Anyone with siblings knows almost anything can turn into a competition. With three kids within 30 months of each other in age, almost everything turns into a competition. Saving money was no different. The perpetual one-upping took over and all three saved their money fairly aggressively to hit the $500 goal.
When I announced the competition, I did it without consulting my wife. Note to all you dads out there: you should probably talk to your wife first.
She heard me tell the kids, “If you save $500, I’ll give you $500.
You’ll have $1,000. How rad is that?” Though she liked the idea of incenting them to save, she wondered if we were creating a problem if they succeeded.
What she didn’t hear me tell them, is that they would not just have $1,000 to blow on whatever. This $1,000 would be their financial foundation for when they were older. They didn’t necessarily have to save it until then, but I reminded them that you never know when something will come up where you’ll need money.
At age four or five, you don’t know what’s in front of you yet.
Maybe you’ll really be into sports and need the money for a special camp. Maybe you’ll be into music and want an expensive instrument. Maybe you’ll be into science and want a particular telescope, or into engineering and use it to build a robot that smashes other robots!
Maybe you don’t spend it on anything like that and you want a car when you’re old enough. Maybe you use it to buy a diamond ring for your future wife. (Boys: “Yuck. Gross. No way, dad!” Annabel:
Maybe you keep it for an emergency fund when you’re an adult or in college. (All: Yeah…that sounds great, dad.) Bad example, even if it’s practical.
What I didn’t tell the kids—and what I did tell Jodie when she questioned my sanity on this idea—is that I would match the money into a stock account at Scottrade. They would have to pick their own stock or stocks with the $500 we gave them. They would then have $500 in savings at the bank, and $500 invested.
My bonus at the company where I worked was in company stock—
and the 401(k) match was in the investments in the 401(k)—so why not make their match in stock as well?
I’m not saying that this was my plan or idea going into the conversation with the kids. I was likely completely winging it when this all started.
If I recall correctly, I came up with the stock idea when Jodie didn’t look convinced that young kids would understand that they couldn’t spend the money we just gave them. She may have been convinced, but sometimes I read her face instead of reading her mind, and this was one of those occasions. Her face was saying
“you’re nuts!” even if she never said it.
To further sell the idea (since I had already promised the kids), I came up with the stock idea on the spot.
“Besides, I’m not giving them cash. I’m going to match it into a Scottrade account. If we match it with stock, it will give them the next couple years while they’re saving to start learning about stocks and the stock market. By then, they can have an idea of what they might want to buy.”
Wow, that actually sounded really good and is a great idea. (Nice work panic button!)
Jodie: “Did you tell the kids that’s what we’re doing?”
Me: “No but I will eventually…”
Eventually I told them what was really up and that it would be for their own good, blah blah blah. Whatever, it was a bait and switch…and I’m ok with it. I explained that it’s important to have a cash cushion—at their ages $500 should be sufficient—and then invest the rest.
I also reminded them that the money might grow if they invest it and that they might want that money some day for a car (assuming your mom and dad think you are responsible enough— clears throat aggressively) or college or to move out of your mom and dad’s house or something. (Since that’s what they were probably thinking once they realized they had been baited and switched.) As I write this, they have not touched the $500 they saved. It is still in a savings account at the bank. The $500 we matched has been invested and they have each added to their investments when coaxed to do so.
To start, Henry bought four shares of Apple for $110. Annabel bought four shares of Disney at $90. Max split the difference and bought two of each. When Henry bought Apple, he said, “If it reaches $200, I’ll sell half.” He carried through on that, but actually sold at $210.
It has been a great learning tool in many ways. It helped them learn to save, not spend. It helped them learn to keep a cash cushion. And it helped them learn some very valuable lessons about both the math and the psychology of investing.
It didn’t solve that tendency to want to spend everything they have, but they still save more than they did before the contest.
3 | The Annual Stock Market Game When we moved to California from Kansas, we began homeschooling our kids, but did it by hiring a teacher to come to our home. Seeing how instrumental my seventh-grade stock market game was in my life, I wanted to incorporate it into our homeschool curriculum. One evening, in similar fashion to how the $500 Savings Challenge started, the Annual Stock Market Game began.
Each year on the Tuesday after Labor Day, the contest begins and then runs through the Friday before the next year’s Labor Day.
Why do we run it this way? To coincide with the beginning of the school calendar year (smart answer) and I probably came up with the idea on Labor Day weekend (correct answer).
The kids each choose two stocks to hold from the beginning to the end of the contest period with no changes allowed once it begins.
We simulate a portfolio of 50 percent in each stock. The portfolio that has the highest return after the 12-month period is the winner.
I have a small trophy made for the winner that includes the two stocks they selected and the rate of return for the hypothetical portfolio.
Even as our school situation has evolved, we’ve continued with the contest for our three youngest children. Every Labor Day weekend, we settle the returns from the previous year’s contest and pick the stocks for next year.
I’ve not been participating in the contest. I mean, that wouldn’t be fair, right? I’m a professional! (Sarcasm intended).
I’m not sure how I escaped the scrutiny of participation in this game. Perhaps because it started as part of the homeschool setup, I was able to avoid the humiliation of likely being beaten by one (or all) of my kids. However, it looks like beginning in 2018-2019, mom and dad will be participating in the contest as well, though the trophy will still go to the winner of the contest between the three youngest kids. The bragging rights on those trophies are far too powerful a force to dare disrupt.
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