← Afford Anything | Get Smarter With Money
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- [00:00]
A
Have you ever wondered how to raise kids who actually understand money? Not just the mechanics of putting coins in a proverbial piggy bank, but the deeper skills of saving a long term, planning long term in kids standards, spending wisely, giving, putting in extra effort if there's something big they want, making trade offs. Today's conversation is all about how to teach financial literacy to kids. Our guest today is Dr. Stephen Day. He is the director of the center for Economic Education at Virginia Commonwealth University where he is also a term associate professor, teaching classes in Principles of economics, a special section for future elementary school teachers, and managerial economics in VCU's executive MBA program. He holds a PhD from North Carolina State and he is the author of 10 Teach a Kid to Save. In our upcoming interview, we talk about how to build a mini economy inside of your own home so that your kids can develop smart money habits from an early age. Welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. This show covers five financial, psychology, increasing your income, investing, real estate, and entrepreneurship. The acronym is FIRE with two I's, double eye fire. Hi, I'm your host, Paula Pant. And today's episode is a very practical episode about the mechanics and the benefits of creating a mini economy that your kids can participate in inside of your own home. So if you have kids, grandkids, nieces, nephews, if there's any child in your life that you interact with closely enough that you're managing chore charts and negotiating the allowance, you'll get a lot of practical hands on advice from today's episode. Here he is, Dr. Stephen Day. Hi Steven.
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B
Oh, hi there Paula. How you doing?
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A
Great, how are you?
- [01:57]
B
Oh, I'm doing super, thank you.
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A
Steven, what is a mini economy?
- [02:01]
B
A mini economy is a household system where both kids and parents have jobs and sometimes businesses and there's play money and they buy and sell in the household store, which just set up on your kitchen table. So it's a way to sort of manage chores, but connect that to saving and spending choices about money. Ultimately, it's a way to get kids and parents talking about money and developing practice and habits about money that it's difficult to make happen in another way.
- [02:32]
A
Okay, so I want to dig into a little bit later how to actually implement this. But first a few questions around the why of it to begin with. That sounds complicated. And parents are already quite busy and is it really necessary to set up a brand new economy?
- [02:51]
B
Yeah, I think that kids already like to play. They already like to set up shop and parents already want kids to do chores. And this just kind of connects those things. It takes a little bit of organization, a little bit of planning, but as far as actual time, not much. You know, it's not complicated. It's like the game. You remember the old quote from the Othello board game. It takes a minute to learn, but a lifetime to master. You can start a mini economy by just telling very small children like, you get paid this week. Are you going to spend on something little now or are you going to save for something big later? And that's something that even kindergarteners can manage and something that even parents can manage with almost no planning at all. Taking some thought to how to teach your kids about money is worth it. You know, it's something that parents want to do. And I hear from parents all the time that they wish that their parents had taught them more about money when they were kids. So the idea is that parents need an on ramp. They need something easy for doing something that they just don't know how to do and they really want to do, which is help their kids develop good money habits. So I think that this is a play based way to do it. I think it's pretty easy actually, and I think parents should do it all right now.
- [04:07]
A
There are three distinct stages of development and I'd like to talk through how this works at all three of those. Let's start with the earliest stages. This begins at around what age three?
- [04:20]
B
Well, yeah, three. Well, I mean, even a little before age three is just when kids are very young and they're learning about what the world is going to be like. I mentioned this because a lot of parents think that the ship has already sailed and they haven't started their kids on learning about money at all. But the thing is, if you're just kind of do basic good parenting and keep them safe and fed and nurtured and read to them and give them unstructured play when they're very small children. That's what kids need to start developing executive function. And that's the building blocks for self regulation that persists throughout their entire life. And so I'd say if you're a parent and you're just doing baseline good parenting, you've already started teaching your kids about money. You've given them the very foundation for them having a healthy financial life. The next two stages I'd say would be the elementary grades and then middle and high school. There's a lot out there for teaching kids about money. It's mostly in the middle and high school years, there's some for elementary, but I think that's where we really tend to miss. The problem is, is that elementary grades are when kids develop habits and norms and routines. And if they don't develop any habits and norms about money, then you can miss the boat. And I really think that this is where we need to teach kids. Kids need to practice with money. They don't need info about money when they're in elementary grades, but they need practice. You know, I have four children. I found myself knowing how to teach money. You know, I do it in classrooms for a job, but I didn't really have a way to give my kids practice with money such that it develops habits in a way that wouldn't be just pedantic or teaching them. I mean, I mean, don't get me wrong, there's games out there, there's clever ways to teach this age about money, but the practice is more difficult. So I thought, I need a system, I need a way to help them practice. And so I turned to the mini economy is what I did.
- [06:23]
A
Right. And I'm glad that you mentioned executive function, because executive function is that first developmental stage.
- [06:32]
B
Executive function is something that we practice really throughout our whole lives. I mean, it grows in people up through their 20s, you know, famously the frontal lobes still growing and everything.
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A
Right.
- [06:41]
B
I mean, you can think when you're in your 20s, even trying to learn self control and things like that. But we set the path for it when the children are very young and boundaries, rules, but then also a level of autonomy as well. Kids knowing that they can make choices that affect the world. And so as they move from the very young ages, where just knowing what's the world I live in and how I can operate in it, then that next stage of the elementary grades is where they start saying, how can I start practicing a bit more autonomy, especially in these areas like money or managing any kind of resource really, including my time. Because one thing the mini economy does, I hope I'm not getting ahead of myself here, is it connects their work to their money, to their habits, to their goals. And that's a thing that small children can do. They don't often get a chance to do it. So about the executive function, we just need to keep on working on it. I mean, it never stops at different stages. There's different ways to continue growing it. And so when you get into middle and high school, you can start adding more information. I mean, the school curriculum, your family and parenting culture, all these things start to communicate to people how they can start to build autonomy and how they can start contributing to the community, the family, and how they can be supported in turn by the community, by the family. And I think that really describes a successful person, you know, a person who has autonomy and competence to be a functioning member of society.
- [08:18]
A
Okay, so take this stage by stage, starting at the earliest stages. So let's say a child is three years old and you want to develop a mini economy in your household. We'll assume that the person listening is they're parents of a three year old. They want to set up a mini economy in their household for their three year old child. What would you do at that stage? How do you begin that process?
- [08:41]
B
Yeah, so I think when we did this with my kids, I think the ages were I had a three year old, a five year old and a seven year old with the very littlest child. We say, okay, your job can be. And you know, they can't really make up their own job when they're three. But we had them be the zookeeper because we have a cat. And so the zookeeper's job was to fill up the cat's bowl and to let the cat in and out of the house. Cause we have an indoor outdoor cat and then also to pick up the stuffed animals from the floor. And this is what the parents really wanted done because there were always stuffed animals all around the house. So that's a job that a very small child can do. Right. They can fill up the cat's bowl, let the cat in and out, and they can pick up the stuffed animals. The jobs should have some mix of skill and cleanup. They shouldn't just be all cleanup or all drudgery because the kids want to develop skill. I mean, any interesting job that's motivating has some sort of challenge to it. You sit down with the kids ahead of time and you say, our new economy is going to allow you to buy some things that you don't usually get. We're going to have a little store right here on the kitchen table and look at some things that I already got for it. Maybe a couple trinkets from the dollar store, some candy coupons for privileges like more screen time, or some food from the concession stand at the soccer game and say you can buy this stuff with the money you get from your job as the zookeeper. Let's go ahead and do it. And so they fill the cat's bowl, they let the cat out, pick up some stuffies. You pay them with the play money that you make. But you don't go straight to the store. You ask if they want to, if they're little, you ask if they want to save up for something so you have something a little bit bigger in the store as well. And you say, look, this toy cost in our house, the currency is day bucks, cost 10 day bucks. You need to do your job three times to save up for that toy. So you could get some of this little candy now or you could save up two weeks to get the toy. What do you want to do? 3 year old can understand all that. You can do it with a very minimal amount of planning. And you see what you've done there is you've connected your household routines. It's embedded in the family. You're talking about planning, you're talking about the future. You're helping them make choices in a structure they can understand. They like to create and color the money. But then just this whole idea of do we choose something little now or wait for something better later? I mean that's, we do that our whole lives, you know, and we really want to start them on those choices. Now you can see with just, I just described one hour on a Saturday morning. So you can do it with the little kids, a little bit bigger kids, you can plan a little bit further into the future. We laid out the coupons and all the options for our 5 year old and 7 year old and said, how would you like to plan this? How do you plan to save and spend your money? And they described what they wanted to do. My 7 year old said, I'm going to do a pattern. Because she'd been learning about patterns at school. She says, I'm going to spend two this week and save five next week. I'm going to spend five and save two back and forth, back and forth till I have a little bit of candy each week and I can buy the toy in four weeks. She was also doing math. By the way, the five year old, he's a deep feeler and a deep thinker and he had been asking about what about our donation box. Because we, I live in Richmond, Virginia. A lot of intersections feature folks with cardboard signs asking for money. Yeah, In Richmond, my 5 year old, then 5 year old Calvin said, dad, you don't give money to those guys. Why not? Aren't we supposed to share? And this is a difficult question because we encourage kids to share. We want to model sharing. But here I was not sharing with the guy with the cardboard sign. So what's up? I said, well, we do share with them. We do it through a different way. A lot of our neighbors who don't have homes, you know, there are valuable neighbors. We want to love our neighbor as ourself, but a lot of times they need professional help that we kind of can't give. So we give to organizations that do. So we give to church and church helps them through that. And that's why we do service times as well. We donate our time. When we started our mini economy, I asked the kids, so how do you plan to save your money? And the five year old said, I want to give some to the church so they can give to the poor. That was the first thing he wanted to do. And then he didn't want to spend any money. He wanted to only save. This kid is the saver by the way. He's 11 now and he saves, save, save, save, save. Having this system, even at its very most basic form, it allowed me to have these conversations in a way that the kids could get. It wasn't just the big grown up world of money where I make several thousand dollars a month, which they don't understand at all, but they make this bit of money and they can contribute. And the parents also have many economy jobs. So I also am contributing to the share save spend decisions. And we have these conversations as a family and it allows us to have these conversations and make these choices and model that behavior which otherwise we wouldn't be able to do.
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A
You've described in that mini store you've got goods like candy versus let's say a stuffed animal. But then you've also got, we'll just call it services for lack of a better word.
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B
I call them services privileges. I didn't have a great word for it. Cause I wanted to say goods and services because that's sort of the big basic economic term. But in the mini economy it's often goods and privileges, right?
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A
Exactly. Such as increased screen time.
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B
Yeah.
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A
And for something like increased screen time, is there a dollar a day bucks value associated with that that you can save up for?
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B
Yeah, you have to decide what price to set on that. And sometimes you get it a little wrong. You can end up, the kids end up getting way more screen time than you wanted them to. But you know what, it's sort of like, it's fair in that case, you know, you set the price and if they end up spending their money and getting a lot of screen time, I think it's okay because the things that you sell privilege coupons for are things that are often a little bit bad for them or Annoying or a burden for the parent. You make privilege coupons for things for which you would often say no, but for which sometimes you say yes.
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A
Right.
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B
But in the normal course of family life, the kids usually get these things by just asking the parents and bugging the parents, being like, mom, can I, mom can I? And Mom's like, no, no, no, yes, fine. Or. And I think what the kids learned through just bugging their parents to get stuff is that the way you get goods and privileges in life is by going to the parental authority or whoever's in charge and bugging them for it. Yeah, I mean, they don't really learn anything about choices there. It's no cost to them to bug you might as well just do it. It's a hassle for the parent and they don't learn any kind of self regulation from it. So when they have a mini economy job and they're the ones that make this choice now, first, they don't bug you about it. Also, they're the ones who have to make the choice and there's a value assigned and they need to decide what it's worth to them.
- [16:08]
A
There are a variety of philosophies when it comes to chores. You hear about the households that say, well, everybody has to do a certain amount of chores because that's the tax for living in this house. You know, you get to live in the house. There's a baseline of chores that you must do. Do you believe that all chores should be compensated? Or there's a base that everyone must do and then there's additional chores for which compensation is merited.
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B
I think this is like the fundamental debate in bringing up kids and teaching them about money. I mean, everyone has an opinion on this. I did a deep dive. I jumped into behavioral psychology, child development, economics. I did as much research as I could on this because when I would teach classroom mini economies to teachers, someone would raise their hand and say, but you are demotivating the kid and steamrolling the rules by making them pay for stuff. You're making everything for sale. And that's a real concern. Motivation crowding theory says that you have a motivation that can be intrinsic or extrinsic. And if people have an intrinsic motivation to do something already, if you start paying them for it, then their new motivation will be the payment rather than whatever sort of intrinsic reasons they had. And that is true and that's real and that's important. So there's a strong argument to be made for that. You should do this work because you're A member of the family. We have family rules, and we all contribute as a family. If you never pay the kids for chores, then you lose the opportunity to teach about the connection between planning and work and budgeting and goals. There's good news, Paula. All humans, even kids, can think in categories, which means that you can pay them for some jobs but not for other jobs. It's really that simple. Actually, the jobs that you should not pay them for are work that they're already doing, things for which there are already expectations in place. So preserve your family rules. Keep whatever momentum you have with this. Is family work.
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A
Okay, to the person who's listening, who has a newborn, what should they do? I mean, when the kid is old.
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B
Enough, I think what you should do is you should teach the kids that there are three kinds of work. There's family work, your job, and then service work. Family work is work that you should do because we want to have a nice house to clean up after yourself. It's work that you do because you're the one who is living in the house. And it just is keeping up your own responsibility, really. Your job is making new stuff. It's being productive so that you can build new things that exist in the world and you can get more stuff. So a lot of families already have what they call extra jobs or gig work extra. And I think that kind of folds into the mini economy pretty well. I really like to signal to kids that work is productive and they're making new things. If you don't do jobs, then stuff won't get made. So you should have a special category of thing called their job. I like having a job title where they get paid for that. It's also important to have that category of service work, because if you ever are doing something that benefits the community outside the family, then there needs to be a category for that too, because that's not just upkeep of your own home if you're donating your time, you know. So I think it's important to. To communicate to kids that sometimes we serve others, and we ought to serve others. If you have a small child, you should have them scrape their plate and push it and put it in the dishwasher. That should be family work. And that's something that my family is really bad at for some reason. We can leave the dinner table, and no one has put their plate away. So that's something that we really need to work on. I think I'm gonna try to dump that in the category of family work, but I haven't developed any expectations for the kids on that yet, so I don't know what I'm gonna do. Jobs are good to do all at the same time. People in general get motivation to do work when it's in a community setting. And so if everyone has their own job, but everyone's working at the same time right now, that builds intrinsic motivation as well. I need to make sure that I don't make this false dichotomy between, like, family work is intrinsic motivation, paid work is extrinsic. It's not like that. All because most things we do have mixed motivations. You do things most intrinsically if you enjoy them. And some jobs we like and some jobs we don't like. You know, they say, get a job you love and you'll never have to work a day in your life. I mean, that's true for the part of your job that you love, but most people have parts of their dream job that they hate. You still have to go to silly meetings sometimes, or you have to answer emails or there's things you don't want to do.
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A
Yeah, yeah.
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B
Lisa Dahmore in the psychology podcast I Hope that said that right. She had done a show where they likened the motivation to a plate of food. They say, there's things on your plate that are a job to a plate of food. There's things on your plate that you like, there's things that you don't like, and you kind of have to help the kids get through that whole plate bit by bit. So all our motivations are mixed. And contrary to what some people think about motivation crowding theory. Well, internalized actions that get payment. People are highly motivated for them. Getting paid does not wreck motivation. Right. In fact, if people already are supported in autonomy and competence, relatedness to their community, then you can add a payment on top of that. It adds extra motivation, and you can teach about money. And frankly, sometimes they just deserve it. You know, I mean, if the kid is doing extra hard jobs for the house, they should get paid for it. And I think it signals that they are valued and. And it signals that they're competent. It lets them know their work is valuable, and it helps them start to understand the value of the work that they do.
- [22:14]
A
For many parents, it's hard to keep up with chores on a regular basis. Every week can be a little bit different. There are some weeks when you have to work late. There are some weeks you're coming back from or leaving for business travel. There are some weeks when there are swim meets or soccer practice. Or there's a an out of state tournament. For many parents, given that every week is different, some weeks have dentist appointments. Given all of those changes around scheduling, it can be hard to maintain chore consistency. How does that express itself when you're trying to get kids to maintain chores on a regular basis?
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B
Yeah, I'm smiling because I'm like, do you look at my Google calendar? Because there is so much soccer practice. We've got soccer practice four nights a week. We had an orthodontist visit this week. Birthday parties, so many emails from teachers, there's so little time to do it. The thing is though, you can do things even when you're busy if there's a structure to it. But parents, not only do they not have structure when it comes to chores, they usually don't have very clear expectations either. Researchers observed parents trying to get kids to do chores. It was pathetic. Like they'd walk in while kids were watching tv, you know, I mean, don't try to get the kids to do something while they're watching tv. Their brains can't focus on it. They're negotiating and pleading and begging and ultimately just doing the kids work. What they find out is that sometimes parents will ask kids to do chores out of frustration. They see the kids sitting around and they say, I'm so busy, you should be busy too. And they just spring it on him. But usually if they don't have usual expectations for chores, then this is just out of nowhere as far as the kids are concerned. And it seems very random. Mom or dad is already frustrated at this point. So it's instant conflict. And because there's no momentum or expectation except from arguing, then time, the chore just won't get done. Or it'll get done grumpily or get done badly, you know, so there needs to be some structure and expectation. And other researchers noted that in industrialized countries, middle class families just really suffer from lack of norms and expectations around chores. That doesn't happen in, say, developing countries or more collectivist countries, where kids learn by observing and jumping in, you know, or pitching in, have a time when it's supposed to be done. And this is why, when you have a job title in the mini economy, it works because a job title instantly suggests a structure for it. And when there's specific duties that go along with that job title, they know what to do. Even if you're not doing a mini economy, being able to set structure and expectations for what is supposed to happen with chores, having a vocabulary, having a why is really critical don't wait until you're frustrated that the kids are sitting around watching TV or on their phones before you ask them to do the chores.
- [25:19]
A
So what I'm hearing is there's a defined scope of work and there are defined shifts.
- [25:24]
B
Well, in some ways, kids are no different than older people in that they want to know what the job entails before they're asked to do the job. If it's paid work in the mini economy, then they should have some level of say so. And you know, is this worth it? If I'm just being made to do it and it's really hard work, Then what's the why is this family work? Is it service work? Is it my job? Why is it important? Are we doing it together? What's your responsibility? If it's family work, then I assume that everybody here has responsibility and they want to know that it's fair. So fairness really, really matters if you're not paying them about it. But of course, even if you are paying them for it as well, that's the intrinsic versus extrinsic motivation thing as well. If you keep in mind from self motivation theory that people are motivated when the work is aligned with their values. They know it's valuable when they feel like they are growing, when they feel competent, and when they feel like they're supported by and they're supporting a community that builds intrinsic motivation. That's how you can be intrinsically motivated even if you don't find the work interesting and you want to do whatever you can to cultivate that before you start even thinking about the next step, about what exactly you do.
- [26:50]
A
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B
Yeah, that's what happened in my friend Oleg's house. He has a son who cares about goods and services and is willing to work and a daughter who, as he put it, has a very low level of consumption. And she's happy like that and she's just happy not to do any work.
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A
She's early retired. Yeah. Yeah.
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B
Now the thing is she understands the trade off when she does that, so I think it's fine. Now if you have family work, you know, if it's putting the dishes away and they should really do it, if it's cleaning their room, if it's kind of basic things that they ought to do anyway, then they still need to do that.
- [30:12]
A
Right? Making their bed kind of a thing.
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B
Yeah, making the bed, exactly. It can cause a little bit of strain. If you have one kid who super wants to work and they're doing a bunch of jobs and I say it causes a little strain or Maybe you could say tension, but I think it's healthy and you need to let it go. My 11 year old Calvin, again, he is really into making money. He really wants to do it. He'll do extra jobs. He has a little business making little cardboard figures which he sells at school. He has written a book. It's a young adult book. He rolls out of bed each morning at 6, picks up his notebook and handwrites in cursive for about half an hour before he wakes up his siblings.
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A
Wow.
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B
It's something else. Yeah. It's just interesting to see sometimes that if you have a kid who's a go getter, yeah, they're gonna do extra jobs, extra work, and I think that it might kind of intimidate their siblings. But I mean, think about everything they've learned in that situation. They have learned goals, planning, they're using math, they're being creative, they're learning about entrepreneurship, they're learning how to speak for themselves. They're setting prices and negotiating, they're achieving goals, they're making connections. I mean, they're doing all these things that I think are helping them build financial habits and knowledge and they're gonna take this with them through their whole lives.
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A
You mentioned some of the jobs. I'd love to go through a few examples. You gave the example of a zookeeper in addition to zookeeping. What are some of the other titles?
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B
It's funny that you ask. In addition to Zookeeper. So when we sat down with my kids to plan our next round of Mini Economy, I said, what would you like to see in the Mini Economy this next year? And they said, Lucy needs a harder job. So the youngest child, Lucy has had the zookeeper job for three years now. And she's managed to kind of, in a real youngest child kind of way, be like, oh no, this is all that I can do. I think it's time that she starts getting a little bit more difficult job. When Calvin was really little, his first job was the guard. He said. We asked what important work needed to be done in the house and he said the house needs to be guarded and he wanted to patrol around the house to defend against bad guys. It was so cute. We let him do it as part of the job, but he said other important parts of the job are picking up the toy swords and spears and things that we had lying around the house and. And then also to make characters. Right. So there was a creative part in it too. I always try to mix in a cleaning, tidying part and then a skill, a Creative part as well. You want kids to. It's what's called progressive tax complexity. Thinking about jobs kids can do where they are building more skills over time. Kind of like progressive overload and weightlifting or something like that.
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A
Right.
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B
Other jobs are. There's outdoor jobs. There's the landscaper and the gardener. This started with pulling weeds. Until Robbie, who was. I think he was 6 at the time, he said that he had the most boring and hard job. He said, I have the hardest job. It's the most boring job. And I don't know if it was the hardest job. Maybe it is. Pulling weeds is pretty bad work. Nobody likes to pull weeds. Right. So my wife Sarah, pulled me aside and she said, what if you let him push the mower? And I was like, he's seven. I said, okay, he could. So I let him mow the front lawn. And you should see him push this mower around like he owned the property. He was so proud of himself and so motivated. And so now the gardener's job became mowing. The landscaper's job was edging and basically outdoor kind of lawn jobs that really needed to be done. They brought the advantage in that. Teaching the kids to use tools, I found, is so important. It teaches them skills, and it builds that level of motivation that we rely on, which is competence. You know, if the job does not require competence, there's no growth mindset. They stagnate.
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A
Right.
- [34:32]
B
Let me just list some of the jobs, because you asked it. Zookeeper, gardener, landscaper, librarian, kitchen worker, guard, pool attendant. Because we. In the summer, we'd come back from the pool and you had all your pool bags needed to be organized and that sort of thing. So we had the pool attendant and the pool attendant. They also had to keep track of things when they were at the pool as well. Those are a few job titles I can think of off the top of my head. We have a list of them in the book, along with possible work that they could do for each of those things. And of course, you can make up as many of your own as you want to as well.
- [35:08]
A
Right.
- [35:09]
B
The librarian was supposed to pick up the books. That was the kind of cleanup part. Cause there were always books just strewn around the house. But then also to write. And that was Daisy's job, is to think that she started writing her little stories as part of her job. Read to the younger kids as well. You know, that's a great job. Read to the little kids. Do some writing. Put the books away. That's a great job.
- [35:33]
A
Can multiple kids have the same job. So could there be multiple librarians, for example?
- [35:37]
B
There kind of are multiple landscapers and gardeners at this point. The boundaries between the jobs for the outdoor work has sort of melded together.
- [35:48]
A
Right.
- [35:48]
B
And I think that's okay. People in traditional cultures tend to be more collective with the work that they do, and it's called learning. By observing and pitching in, kids hang around parents and just kind of jump in to the work that they're doing. And the two boys have kind of done that with me in the outdoor work. We started with our distinct jobs, and now we kind of jump into tasks together. So working on the hedges or the weeds or planting new grass or planting flowers, everyone likes to come out and plant flowers. Calvin still likes to do the edging, and Robbie still likes to do the mowing, which leaves me to pull the weeds. I have the bad job in that. So jobs can often overlap. We still have job titles for them, but their titles have overlapped.
- [36:36]
A
Right. Does that ever lead to sibling conflict in terms of, hey, I'm doing their jobs, and then conflict around compensation as a result?
- [36:43]
B
This is an important part of building intrinsic motivation. Have a morning meeting, Saturday morning, gather the family together. What you do is you can set a schedule for the day, talk about what jobs need to be done, when we're going to do the work. Doing household chores, whether you're doing a mini economy or not, is more effective when everybody's working at the same time. If you send somebody off to do it in isolation, it's not as good. So you talk about when you're going to do the jobs. You ask the kids if they have any thoughts about what's coming up, and they'll speak into the situation is something not fair. And you can kind of adjudicate it right then. I mean, it's difficult when they want their sibling to do more. More work. You know, in that case, what you do is if the rules need to be changed, you usually don't make the change. Exactly right. Then if it's a burden on somebody else, whether it's setting a new expectation or raising a price or doing something that can be difficult, you just say, we'll make it happen next week. What did happen was my two boys said, lucy needs a tougher job. She's been the zookeeper for three years, and that's a toddler job. Then we say, okay, well, we're not gonna just switch what Lucy does right now, but over the week, we're gonna find out some new work that Lucy can do that maybe is something that a big 7 year old can really accomplish and find something that she can be successful in. So that morning meeting is critical for building a family culture, for setting the norms and expectations and planning. And all this builds intrinsic motivation which you need for them to do even their paid work. You know, people don't work only because of money. The money is an add on. I mean, you should do this whether you have a mini economy or not, right? Yeah.
- [38:26]
A
And then on that topic, because there's such a major component of that that ties in with goals. For a young child, that goal might be, all right, I want the stuffed animal instead of the candy. So I'm going to say for a couple of weeks to get this bigger item. But when they become a bit older and their goals become a bit bigger, how do you deal with that? Particularly when the goals, the true goals that they have are outside of the domain of the house.
- [38:54]
B
Yeah, I love the question because it shows that ultimately we want the kids to learn about money. The end goal is to be able to pursue those things which are valuable to us. So you name what you value and you use that to set goals. As the kids age, their goals change. In some ways they grow out of the mini economy a bit. And that's because a mini economy is largely a little environment for small children to grow up through in their elementary years. And by the way, it helps you change the prices of things so that the kids can get less stuff that you really don't want them to have, like loads of sugar and they can get relatively, you can make things cheaper for healthier things. Right now as they get older, they start to notice they could just buy those things in the store. All of our mini economy money is convertible to US dollars and that helps anchor the value. I found that to be very important. There should be an exchange rate for mini economy money to real money. And as the kids get older, they start to value the real money. Now they still value the mini economy money because they can buy privileges. And that goes really all the way through teenagehood. If there's still things where as a parent you say no to sometimes and yes to sometimes and the parents still have discretion over those. Kids still value the privilege coupons. So the mini economy is still in place, but more and more they start to cash in their day bucks in our household for real money.
- [40:28]
A
Ooh, it would be fun if it was a floating currency conversion that changed every day and then they could like forex arbitrage.
- [40:36]
B
Well, that can happen in a simple version and that Just goes by how much they choose to convert it versus how much they don't. And there are currency flows. I mean, sometimes I find myself short on US dollars and our little cash stash, or find myself flush with mini economy money. So all those same economic principles still, they still hold. I think the kids, they have learned the word exchange rate and they know how to use it because they've used an exchange rate. In our household economy, what the kids can use money for is investing. Because we also have household businesses. When the kids are selling stuff back to me through their household business, if they're using stuff that I bought from the store, they have to pay me for those things. So Robby's household business was to make the morning coffee. Man, it's just glorious. Wake up in the morning and there's just coffee just waiting for you. A child just hands you your cup of coffee. One time I woke up to a fight happening in the house between the kids. And I went to go like, adjudicate the fight, and there was Robby handing me coffee. You know how much if you had to wake up in the morning to deal with the fight? And just there's your little assistant handing you coffee. Oh, man, perfect. No, I guess in that case, he didn't have to buy the resources for it. When Calvin wrote his book and was selling it, he had to pay me for editorial services. I transcribed it using an AI tool because he hand wrote it. And so I took the picture of it and had the AI transcribe it and put it in Google Docs. And then I did editing as well. That took work. And then my wife Sarah is really good with graphics, and so she dealt with the technical side of that, even though Calvin did all the illustrations. So they had to compensate us for that. Now, as the kids get older, the simple answer is they keep on doing their household jobs, but they just value real money more. And because the mini economy money is convertible to US dollars, they can do that. And sometimes they just say, dad, I'm saving up for this thing. Could you please pay me in US Dollars? Yeah, sure, Fine. There's an easy exchange rate. It's all legit, causes, no hassle.
- [42:51]
A
How are decisions made around things like the compensation structure and the exchange rate? I mean, is it a democratic system in which the kids get a vote?
- [43:03]
B
Yes. And that happens through the morning meeting. If the kids think they deserve a raise, I'll definitely give them a raise. If they learn new skills and if they become more productive, I say, look, you guys are getting lots of Useful work done around the house. I mean, stuff looks great and it's because you learned how to do this new thing. You're using all the cleaning supplies or you used a power tool. You can do all this stuff that you weren't able to do when you were little. Yeah, you deserve a raise, you deserve more money. But when you have your morning meeting, when you discuss the work that you're doing, if the kids say this should be worth more, I think that's great teaching because we want the kids to know how to value their own work and to speak into it.
- [43:47]
A
Yeah. It strikes me you've got four kids, so there's a bit of a council with a variety of voices. But I'm thinking about the challenge of being an only child in which you are outnumbered by the adults. Right. As an only child, there's no one to back you up. So if you assert that something is unfair, but the grownups say otherwise, there's no support from siblings.
- [44:11]
B
Right. That's a great point. I had a mom ask me one time, she said, we have an only child. How can you do this system? How can you have a whole little economy? Is this a thing for me? You know, if you have an only child, I think it's a mini economy. Probably works best if you have a household store where you team up with another family. So that play date you were gonna have anyway, instead of just doing a play date, say, come over and bring some stuff. We'll throw in the combined household store and we'll all just shop together. I think that would be a fun play date. You need to make sure that the amount of money that's been paid out in both economies is approximately equal, or else you have an exchange rate problem. If you have a smaller family, you should go more quickly to everyone in the economy having their own business, because you start a mini economy with assigning jobs, it's a little bit top down, Right. But when everyone gets their own business, it becomes not very top down at all. You know, Robbie's making coffee, Daisy's writing books. Calvin is making cardboard figures. I'm talking with Lucy now about what her business could be. Then what happens is you have a circular flow of economic activity. Everybody's expenditure is another person's income. Everybody's income is another person's expenditure. It creates a setting where parents must ask the kids their opinion. It's your business. What do you want to sell for? I had this happen with Robby in the coffee, actually. He wanted to charge two day bucks per day, which is $1 a day to make coffee? I thought it was. No, no. He asked for 3 day bucks, $1.50. I thought it was a little too expensive. And I said, you know, Robbie, I think that's too expensive.
- [45:54]
A
So. So you pay him.
- [45:56]
B
I pay him.
- [45:56]
A
You pay him for his service in handing you that.
- [45:59]
B
Exactly. His business is coffee, is barista.
- [46:02]
A
He's a barista.
- [46:02]
B
Yeah. And this is not a barista. And this is his own business, you know.
- [46:05]
A
Does he have to purchase the coffee beans?
- [46:07]
B
Well, no. Cause he would if he was. But we were gonna do that anyway. Right. His business is entirely the making of the coffee.
- [46:16]
A
Got it.
- [46:16]
B
In the case of the kids writing their books, I wouldn't be doing those editing services unless they had written a book. So they had to pay me. They had to compensate me for that. When I was a kid, we had a lemonade stand and we were shocked when my dad charged us for the lemonade from the pantry. And I said, dad, it was free. It came from the pantry. He said it was not free. And I remember my mom sidles up next to him, was all like, harlan, do you think maybe just this one time we can let them keep the total revenue? And he was appalled. He said, I will not have them going through life thinking that productive resources are free. And so we had to pay him back the real cost of the lemonade. We made almost no profit. But I learned what it costs to produce goods and services, cost of goods.
- [47:06]
A
Sold and sell them.
- [47:07]
B
So to your original question way back, an only child wouldn't have the siblings to back them up. And standing up to the parents so much. But I say in that case, you move faster to the household businesses. And that means that there must be negotiation. It's not about rules so much as it is prices. And it creates that circular flow of economic activity that really calls the kid to be responsible.
- [47:31]
A
Right.
- [47:32]
B
A lot of parents kind of struggle with a vision for how to teach their kids about money at all. But some of them don't ever intend to teach their kids about money because money is not something that we talk about. You know, this is something that dad takes care of, period. You know, having a system that says this is possible and it's this game that you play. And it doesn't put parents on the hook about their own real. It doesn't their own real money. It doesn't make them discuss their finances with the kids. For a lot of parents, their finances are in disarray. They don't want to model finances to their kids. You Know they're ashamed of it. Other parents do have good finances, but they don't know what to say. Others have whatever the state of their finances. Money is a private thing in this house and we don't really talk about it. But if you have a play money system, then I think you can talk about it because you can come at it instead of the. It's less intimidating and the stakes are a little lower. If you say this is one step up from play, you know, we're making a play money store. It's a thing that we can do together and it's fun. If you're an only child, maybe all three people or all two, you know, you might have a single parent family, you should both have businesses. If you start to have only two or three people at your house, it's a little better to maybe invite one other family in and say, we're going to play store. We're doing this little economy. Can you do this with us? So I would invite someone else in in that case.
- [48:59]
A
Right. So essentially, if the economy shrinks to be too small, there's a lack of external feedback that can lead to it being a little bit too insular, I think.
- [49:08]
B
So. I think especially if there were only two people, I would say for a family with one child, which friend do you hang out with that you have play dates with and say, here's what we're doing. We're paying them for chores this week. With this play money, what we want you to do, can you come over and for the play date, we wanna make this money together. Like color it. The kids love to color the money and design it and make it. That's just a fun thing. Then we'll do our little jobs and then we'll have a little store together. I mean, let's just play, you know, and it gets you a little momentum. You know, the stakes are real low. It's not a system that takes over your whole house or anything like that. It's this. You can do a mini economy with any level of commitment that you want. Big commitment or tiny commitment or big commitment all the way down to just game. Anyone can do it.
- [50:13]
A
You talked about the importance of that work happening in community. So you start Saturday with a morning meeting and then everyone works together at the same time.
- [50:23]
B
Yeah.
- [50:24]
A
How does that translate though, to Monday through Friday?
- [50:28]
B
You can increase or decrease the intensity of the mini economy as much as you want. Yeah. You can have more family work or less family work, more jobs or fewer jobs. It does require a little organization during the School year, we only do mini economy on Saturdays. They do their chore, they do the store. That's it. We're so busy with soccer and school and homework and friends and things that we don't have a lot of time for other things. So mini economy gets scaled back during the school year or just not done at all. And we used to not do it during the school year.
- [51:03]
A
What would happen for people who are listening to this, who are trying to implement a mini economy in their own home, but the feedback that they get to a plan like that is, hey, I would like to work more so that I have discretionary income to be able to purchase these additional goods and services or goods and privileges. But there's a lack of job opportunity.
- [51:25]
B
Oh, boy. I mean, that's a good problem to have right there, right? I mean, your child comes to you and says, I need more work because I have a goal. I mean, if that's your problem, then you're already winning. You know, that's the thing to start thinking through and talking through them with. I say if they want an opportunity to be more productive, to sell more stuff because they have a goal, that's a time when a parent should, I mean, drop what they're doing and help them say, yes, let's get you some more work. Let's teach you some new stuff. If you are personally paying them, I mean, pay them, they're really growing into another level of responsibility. And if they become so good that they're earning dozens of dollars a week and you can't keep up with it, then maybe their time, you know, it's time for some work outside the house.
- [52:19]
A
So how does this work? When the kids become old enough that they do start taking on jobs outside of the home, they turn 14 or 15, they get a job at the drive through of McDonald's, they get a job job as a lifeguard. How do they balance work at home versus paid work outside of the home? And do the economies need to match up in terms of hourly rates?
- [52:45]
B
Yeah, great question. I think we have a little bit better apparatus already for teenagers to make money. You know, there's the babysitting, there's the lawn mowing, the traditional jobs. I say what you definitely want to do is when your teen starts earning real money, make sure they have a bank account and make sure that they have savings either for a goal or a certain percentage. Get that in early. You can still have them do the donation box. My parents did that when I was a kid. We had to give a certain amount of Money also to donate and to church. And those categories get the kids already thinking about budgeting earlier. It's not called a budget, but they understand that when they get money, some of it's spoken for. They have fixed costs, they have responsibility. Money doesn't come into your pocket and it's just used all for spending on stuff that you want. Kids should know really early that money has responsibilities when it comes in the door. So when your teen gets a job, you should still have those quote jars, share, save, spend. Though the save might actually go into a bank to let them know the money's spoken for. Some of it is. I really encourage parents to help their kids invest even when they're young. Buy a share of a mutual fund together. Buy a share of. Some people would disagree with me on this, but I'd say even a single stock. I know buying a single stock isn't great investment strategy, but I think it's a good teaching strategy because it's very tangible. The kids can think about it more easily. That gets them also thinking about college savings as well. Do we have money saved for college? Well, as a matter of fact, we do have a 529 account. And you know how we have a mutual fund together or, you know, the stock that you have that's like what we have in college, you know, for saving for college. Now, research shows that if kids know that there's college savings at all, they're more likely to go. All these conversations about money, they really flow more easily when the kids have their own income. You set a few basic rules about what we as a family do with money when we get it, using that family culture to get some momentum and then start dipping your toe into investing and then, you know, then they're ready when they graduate. Especially 529 accounts, you can now roll them over to IRAs.
- [55:11]
A
Right.
- [55:11]
B
If you have leftover money when the kids graduate and you know the finances of that to the side. What a great teaching opportunity. Child is 17 years old and knows that any money they save from going to College from their 529 account can get put into retirement when they're 22. Show them that compound interest calculator which they can get at. The real fun one is at econedlink.org econedlink.org, yeah, it's from. The Council for Economic Education has an animated one. So you can punch in your numbers and just see the money.
- [55:46]
A
We'll link to that in the show notes.
- [55:47]
B
Yeah, see it grow. Just showing that to kids when they're young. It really motivates them. My dad taught us that. When we were 17, my brother went to the Marine Corps. He was 18. Right after boot camp, he started to get his paychecks and he had them automatically routed into a Roth ira. And he found that the Marines in his platoon were wasting money right and left. Cause they didn't know what else to spend their money on. You know, they're on base and he, I think two of them, he pulled them aside and set up Roth IRAs and showed them how to automate their savings. And so now there's a few Marines out there who at age 18, had my brother guide them to automate their savings. I think kids should really be thinking about that even when they're teenagers.
- [56:34]
A
We're coming to the end of our time. Do you have any final words of advice for people who are listening who want to set up a mini economy in their home?
- [56:43]
B
Well, first I'd say for words of comfort. If you have started building executive function in your kids by being a good parent, generally when they're young, then you've already started. You've given them those building blocks where they can self regulate going through life. So there's many ways in which we're already doing things right. So good job, parent. If you read the book in its entirety, I think it starts off talking about how to do a mini economy. But I've noticed as I've read it that you come away with a sense of how to build boundaries and structure and using words for when we're working, why we're working, what we use money for, what we as a family do, what your habits are, what our money norms are, what our goals and values are. And you can really develop a way to speak about that. And even if you're not doing a mini economy at home, I think that the book can really still help parents get an idea of how we think and talk about money and how we set structure. Because really parenting is all about structure. You set structures and boundaries that your kids can have freedom and autonomy in so they can start to learn to grow. And then we start to widen those boundaries as they get older and they grow and they can start to become more autonomous people who can contribute more and more and gain more and more confidence. It is awesome to see what they can do. You know, they will surprise you with how talented they are. You just need to provide a bit of a foundation, you know, about doing a household mini economy. It takes a bit of thought and planning. And I know our lives are so Busy and things are crazy. But how else are you going to give them practice when they're elementary ages with money? Elementary grades are when kids develop habits and norms. They ought to develop some habits and norms about money. How are you going to talk with them about money in general? Parents just tend to not really have a way to do this. So I think it's worth doing. You know, we watch what we eat. That takes effort. We do some exercise. That takes effort. There's lots of things that take effort that we do with our kids. I think it's worth setting aside a little time to learn how to have a bit of a system and a plan for how we're teaching our kids about money. And kids need practice. You know, they don't just need head knowledge when they're in elementary grades. In fact, they don't really absorb a ton of head knowledge a lot of the time, but they do absorb habits. Kids need practice to develop habits and that's what we can give them.
- [59:34]
A
Thank you to Dr. Stephen Day, the director of the center for Economic Education at Virginia Commonwealth University and the author of Teach a Kid to Save. So what are three key takeaways that we got from this conversation? Key takeaway number Kids don't need lectures about money. They need to put in their reps. They need to form habits. And that happens through repetition. A lot of adults look back on their childhood and say, I didn't learn about money when I was a kid. My parents never taught me about money. And often as grown ups, when we think back on that, we might fill in the blank by imagining that discussion. But what is actually required is practice. Steven talks in this interview about how habits form long before we learn how to read spreadsheets as kids. We don't need explanations. Kids need repeated low stakes chances to make choices between a little bit now versus more later. Because repeating the habit of making those choices, that is a habit that then carries into adulthood.
- [60:48]
B
The problem is is that elementary grades are when kids develop habits and norms and routines. And if they don't develop any habits and norms about money, then you can miss the boat. And I really think that this is where we need to teach kids. Kids need to practice.
- [61:06]
A
That is the first key takeaway. Key takeaway number two. Paying kids for things doesn't ruin motivation, but confusion does. Confusion ruins motivation. There are many parents who worry that paying for chores will kill intrinsic motivation. Dr. Stephen Day flips this on its head. He says that the issue isn't money, it's clarity. Because if kids understand why they're doing something, if they know that the reason is family responsibility versus the reason is paid work versus the reason is service to their broader community, well then they get it. And receiving payment reinforces a feeling of competence and a feeling of value. And that's quite similar to how we act as adults, right? Motivation. Our motivation to do our jobs is a mixture of intrinsic and extrinsic factors. Research shows that adults enjoy their jobs more if their jobs have a sense of purpose. But obviously, in addition to a sense of purpose, we also need compensation. Just as adults have a mix of intrinsic and extrinsic, kids do too. But there just has to be clarity around it.
- [62:16]
B
All Humans, even kids, can think in categories, which means that you can pay them for some jobs but not for other jobs. It's really that simple. Actually, the jobs that you should not pay them for are work that they're already doing, things for which there are already expectations in place.
- [62:34]
A
Finally, key takeaway number three. When kids earn, spend and save their own money, they stop negotiating and start choosing. And so one of the benefits of a mini economy is behavioral. Because when kids have a sense of control and autonomy over the trade offs, then the parents no longer have to be the gatekeeper. So there's no begging, there's no emotional bargaining. The kids get to make the decisions. That's a skill that's incredibly valuable for adult life.
- [63:06]
B
What the kids learn through just bugging their parents to get stuff is that the way you get goods and privileges in life is by going to the parental authority or whoever's in charge and bugging them for it. There's no cost to them to bug. You might as well just do it right? It's a hassle for the parent and they don't learn any kind of self regulation from it.
- [63:29]
A
Those are three key takeaways from this conversation with Dr. Stephen Day. Thank you so much for being part of the Afford Anything community. If you enjoyed today's episode, please share this with your friends, families, neighbors, colleagues, with the parents of the other kids at your school, with your siblings, with your uncles and aunts. Share this with all of the people in your life because that's how you spread the message of great financial practices, financial habits, financial health, and fi r e. That is the single most important thing that you can do. Number two. Remember we have a free guide. 52 moves that you can make one move per week, every week of the year. It's totally free and it's a great way to kick off your January. So free download 52 tweaks one tweak a week for the 52 weeks of the year so that you can end 2026 with way stronger than you started it. Download it for free@affordanything.com financial goals. That's afford anything.com financial goals. That's thing number two. And then thing number three. Please open up your favorite podcast playing app, hit the follow button and leave us up to a five star review. Write a few words, share what you enjoyed about this show. Thank you so much for being part of this community. My name is Paula Pant. This is the Afford Anything podcast and I'll meet you in the next episode.