Avoid The Stock Market Game

Stock Market Game
Stock Market Game

We need to talk about the Stock Market Game.

Well, I need to write about it. There is something very wrong with the Stock Market Game.

However, before that, let’s get everyone up to speed.

What is the Stock Market Game?

The Stock Market Game is an educational tool designed to teach students about the stock market. Participants engage in a simulated trading environment where they buy and sell stocks, mutual funds, and exchange-traded funds (ETFs) using virtual money. Virtual money allows them to gain valuable experience without risking real money.

History of the Stock Market Game?

The Stock Market Game started in the late 1970s to promote financial literacy among kids. Over the years, it has evolved into a widely adopted educational program, reaching schools and colleges all over the world.

How Does the Stock Market Game Work?

Students use one hundred thousand dollars in virtual money on the Stock Market Game website to invest in stocks. It’s very realistic, which can help them learn how to use a brokerage platform using real money later in life.

Students learn stock tickers and how to place market and limit orders. They can work by themselves or in groups of up to five. The goal is to make the most money. The game lasts between 10 and 15 weeks. (It seems that the teacher may configure this, or different regions have different lengths.)

The Problem with Stock Market Game

A stock market simulation sounds like a fun way to learn a practical skill, right?

Unfortunately, it has one ginormous problem: The Stock Market Game encourages kids to invest recklessly.

Over a short period, a well-diversified ETF such as the S&P 500 Index or a Wilshire 5000 Index will never win the stock market game. Over a decade or more, the same well-diversified ETF will outperform nearly 90% of professionally managed funds.

In the Stock Market Game, there will always be a kid who got lucky on the first day trading some of the recent hot stocks. The kid could then sell and stay at the top of the leaderboard. Other kids who didn’t get lucky will probably lose money. They’ll make more risky bets at that point because that’s their only hope of winning.

Kids could lose 80% of their virtual money, and it wouldn’t matter. If they lose the game by $10, it’s the same if they lose it by $90,000. They weren’t planning to buy real cars or houses or save for retirement with it. In real life, turning $100,000 into $110,000 with minimal risk is rewarded with the ability to spend $10,000. In real life, losing $90,000 may mean working much longer than planned.

The Stock Market Game could do much better by teaching kids the investing basics of asset allocation and buy-and-hold (for years). It’s like giving kids a couple of games of Super Mario Cart as a test for their driver’s license. No one has ever played Super Mario Cart to complete the race safely.

Is The Stock Market Game a Scam?

I’ll let you be the judge, but Allan S. Roth, MBA, CPA, CFP® makes a good case in my opinion:

“Why would SIFMA want to teach maximizing risk? SIFMA stands for the Securities Industry and Financial Markets Association. Well, over half of its 520 members are broker-dealers. The SMG provides great benefit to those broker-dealers. If students do well in the game, they could take away the lesson that investing is easy and become a day trader. If they do poorly, they might learn the opposite lesson and believe that picking stocks is so difficult that they need to hire a broker to buy individual securities.

I view the SMG as yet another version of the financial services industry’s game of ‘heads we win; tails we win more.'”

Andy Hallam, a former teacher, has this to say:

Stock market games reinforce bad behaviours while crushing the good ones.

Nothing else in education is so inherently backward.

What’s better than the Stock Market Game?

I recommend reading Investing for Kids or visiting our Investing landing page (which is still under development). Another great resource is the MoneyTime Kids course.

Kids will learn a lot more if you let them make their own mistakes on a small scale.

Five Ways to Teach Compound Interest

Teach Compound Interest
Look at the difference between compound interest and simple interest!

“My wealth has come from a combination of living in America, some lucky genes, and compound interest”
– Warren Buffett

When one of the richest people on the Earth gives actionable advice that anyone can take it’s worth listening to. He’s used the magic of compound interest better than anyone.

Here are four fun ways to teach compound interest to kids:

  1. Read A Book About Compound Interest

    My third grader did a play at school called One Grain of Rice. We had read the book earlier this year.

    One Grain of Rice is a lesson on how a grain of rice doubled every day for a month becomes a huge number – enough to bankrupt a kingdom. Substitute a penny for the grain of rice and there will be enough money to fill a mountain!

    Read my One Grain of Rice article here. It has an interactive spreadsheet, which illustrates it better than a compound interest calculator in my opinion.

  2. Use a Graph

    There’s a classic example of the power of compound interest that compares two investors. The younger person invests for a few years and then stops after 10 years. The slightly older person invests for 30 years and still can’t match the younger one. Here’s a graph of what that looks like:

  3. Give Kids Firsthand Experience

    You can read books about fixing cars or programming computers. Reading is not the same as doing.

    In The First National Bank of Dad (Review), I learned a technique where kids are given monthly interest payments on their deposits. Shorter compounding periods help kids notice the money growing faster. This creates an incentive to save more.

    For example, a 3% monthly interest rate is an annual 42% interest rate. It’s something that many parents can do because kids don’t have $100,000 of principal to break the bank.

    You may think that putting kids’ money in a traditional savings account is a great choice. However, the interest earnings are so low it will take them the rest of their lives to earn much. It’s no way to show how the rewards of compound interest are often described as the eighth wonder of the world.

  4. Watch a Video About How Compound Interest Works

    This video explains how the above works with a 10% monthly interest rate. It also illustrates how compound interest works over a lifetime:

    While the video says it is geared to grades 5-8, I think it works for grade 3 and maybe even some second graders. The multiplication at the beginning is the most difficult part, but it’s very quick and kids don’t have to follow the math exactly to get it.

  5. Take A Course
    MoneyTime is a course to teach kids about money in general. It covers much more than compound interest. MoneyTime has some gaming features like allowing kids to create their own avatar.

Teaching compound interest to kids is especially useful because they have more time to grow their money. The video above showed how much of a difference there is between an 18 and a 25-year-old saving over time. Imagine if you can start even seven years before the video’s example.

Parts of this article were originally published July 8, 2022

Teach Your Kids About Money with Television

Teach Kids About Money With Television

Does it make sense to teach kids about money with television shows? At first, it may make sense to avoid it. Some argue that kids watch too much television these days. It’s good to have limits, but I think television can be a useful tool.
My opinion is, if they are going to watch television anyway, teaching kids financial literacy is a good use of that time. I’ve put together a few shows that can help form (or supplement) their financial education.

Teen Titans Go!

Teen Titans Go! has 7-10 episodes that cover many important personal finance lessons. Since there are more than 300 episodes of Teen Titans Go! use this guide to look up the specific episodes on Hulu.

There are very few other places where you’ll find an entertaining episode about building wealth with rental properties. One episode covers the importance of good credit history and credit score. Another episode teaches the value of money with a weird analogy of bees being the currency – a perfect starter to talk about cryptocurrency. There’s also an episode with an analogy of taking on too much student loan debt to go to the dream college instead of making the fiscally smart decision.

Warren Buffett’s Secret Millionaire Club

Warren Buffett has a cartoon teaching kids entrepreneurial lessons. There are more than twenty episodes of his group of young teens learning money lessons. It’s free to stream on Kartoon Channel at the link above. No subscription service to buy!

School House Rock

Decades ago, School House Rock famously taught millions of kids how a bill became a law and how parts of speech work. I don’t remember seeing their lessons about money, but my local library had a DVD that was pure gold, Schoolhouse Rock: Money.

It’s another great way to teach your kids about money with television and you can watch all 8 money lessons on YouTube! These videos aren’t the best quality.

If you have a Disney+ subscription, you can get perfect quality by looking up School House Rock and skipping to season 6 for all the money lessons. The other seasons cover a variety of different topics that are worth your time too.
If you have a Disney+ subscription, look up School House Rock and skip to season 6 for all the money lessons. (While you are there check out all the other seasons.)

The short songs cover money management, economics, taxes, the national debt, investing in stocks, and dollar-cost averaging. There’s a little history of money, explaining how barter and coins work.

Cha-Ching Money Smart Kids

There’s a very complete curriculum of money education available at Cha-Ching Money Smart Kids. The lessons consist of 3-minute videos and PDFs designed for teachers (classroom activity) and parents (family activity).

Dr. Alice Wilder, the creator, is known for Blues Clues, Tumble Leaf, and Super Why, one of my favorite shows for teaching younger kids how to read.
Forbes gave Cha-Ching Money Smart Kids a good review.

Shark Tank

Older kids may appreciate Shark Tank. While some topics may be boring to kids, there are quite a few episodes with kids who are entrepreneurs. My oldest saw an episode where a kid started a dog treat business that was very successful. He wanted to start cooking right away.

Biz Kid$

Biz Kid$ is a show designed to teach kids everything about personal finance. You can find some clips here. Those clips come with a lesson plan. All the lesson plans are available in English, but some are available in Spanish as well.
There are a few free streaming episodes on Vimeo.
Unfortunately, if you want to watch all the episodes, it is quite expensive. It seems like the pricing is geared towards school districts. Each 28-minute episode costs $5 to buy or $2 to rent. It would cost about $350 to buy all 71 episodes. You can buy a subscription to stream seasons 1-3 for $30/mo. You’d have to buy another subscription to stream seasons 4-6 for another $30/mo.
So if you were really good about binge-watching 71 episodes, you could do it for $60. That’s a tall order.
I haven’t taken the time to watch this series yet, but I hope to at least watch and review the free episodes soon.

The Toy Box

I’ve never seen this show, but I’ve read some interesting things about it. It sounds a little like Shark Tank where kids (and toy experts) are judges of toys. I’m not sure how much personal finance it will teach, but it sounds like it would be a fun show.
You can buy each of the two seasons of The Toy Box for $15 on Amazon. I can’t seem to find it available for streaming on any major platform.

Final Thoughts on Teaching Your Kids Money with Television

There are a lot of resources out there. I think it makes sense to start with the free ones like Warren Buffett’s Secret Millionaire Club. We’ve watched most of them and, while it isn’t our kids’ most favorite show, it’s among their favorite learning shows.

[Originally Published: 1/6/2022]

Halloween Money Lessons – Cash or Candy

Halloween Cash or Candy

Halloween is just a week and a half away. This is the time of year for witches, ghosts, candy, and kid money lessons. Wait, kid money lessons?

Yep.

We all know how Halloween night is supposed to go. Kids get dressed up in costumes, and they go door-to-door ringing bells, saying “Trick or Treat,” and get some free, delicious Halloween candy.

What if, instead of just giving candy, the response was “cash or candy?”

That’s what Chuck Jaffe has done since 2016. It’s worth reading the article. I’ll wait.

If you cheated and didn’t go read the article, then:

  1. Shame on you
  2. I’ll give you a little summary

Jaffe has played games with kids where they either forgo candy or trade candy they already have. In return, they can have a guaranteed cash prize and/or a chance at a bigger cash prize.

The idea is simple… get kids thinking about value.

Almost all the kids took the money when the offer was simply cash. That makes sense; they can get candy from every other house. Over the years, the kids visiting Jaffe’s home seem to know he’s “the money house.” The kids almost always take that option, even when it’s just a gamble. And why wouldn’t they? It’s fun.

What if kids were given big candy bars? Everyone knows that the houses that give out the big bars are rare. They’re more valuable.

Experiment: Would Kids Choose Cash or Big Candy

I found this YouTube video about how one house offered kids a $2.50 giant bar or a dollar bill. Clearly, the giant bar of candy has more value. However, kids can still get candy from everyone else, and cash is rare. It turns out that about 25% took the dollar bill. There are a few other interesting things that the person learned. I don’t want to give it all away, so watch it below:

Final Thoughts

I’d love to try out some of this stuff at Halloween myself. However, we only get two or three groups of trick-or-treaters every year. I’m not sure I’d learn too much or increase the financial literacy of too many kids.

One of the more interesting side effects of Cash or Candy is that kids walk away with less candy. That’s less sugar, cavities, and obesity.

Finally, if Cash or Candy isn’t your thing and you find yourself with too much candy, you can always try “Cash FOR Candy.” This program run by HeathyWage will give you cash for sending your candy to overseas troops. They have limited cash to give, so you need to act fast.

Teach Kids How to Budget

Teach kids budgeting

Teaching kids how to budget is essential. It’s a skill they’ll use their whole lives. It’s a great way to start kids on a financial independence path and make your kid a millionaire.

Many adults need to learn how to budget. If they don’t, their lives can become more difficult as they build debt. That means they spend much of their paycheck simply paying interest to the bank.

Fortunately, when you start teaching younger kids, they can build good budgeting habits before bad ones set in. One of the problems with teaching budgeting is that it can be quite boring to kids. Kids are often a little interested in how much things cost, but they don’t really want to know where the money goes.

They’d rather play a game. So let’s give them what they want – a game!

Budget Project for Kids

In my son’s fourth grade class, the teacher used this specific Wants and Needs Budget Project. It’s free from Teachers Pay Teachers. Since this one is free, maybe I should call it “Teachers Don’t Pay Teachers.”

The student is “hypothetically” dropped off on an island. They are given $1450 to spend but must get needs (shelter, clothing, food) and wants (entertainment such as internet access, game station, tablets, streaming service, Legos, dolls, etc.)

The shelter has three options: a mansion, a house, and an apartment. The mansion has entertainment, such as a movie theater and playground. However, it eats up most of the budget.

There are two clothing stores: a fancy store and a normal store. According to my son, very few students picked the fancy store. Given the context of being dropped off on an island (presumably alone), why would anyone choose the fancy store?

Next, the kid has to pick out food to bring to the island. Most kids will pick a lot of their favorite foods.

The problem with the food and clothing instructions is that there needs to be an indication of how much to bring. You have to eat and wear clothes for a month. If you choose to spend $6 on bacon… is that going to last a month? It’s unreasonable to expect anyone to know exactly how many shirts or pants to buy. Does the housing have a washer and dryer for laundry? Shoes are a clothing option. Do kids need to buy shoes? Or can they skip them since they are likely already wearing shoes when getting dropped off on the island?

The teacher (or parent) should provide some guidance on how much to buy of each. Perhaps the food should be normalized to a 30-day supply. Or maybe the food should be simplified into three choices: a meager (bread and water) tier, a middle tier, and a fancy tier (a 30-day supply of their favorite foods)

Finally, there is the “Want” store. This is the fun stuff that kids love. Kids can buy art supplies, game systems, tablets, internet access, streaming services, Pokemon cards, Legos, books, etc.

I wish I knew what my son picked for his “wants.” Maybe he remembers, and I’ll update this article later. If it were me, I’d go with the Kindle, internet access, and a streaming service. I would choose Netflix, but I bet both kids would choose Disney+.

Final Thoughts

The creator of this budget project specifically noted that it’s useful for math. I think the idea was to create an interesting scenario for kids so that doing all the addition isn’t dull. That’s probably why all the foods are listed separately rather than three plans. It’s more math to add up the cost of bananas, chicken, and bottles of juice than it would be to choose one price for a tier of a food plan.

There may be better tools to teach financial literacy than this budget project. However, it’s a great introduction to financial literacy.

Kid Start-Up by Mark Cuban (Book Review)

Kid Start-Up by Mark Cuban

Ask a kid if they want to start a business, and you’ll probably get a mixed response. Some kids are excited for a new adventure. Other kids may see it as a lot of work. A kid with either opinion is correct: Starting a business is both an adventure and a lot of work.

If you have a tween kid who is motivated to start a business this is the book for you. Kid Start-Up was written by Mark Cuban, Shaan Patel, and Ian McCue. I speculate that Patel and McCue may have done most of the writing, and Cuban lent his name to give the book credibility. I have difficulty believing he carved out a lot of time from his hundreds of business ventures to write a kid’s book.

I believe there are two clear-cut ways to make your kid a millionaire. One follows traditional personal finance methods such as saving, earning, and investing. Teaching compound interest will take them a long way. The second way to make your kid a millionaire is to teach them to be entrepreneurs. Kid Start-Up is the perfect guide for that path.

Kid Start-up Summary

Kid Start-up was written for kids. While the authors claim that kids ages 8 and 9 can follow it, I think it might be better suited for kids who are a little older. In fact, some of the advice is perfect for adults. I’m going to go through each chapter and highlight what is covered:

Chapter 1: What is an Entrepreneur

An entrepreneur is someone who starts a business to make money. To be an entrepreneur, you must have an idea and take action on it. For example, I had the idea for Kid Wealth over five years ago. I only took action to make it a reality about a year and a half ago. Of course, right now, Kid Wealth isn’t much of a business – it doesn’t make money. Maybe it will make money and become a business someday. In the meantime, I enjoy the hobby of writing it.

One of the important things to know about being an entrepreneur is that they fail. Some of them fail a lot. Failure can be a good thing. As Jake from Adventure Time says:

Jake from Adventure Time on Sucking

The good thing about failing as a kid is that you get started on that first step to being good early.

Successful entrepreneurs have five main traits. They are hard-working, enthusiastic, creative, flexible, and motivated. I feel enthusiasm and motivation go hand-in-hand, but the authors decided to write about them separately.

The main thing that an entrepreneur aims to do is to create value for someone else (usually a customer). You help them solve a problem they are having. For example, imagine you are a parent of a kid who wants to start a business. You want to help your kid learn how to start a business, but how? The authors of this book solve that problem by putting it all in the Kid Start-Up book. You spend a few dollars to give your child the knowledge of several successful entrepreneurs.

The authors of the book created a business that sells that knowledge. If people have problems like their grass growing too fast and crazy, kids can create a business that mows lawns for neighbors.

Chapter 2: The Kid Entreprenuer

Kid entrepreneurs have a few advantages that adults don’t have. The book repeats the message that by starting, young kids have more time to learn from the mistakes they make. However, the book is realistic. Kids are in school a lot, so they have to plan their time outside of school well. That can mean cutting out video games and not watching Mr. Beast on YouTube. Kids need to use that time to build their businesses. There will be time later when they’ve made their millions.

Kid Start-Up makes the great point that when time is limited, people become more efficient. For example, if you have three months to read a book, you might take all three months. If you have three days, you’ll divide it into thirds and attack it a little each day. This chapter gives kids some basic productivity tips.

Success kid entrepreneurs say the following quotes every day:

  • “One Day at a Time”
  • “One Task at a Time”
  • “I Will Make Money”
  • “Two Hours for Business”
  • “My Reward Will Be…”
  • “My Goal Is to…”

The book also gives you the best predictor of success for entrepreneurs. Curious what it is? I’m not going to give it away: Buy the book to find out.

Chapter 3: Discovering Your Business Idea

The main idea of this chapter is to identify a problem in your daily life. You can’t help someone without some kind of problem. Once you have the problem, invent a solution with a product or service. Sell that solution and profit!

What’s the best business idea? It’s a business that you are good at and gets you excited about working hard. You need to have both of them if you are going to be successful.

Chapter 4: 10 Businesses Any Kid Can Start

This next chapter is just what the title says. It’s ten business ideas that kids can start. The two ideas that interested me the most are the scented soaps and making and selling duct tape wallets. One of my sons loves to cook, and the scented soaps would be up his alley. The other kid loves making things. He’s already made wallets out of construction paper just for his own amusement.

This chapter not only gives kids some concrete ideas but also walks them through the pricing examples. Kids will learn the cost of goods and how much profit they’ll make for each sale. Kids will also learn how and where to sell the products and services.

Chapter 5: Nuts & Bolts of Launching Your Business

This chapter walks kids through the technology that can be used to sell most products and services. Kids will learn how to make flyers, use social media, build a free website, and sell on eBay.

It finishes with a page on legal tips.

This chapter often recommends that kids work with their parents. In reality, very few of the ideas in this chapter make sense for an eight or 9-year-old. Parents will need to do nearly everything in this chapter.

Chapter 6: Successful Kid Entrepreneur Interviews

This chapter consisted of six interviews with six kids with successful businesses. These stories are motivational, but I don’t know how useful they are. The answers are often very specific to that specific kid’s business. They may not translate to a different business.

Chapter 7: 10 Business Principles Any Kid Can Follow

This chapter serves as a summary or reinforcement of the previous chapters. It brings it all together.

1. Business Ideas are Easy

Kid Start-Up stresses that coming up with a business idea is easy. I agree. I have at least ten business ideas that are just sitting around. What’s difficult is executing the ideas. It didn’t take me long to come up with the idea of a website that helps parents and kids learn about personal finance. It was a lot more work to find the domain, write the articles, promote it on social media, etc.

An important thing to note is that you shouldn’t guard your business ideas. Most likely, no one else has the time to execute your idea.

The section finishes with a template designed to guide kids to create an action plan.

2. Do What You Know

The best business to start is in a field that you already know. If you don’t have a dog and have never walked one, a dog walking business may not be a great idea. If you have no experience, you don’t know if you’ll be enthusiastic enough to work hard at it.

3. Don’t Expect to Win the Lottery

Starting a business is not a get-rich-quick scheme. It can seem like famous people on social media make money overnight. It’s extraordinarily rare to go viral on social media and also extraordinarily rare to make a big profit in your business right away.

Slow and steady wins the race. It will take some time to get your name out and for business to come in. Try to set some goals, such as making your first $100 in the first month. Then try to make $200 in the next month. Keep on trying to grow the business and profits.

4. Save Money to Make Money

You do not often see a frugal mindset mentioned in an entrepreneurial book. However, it makes a lot of sense. If you can keep your costs low, that’s less risk and more profit!

5. Be a Big Fish in a Small Pond

It’s better to do business in a small town with less competition. You wouldn’t open up a fast burger place right next to McDonalds. It’s better to find someplace with no McDonalds, even if fewer potential customers are there.

6. Make Money in Your Sleep

Be careful about trading time for money. It can work for some highly paid professions, such as doctors, lawyers, and plumbers. If you start an online business, you can make money in your sleep. For example, I could add advertisements to this website and make a little money throughout the day. However, my traffic is very low, and you might not want to look at advertisements. I’d prefer you email a friend or share Kid Wealth on social media. That’s more likely to happen if you have a great experience here.

(Are you having a great experience here? Let me know by leaving a comment.)

7. Just Start

This is perhaps the best advice in the whole book. The biggest thing is to get going with something. You can always change/modify/evolve it.

The only problem with this section is the assignment. It asks kids to take an online business idea from the previous section and build a website along with a payment system. At least it tells the 8-year-old to ask their parents to help with a PayPal account. The advice is to advertise the product or service even if you haven’t created the product or know how to do the service. I don’t think that’s a smart idea.

8. Be Obsessed

This may be the second most important advice in the book. If you are obsessed with your business, you will think about it every waking minute. That means you will want to work on it and improve it.

Kid Start-up separates passion from obsession. Obsession is much stronger than passion for something. It suggests writing some things that you are obsessed about. My oldest is obsessed with Pokemon. My youngest is obsessed with anything related to Legos. Maybe they could each have their own YouTube channel.

9. Give Something to Get Something

The advice here is to give away something for free to hook your customer. For example, you can offer the first car wash for free. I could offer a free ebook for Kid Wealth in exchange for your email address. Perhaps when I create a product (such as an online course), I could sell it to you.

In fact, the example they give is to create an eBook to give away. However, I don’t know how many 8-year-olds can write a 10-page eBook.

10. Start a Service-based Business

Finally, Kid Start-up suggests selling a service-based business instead of a product-based one. It feels like they ran out of ideas and just wanted to make an even number of ten business principles.

Chapter 8: Extra Content

The extra content is a page on affiliate marketing, which is completely inappropriate for a kid under ten. Next, there’s a glossary, which is a lot more valuable. Finally, there’s a list of software and online resources that can help you get going. Some examples are art programs for designing flyers or free website hosting services.

Final Thoughts on Kid Start-Up

Mark Cuban and other Kid Start-Up authors
Mark Cuban and other Kid Start-Up authors

Kid Start-Up is the best book on entrepreneurism for kids. The only nitpick is that the suggestions often go beyond the target ages of 8-9 years old.

It’s very difficult to imagine a book on entrepreneurism because it can be very vague. Kid Start-Up has to cover the process of creating any type of product or service. Yet it does it very well. I felt like I was ready to start a new company after reading it.

“Kid Start-Up” is not just a book; it’s a call to action for the next generation of entrepreneurs. It encourages kids to dream big, work hard, and take the first step toward creating their future. Mark Cuban’s passion for entrepreneurship and dedication to empowering young minds shine through every page, making this book a must-read for kids and adults alike. It’s a roadmap to success that starts with a single step, and who better to lead the way than Mark Cuban (or writers working with him)?

If you enjoyed this book review, please check out our guide to the best kids money books.

Kid Wealth Voted Best Financial Literacy Content for Children

There’s a tremendous community of personal finance content creators. I started blogging my own financial journey in 2006. I quickly realized other bloggers had the same idea: Take control of your money, and it will take care of you.

Nowadays, blogs might not be as popular to learn about personal finance as they once were. There’s a lot more content now. There are short-form and long-form video platforms like TikTok and YouTube. There are social media platforms like Facebook and whatever Elon decides he wants to do with Twitter/X this week. Podcasts are extremely popular.

All of these different forms of media fall under the umbrella of content. There’s only one awards show in the world of personal finance content. It’s not like television or movies with awards like the Emmys, People’s Choice, and Screen Actor’s Guild.

The only awards in town are the Plutus Awards, and today they have decided that KidWealth is the Best Financial Literacy Content for Children!

The Plutus Foundation does a lot more important work than running the Plutus Awards. You can read more about the Plutus Foundation mission here

You may have noticed that I haven’t created new articles in the past few months. I had been working on a push to close out the year, but now I’m even more motivated.

Stay Tuned.

Teach Your Kids to Be a Loan Shark

Raise your hands if you are having a great Shark Week so far? I know I am.

Kids love sharks. Especially baby sharks (do do do do-do-do). I hope kids are learning lots about sharks. Did you know that sharks can teach you about money?

I found a shark who will teach your kid (or you, if you are a kid) how interest works. I’ve got an easy job of putting just a few words of an introduction together. The great people from Nex Gen Personal Finance are doing all the work. I love it when I can work smarter, not harder. Thanks, Nex Gen Personal Finance!

A couple of weeks ago, I was searching for something unrelated on the internet and stumbled upon this gem from the Nex Gen Interactive Library. You get to play the “bad guy” as you try to maximize profits from all the delicious victims that enter your office looking to borrow money.

Shady Sam Loan Shark

I made it so that you either click on the title or the image to play the game. It isn’t as easy as you think. I got a few wrong. I think it might be best for kids in the 4th grade or higher, perhaps ideally in the 5th or 6th grade.

I’m keeping it short today. It gives you more time for learning.

Originally Published: 7/26/2022

Make Kids Negotiate for a Bigger Allowance

Kid negotiate allowance

My ten-year-old thanked me for making him read the American Girl: Smart Girl’s Guide to Money the other day. I thought it was weird because he had read it last year. I only made him read it because he needed a “free read” for school at home and rejected so many of our other books. Even though it’s a book geared towards teenage girls, a 9-year-old boy can find value in it.

I probed deeper to find out why this is interesting now. It turns out that one of his school friends gets $12 a week for allowance. My ten-year-old only gets $5/week. This friend travels all the time – she spends more time at Disney World than Mickey Mouse. She has many opportunities to buy from gift shops where my son doesn’t.

My son remembered that the American Girl book wrote that asking your parents for a bigger allowance was fair. He knew that it was wise to mention her as a comparison. He wasn’t whining but just making a logical argument.

I said, “So you want to negotiate a bigger allowance? Let’s talk about it.”

One of the best parenting books about money is The Banks of Dad (Review). In that book, author David Owen suggests that the kids should apply for it in writing.

That’s exactly what I asked my son to do.

I’ve seen him write a few dozen sentences in a school paper on some fictional adventure. However, when it came to this – something that might impact him more – he mustered three sentences. They weren’t persuasive at all. He said that he’d do his summer reading. That’s no big deal. He’s supposed to do that. He even forgot to mention his friend’s allowance in the paper.

The sentence about doing his summer reading gave me an idea. His school gave summer reading “suggestions” – award-winning books in the last year. However, they wrote that anything that seemed interesting was fine.

So I thought, “He had a positive experience reading a money book. What if I give him a fun one that covers a little more? Better yet, I’ll create a whole ‘Fun Kid Personal Finance Course'”

  • Grandpa’s Fortune Fables (Review)

    I decided he could earn one dollar a week by reading Grandpa’s Fortune Fables and completing the code at the end of every chapter. Unfortunately, the code is like Wheel of Fortune, and he was able to complete it by the fifth chapter. I had to explain that finishing the book was the requirement – not the code itself.

    He read it in a couple of days.

  • Complete the Money Time Kids Course

    I reviewed MoneyTime in the past. In fact, my son, who was eight at the time, gave it a test drive. The course was designed for 10-14-year-olds, so it was challenging. He got through a few topics, and I got enough detail for my review, so we moved on.

    MoneyTime has a total of nine topics. I decided he could earn a quarter for each “topic” in the course for a total possible earnings of $2.25. I only asked him to do the ones he hadn’t done before, but he misread my instructions and did them again, so it was reasonable to adjust my system to include that.

    He got through three topics fairly quickly. It will be a little slower now that he’s back in camp. One benefit of this approach is that he’ll find the time if interested.

  • Watch Warren Buffett’s Secret Millionaire’s Club

    I wanted him to learn entrepreneurialism. One of the best ways to learn about money is through television. Warren Buffett’s Secret Millionaire’s Club is a cartoon that is a perfect fit for both.

    My other requirement was that after watching all the episodes, he would have to write a paper about what he’s learned.

    My 9-year-old is now interested in negotiating an allowance. I want to sync them up, so they can watch this together and write a better paper together. I don’t know about this one because the writing ability of a pre-fourth grader is different than a pre-fifth grader.

He can earn $4.25 in allowance from these tasks, bringing him to $9.25/week. It’s less than his peer’s $12/week, but he could get more than he asked for because of…

Allowance Bonus: Compound Interest

After completing all the previous tasks, he unlocks a special bonus. By now, he should know the power of compound interest. Using the concept in The Bank of Dad, I’m going to pay him 1% a week. This is around a 68% annual interest rate. When he has $50 saved and gets an extra 50 cents each week for doing nothing, it’s similar to earning $9.75 a week in allowance.

It will cost me a few extra dollars each week – more than $200 a year with the compound interest bonus. Between the two kids, it might cost me more than $500. They’ll make money mistakes and they will learn.

Real-Life Money Spending: Always Look at Prices!

A couple of months ago, I wrote a real life money story about my son using his debit card to buy some arcade games and candy for his friends. I guess this isn’t normal for a ten-year-old.

Today, I’ve got another money story. As you can tell from the title, it’s not quite as positive.

My kids love Guardians of the Galaxy. They love that it has the action of a Marvel movie, but also that it’s very funny. They also love the music, which is a big win for me. We were at Walmart picking up a few things, and my 10-year-old (the oldest) spotted a Guardians of the Galaxy magazine as we were going through the checkout. He grabbed it and said that I could subtract it out of his FamZoo account. It sounded good to me. I encourage reading over video games and YouTube any chance I get.

Guardians of the Galaxy Magazine

We got home, and it was late, so we went to bed. The next day we were both in for a surprise. I looked at the receipt and saw that it was $13.99. So I asked my son if he knew how much the magazine was. He said that he didn’t. I bet it wasn’t advertised very well outside of the little price in the lower-left corner. I don’t think many kids would know to look there for the price anyway.

The tragedy is that $14 at Walmart goes a lot way. You can get a decent toy and have money left over for a good amount of candy. While he loved the magazine, I think he realized that it wasn’t the best use of his money.

It was a great lesson, and it wouldn’t have happened if I didn’t let my son control his money with the FamZoo account. By empowering my son to make money mistakes, he is learning. In a related story, I have an update on the $7 shark pen my youngest son bought in that article. He came home at the end of the school year with it, and it was broken. The shark’s jaws wouldn’t open or close anymore. I asked him if he thought he got $7 of value out of it, and he said that he did. Maybe it wasn’t a money mistake after all. Maybe he is still learning some of the costs of things.

The money-learning journey continues…