The Magic Money Game - Part Two
Posted on November 26, 2006
Last week, I introduced you to a game parents can use to teach their children financial responsibility. I call it The Magic Money Game. Ideally, the game should begin when children first start kindergarten or first grade and last through high school, but starting it at any age is better than not at all. The game involves treating school as a child’s job, paying them for attendance and then helping them manage the money they earn. If you missed last week’s column, you can read it on my website at www.weekendmillionaire.com.
Imagine the learning opportunities this game could provide. Like with real jobs, it could be used to teach children that they get paid for the days they attend school, for holidays and vacation days, including summer vacation, but not for the days they miss school. You could give them small pay raises as the years pass�children need more money as they get older. The game needn’t be a financial burden, because children could use their “own” money to pay for some of the things parents would otherwise buy anyway. It could be used to teach them the value of money and to appreciate having to work for what they get.
The life lessons that can be taught with this game are endless. As children grow, the coins you paid them in elementary school could be switched to bills as they reach middle school. Eventually the money in the “Savings” container could be used to open a savings account at a bank into which they could continue depositing their savings. While the children watch their savings grow, they could be taught how banks work as they receive their monthly statements.
The effects of credit could be introduced by occasionally loaning them a week or two week’s pay to buy something today and then withholding future pay until they earn back the loan. In real life, isn’t that what happens when you borrow money to buy something today and then have to repay the loan with payments from tomorrow’s income. This lesson teaches children that when they buy on credit it means doing without things they could otherwise enjoy until the loan is repaid. Many people still haven’t learned this lesson by adulthood.
Here’s a tip! Being promoted from elementary to middle school is a golden opportunity to celebrate by giving children a big raise and teaching them another life lesson. If they’ve been “earning” a dollar a day playing The Magic Money Game in elementary school, why not reward them with two dollars a day when they start middle school. Just like that first day they started school, children moving from the nurturing environment of elementary school to the raging hormone surroundings of middle school tend to be a bit apprehensive. It’s much like the apprehension that comes with a new job or big promotion so it should be rewarded accordingly.
Throughout the summer break, parents can encourage children by discussing the promotion to middle school and the big raise that will come with it. They can discuss how with additional money, they will have more responsibilities. As mentioned last week, it’s not the amount of money, but the principle that’s important. Whatever a student has been receiving in elementary school, doubling this in middle school equates to a big raise. What’s important is that parents continue to provide guidance and insist on them allocating the money based on the same percentages used before the increase.
Instead of paying with the gold Sacagawea dollars I recommended using in elementary school, students can now be paid with dollar bills. If they will be receiving ten dollars per week instead of five, students should put two in their savings account, four in the clear container whose name you will change from “toys” to “special purchases” leaving the remaining four dollars for discretionary spending. By middle school, children are old enough to understand the concept of charitable giving. Parents may want to encourage them to give to their church, civic or other charitable organization, but they need to understand that it’s also important to let young people make some financial mistakes and pay for them. There’s no better teacher than a bad experience.
As savings deposits continue to grow, young people will slowly see the effects of investing for the future�you don’t want to mention retirement at this age, because in their minds, they’re never going to get old. The four dollars per week they put into the “special purchases” container helps them understand the concept of saving for more expensive items and allows them to experience the excitement and anticipation that comes as they get closer and closer to being able to make that “special purchase.” The contrast between the euphoric feelings that come with finally having saved enough to make a purchase and the dismal feelings of having to do without to repay a loan if they borrowed to get it a little earlier is dramatic. This experience will be invaluable in later years when they get their first credit card.
This is the second in a three part series on using The Magic Money Game to teach children how to start out in life with the basic money management skills needed to become financially successful. Next week we will continue with ways the game can be used to prepare high school students for college and the workplace. Once again, I want to remind parents that this game requires their involvement and teaches children things they will not learn in school. Those who are up to the task will help their children grow into productive and financially secure adults.
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