Fu Manchu has a question. I’ve got two young kids and they’re getting some cash gifts this year. What do you all recommend or do personally as a spend versus save allocation for your kids? And then where do you park that savings?
Actually, I have little kids. My oldest daughter is seven, my youngest daughter’s five, and we have a brand new baby on the way that will be here very soon. So right now, what I’m focusing on is conceptual ideas. I want them to really grasp that. For both of my daughters, we have these little piggy banks you can buy off Amazon. It’s just got three compartments right, and it’s literally like a jar with three slits in it, and they’re multi-colored. One says give, one save, and one spend. We call it our give save spend jar. And every time they get money, whether they are grandma gives them birthday money or they go, by the way, did your kids ever do this?
Did your kids ever set up a table at the end of your driveway and then just start selling crap out of your house that you did not approve? One time, we went out there, and they had like one of my wife’s hats, and it was like a nice hat, and they had it for like, you know, two dollars, and I was like, what are you kids doing? And fortunately, none of our neighbors came by and just absolutely fleeced us and took our stuff. Your kids ever do that? My kids didn’t, but my mother when I was at college did that. She sold every one of my leather basketballs. When you get a leather basketball, playing basketball in high school, it took a while to break those things in. My mom, I found out, she sold all these other basketballs for a quarter a piece.
So if my daughters decide to go out and steal some of my wife’s stuff and sell it to neighbors in the neighborhood when they get that money, I always walk her through give save spend to have them do these three compartments. Now, they haven’t gotten the percentages yet. They haven’t gotten that figured out, so often what I’ll do is I kind of do a third or third a third. I know that’s not exactly perfect, but it gives them the idea. So whatever money they have, I will break it into denominations, whether it’s dollar bills or whether it’s change, so that they can choose themselves to put it this much in the give part, this much in the save part, this much in the spend part so that it just becomes automatic. They know whenever they come into possession of dollars, they have to think through how they’re going to split that up.
As they age, I plan on becoming a little bit more sophisticated with it, like okay, well, let’s talk about percentages, and then okay, hey, you have some savings built up, what are we going to do with that? Because right now, it just sits in this little jar. Eventually, we’ll have an account where they can earn interest on those and then an investment account where they can invest those dollars. But it’s about mastering the behavior first and then moving towards the optimization strategies.
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