Fiscal Fallacies

I have spent a pretty fat amount of time teaching my little bundles about money.  Not teaching them to worry constantly about it.  Not teaching them that it buys love or happiness.  Not teaching them that the world revolves around it.  But teaching them that its importance lies more in what you do with it, not how much of it you have.   Teaching them that money is a merely a means to an end.  That while it does not buy happiness, it can be a tool for helping you find it.  Teaching them that if you are able to remove money from the list of things you are worried about, that space in your brain is set free, lightening your burden, giving you room to smile a little more often. 

Responsibility. 

Independence.

Self-confidence.

Knowing how to handle your money gives you a toehold.  Understanding debt and credit scores and interest.  Having a basic knowledge of bank accounts, mortgages, investments, and loans .  Just the knowledge alone gives you a bit of freedom to worry about other things. 

Frankly, I think that setting your children loose upon the world without this knowledge is a travesty.  Young adults should know what they’re signing when they see a rental agreement.  Or a credit card application.  They should know how to read them and what the words mean.  They need to know what a credit report looks like, how to read it, what it says about them, and the difference between annualcreditreport.com and freecreditreport.com (one of my huge pet peeves). 

So, in the spirit of this, here’s another thing you can put on the list of shit that makes me a bad parent.  I have given my kids a weekly allowance since they were 8 years old with money I did not make them earn.  And here is why. 

The parenting community has a funny habit of perpetuating fallacies that have absolutely no basis in fact, yet they accept these axioms as gospel truth when the concept is relatively easily taught and is combined with guaranteed social acceptance.  They tend to put an exorbitant amount of significance on the theory that understanding the value of a dollar can only be achieved by working your fingers to the bone for every dime that passes one’s palm.   

I hereby put forth the hypothesis that this is categorically untrue, unfounded, untested, with no factual basis in social science whatsoever.   Furthermore, I ascertain that the simple notion of physical labor in exchange for money is nowhere near as important as lessons in microeconomic personal finance. 

When they were around 7 or 8, my boys had their own debit card.  It was a prepaid account linked to my checking account from which I transferred their allowance every Friday, a dollar for each year of their age.  When they turned 15, they each then got their own checking and savings accounts.   They still get a dollar for each year of their age.   

But what you might not realize are the deeper lessons that come with the 8-9 years of experience they already have in managing their own personal finances.  The questions they ask are ones that would sound like a foreign language to most kids their age.  They know the difference between APR and APY.  They understand the basics of a credit report and the factors that influence your score.  They know the difference between mortgage loans and credit cards, “good debt” versus revolving debt.  They have experienced everything from having their card declined because they failed to keep up with their balance, all the way to saving up for things like iPods and Xboxes.   

But the benefits don’t end there.  Because, you see, they learned all of these things by experiencing them and by asking questions.  I never taught them anything in the form of a textbook or classroom.  I just enrolled them in Life 101 and allowed them to learn from experience.  And it is from those experiences that the questions arise. 

“Does your credit score affect your car insurance premiums?”

“How much is my car insurance going to be?”

“So, let me get this straight.  If people pay only the minimum amount due on their credit card, the interest can actually increase their balance each month rather than decrease it, right?”

“What are the easiest ways to start to build my credit score?”

“How do mortgages work?”

“How much are your bills each month?”

“How much should I have saved for emergencies?”

“What is a 401(k), mutual fund, IRA, money market account?”

These are all questions that have been asked of their own accord for their own reasons.  And none of them are subjects that I have ever addressed in the form of a lesson or assignment.   Which, I think, is the rub.   

Because of the pervasiveness of the modern educational institution, it seems to have become a common misconception that everything a child learns must be taught.  Children must be taught the value of money.  They must be taught discipline and self-sufficiency.  They must be taught that money is only forthcoming through household chores that are each assigned a dollar figure.  And the fallacy here is quite obvious in generation after generation of kids indoctrinated in this way who grow into adults who have learned to be the absolute bare minimum person they can be in order to achieve the results they desire.  Do the least amount of work required.  Get through your day in the quickest and easiest way possible. 

Or.

Consider the alternative.  Stop teaching your kids and invite them into your world.  Invite them to experience it every day.  Invite them to have a look at your bank accounts and bills and savings accounts and investments.  And then give them the tools to do it themselves.  A bank account with a little money to manipulate.  Let them screw up.  Let them fix it.  Let them save and succeed and make smart financial decisions without your intervention.  And when they do, don’t congratulate them with a condescending “atta boy” pat on the back.  Explain to them the reality.  That they have just accomplished something that confuses and befuddles most adults.  Control over their own financial life. 

Some may wonder how their offspring will ever be able to perform hard work and associate it with earning money.  They assume my technique results in little princes who must not be bothered with menial household chores because they are too busy reading prospectuses and running retirement simulations and counting the bucks I funnel freely into their bank account.  

Scoff.  And shame.  It is a typical adult’s underestimation of a child’s ability to understand real-world concepts.   The “lesson” that jobs and hard work give you a paycheck is about as primary as the fact that drinking a glass full of water is going to make you have to pee.   

Here, I’ll help you teach them.  Gather your kids and tell them to listen up.  Then, say “Hey, kids.  When you grow up, you’re going to have to get a job so you can make money.”  

Done. 

And now that that is out of the way, stop underestimating your kids and let them show you what they’re made of.  Let go of the assumptions based on meaningless social conjecture and have a little faith. 

My kids do plenty of chores, by the way.  

Many times without ever being asked.  

And many times after being poked with a cattle prod.  

But "chores" and "allowances" simply have nothing to do with one another.  

Except I do pay them to cut the grass.  An obscene amount, actually.  Because I fucking hate cutting the grass.   

And on a completely unrelated note, when Sarge does the laundry, he actually folds my underwear.  I know, right?!