Thursday, December 17, 2020

How much are you going to pay me?

Teaching our kids about money is something that can start at a very early age. Yes, perhaps the end of cash will happen in our lifetime. Maybe our kids will see a day in the (near) future when they don't need a wallet anymore. I  imagine my grandchildren someday asking me, "Grandpa, what's a penny?" But, even as how we pay changes from coins to cards to bytes, I doubt that we will return to a barter system anytime soon. So, the idea of money and how our kids handle it is going to be important.

In my previous article about marshmallows, we learned that money, and saving for something can help our kids learn about delayed gratification (which is a good thing). Kids and later adults who have learned to put off a small reward now in exchange for a larger reward later are more likely to advance in their careers and in some studies were shown to be just plain happier. Keep in mind that this does not work if there is always enough money available to get what they want without having to save and wait. We all want to give our kids everything but tightening the purse strings can make for a better lesson.

In addition to the discipline our kids can learn from saving, there are more practical reasons to start them early with a few bitcoins of their own. With their own money, they will need to understand budgeting (spending less than they earn). Having money of their own makes any discussion (lecture) about investment just a bit more interesting. It is not so hard to make up easy to understand examples to explain interest and compounding returns. "What if you could put that dollar under your mattress and when you take it out the next day instead of 1 dollar there were 2 dollars?" With an understanding of what a "dollar" (or yen or rupee or peso...) is our kids can start to see what the costs are for basic things they have lived with their whole lives. You might be surprised at how little even the teenagers in your house know about actual costs. I recall a Mother at my son's school talking about her older daughter. She had recently returned home for the first time since heading off to college. The daughter, with a dismayed look on her face, came up to her Mom and shared a discovery she had made living on her own, "Mom! You would not believe how much toilet paper costs! Who knew?" The Mom rolled her eyes and responded with, "Who do you think has been stocking our bathroom your whole life?" 

This preamble leads to my real question. Should I pay a weekly/monthly allowance or is a pay-per-job approach better? I am leaning towards the pay-per-job option. A regular allowance seems like it could be quickly perceived as an entitlement. Even if we assign tasks that need to be completed to "earn" the allowance, I can imagine that 1) the money will not be enough of an incentive to do the work or 2) We will end up paying anyway even when the work is not done. This would create a bad precedent. The downside of the pay-per-job approach is there are chores that I think should be "part of the family" jobs like keeping their room clean or clearing the table after dinner. If a culture of "How much are you going to pay me to do that?" develops we are again, not building positive habits. I remain undecided...

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