education. We want to employ the knowledge about which we’ve been educated. We want experience.
Unfortunately, experience is often missing from education. This is why you’ll often hear MBA students say they learned loads more about business once they encountered the real world beyond the classroom. Often, of course, the real value of an MBA is in the networking amongst students. Those interactions — those experiences — provide invaluable future connections.
Here at The Art of Allowance Project, you’ve probably guessed where our focus is. Our belief is that education without experience lacks value. Of the three ways we learn, which I describe in this essay, experience is the most beneficial.
Look deeper into claims that tests and quizzes help people become financially literate, and you’ll first notice there’s scant proof that the learning sticks. Further, knowledge acquisition is different than behavior change. And you and I are on this journey for the latter reason.
So rather than wish your child’s school offered a personal finance class, take this opportunity to begin or refocus your own homegrown program. We have lots of ways you can get started, including:
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Money, Money, Money, Muuuuuhhhh-nee: American businessman David Geffen has a net worth of close to 8 billion dollars. So why does he seem so miserable?
“Money plays an important role in life, but it can’t be the only filter for how you decide to spend your time. Nobody will ever pay you to go on a date with your spouse or take your kids to the park or grab coffee with your parents.”
-James Clear, author of Atomic Habits
Similarly, the green stuff plays an important role in our allowance programs to help us raise money-smart kids. But it can’t be the only filter for how we make decisions about engaging with our kids when it comes to finances.
Case in point: A mom friend who had read my book and implemented a program asked me if it was okay to indulge her daughter once in a while. For example, could she pay for her daughter’s lunch with a friend when that type of expense was supposed to be covered by the allowance?
I appreciated her quandary because I, like I’m guessing most of us, had experienced it myself. My responses were dual-pronged:
Unexpected rewards can be powerful, so treating your child to things that would normally come out of his allowance not only is a nice thing to do but also gives you both some warm feelings without derailing his progress. You just don’t want to make a habit of doing this.
Then I emphasized the art in The Art of Allowance. Think of my writing as the foundation for the money-smart house you’re constructing with your kids. You can design and decorate this house in a way that works for you and your family, so long as it rests securely upon this structure.
As always, 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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