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I have a dream.
I dream that my childrens, childrens children (and beyond) will benefit from Melissa and me; in faith and finance. That our lives make such an impact, that it’s effects and blessing echo through generations.
What is the string that connects one generation to others? I believe it’s the passing on of wisdom.
Take for example Proverbs 4 where Solomon recounts his fathers teachings. When it came time for Solomon to become king and God asked what he desired, he was prepared for the correct answer; not money or long-life but “wisdom” (so God not only provided wisdom but money, honor and long-life too too).
The tricky thing about wisdom is that you don’t just obtain it. First there is knowledge or bits of information, as the pieces come together you get understanding and after it’s been practiced a million times and becomes as easy as breathing you have wisdom. So how do you teach your kids wisdom? First give them knowledge, or organized bits of information and let it develop into understanding.
Regarding money, I dream that my kids are financially astute, that we open businesses and work on investments, ventures, and charitable projects together. Knowing that my girls are only 7 and 4 years old, what do we teach today that gives us the proper compass setting for financial astuteness tomorrow?
I believe that good, old-fashioned allowance is a solid choice.
When I first decided that it was time for Sara to start getting an allowance, I talked to fellow parents and read lots of opinions on internet blogs, articles and forums. The range was wide; from no allowance because they didn’t want their kids getting an entitlement mentality to giving allowance with no other strings attached. As a person whom the simple mention of the word “entitlement” makes my blood boil, the last thing I would ever want to do is accidentally train my kids that money is just given to them…what to do?
As my aikido instructor used to say, “when things become difficult, go back to the basics.”
So here is my understanding of the basics of money. Money has three aspects:
– it flows in
– it flows out, and
– it can be leveraged
I thought it would be a good lesson to use allowance to simply teach one of the aspects; out-flows. Money can be spent on consumables (toys, food, clothes), invested for a return or given to charity. To have a firm concept of out-flows and spending buckets at the age of 7 would a pretty good start to financial wisdom.
When we started giving allowance to Sara, I gave her 3 envelopes to decorate. On one envelope she wrote “charity” another “savings” and the third “spending”. Each week Sara puts 1/3 of her allowance in each envelope. In the beginning Sara had to describe to me what each envelope could be used for. “This one is for charity, we use this money to help people in need.” “This envelope is for savings, we use this money for big purchases later in life.” “This one I can spend on what I want.”
With this compartmentalization from the start – Sara doesn’t even ask to take money from savings or charity for spending. She has internalized the separation of her spending buckets and knows her spending limits. Imagine if everyone knew their spending limits!!
She only gets $1 per week for spending so we have to be realistic about what we expect her to buy. When she wants a toy or stuffed animal, she uses her spending money. If she doesn’t have enough, she has to save for more weeks to get it. Is the toy worth saving for a few extra weeks? If not, it really doesn’t have much value to her and we shouldn’t buy it anyway. If so, she waited and put off other purchases to get the toy and avoided the instant gratification of a purchase.
Charity is a cornerstone of our faith and we want to instill this value in our children. Probably the biggest lesson I’ve learned (and want to pass along) is that you should be vested in causes that you contribute to. It’s easy to cut a check, throw it over the fence and feel good about yourself. But I want my kids to experience the cause that they are supporting, I want it to be close to their heart and have them feel compassion for those that they are helping. Giving needs to be from compassion, not obligation.
By compartmentalizing her money, I believe it’s easier to teach about charity. With $X in the charity envelope, we can have a conversation on how are we going to give it away versus trying to negotiate how much of her spending money we are going to give to charity. Recently her charity envelope has become overstuffed – Sara is now telling me that we need to give some of this money to people(!!!)
Allowance for our family is still a work in progress but so far the results have been better than I imaged. I believe that by being specific and realistic on what the lesson is that we want allowance to teach is vital to it’s success. So today, I continue dreaming of the family business.
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Proverbs 4:5-7 (NKJV)
Get wisdom! Get understanding! Do not forget, nor turn away from the words of my mouth. Do not forsake her, and she will preserve you; Love her, and she will keep you.
At the mid-term we began our subtraction intensive study hoping that would only take a couple of weeks to be refreshed on the concepts. I was then hoping to spend the last portion of the summer with story problems and mid-level second grade math.
Unfortunately, when we began the subtraction focus, it became evident that subtraction was a little further behind than I had expected. It’s no wonder that Sara hated school so much, when you’re trying to figure something out and the class keeps moving forward, it’s frustrating and scary. In math, if you don’t get basic addition and subtraction, you’re going to struggle with anything else math-based.
So, we start at the beginning; first grade, subtraction day 1.
I’m going to try a different approach with subtraction. We’ll start out working subtraction by numbers of 1 through 5 using points. So 10 – 3 is figured by counting down 10, 9, 8,7 using three points on the 3 to count backward (like the picture to this post). With 6-9 we’ll use a counting down method. I’m thinking that we get really good with a couple methods and have Sara practice them for speed (and accuracy) and we should be in good shape pretty quickly.
Sara is getting really comfortable with addition so I’m also trying to work number combinations like 5, 7, 12 (5+7=12, 12-5=7, 12-7-5) so she can use addition to compute her subtraction. So far, not so good but we’ll keep working on a few key combinations.
While it may seem like we are behind, I’m encouraged by Sara’s skip counting (preparing for multiplication). So far we have:
– 2’s up to 100 (goal achieved)
– 3’s up to 24 (goal achieved)
– 4’s up to 20 (goal is 32)
– 5’s up to 100 (goal achieved)
– 6’s nothing yet (goal is 42)
We can spell our numbers to fourteen (20 is the summer goal).
We had a new lesson that falls under Big Concepts for Little People; partnerships. Sara wanted a set of walkie-talkies and didn’t have enough money and I kind of wanted a pair for my up coming hunting trip. So we worked together to determine what features we wanted then went to Amazon and researched which models met our requirements and finally read customer reviews on our candidates. The one we wanted was $60 but Sara only had $6 to spend. She had an idea, a product and a little money (skin in the game) but needed a money guy to back it…aka me. So we agreed on the terms and cost-split and the partnership was formed for the walkie-talkies.
I know it seems like a lot more trouble than just saying “no” to the walkie talkies or saying that we will just buy them, but I think it’s worth it as I was able to teach a concept of a partnership (and to some extent joint-tenancy) and how to research (and sell to investors) a product. I’m sure we’ll go over this concept many times as the girls grow – cell phones, bicycles, car, etc.
In my last post I talked about beginning to plant seeds of big concepts in little minds. Hopefully the concepts will help mold the little one’s perspective as they grow. With contracts the concept is that when you agree on something with someone and put it in writing (or verbal) that you need to live up to your end of the deal (Proverbs 15:4).
The next major concept I’m working on is being the lender and not the borrower (Proverbs 22:7 “The rich rule over the poor, and the borrower is slave to the lender.”). Sara gets a weekly allowance of $3. To help her understand allocation of assets we gave her 3 envelopes; one for charity, one for savings, one for spending. Each week $1 goes into each envelope.
Over time and through birthdays and Christmas she has accumulated quite a bit of money in her spending envelope. As any kid would do she’s thinking about what she wants to buy with all of that cash.
Meanwhile, I set up an investment account for the girls that we put a little bit of money in for them and buy various stocks and mutual funds. I’ve particularly focused on the ones that pay dividends monthly so the girls can see activity in their accounts every month.
So as Sara is day dreaming about how to spend her money, we also talk about what happens when we let people borrow our money. If we let someone borrow $10 for a little while they have to pay back $10 plus a little extra, so we may get back $10 and $.10 – then we have more to spend or to lend to someone else. Then I show her the investment account where we “loaned” money to companies and they pay us a few dollars every month.
I don’t believe that we drill these big concepts in too hard but every once in a while when the opportunity presents itself, we go over the concepts. Hopefully, when Sara gets older and earns a fist full of dollars, she will consider that there is more that she can do with the cash than simply spend it or stash it under her mattress. If she understands Proverbs 22:7, she will have more freedom in her life than most of her friends.
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