“Working to help parents raise money-smart kids.”
Hello, friends!
In last week’s newsletter, I included some simple formulas to help you and your family along your money-smart journey.
Continuing on that thread and referencing Occam’s Razor, I’m revealing three simple ideas I hope you share and save this week.
Occam’s Razor refers to the notion that given more than one explanation for something, the simplest explanation is likely the correct one.
— 1 —
We All Need Help: When I host our Money Mammals live shows, I incorporate a game called “Needs versus Wants.” The premise is simple: Children thrust their hands in the air to guess which images depict needs and which ones portray wants.
Kids are surprisingly good at this activity. However, they’re equally excited for me to leave the stage so they can get back to their Money Mammals pals singing “We’ll Share & Save & Spend Smart Too!“
So much so that during a show for our partner Service Credit Union, I was worried that the three hundred kids chanting for Joe the Monkey might storm the stage. 😜
By now, you likely recognize distinguishing between needs and wants as one of the three core money-smart skills we should teach our kids when they’re young.
And once our children are comfortable identifying needs and wants, we can introduce them to “needlets,” a term I coined to describe conditional or situational needs. For example, when you play soccer, a soccer ball (or something similar) is a needlet. You can survive without it, but the game will lack a key ingredient.
In the book Launching Financial Grownups, mom and money expert Bobbi Rebell argues that we can return to the needs versus wants framework when our kids begin “adulting.” But she suggests that we flip the emphasis:
“Focus on the wants, not the needs. Try to subsidize the wants. Don’t pay their rent. Don’t pay their utilities. But treat them to dinner. Take them on a family vacation. Put money aside for your grandchildren in a 529.”
What’s more, Bobbi reminds parents like us to go easy on ourselves:
“You are not ruining your kids’ lives if you are subsidizing them, but you are ruining their lives if you create a situation where if you are not there, they would not be ok. [So] maybe have a conversation about getting some sort of an exit strategy so they won’t be dependent on that subsidy.”
If you haven’t figured it out yet, Bobbi is my next Art of Allowance Podcast guest. And the quote above is a little “sneak peek” into our conversation, which I hope to share with you in more detail next week.
— 2 —
We’re Only Human: Think about some of what we take for granted these days: one-day Amazon deliveries, phones with turn-by-turn directions and even artificial intelligence (AI) text-generated art.
We habituate to what are, at first glance, astonishing achievements. These services and tools would be indistinguishable from magic to generations before us. And, of course, we’ll almost certainly take for granted the wonders of DALL·E (including my impressionist Greyhound party 😉) and other generative AI in short order.
As humans, we acclimate to improvements, however remarkable they may be.
And we do the same with money.
That first paycheck that made us feel so flush with cash would today seem like a pittance. But we habituate to money as we make more of it and strive for even larger amounts. And without conscious attention to counter our nature, we do the same with cars, homes and pretty much anything else we desire.
We’d be lying to ourselves (myself obviously included) if we didn’t admit to acclimating to various life desires. Then we “move the goal posts,” so to speak, adjusting our wants in the process to “better” things.
And so it goes.
Of course, we don’t want to paint a picture of utter scarcity for our kids. They will undoubtedly want to enjoy some fruits of their labors, those “better” things.
So one practical hack we can introduce is compartmentalizing luxuries. We can each have one or a select few areas of extravagance in which we indulge ourselves a bit. For some, it could be fine chocolates. For others, it might be tech gadgets or camping gear.
The point to make with our kids is that just as compounding works in our favor when we save and invest, it works against us when we don’t compartmentalize our indulgences.
— 3 —
Invest and Own: On a recent podcast episode, serial entrepreneur Kirk Drake shares the terrific advice his parents gave him that, impressively, he followed.
He began at a young age by saving a portion of any money he made, thereby leveraging the most powerful force in compounding: time. ⏳
Kirk also shares that he stresses ownership and investing with his kids, and we captured both of these areas in handy-dandy cards. Like I said, he thinks like a serial entrepreneur.
This week’s “3 Ideas to Share & Save” in summary:
- Wants and needs can help you help your older kids navigate the financial transition to adulthood. ⚖️
- Compartmentalize your luxuries to prevent those goal posts from moving. 🤑
- Get your kids thinking like owners and investing a portion of what they make. 📈
And here’s a fourth idea: 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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