At what age should parents start teaching their kids to conduct basic financial transactions? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.
Imagine me at six bundled up in a coat, knit cap pulled tight, balanced on my belly on an elm limb more than ten feet off the ground, an elm limb not quite as thick as my skinny little thighs, while my mother standing off to one side keeps cooing, "Keep going, you're almost there." With mom's encouragement, I conquer my fear and inch forward. Soon, the last bunch of mistletoe we'll need falls to the ground.
We gather up all the mistletoe and carry it to the dining table where we sort it into big sprigs with white berries, medium sprigs most with berries and small sprigs usually lacking berries. Mom reels off length after length of red velvet ribbon bought just for this enterprise, and we tie bows on each set of sprigs. Her bows are much nicer, so I limit myself to a few of the small sprigs.
Into my "little red wagon" they go as mom counsels me, "fifteen cents for big sprigs, a dime for medium sprigs and a nickel for the small ones." Around the neighborhood I go, and before I'm even halfway down the other side of the block, I'm empty and in possession of some three dollars and change--a small fortune at a time when five-and-dime stores were big. I bought Christmas presents for everyone with my earnings from not even two hours of risk-taking, merchandising and salesmanship.
My mother hadn't been just another Depression Baby, she'd been a sharecropper in Mississippi who never owned a store-bought dress or even toy. Her large family lived by their wits. Her middle name might as well have been Resourcefulness. And that was her approach to raising me and my younger brothers.
My dad's family had been well-to-do. I remember at ten his older brother, a physician, handing a wide-eyed me a gift ten-dollar bill (equivalent to roughly $85 now). My mother neatly lifted the bill from my hands, "Thank you so much, Gene. We'll open a savings account for him with this first thing tomorrow."
He neatly lifted the bill back and, bless him, placed it back in my hands. "Let's let him enjoy spending it, and then he will always want to earn more."
I always leaned after that toward my uncle's economic philosophy.
And I wanted to make sure to recapitulate such lessons for my own kids. When my oldest was six, my wife and I held a garage sale in part as an economics lesson to our oldest. I even borrowed a cash register. Naturally, he claimed the cashier job as he wanted to control the money.
It happened to be the hottest day on record for that August date, so I raided the lemon trees and made a huge batch of cold lemonade. "We'll charge a dollar a cup," he asserted. "No, a dime. We want them to relax and spend time shopping." "It's hot!" he exclaimed, pointing out the obvious, "They'll all want it and we can make a lot of money." I put my foot down.
And so my son, who was a virtuoso on the cash register, whenever a lemonade sale was to be recorded, simply hit No Sale, flung the dime into the money tray wherever it landed and slammed the drawer shut. Those times he had to make change for lemonade, he bristled the whole while.
So I wasn't surprised when just over a year later I came home to find he'd made a chocolate cake and muffins from scratch with a little help from his au pair. "Great," I pronounced, "We can have it for dessert tonight." "For ten dollars," he dryly corrected me. "Listen, son. I bought all the ingredients." "That's why I am only charging you for my time."
Okay, fair enough, I want to teach him to be enterprising. He took the ten dollars and bought his own ingredients (with money to spare), and the next cake was $20! I told him to go sell it to someone else. When he seemed fine with that, I broke down and coughed up a twenty, remembering how good the last one had been. I believe I thereby gave him an important lesson in the consumer psychology of human weakness.
And so it went that rather than teach our sons lessons in thrift and value, we spent our time fending off their money-raising schemes. But we had a couple of key events as the boys got older. Believe it or not, the oldest didn't want to go to high school. He wanted to work to get money and job skills instead. Because he had serious film experience, at 17 he was invited to go with a California high school class to Cuba for a month if he would make a documentary of their visit. The requirement was that he would have to raise $3000, and not from family (bless that teacher). Canvassing the neighborhood, he was done in a few afternoons of effort.
The next son was invited, at 15, by the Mariners to play on their goodwill team in the Friendship Games in Beijing. He had to raise a similar amount of money, and, again, it wasn't hard. That was an incredible lesson for the boys to learn that people will willingly support their endeavors. It's been a life lesson for them.
The Elephant in the Room
But the big topic when teaching children about money is ever and always allowance. I remember asking my mom once, in my adult years, why she never gave us an allowance. "Oh, I did... for about three weeks. But within an hour you would have your brothers' allowances too and go spend it all on something you wanted and that you'd take the lion's share of." Ouch!
My dad paid me a dime an hour for man-level work tearing down derelict houses he'd buy and clearing the lots. But he would never pay us for work on our own home. I kept the same philosophy that a family does not owe you money for helping out. I also did not want to be like a lot of the parents I knew and simply give them money. That sounded like a formula for breeding lazy sponges.
What my wife and I settled on was that we would be venture capitalists to our kids. They could ask for any amount, but they had to make a case for the value of whatever was being requested. We'd inquire how much they could contribute, or raise. We'd grill them on the logistics and other details. Steadily, they had to be more and more prepared in their requests, and they realized they'd have to have some of the funds themselves. They got pretty good at pitching us and in realizing that "gimmes" were not going to fly but that quality experiences or purchases held a good chance of success.
That too has been a lifelong lesson for them that has served them well in adult life. I'd urge any parent to use that approach.