How To Teach Kids About Money

Okay, I am your family shrink, I’m not
your financial adviser but I’ve got some ideas about how to teach kids about
money. Money makes the world go round, right? Well I don’t know if it’s money
that makes the world go round but that’s that’s a common saying and it’s
something that we have to deal with in our world. How do we teach our kids about
money? I think we’re getting ahead of ourselves.
We need to talk first about value so let’s consider something for example, how
about this candy bar? Alright, what is it worth? What is its value? And maybe
those are separate questions but think about that for a moment. What’s it worth?
Now when I ask people in a presentation or a training that I’m doing or here at
my office, I get answers that vary a little bit but they’re usually close to
about a dollar. I have a dollars worth of quarters here. Okay, so let’s see how this
transaction might work. The candy bar is the item that will be involved in the
transaction. Any transaction has at least two parties. So let’s on this side, we’ll
put the seller, okay. This is the person who’s holding the candy bar and wants to
transfer it to someone else so on this side is the buyer. The buyer is going to
receive the candy bar from the seller now what gets traded for the candy bar?
The money. So technically, the money is starting in this hand, the candy bar is
starting in this hand. Seller, buyer. They’re both holding something so think
about if you were the buyer, okay. You’re feeling the munchies, you go into the
convenience store, you see the candy bar over there sitting on the shelf, you get
a dollar in your hand or your pocket. What do you do? Duh, you
trade, right? So you say, “Hey. I will give you this money for that candy bar.” So
these two things get to trade hands. See how that works? Now nothing was created
or destroyed, everything already existed before this transaction but something
just traded hands. Now I want you to think about this. In terms of value, what
is this worth? Now it begs a question but I need to illuminate the obvious to you. To whom?
What is it worth to whom? So you in this example are the buyer, you’re the
one that ends up with the candy bar, right? What did you have to start with?
You had a dollar? What is this candy bar worth to you? You paid a dollar for it.
Okay, most common answer is it’s worth a dollar. That is the most common incorrect
answer. It’s not worth a dollar. How do we know that? It’s evidenced by your own
behavior. You have a dollar, there was a Snickers on the other side,
you compared them. Which one did you want more? The candy bar. So obviously, this
candy bar is worth more to you than this dollar. Makes sense? As evidenced by your
own behavior, you traded and there was no force involved okay. That’s an important
assumption. What was this candy bar worth to the seller? Notice the seller have the
same choice to make, there’s candy bar, there’s a dollar, it’s the same candy bar
on the same dollar. Which one did the seller want more? The dollar.
So obviously, the Snickers was worth less than a dollar to the seller because he
wanted to trade as well so by his own behavior, it’s worth less. A dollar is the
only incorrect answer here. It’s not worth a dollar to anybody.
You think it’s worth more, he thinks it’s worth less. It’d be kind of like going to
the grocery store. We do this all the time. Pretend that you go down to the
grocery store, you pull a box of cereal off of the shelf, you see the price says,
five bucks. You’re like, five bucks? This isn’t worth five bucks. You take it
upfront, you slam it down on the counter, this is not worth five bucks. The clerk
looks at it, I agree, it’s not worth five bucks. You give him five bucks, he gives
you the cereal, everybody’s happy, it’s not worth five bucks to anybody, it’s
worth more to you, less to him. You see where we’re going? This really hit home
for me when one of my financial advisors and mentors shared with me an example of
this very transaction. He was giving a seminar and he asked the audience, does
anybody have a candy bar that I can I can buy basically to demonstrate this
this particular transaction, what we’re talking about here today on this video,
and this lady came up she had one, okay, yeah, I got one. He said, “Can I buy that
from you?” You know how much he paid for this? Just guess. Yeah, a buck, right? That’s
the most common guess. No, more. Five bucks? No. Ten bucks? No. Keep going. 20?
No. 50? No. $100. Okay, so he’s holding the hundred bucks, she’s holding the candy
bar, they trade. Who won? Now you might be thinking, wow, she got a hundred bucks for
that candy bar. Yes, she did. What was this candy bar worth to my friend who bought
it? As evidenced by his own behavior, he chose this over that. It’s worth more
than a hundred bucks to him. Can you wrap your head around that for a minute? How much
is the same candy bar worth? Same transaction to the lady who sold it to
him. Obviously less, probably a lot less than a hundred bucks.
Who won? They both won. If you can wrap your head around
that for just a minute. They both won. He told me after the seminar. He said, “Paul. I
was prepared to pay far more than that. I got a really good deal.” What? He could
have walked down to the hotel gift shop and purchased the same candy bar for
probably a buck and a half. It was worth far more to him. Why? Well he knew
something that the rest of the room didn’t know and quite frankly, he
probably made a million dollars off of that but that’s not what we’re here to
talk about today. Understand that the money is not the value, the money is the
receipt for the value. Now why is this important as we teach our kids? It’s easy
for them to get the misguided notion that it’s the money that’s valuable, this
is the valuable stuff but quite frankly, it’s not. Look at this one for
example, what could you use this for? Well not much actually except in trade. We’ve
agreed that this represents value, it’s not value, I don’t know unless you
run out of toilet paper, there’s not a lot that you could use this for except
in trade. So we trade this for something of value
but think about the money as a receipt for value and then this makes a
whole lot more sense. Why is this important? Because the only moral reason
that anyone would ever give you this is because you provided for them something
of value, either a product or a service, something that they value more than
their money and then the trade is a win on both sides. The money is simply the
receipt, you’re not even going to keep the money, are you?
No, you’re going to go trade it for something that you value and you’re
eager to trade it for something that you value more than the money. I think that
is probably the most important thing that we can teach our kids about money.
It’s not the money that’s valuable. Do you want money?
Well not really. You want what the money can get for you so to get clear about
money being a receipt for value then if you need more money or want more money,
the answer is always the same. Create more value for more people. As you
create the value, the money flows in as a receipt. What a service that would be to
our kids if we can actually teach them where the real value is. It’s in the
creation of value for other people. The money comes in as a receipt. So this is
one of the best ideas that I’ve heard in recent times about teaching kids about
money. What have you heard? Would you please share some of your
ideas down below? Let’s share these ideas together.

3 thoughts on “How To Teach Kids About Money

  1. This is really great. I have been trying to tell my kids and pretty much anyone that I can influence, this very same idea. Money really is nothing more than a tool to make trades possible.

  2. doc , I can't understand why don't you have a large amount of subs or views ,the efforts you are putting in videos and spending money for some editors to edit , putting time and other sutff . it's just not making sense to me 🙁

Leave a Reply

Your email address will not be published. Required fields are marked *