“Working to help parents raise money-smart kids.”
Hello, friends!
Let’s dive right into this week’s ideas, which I hope you find worthy to share and save.
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Simple Formulas: Below you’ll find some formulas I’m thinking about in my quest to unlock a unified theory of money smarts for our kids. 🤓
Spend < You Make
It should be obvious that we need to spend less than we make and not buy stuff we can’t afford. However, there’s a reason SNL created this phenomenal parody:
Unfortunately, our consumption problem is pervasive. And the BNPL (Buy Now, Pay Later) movement is just the latest salvo in the battle to separate us from our money (or even money we don’t have 😬).
Truth be told, even though my wife and I have discussed the perils of BNPL with our teens, I just reminded them to be wary of this practice (which is somehow being lauded as a novelty).
Spend = Desire
Spending is driven by desire. But I think this is an area where we parents can have more impact than we realize. In fact, one of the gifts we can give our kids is modeling money-smart behaviors that will help them in the long run.
What’s more, sometimes we might need to give voice to our invisible choices so our kids “see” decisions they might otherwise miss. For example, it’s useful to show them how we comparison shop when at a store.
Desire < You Make
“Savings can be created by spending less. You can spend less if you desire less. And you will desire less if you care less about what others think of you…money relies more on psychology than finance.”
– Morgan Housel, The Psychology of Money
This video from our Adolescent$ program might help get Housel’s point across to your tween or teen:
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Play the Infinite Game: The arrival fallacy is the belief that you’ll find happiness when you reach a milestone. Unfortunately, we have all experienced how fleeting such happiness can be.
Philosopher Alan Watts gets to the heart of an arrival fallacy our kids encounter as they progress through years of schooling:
“Let’s take education. What a hoax. You get a little child, you see, and you suck it into a trap and you send it to nursery school. And in nursery school you tell the child ‘You are getting ready to go on to kindergarten. And then wow-wee, first grade is coming up, and second grade, and third grade.’ You are gradually climbing the ladder towards, towards, going on towards progress. And then when it gets to end of grade school, you say ‘high school, now you’re really getting going.’ Wrong.”
As a reader of this newsletter, you know my focus is on the journey. Because the road we’re taking to raise money-smart kids matters more than any particular destination.
Since I’m a big Settlers of Catan enthusiast, perhaps a board game analogy might help here. Individual games are what philosopher James Carse might call finite games. For instance, every game of Splendor or Ticket to Ride ends with a winner.
In terms of money smarts, saving for a goal is a finite game. It’s wonderful for our kids to “win” by saving for a scooter, a video game system or half the cost of a school trip to Japan.
The journey of money empowerment we take with our kids, though, is an infinite game. There’s no winning and losing, only experiencing and improving. We work with our kids to help them develop financial behaviors they will use to craft meaningful lives. And just as infinite games have no end point, they also vary widely from family to family and even within families.
As money researcher Ashley LeBaron and her colleagues put it in this paper, financial education is often treated as a means to an end, or rather, as a finite game. However, we know as adults that this depiction is a fallacy. In reality, we’re playing an infinite game.
And since this game is a journey, there are many stops along the way. For example:
↪Your daughter makes her first charitable donation from money accumulated in her Share jar.
↪You help your son set aside money in a Roth IRA when he gets his first job as a teen.
↪You advise your daughter (if necessary) to maximize her company’s matching program when she gets her first job in the “real world.”
And so it goes …
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Great Expectations: I’ve been thinking about expectations a lot lately, and I realize they present us with a paradox. I anticipate my kids will do wonderful things and make a difference; however, my day-to-day experience improves when I lower these expectations.
Take my kids’ dirty rooms from last week’s newsletter. When I heeded Barbara Coloroso’s advice and lowered my expectations about their spaces being spic and span, my stress went down. Sure, I certainly notice their rooms are messy. But unrealistic expectations no longer cause me (and them) unnecessary pain.
In the words of Charles Dickens, we all have “great expectations” for our kids. These expectations yield fruit when we’re able to indulge our children’s interests in painting, rock climbing or fencing.
The danger, though, is when our expectations drive unnatural agendas, like suggesting our kids take up fencing to secure college scholarships. Put another way, when we’re playing finite versus infinite games:
“What generates all the emotion is just how big the gap is between expectations and reality.”
– Morgan Housel
The reality is that life is lived day by day, moment by moment. Perhaps by using simple formulas and emphasizing infinite games, we can close the gap to bring our expectations more in line with reality. And maybe, just maybe, we’ll better enjoy the journeys we’re on.
I appreciate your attention. And as always, thanks for taking the time to journey with me.
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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