I loved my big bin of mismatched LEGO blocks when I was a kid. I’d look into it and see possibilities. Then I’d pick out pieces and start building.
One time I built a massive space freighter.
If one of my brothers asked to use any LEGOs from the container before I started, then I would have thought nothing of it.
But once I began, each piece mattered more than the last. And if my brothers asked me for that yellow block on the edge of my freighter’s wing? I’d sooner eat broccoli!
How on Earth does this memory relate to money?
I read a recent Economist article about the huge stimulus Congress just passed. The author suggested that the stimulus’s success hinged on whether recipients perceived checks as income or wealth.
When people consider additional money to be income, they are less likely to hold on to it. When they think of it as wealth, they are more likely to keep it.
And though we collectively hope that stimulus money is perceived as income because spending stimulates the economy, the broader research cited in the article got me thinking.
An increase in income is a bit like someone’s adding a few more blocks to the big bin before you start building a massive space freighter. You use the new blocks and assume you can return to the container for more whenever you need them.
An increase in wealth is different. When thought of as wealth, each new block (and even each block already in the big bin) can — maybe even must — be added to the massive space freighter to improve it.
When we perceive our dollars as wealth, our mindset changes.
So if we want to help our kids become money-smart, then we want to help them see differently. Additional blocks aid in building a space freighter just as extra dollars aid in building a portfolio.
The simplest way I know to help our kids is to expose them to investment. You can buy a few shares of a stock that interests your children within your brokerage account or open up a mutual fund account to which they regularly contribute money.
The vehicle matters less than the mindset.
With a shift in mindset, your kids can begin to build wealth.
John
Thanks for the editing help: Erin Prim, Steven Ovadia, Art Lapinsch, Soma Mandel, Sunil Suri and Compound Writing.
Thanks to my dad, John Lanza, Sr., for the picture.