Getting a Kid to See the Light

[TromboneAl]

In the thread on "When did you see the light?" I said this:

I'm going to see if I can introduce the light to my nephew and niece (13 and 15) when visiting this month. I'm going to keep it simple, and say this:

I'm going to tell you a secret about life that most people don't know:

1. Lottery winners, after an initial period of a few months, return to their pre-winning level of happiness. That shows you that buying stuff won't make you happier.

2. If you buy less stuff, and LBYM, you can easily save enough money that you don't have to work, and you can do whatever you want while you're still young enough to do it.

Last night I realized that this is really dumb (even dumber than most things I say).  To paraphrase it:

1. Money doesn't buy happiness.
2. If you LBYM you can have lots of money.

Can anyone think of a better way to help my nephew and niece see the light?

 

[Sam]

Teaching young teenagers about the value of money and LBYM is probably just as difficult as learning to understand your wife.  Talk about impossible mission.

I find that situations are the best teacher.  My younger brothers and sisters came to the US with my mother when they were very young, oldest 13, youngest 3.  Like most new refugees, we were at the bottom of society.  My bros and sis started delivering newspapers, mowing lawns as soon as they were able to comprehend the language.  No one had to teach them anything about money.   But now they are struggling just like everyone else trying to transfer that knowledge to their kids.

 

[Rich_by_the_Bay]

In the thread on "When did you see the light?" I said this:

Last night I realized that this is really dumb (even dumber than most things I say). To paraphrase it:

1. Money doesn't buy happiness.
2. If you LBYM you can have lots of money.

Can anyone think of a better way to help my nephew and niece see the light?

Nope, I think that pretty much says it all.

Maybe for lesson #2, something about how without doing anything your money will make more money. (Not to be confused with the birds-and-bees lesson.)

 

[starry night]

Here's some of the manifesto we have used in lecturing the young ones:

* Do not confuse a lavish lifestyle with having wealth. They are not the same thing. Wealth is the accumulation of MONEY. Lifestyle is the accumulation of STUFF. Sure, it's fun to have great stuff, but that is not what builds wealth. And don't mistake those you see who have great stuff by thinking they are well off. They probably have NO MONEY in the bank.

* SAVE SOMETHING out of everything you get. Anytime you acquire some money, make it a discipline to put SOMETHING aside for later. If you do this you will never be broke. If you don't do this you will always be broke.

* Learn to live within your means. If you do this you will never be broke. If you don't do this you will always be broke.

* Learn to enjoy the feeling of accumulating money as much as you enjoy spending it.

* Put the money you save to work for you in income-bearing accounts or investments, and put it in an inconvenient place where it will grow and multiply undisturbed and away from temptation. It is still yours and will be there for you later. Don't fritter it away today, but let it grow for you for tomorrow.

* Keep records so you can see how you are doing and can learn from what you see. Keep a chart of monthly expenses (year at a glance). Keep a periodic summary Balance Sheet of your net worth (at least annually).

* Borrowing money is sometimes a necessary and appropriate (even beneficial) financial need, but try to keep free from debt.

* Be generous with yourself and enjoy the fruits of you labor -- but strive to strike a responsible balance between today's lifestyle and tomorrow's security.

* SPENDING all your money does not create wealth. SAVING and INVESTING is what creates wealth.

LIVE LONG AND PROSPER, Grasshopper! (to mix some TV metaphors from my generation!!)


Do you suppose they can hear us

 

[Nords]

Last night I realized that this is really dumb (even dumber than most things I say).
Can anyone think of a better way to help my nephew and niece see the light?

You're presuming that teenagers have the critical-thinking skills to see the logical flaws in statements like that? Maybe the only way to jump-start the conversation is to let them think that they've caught you in a logical error.

How 'bout: "Find a job you love and live below your means. If you have money, you have choices. If you don't then someday you'll wish you did."

 

[ash]

Al,

I think your two rules sound great, even if they do sound contradictory.

My take on them would be:

1) The happiness you get from buying stuff wears off quickly.

2) LBYM helps you to love what you have instead of what you don't.

 

[CCdaCE]

Another simple thing to for them to comprehend (or is it?) ... is, money is simply stored up time/energy/output, etc. You do things (work) to get money so you can spend it later, since we don't barter/trade, etc. much anymore.

I read that in a book, I don't recall which.

Since you can't really store "work", money becomes "work storage". Unless we start getting into potential energy and other fun engineering terms. That's my "tech sickness" interpretation of it all.

Maybe thats a bad way to think about it, and I'm going about this all wrong. Hah!

-CC

 

[PsyopRanger]

Here's some of the manifesto we have used in lecturing the young ones:

* Do not confuse a lavish lifestyle with having wealth. They are not the same thing. Wealth is the accumulation of MONEY. Lifestyle is the accumulation of STUFF. Sure, it's fun to have great stuff, but that is not what builds wealth. And don't mistake those you see who have great stuff by thinking they are well off. They probably have NO MONEY in the bank.

* SAVE SOMETHING out of everything you get. Anytime you acquire some money, make it a discipline to put SOMETHING aside for later. If you do this you will never be broke. If you don't do this you will always be broke.

* Learn to live within your means. If you do this you will never be broke. If you don't do this you will always be broke.

* Learn to enjoy the feeling of accumulating money as much as you enjoy spending it.

* Put the money you save to work for you in income-bearing accounts or investments, and put it in an inconvenient place where it will grow and multiply undisturbed and away from temptation. It is still yours and will be there for you later. Don't fritter it away today, but let it grow for you for tomorrow.

* Keep records so you can see how you are doing and can learn from what you see. Keep a chart of monthly expenses (year at a glance). Keep a periodic summary Balance Sheet of your net worth (at least annually).

* Borrowing money is sometimes a necessary and appropriate (even beneficial) financial need, but try to keep free from debt.

* Be generous with yourself and enjoy the fruits of you labor -- but strive to strike a responsible balance between today's lifestyle and tomorrow's security.

* SPENDING all your money does not create wealth. SAVING and INVESTING is what creates wealth.

LIVE LONG AND PROSPER, Grasshopper! (to mix some TV metaphors from my generation!!)


Do you suppose they can hear us

we use the same approach with our kids and the 3 Jar Principle.

1 Jar - Spending - whatever you want - 40% of all money (allowance, birthday, etc)
2 jar - Investing - Money gets invested in low cost MF until the accumulate enough for VG - 40%
3 Jar - Charity - Church, homeless, Habitat for Humanity, Alex's Lemonade Stand - 20%

Each month we have a spending day, the only day you can spend your spending jar.

We also explained investing like this

"Would you rather be able to buy 1 toy now or all the toys you want in the future?"

I have heard good things from a program called Seeds of Wealth by (Justin Ford?) although we have not looked into it yet. It is based on teaching financial skills to young ones.

 

[kcowan]

Another simple thing to for them to comprehend (or is it?) ... is, money is simply stored up time/energy/output, etc.   You do things (work) to get money so you can spend it later, since we don't barter/trade, etc. much anymore.

I read that in a book, I don't recall which.

Since you can't really store "work", money becomes "work storage".  Unless we start getting into potential energy and other fun engineering terms. That's my "tech sickness" interpretation of it all.

Maybe thats a bad way to think about it, and I'm going about this all wrong.  Hah!

-CC

I am not sure if they are ready for this but building on what you just said, there are three ways to make money:
1) Trade your time for money, i.e. working for pay
2) Trade your money for money, i.e. put savings in a bank and earn interest
3) Trade other people's time and money for money.
This last category is how really rich people get rich. There are many examples of how to do this. One way is to start a business and hire people. Another is to buy stocks in a good company.

If you can get them thinking about the third option, they may become motivated to save because they will need a nest egg to try it. Plus then you can help them visualize how life would unfold for them if they can master option 3.

 

[uncledrz]

In the thread on "When did you see the light?" I said this:

Last night I realized that this is really dumb (even dumber than most things I say).  To paraphrase it:

1. Money doesn't buy happiness.
2. If you LBYM you can have lots of money.

Can anyone think of a better way to help my nephew and niece see the light?

TA
Even teenagers understand control and lack of control. Trying to explain LBYM to them might not work as well as explaining that putting together enough dough/property that they can have an income that makes them self supporting means they have control over their lives, rather than parent/boss/drill sergeant/teacher, might get their understanding.

OTOH, with teenagers, who knows

Uncledrz

 

[sgeeeee]

LBYM (or frugality) is about seeking the optimum value proposition. The problem is that you have to learn not only to ask, "What do I get by spending this money right now on X?", but also, "What do I give up in the future by spending this money right now on X?" If you have no long-term goals, you will always decide that X brings more pleasure than holding a stack of dead Presidents.

People become frugal when they understand the full short-term/long-term value proposition, and they have long-term goals that they really want to achieve.

 

[Robert the Red]

I recall that when I was about 12, I noticed that I didn't really like my Christmas presents much after a few weeks/months. That was the point where I became a LBYM-er, even before I had Means. I had developed a little bit of brain maturity to take the past disillusionment with stuff and project it to the future. Within reasonable limits, at least.

So maybe trying to make a kid look back at how fast she/he became burned out on some toy and apply that to the future would help. But what do I know, really? Don't have kids.

 

[dmpi]

Teach the kids that LBYM is both an art and a skill. You can still have a pretty nice lifestyle on a limited budget. The key points are: Carry no debt. Don't waste stuff, Plan for the long term, & most important... the best thing in life are free.

 

[Scrooge]

I didn't "get" LBYM until I was 24-25, so I am not sure if my experience is relevant, but for what it's worth, here are (some of?) the reasons why I wasn't practicing LBYM in my early 20s:

1. Time. LBYM requires thinking about money and how to get the best value. It requires planning accordingly, e.g. see Al's post from earlier today in the cell phones thread. Spending even a couple of hours on that kind of research felt like a lot of work when I was young. There was a certain amount of freedom in not having to think about finding the best bang for the buck and just buying what you wanted when you wanted it.

2. Peer pressure. It "felt good" to be able to invite my peers to a random restaurant without having to check prices, especially after years of having limited means as a kid and a teenager. It felt even better to be able to help them by guaranteeing their loans, leases, etc. (I am sure you can tell where that's headed.)

3. Failure to prioritize wants and perceived needs. "Hey, I had a bike when I was a kid and it was fun. I bet it would be fun to have a bike now!" So I went out and got a bike without considering where I would store it, whether I would drive it in inclement weather, etc. The end result was that many purchases were subsequently underutilized, something already discussed above.

The one big thing that helped me see the light was fear. Nothing like having your manager's boss explain to you that there is a better than even chance that you will be losing your job in another month and realizing that you have no money in the bank and tons of obligations. Unfortunately, I am not sure how you could emulate this scenario with a teenager or even whether you would want to  

 

[poboy]

Just curious as to the lifestyle of the parents? Big spenders, misers?

 

[jclarksnakes]

Al,
...I don't think your original

"1. Money doesn't buy happiness.
2. If you LBYM you can have lots of money."

are the wrong way to teach this to young people. I would think that you could also say that most of the stuff people are spending their money on or going into debt for is depreciating and becoming obsolete and wearing out just as soon as they buy it. It seems to me that most teenagers are not going to "get" these concepts right off but that with some reinforcement over several years, perhaps even over a decade some of them will get it. This is not such a terrible thing. Many of the FIRE people here did not get it in their teens or even in their twenties.
....Good luck and much happiness in your recent ER. You are among the posters here who make plenty of sense and are an inspiration to many of us. I am only 10- 15 months behind you.
jc

 

[slepyhed]

There's a whole, big world out there shouting to kids saying "WORK! BUY! REPEAT!"

You will whisper "There is another way. Become financially independant."

They will hear you, and they will ask others about it. They will hear "NO. IT IS IMPOSSIBLE."

How can a teenager know who to believe? Will they listen to the crazy uncle? After all, he's got so much money he should be driving a Mercedes! What's the point in having all that money if you can't enjoy it?

There's a very stiff headwind to go against.

 

[REWahoo]

Maybe good old Uncle Al should send his nephew to Money Camp.

"Children are given paychecks and learn how to distribute their funds with an emphasis on paying themselves first. That savings is then used to invest in stocks, real estate and businesses. The goal by the end of camp is to have enough passive income from all of their assets to outweigh their expenses. If they can achieve that balance in real life, they will work because they want to work, not because they have to work."

 

[wabmester]

Maybe good old Uncle Al should send his nephew to Money Camp.

I think you just found an outlet for the ER's here: camp counselors.

 

[REWahoo]

I think you just found an outlet for the ER's here: camp counselors.

Sounds like a perfect j*b for Nords....

 

[Nords]

Sounds like a perfect j*b for Nords....

Surf camp? Sign me up!!

 

[Jay_Gatsby]

There's a whole, big world out there shouting to kids saying "WORK! BUY! REPEAT!"

You will whisper "There is another way. Become financially independant."

They will hear you, and they will ask others about it. They will hear "NO. IT IS IMPOSSIBLE."

How can a teenager know who to believe? Will they listen to the crazy uncle? After all, he's got so much money he should be driving a Mercedes! What's the point in having all that money if you can't enjoy it?

There's a very stiff headwind to go against.

Exactly. Kids believe that if you have money, you should spend it. Otherwise, what's the point in having it? Financially-responsible parents are trying to teach their kids one thing, while the media and advertisers are teaching them exactly the opposite by showing a constant stream of conspicuous consumption.

 

[brewer12345]

I'm not quite as far along as Al since my kids are very young. But pretty soon, it will be time to start introducing very basic concepts to my oldest (a bit over 2). She already knows that both the green stuff and plastic are "money". I can eventually explain that the reason daddy is gone all day that he must trade his time for money and hopes not to have to do this any more one day, but I will need to come up with more age-appropriate messages first. Any ideas? Seen any decent books on the subject?

 

[wabmester]

I'm not quite as far along as Al since my kids are very young.  But pretty soon, it will be time to start introducing very basic concepts to my oldest (a bit over 2).  She already knows that both the green stuff and plastic are "money".  I can eventually explain that the reason daddy is gone all day that he must trade his time for money and hopes not to have to do this any more one day, but I will need to come up with more age-appropriate messages first.  Any ideas?  Seen any decent books on the subject? 

Just expose her to basic economic principles.

Our kid is three, and she seems to have a pretty good handle on this stuff.   We held a garage sale a while back, and she sold cookies.   That taught her how to "pitch" stuff, make the monetary transaction, and she often goes through her stuff and decides what she wants to sell at the next garage sale.    She's got a piggy bank, but doesn't really seem to "get" saving for future purchases yet.

She also has a toy cash register, so she knows the different denominations.   (And she says "cha-ching!" when play-shopping.)   She can add small numbers, but I don't think she gets that 2 dimes and a nickel are the same as a quarter.

I think at this age, that's about as far as you'll get.

Edit: Well, my kid just proved me wrong. She asked me for some money for her piggy bank. I asked her what she was saving for. A motorcycle, a skateboard, and a two-wheeled bike.
So, I told her I'd give her a quarter if she put away 3 of her toys. She negotiated. So, she's putting away 12 toys and gets 2 quarters!

 

[Scrooge]

So, I told her I'd give her a quarter if she put away 3 of her toys.   She negotiated.   So, she's putting away 12 toys and gets 2 quarters!

Clearly, she still needs to work on her negotiating skills!