Teaching Your Children Prosperity Economics – Episode 126

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome to another edition of the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, we have my co-host and bestselling financial author, Kim Butler with us today. We’re going to talk about some questions that came out of an event I recently attended and it was targeted at giving training to people who homeschool their children. But I would think that this is not part of an education that people are going to get even if they are in public schools or private schools or whatever.

[00:49] But the question that we were asked is how do you introduce the principles of prosperity economics to your children? And on our show, we’ve talked about kind of the when, but we’ve never really gotten specific on the how. So this is Kim Butler’s expertise. So she certainly has done this with her own family, helped a lot of other families do the same thing. So Kim, welcome and let’s just have like a fun topic. Absolutely. Well, thanks for bringing it up. And I’m thrilled to address it because you’re right, the how is equally as important. And of course, it’s very age based, but and I wouldn’t say age, I guess, more experience because as we all know, one six-year-old in one family can act like a nine-year-old

[01:34] and another six-year-old in another family can act like a three-year-old and actually probably all of them both. But there still are some, I think, concrete ways that we can help our children and gosh, children, you know, that that word alone, sometimes we can be 50-year-old children, but we can help our children get a handle on their ideas about money by introducing prosperity economics thinking, which is so much more beneficial than a lot of the typical financial planning thinking that is out there. And the very first one that I want to bring up is the often used statement by parents that money doesn’t grow on trees or that, oh, my gosh, that’s too expensive. And it’s so important. And I have to catch myself on this.

[02:32] I have to catch my children on it. I have to I caught my dad on it the other day. It’s so pervasive in our society to just look at something and immediately say, oh, that’s too expensive. Money doesn’t grow on trees. I can’t have it or I can’t get it or I can’t use it or benefit from it or experience it. And that thought process immediately limits us. And the very first principle of prosperity is that we want to be thinking from a prosperous mindset. And so if we’re going to be thinking from a prosperous mindset, we must stop the kind of thinking that is limiting. We must stop the kind of thinking that says money doesn’t grow on trees. We must stop the kind of thinking that says, oh, my gosh, that’s too expensive

[03:24] because we must start the thinking that says, well, how can I experience it or how could I possibly afford it? And you know what? Money does grow on trees. What do you think? Peaches and oranges and filberts, hazelnuts for most of the country, but I’m from Oregon. We call them filberts and almonds. And walnuts and kiwi fruit and, and, and, and, you know, those are all things they grow on trees, right? Those are representations of money. Absolutely. And I definitely brings to mind I was watching a show this weekend. I think it was on Cornelius Vanderbilt and it was early in his career and he wanted to buy this company. And the person finally agreed to sell it to him for like two and a half million dollars,

[04:16] which was an enormous price back then. But the contract was contingent upon him delivering the first one million dollar payment within 24 hours. And he literally had less than a hundred thousand dollars to his name. And he went out and raised the other nine hundred and fifty thousand dollars in 24 hours and delivered that million dollars. I mean, they made the deal thinking, ah, ha, ha, we’ll just embarrass him. And he pulled it off. I mean, think of what a million dollars must have been worth back then. Oh, my gosh. No kidding. That’s incredible. Well, you know, that thought process that says, how can I do this? And I really very first heard this change in thinking from Robert Kiyosaki and he encouraged people along say, how can I afford it rather than I can’t afford it?

[05:12] And there are times when we can choose to not be focused on affording it. The example that I brought up with my dad is very legitimate. We’re all going to go on Alaska cruise. And there are things that my husband and myself will spend money on that somebody else doesn’t feel is as important. And in this one circumstance, we wanted another night in this one city. So we were going to go early. We said, why don’t you come with? And he said, I don’t want to spend the money on that. And I said, well, that’s totally fine. That’s a completely different statement than I can’t afford it or it’s too expensive, which is what he said is it’s too expensive. And it was an awesome example, I guess, really of it’s totally fine to have your own

[06:01] values around money. And one of the values that Todd and I have is that when we’re at a place that we got there because of travel, we want to spend time in that place. Now, I’m sure there’s probably some places that we wouldn’t want to, but for the most part, it’s a value decision on our side that enables our cash flow to make happen something that’s important to us. So as you’re talking with your children, you want to be helping them think from a prosperous mindset, but you also want to be helping them with their values. And another example of this is I’ve got a teenage nephew and he likes those monster drinks, the energy drinks that are what, two, three, maybe even $4 at the convenience store.

[06:53] And over the course of our visit in the last week, I watched him buy these drinks and I never said anything to him. And I hope that I get a chance to say something to him. Maybe it’s not my place, he’s a nephew, not a son, but he has some goals. He wants to buy a motorcycle. He wants to buy other things that are important to him. And it just is interesting to me. And we’ve heard this example with the latte factor and David Bach and whatnot, that here he’s totally willing to spend $4 to possibly even $8 a day on these monster drinks instead of bringing water or other alternatives that might be less expensive. And I wonder what’s going to happen when it comes time for him to buy his motorbike and he doesn’t have the savings for the down payment.

[07:41] And so again, it’s a value thing. And I would love to have had the guts, frankly, I’ll admit, I chickened out. I would love to have had the guts to say, hey, you’ve got a choice here. You’re making a choice every day to spend $4 on this drink when if you save that $4 over the course of time, you could have, let’s just do the math. Four times 30, you could have $120 saved for the motorcycle he wants is like $1,500. So $120 a month, that’s going to start to add up pretty quick. And he could very easily have the down payment saved for that motorcycle. And there’s no judgment in that. If he wants to spend his four bucks on monsters, that’s totally fine. I just want him to think and I want him to get clear on his values, his own values.

[08:34] He’s the one that should be deciding is the motorbike more important or is the monster drink more important? And I mean, the bottom line, the principle we’re teaching here is to look at cash flow versus net worth because that $4 a day doesn’t really impact your net worth that much on a daily basis. But the cash flow to developing that net worth is massively impacted. So I think this is a way that we can really back up. And whether it’s 50 cents or a dollar or whatever, this is a great way to shrink this down to their world. I mean, you know, teaching an eight year old about somebody who was able to come up with a million dollars or go on a cruise or something like that. Probably just not relevant.

[09:24] But understanding what they can do with the cash flow that they have, those principles are eternal. Well, and we can bring it down a notch from the teenager example that I gave to that eight year old with candy, because every eight year old, when they get a dollar in their hand, wants candy. But then when it comes time to buy the toy that’s $10, they may not have that $10. And so you can help them understand what’s more important to you. Candy in your hand today or a toy in your hand this weekend or next month or, you know, whatever the appropriate time frame is. And so, of course, the next logical question that’s going to come up is what about allowance? And I have to admit that I’m not a big fan of allowance.

[10:11] I much prefer work and payment. I want the children to take out the garbage. Then I should find a way to pay them to do that. Now, there’s going to be some jobs, like maybe cleaning the dishes, and I’m just throwing out examples, that are a part of our family’s work. And we all do work for the family without getting paid. But there are other jobs, so you could separate them out. Maybe dishes as family, but garbage is not. Or maybe it’s the other way around. It doesn’t really matter. But there are some jobs that the child should get paid for. But then the super fun thing is let the child come up with jobs that they think they should get paid for. And work out a way that might end up being similar to allowance.

[10:58] And I know one of the rules of thumb that a lot of people write about is a dollar per week or per month for their age. So, if we have, let’s say, a 10-year-old, a dollar for their age, $10 a week, $10 a month. I’m actually not sure of that. Do you happen to know that kind of rule of thumb? I don’t. I would say it’s more relevant to the amount of work accomplished. Yeah. And that, you know, those of us who are either self-employed or have a home-based business or whatever, it is completely legal and tax deductible to pay your children a certain amount. So, it not only benefits the children, it benefits you. So, you know, a lot of people say, well, you know, that’s still ridiculous. And it’s like, well, you know, it’s right before school starts.

[11:47] Who’s not going on a shopping trip right now, outfitting their kids for school? Well, if that money was paid to them and let them outfit yourself for a school, number one, you’ve created a tax deduction. Number two, you’ve created an education system that they’re getting paid based on what they’re worth. I don’t like the idea of getting paid based upon how old you are because it really is not something you can control. One year from now, you’re going to be older, whether you work harder or not. Totally agreed. I was using the age-based allowance rule of thumb just to try to give some perspective for the dollar figure. And if people felt that they wanted to use that, they could work backwards to determine the payment for jobs.

[12:32] But you’re absolutely right. It’s so much more valuable to let the kid, for example, that gets out there with the lawnmower and mows in the heat and has an awesome mowed lawn, get paid more than the kid that’s taking out the garbage. And age doesn’t really have anything to do with it. Now, there’s obviously some limitation to that. You don’t want your three-year-old mowing the lawn, but at least I don’t think so. But you can find a way to come up with an appropriate amount. And there’s always bonuses that you can give. There’s extra money for extra work. There’s extra money for extra good work. There’s docking of money for poor or shoddy work. And that’s something that I know my dad has done

[13:20] with a lot of the kids that he hires on his farm, is he will make them aware that there’s a base payment per hour for hauling hay that everybody gets that hauls the hay. However, at the end of the session, typically like the end of a Saturday or maybe even the end of a weekend, he will give bonuses for the kids that were really hustling. And it didn’t have anything to do with strength. It had to do with hustle and grit and perseverance and things that a kid at any age and any level could handle. Of course, there’s going to be the bigger boys that can get the bigger bales and all that. But there’s still a big difference. Plus, one of the other things that he does that I love is he’ll give bonuses for good attitudes.

[14:07] Because if somebody has a good attitude, obviously they’re way more enjoyable to work with than those that don’t. And as kids can be sometimes, you know, off one day on another day, maybe on a Saturday, a kid got a bonus for a good attitude. But on the Sunday, he was there and grumpy and not happy so he didn’t get a bonus for a good attitude. So these are all things that you can do to support the how around prosperity economics. Because prosperity economics is separate from any age-based thinking. It’s separate from any time and effort-based thinking. It’s results-based. And when we talk about, for example, our alternative investments, those are very results-based oriented. They have minor time association with them

[15:01] just because of the nature of them. But it’s not like it’s a time and effort deal. It’s more of a results-oriented deal. And that is a really clear principle that is very, very important inside prosperity economics that can absolutely be taught to children as it relates to the jobs that they’re doing and the idea of holding on to some of that cash for things later that they would want to actually quote invest in. Maybe it’s a toy or a motorbike instead of investments. But maybe not. An older child can certainly start to look at some of these investments. And somebody at 18 can buy their own life insurance policy if they have a summer job that would support them having the ability to pay a premium

[15:51] of maybe $50 to $100 a month. That’s a very standard first step for once you’ve turned 18 and can own a contract because that’s what a life insurance policy is and sign those documents. Now, I know I helped my children understand what life insurance could do from the savings and the emergency slash opportunity environment. When they were as early as nine and 10, they didn’t own their own. I owned one on them, but they absolutely knew what it did and how it worked. I know we’re running a little bit long today, but there’s one other topic I want you to touch on before we leave. And that’s the concept of giving away your money. Ah, yeah, I think that’s a great one because if values in your family support the idea

[16:41] of giving, donating to charity, helping food banks, that kind of thing, then we can teach that to our children in the how department by first giving of their time, potentially giving of their toys. And then yes, as they get more substantial jobs, absolutely giving of their money. I know a lot of parents do a three piggy bank approach where the money that the child earns must be split between the long-term piggy bank, which would be the toys or the motorcycle, the medium term. Well, I think it’s long-term and short-term, no medium. The short-term piggy bank, which would be a date night or a food item or something that they want that’s within the week or so. And then the third is the giving piggy bank

[17:30] or the charitable piggy bank where 10 or 20 percent kind of based on the family’s own thought process around that or maybe even the child’s choice if they’re old enough to understand. But 10 or 20 percent of all the dollars actually go to this charity-oriented piggy bank and then when maybe $50 are reached or $100 or something like that, the child then gets to choose which charity he wants to donate it to. And I’m so glad you brought that up. I think that’s a fabulous strategy to involve our children in as early as possible. Super. And in that same principle of giving, I know you have a special gift that you have just for our podcast listeners. Absolutely. It’s an audio version of a book called Financial Planning Has Failed.

[18:18] And it is about our story of why financial planning became so clear to us as the wrong way to handle finances. And a much more effective approach to finances, which of course is the prosperity economics thinking. And it talks about the seven principles of prosperity in there. It is available at partners number four, prosperity.com slash ebook. There’s a PDF there as well as the audio version. And it’s available to anybody that is listening to the podcast. And we get great comments from our listeners on the podcast, which we’re always so grateful for. And we love the questions that come in. So again, that’s partners number four, prosperity.com slash ebook. Super. Well, this is No BS Money Guy Todd Strobel.

[19:08] Special thanks to Kim Butler today. I think some great educational information here. And I look forward to creating more things that we can use as ways to not only learn this message ourselves, but be able to see a generation that didn’t have to have a change in mindset. But that was the only mindset that they knew. Beautiful concept. Glad to be part of it. Thanks so much, Kim. We’ll see y’all later. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.