Monday, May 12, 2008

My Son's First Real Purchase

My oldest son is five years old. For the past couple of years I have been teaching him about money. Periodically, when he does me some small service, such as helping with his brothers or helping to clean the house I give him a dime or quarter. Sometimes he gets small amounts of money from him grandparents or relatives. The problem is that I am not completely sure that he gets the true value of money because he is never required to spend any of it.
Yesterday I decided to do something about it. My son really loves his Wii console and every few months I buy him a new game for it. Well, a really fun game just came out called Mario Kart Wii - the game comes with a plastic wheel and you can race your car by steering the wheel (I am telling you those Nintendo guys are geniuses). Long story short, I bought my son the game and when I came home and he saw it he got extremely excited. He asked: is this for me? I said, actually, I bought it for myself, but I am willing to sell it to you for $5. It took my son all of about one micro-second to say "deal". He then rushed upstairs and got $5 in exact change from him cash box.
For the past 24 hours he has been proudly announcing to everyone how he bought his new game from dad. I think this approach will help my son learn what you can and can't do with money and will also educate him to the value of saving. I think I will continue along the same lines by asking him to purchase - for much reduced costs - things that I would otherwise simply give him.
Any opinions about this strategy?


frugal zeitgeist said...

Wow, flashback! My mom did something similar when I was just about the same age. I think it's a good introduction. I bet it'll be fun teaching him about choices and opportunity cost.

Chief Family Officer said...

I love this idea! And that he was so proud is so cute!

The only thing that would worry me is that he will think a game really does cost $5. :)

One thing I've started doing with my three-year-old is letting him "pay" for toys at Target with a giftcard he was given for his birthday. While it's not paper money, we talk about how many toys he can buy with the money on the card, the factors he should consider, we force him to make choices ("you can have this or that but not both"), etc. We also don't let him buy something just because it's his own giftcard. There will be plenty of opportunity for him to make those kinds of mistakes in the future!

Shadox said...

Frugal - it's a lot of fun, but we haven't quite reached the lesson of "opportunity cost". I think we will cover efficient market theory; the difference between GDP and GNP; and assymetric information in market trades before we get there... :-)

CFO - BTW, I found your blog just the other day. It's cool. I had the same concern, but then you have to consider the issue of purchasing power parity (sorry, frugal, couldn't resist). He has about $25 saved up altogether, which means that I either had to take him for everything he's worth, simply give him money and take it back, or opt for the simpler solution of demand distorting consumer subsidies... darn it, I just can't stop!

basicfinancial said...

That sounds like a really great idea on how to teach your kids about the value of money.

plonkee said...

I love it. And it's saved you $5 on the cost of the game as well. Everyone's a winner.

Btw, what are you going to do with the money?

Shadox said...

Plonkee - you mean what I am going to do with the $5? I think I am going to blow it all on hats... (a line from the horrible movie "Hotshots").

I don't know. Any thoughts?

Mrs. Accountability said...

I'm with CFO, I'd be afraid your little one would think the game was only $5. Reminds me of when my son with Down Syndrome was younger. Every once in a while he'd have a bit of birthday money and I remember more than once he'd pick out more stuff than he had money for. I would try to explain he didn't have enough money, but he would insist on going to pay for it. I let him, thinking of course the cashier would tell him he didn't have enough and they ended up putting money from their own pocket into the register! So much for teaching him a lesson. lol! Found your blog via the 153rd Carnival of Finance. Nice to meet you.

Shadox said...

Mrs. Accountability - I guess in a way you did teach your child a lesson. Sometimes you can get things without money. Not sure that's quite the lesson you were going for.

I'll keep an eye out for undesirable consequences, and keep you all posted.

karla (threadbndr) said...

What we did when the Marine!Goth was little was to 'co-own'. At the store, we would each kick in some for the purchase of the game and "share" it.

And while they are little, try to always pay with cash as much as possible. They just can't make the connection that there has to be money in the bank for the check or debit card to access.

Shadox said...

Karla, that's a really good idea. I think I will adopt it. Besides, I would love to be co-owner of a Mario Kart Wii game. That way I might even get a chance to play... :-)