Have you ever seen the game show “Are You Smarter Than a 5th Grader”?
This is a game show where the contestant is asked questions that appear in a 5th grade textbook. You can win up to $1,000,000.00. Should you answer a question incorrectly or opt to end the game prematurely, contestants must state that they “are not” smarter than a 5th grader.
As you might imagine, very few people has won the grand prize, proving very few people are smarter than a 5th grader.
Since I know that you’re smarter than a 5th grader, I know that you know the word “broker” used in the title of this column isn’t a word in the context that I used it. I also know that you know what I mean (smile).
I have a 5th grade son who inherited my “financial nerd” gene. I recently had a friend of mine babysit my two youngest sons. Upon picking them up, she laughed as she told me, “I know this is Damon’s child.” She explained that my son told her, “You have a nice apartment. How much does it cost?” He goes on to ask her about her utility bills and other things. She says, “What 5th grader asks these types of questions?” We laughed.
What 5th grader asks these types of questions? The same 5th grader who:
Walks around the house, turning off the lights and televisions in empty rooms saying we’re wasting electricity.
Asks if he can review various household bills.
Wants to know how much various entertainment activities cost that we partake in.
Saves the monetary gifts he receives for his birthday and Christmas
As parents it’s important that we teach our children “age appropriate” sound financial principles. Ironically, in my 5th grade son’s case, I didn’t realize just how much he was paying attention. Up until my friend asked me, “What 5th grader ask these types of questions,” I overlooked his tendencies.
My 5th grade son literally grew up while I was growing into a Personal Finance Expert. He attended and listened in on several of my speaking engagements. He read all of the children’s “Personal Finance” books that I purchased for him. While driving in the car, he would tune into the Financial Radio Talk Shows or Financial Seminars that I was listening too.
To date, this young man has a nice chuck of change that he has personally saved up. I often hit him up for $20 or so when I’m low on cash and in between pays. How is it that this young, unemployed boy is in position to lend me— the so-called money expert money from time to time? Am I “broker than a 5th grader”? Here are some lessons that have been instilled in my son over the years:
Work creates money: All parents tell their children “money doesn’t grow on trees.” Yet, many of us fail to explain how money is created. It’s important that we as parents connect the dots between a good education, a strong work ethic and the real reason why we as parents go to work every day—to earn money.
Purpose of Money: There are five things that you can do with money—spend, save, invest, give, and waste. It’s important that our children understand all five of these concepts and be an active participant in four of them while avoiding one.
Money is finite: It’s important that we explain to our children that money is finite and we’re restricted by the amount of money that we have at our disposal. Therefore, when you have competing needs, wants, and desires that cost money you have to prioritize what is most important. Save up and purchase based on their order of importance.
Debt is adult’s Mr. Yuk Mouth: Just like certain poisonous substances are hazardous to your health, debt or money you owe to companies or people is hazardous to your wealth. It’s hard to spend, save, give and invest money when owe money to others.
Saving is the key to financial independence: If you lack the ability to save, you’ll never be financially independent. It’s consistent, diligent saving over an extended periods of time that assures financial stability. Saving money is how average earners become wealthy and how above average earners stay wealthy.
As I was reflecting on this article, I asked my 5th grade son a couple of questions:
Why do you always say we’re wasting electricity? Because if you spend less money on electricity, you will have more money to go out to eat and spend on me.
What are you saving your money for? I want to buy a car and a house when I become an adult.
Clearly, this 5th grader gets it!!
I have four kids. My 3rd grade son told me, “Dad, I understand the importance of saving. When I see good stuff, I have to have it, I can’t help myself.” When he learns that his brother was the feature of my article, he’ll start to better manage his money. He thinks all the attention should be on him. My 21-year-old son has diligently saved for and purchased two cars in the past six months. Good to see he has a good work ethic and an ability to save.
Problem is his confidence encourages him to do things out of order. Long story short—he’s in need of another car. I told him about Daddy’s matching contribution plan. If he does things in the right order and saves X amount over a 4 month period of time, I’ll match his savings with X amount. The jury’s still out on that. Let’s see if he has the patience.
My 20-year-old daughter is a college student. Very smart, but thinking she’s grown, she made a decision without informing anyone that resulted in a bill. Good thing is she recently landed a part-time job and is working decent hours during the summer. I told her about Daddy’s matching contribution plan.
I think that it’s important that young adults personally contribute financially when they’ve made a decision that resulted in a bill. I told her since she has a job, instead of sending her money here’s the plan: You have this bill out there, if you save X amount, I’ll match it with X amount. She agreed to the terms. We’ll see if she’ll hold up to her end of the deal.
(Mortgage and Money Coach Damon Carr is the owner of ACE Financial.)