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Learning by doing

Teaching children the value of money is vital for their long term financial health. Work smart or just hard? Learning from mistakes is a great motivator.
Teaching our children the value of money and how to successfully manage it is also something that is best achieved by doing. This responsibility falls to the responsible adults in their lives, as it doesn’t get much coverage in their formal education.

The first “job” many of us held was earning pocket money in return for doing chores around the house.

Starting at the age of 5 my mother would give us one age appropriate chore for each year old we were. Every week if we had completed each chore to an appropriate standard, and without needing to be nagged, then she paid us the princely sum of 10 cents.

Putting children to work is a great way to teach them about money

If we didn’t complete the chores we’d both not receive payment, and be sufficiently motivated by a painful old school parenting reminder of why our performance needed to be better next time. There was none of the currently trendy “fail fast, fail often” philosophy, instead it was firmly pointed out that it was impossible to ultimately succeed if all you do is fail.

Not all jobs were created equal

The chores were deliberately varied, to teach us there are easy ways and hard ways to earn a living. Vacuuming the house was an easy one, complete in maybe 20 minutes once a week. Setting the dining table was harder work, as it was a daily job so for the same money we needed to complete it 7 times. Bring in firewood meant heavy lifting in freezing cold temperatures. Cleaning the toilet was a terrible job none of us wanted to do, which was overcome by awarding it a higher pay rate.

This variability encouraged us to manage our own schedules. It required upfront planning. Sometimes research into the optimal way to perform the chore with the minimal effort and most fun was necessary. Using water guns to wash the car can be loads more fun than a plain old bucket!

We could spend our money on whatever we liked. If we saw a toy we really wanted then my mother would help us calculate how long it would take to save up for it. She explained opportunity cost to us, teaching us if we blew all our money on sweets each week then we wouldn’t be able to save up for that Lego set we really wanted.

Double or nothing

To encourage saving there was a standing offer that at the end of each year my mother would double whatever our money boxes contained, providing we then deposited all the money in the bank. Once it went into the bank we couldn’t get at it again, mimicking how a retirement account is supposed to work.

Double your savings

So what?

This system worked pretty well for me, by the time I got my first job at the age of 10 I had saved up several hundred dollars in my bank account. It taught us to understand important economic concepts like scarcity, opportunity cost, and how the forces of supply and demand set the market price for different types of work.

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