It's family vacation time and your on the hunt for a new bathing suit. You're in your favorite department store trying on one after another until you have finally found the perfect one. It looks great on you -- you like the color and the style. Unfortunately, it's peak season for bathing suits and the one you found is selling at full price. Do you say "I need it for vacation!" without hesitation, or do you think "I really like the suit, it's just what I wanted, but the cost is the equivalent of one full day of work -- maybe it'll go on sale before the trip?"
You have to teach your children to connect their "earning power" and "buying power" to the concept of time. How much time will it take for them to earn enough money to buy those trendy boots they want? Is it worth it to them to spend five weeks of their time earning the money for the purchase? Instant gratification usually wins out with kids, and unfortunately, with a lot of adults. Teaching time value to your kids at an early age gives them tools to help them cope with their primal urge to "buy now."
- What if you had $1,000, what would you do with it?
- What would you do with $10,000, or $1,000,000?
- Which charity would you choose if you had $1 million to donate?
Have your children map out a plan for each sum. What would they save? What would they buy? How much would they give to charity? Why did they choose that particular charity? You can even keep a record of your kids' answers in your family journal and then play the game again in a year and compare results? It's fun to see how our children mature.
Now, play an easy variation on the "What If" game that will teach them about the connections between earning power and buying power. Let your children try to figure out how long it would take to earn different amounts of money. First have them assume they are making $5 per hour and working 40 hours per week. Then have them assume they're earning $10 per hour, then $100 per hour, etc. At each salary, how long would it take them to earn $1,000, $10,000, $100,000, etc. Bring them back to reality, ask them how long it would take to earn enough to buy their favorite sports car or pay for a year of college.
How many times have your heard "Mom, I know I was supposed to sort the recyclables, but I just didn't have the time?" This is the perfect opportunity to teach your children about the time value. Time, like money, is a finite resource -- time has to be budgeted too.
Just as there are fixed and variable expenses in a budget, the outlay of time can be fixed and variable too. A good way to illustrate these concepts to your children is to have them keep a log for a few days of everything they do and how much time they spend doing it.
Make a list of all the activities and the amount of time spent on each. Your children can use their math skills to determine what percent of their total time each activity represents. A further refinement is to split total time spent on each item into fixed and variable amounts. For example, hours spent at school are fixed but time spent on homework could be considered school but variable time. Another way to look at it is that fixed time is required while variable time is "spare time."
- School and Homework
- Sleeping
- Chores
- TV watching
- Connectivity (phone time, instant messaging, e mail, online games etc.)
- Grooming
- Extra curricular activities
- Hanging out with friends
- Worship
The next step is to help your children make an evaluation of how they want to spend their free or variable time.
Have them list their spare time activities showing their favorite first. Now they can make a separate calculation showing just what percent of their total variable or spare time each activity is in this category. The activity they have listed first, as their most favorite, may not be the one on which they have spent the most time. This is information they can use to determine what changes they may want to make. The choices of how to spend their variable time are up to your children and are to be considered guilt free.
These kinds of activities will teach your children valuable life lessons on how to spend not just their money, but their precious time. You're teaching them to determine how much their time and earning power are worth to them -- what I call the Time Value of Money. These are simple lessons that we all could benefit from -- perhaps you will think differently next time you're shopping for a new bathing suit.
Please use the space provided to share your comments on the Time Value of Money.