“Working to help parents raise money-smart kids.”
Hello, friends!
As you may have figured out, I love having conversations about ideas. In fact, I recently started a podcast club with a few local friends just to have more discussions around interesting topics.
Our first two talking points were artificial intelligence (and its existential ramifications, courtesy of The Lex Fridman Podcast) and contemplating our own finitude (with the help of Oliver Burkeman, frequent podcast guest and author of Four Thousand Weeks: Time Management for Mortals).
As you can see, we started small. 😉
I enjoy listening to the perspectives of other thinkers. And while it’s good to process my own ideas by writing about them like I do here, voicing thoughts and theories in front of others exposes holes in my thinking which I may not have known existed.
Similarly, and more to the point of this newsletter, I started The Art of Allowance Podcast to have interesting conversations about raising money-smart kids. And truthfully, some of these discussions have challenged my beliefs about youth and money.
Which brings me to the first of today’s “3 Ideas to Share & Save”!
— 1 —
You Don’t Need an Allowance: Yep, you read that right. 🤯
Are you shocked the author of The Art of Allowance thinks you don’t need one? Admittedly, my recent podcast conversation with Kirk Drake convinced me to think deeply about the necessity of this tool.
Kirk, a serial entrepreneur, has never given his kids an allowance. Instead, he’s focused his efforts on teaching them how to make money. Considering that Kirk himself developed his trademark entrepreneurial “hustle” at a fairly young age, it’s not surprising he’s taking this approach.
But Kirk’s is a unique case, so there are a few caveats to go along with my surprising pronouncement.
First, Kirk helped his 5-year-old kids launch a tried-and-true lemonade stand. I encourage you to listen to our discussion about this endeavor, as you’ll discover this was not your normal neighborhood undertaking. (Tune in at 15:44 for all the “juicy” details.) According to Kirk, and with his assistance, his kids were “killing it” with their venture. For unlike with most lemonade stands, they turned an immediate and a healthy profit, generating enough income to replace a traditional allowance.
Also, you might remember a few newsletters ago when I took issue with hosts Stephen Dubner and Angela Duckworth of the No Stupid Questions podcast. In the episode titled “Should You Give Kids an Allowance or Make Them Get Jobs?“, they present allowances and jobs as opposites and paint an allowance as simply a handout. So according to their argument, you either give your kids a handout or make them work for their money. When put that way, what self-respecting parents would create an allowance system?
But Dubner and Duckworth missed a key component of an allowance program. Frequent readers of this newsletter know that an allowance must be intentional. It needs a purpose, or else it is just a handout. (And I would therefore have to agree with Dubner and Duckworth.) For your reference, I’ve addressed the purpose of an allowance in my book and in previous newsletters like this one.
What’s more, the No Stupid Questions episode doesn’t address the opportunity cost of the time between your kids’ readiness for money-smart learning (age 5, if not younger) and their ability to secure traditional jobs. Kids aren’t able to earn paychecks until they’re teenagers, and they likely can’t start under-the-radar jobs (e.g. within the family) until they’re in their tweens.
There are exceptions, of course. For example, if you own a family farm, then your kids probably begin working much earlier. Most of us, though, don’t live on farms, so waiting for our kids to be tweens or teens before we put money in their hands is missing out on a big opportunity.
Which brings us to …
— 2 —
The Power of Low-Stakes Mistakes: Podcast guest and money researcher Ashley LeBaron put the idea of “low-stakes mistakes” so perfectly that we feature her words on one of our Art of Adolescent$ shareable cards:
We know a key benefit of an allowance program is the opportunity to practice with money from a young age. Doing so allows our kids to make “low-stakes” mistakes. Although we can do our best to provide guidance to help them avoid financial faux pas, experience is a wise teacher.
To reiterate, Kirk’s story is unique. For one, Kirk was quite involved in helping his kids identify an ideal market for their lemonade business. Also, Kirk’s honing his entrepreneurial skills over a lifetime and his children’s having an expert dad undoubtedly contributed to the stand’s success.
Granted, we don’t all have the same “hustle” as Kirk. So while it’s admirable to help our young kids build the Amazon of lemonade stands, most home-grown start-ups aren’t going to provide a meaningful replacement for an allowance.
Therefore, don’t forget that an allowance can act as a catalyst to kick-start an ongoing money conversation with our kids. We don’t want to miss this opportunity!
So though some families may not need an allowance, I believe it’s an effective tool for many of us.
— 3 —
The Comparison Paradox: Aphorisms are a dime a dozen on LinkedIn. (See what I did there?) Unfortunately, I think many of them are trite and contribute to the derogatory LinkedCringe meme trend. 😱
That said, I’m still a sucker for a good quote. And from time to time, a LinkedIn post makes me stop and think, like this one that Jaime Yates (of our partner Service Credit Union) recently published.
In a funny coincidence, the backup quarterback of my favorite NFL team, the Seattle Seahawks, shared the same quote in a recent article:
“Comparison is the thief of joy is what Barry Odom told me one day when I was in college, and that’s kind of stuck with me.”
– Drew Lock
Go Hawks!
One problem with aphorisms is that they often sound good but aren’t actionable. Or worse, they’re untrue.
However, the quote above resonated with me because I know how powerfully we are biased to compare ourselves to others. For our prehistoric predecessors, comparison was essential. Where they stood in the social order might determine whether or not they ate.
But for the fortunate among us today who are not in want of food, social comparison ends up being more insidious than useful:
“The ceiling of social comparison is so high that virtually no one will ever hit it. Which means it’s a battle that can never be won, or that the only way to win is to not fight to begin with—to accept that you might have enough, even if it’s less than those around you.”
– Morgan Housel
I think Housel, author of The Psychology of Money, is right. We don’t want to engage in battles that cannot be won. And in case you missed it, I included a short section in my book about desiring more (Idea #3 in this newsletter) to help you be more mindful. Because as you know, distinguishing between wants and needs is a core money-smart skill.
I hope you found these ideas share-worthy. If so, then I’d really appreciate your forwarding this newsletter to a friend or colleague. You could also just copy and paste this link. Easy peasy!
And before I sign off, I want to point out another problem with aphorisms. They’re often misattributed, typically to Albert Einstein, Mark Twain and, as in the post above, Teddy Roosevelt. In case you’re interested, it’s unlikely the “man in the arena” ever said those six words. But I still like the quote. 😉
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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