The $10,000 Experiment: How To Teach Financial Management in A Cashless Society


How To Teach Financial Management in A Cashless Society
How To Teach Financial Management in A Cashless Society

The $10,000 experiment

I recently completed an unsanctioned, unsupervised psychological experiment on my children, the premise of which was $10,000 in cash on the kitchen table and a sign next to it that said 'Don't touch the money yet!', and before I dive into it, you should know that we are a game-playing family.

We play ball games, board games, dice games, card games, all sorts of games, but the games that my children love to play most are games like Monopoly, and when they play Monopoly, they play marathon games of Monopoly that last hours and hours over days of play.

Each of my kids has a unique strategy and personality when they play Monopoly.

My daughter, who is 11, she is always the dog.

She plays entirely for Chance and Community Chest cards; you can say that she uses the 'luck' strategy.

My 9-year-old son is always the car - a very strategic player.

He buys all of the Railroads and all of the Utilities and then proceeds to put houses and hotels on the most expensive properties - very savvy.

And then his younger brother, who is seven, he buys everything that he lands on with no exception, which is fitting because he is the wheelbarrow.

Now, before I tell you how my experiment unfolded, I have to share an observation that led me to the creation of it.

One Monopoly marathon, Saturday morning, I was playing with my kids and noticed that they were all playing just outside of the rules of the game.

So they were doing things like buying each other out of jail and lending each other money to buy properties, and I found myself going, 'Guys, this is not how this game is played!' to which they'd say, 'Dad, it's fine! We just want her on the board with us', or, 'He can pay me back at the end of the game, when he's flush with cash', and I'm thinking again, 'What am I teaching these kids?'

So, I started watching how they were playing listening to their banter, getting a feel for how they were making decisions - and I had this thought:

'What if they're playing this way because the money isn't real?'

It's a concept I've been reading a lot about, lately, 'Financial abstraction', the notion that when money becomes more and more of an idea, less tangible and therefore more abstract, it changes the way we interact with it on a regular basis, and there's anecdotal evidence of abstraction everywhere around us.

All you have to do is listen carefully to people who say, 'I loaned my child or grandchild the phone, and a month later, all these errant in-app charges showed up on my bill.'

In 2014, Apple reimbursed customers for in-app purchases that were unapproved, mostly by children, to the tune of $32.5 million.

This is in a US FTC settlement.

In the documentation, it said it was just too easy for kids to make an in-app purchase.

The Imagineers at Disney were charged with making the parks 'frictionless' - is what they called it - so they invested a billion dollars in a MagicBand.

It's a wearable device that functions as your room key, your park ticket, and your ID and wallet when you're on park property.

So if your child wants a set of ears and a dessert in the Magic Kingdom, 'bibbidi-bobbidi-boo' your vacation just cost a whole lot more, magically.

Magically.

Lastly, I had a conversation with some teenagers who told me that $100,000 a year really wasn't that much money.

I said, 'Really? Why do you think that?'

They said, 'Well, we both have $500,000 in our ATM machines on Grand Theft Auto', which is a very popular and somewhat sketchy video game.

So as I'm playing with my kids and I'm watching them play, listening to them talk,

Important:  czland

I thought, 'What if the money were real on the table?

Would they play differently?'

And so I calculated quickly on the box, 'How much would it take in the capital, in currency, to play a physical game of Monopoly with my kids so that they actually tangibly got to feel the money in their hands?'

And I estimated, for four or five players, it's about $10,000.

So one Friday, I stopped at the bank, I got all the denominations of bills on a Monopoly board with the exception of a $500 bill - hard to get - and on Sunday, I rounded the family up for a high-stakes game of Monopoly, where the winner takes all.

All of $20, by the way.

All of $20.

You have never seen kids' eyes light up the way mine did when I handed each of them $1,500 in starter capital, and you have never seen anyone's eyes light up like my wife's when I took it back on Monday. All of it.

Our marathon game only lasted two and a half hours far shorter and more strategic than most of the games they normally play.

True to my hypothesis, two of my three kids actually played differently; my daughter still played the 'luck' card.

She was the first one bankrupted, and she happily retired to the living room to read a book.

My youngest son, the wheelbarrow, did not buy everything he landed on;

instead, he carefully calculated how many rolls away he was from one of his brother's properties and how much he would owe his brother if he landed on said property, and made his decisions based on that.

In effect, having real money on the table and a cash prize at the end made him more conservative.

And my middle son - very strategic - still bought all of the Railroads, still bought all of the Utilities, but did not buy Boardwalk and Park Place or Mayfair and Park Lane, but instead, he put hotels immediately on Oriental and Baltic Avenue, or Coventry and Leicester Square on the UK version. When I asked him why, in his own words, he said, 'Dad, they're just more affordable properties.'

At which point, I cried a tear of pride.

So he got it!

In the end, my son finished with 28 properties, more cash than he'd ever seen and held in his entire life, and he now knows the meaning of the phrase 'making it rain'.

In the confines of my experiment, there is an idea worth spreading, and it is this:

I believe kids today are being raised in a world where money is no longer real; it's actually an illusion, but it has very real consequences.

Peter Drucker, famed leadership guru, said banking and finance industries today are less about money and more about information, and yet young people today don't get that information; they don't get the experiences of money, early on.

Three researchers from the Centre for Creative Leadership, in a study done two decades ago that's been replicated many, many times, they interviewed over 200 executives in a report called 'Key events in executives' lives'.

In this report, they found that of the 200 top-level executives who were at the top of their game, all of them had similar characteristics.

One of them was that early on in their career, they had been thrust into a leadership role that required them to make decisions that had serious consequences.

They also had a mentor in place that helped them appreciate the lessons they were supposed to learn from those experiences.

The study created a leadership framework that said, in essence, that someone with potential, if given the opportunity to engage in strategically relevant experiences and given the ability to learn the lessons from those experiences, would have a higher likelihood of success in their career in a leadership capacity.

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Now if you took that study framework and my $10,000 experiment and looked at it through the kaleidoscope, you would get a statement like this: if kids are given financially-relevant experiences in their life and someone is there to help them learn the lessons from those experiences, they have a higher likelihood of achieving financial success later in life, and in my humble opinion, they need to have them early, and they need to have them often.

We under this not-so-subtle societal shift in the way that we pay each other, today.

It's estimated there are trillions of dollars circling the globe in our global economy every single day, yet only four percent of that money is actually in coin or currency.

The rest is all digital, data packets, ones and zeroes, and today's digital-native youth - they don't see people paying with cash or cheques.

In fact, if ever you're in a line, and someone in front pulls out their chequebook to pay, you are liable to say to yourself, 'Really, a chequebook?

This is going to take forever.'

You're laughing because it's true.

The currency of today is digital.

Many of these kids equate spending with credit and debit cards, with Google Wallet and Paypal and Zap.

All of these are what they equate spending to, and by the way, I am not pooh-poohing the technological advancements in payment technology today - far from it.

I think tokenization and randomization and biometrics are the wave of the future.

The first time that I used Apple Pay, it was like showing the caveman fire.

It was amazing.

But what snapped me back to reality was hearing my son behind me say, 'I sure wish I had a phone so I could buy stuff.' 🙂

You see, money, to a young person, is somewhat abstract, anyway, and when we further the abstraction by waving a MagicBand or putting our phone over a sensor and giving the thumbprint, all it does is further the abstraction.

It's a recipe for financial disaster later in life to the uneducated because, to a young person, they see money as limitless because they have no concept of the backend until it comes around to bite them in the back end.

I've seen this firsthand in my work with university students young people who borrow and spend untold amounts of money, having no concept or understanding of the increase in payments, the decrease in lifestyle, and the challenges they'll face later on.

In the UK and the US, student debt is ballooning problem.

In the US, we're at $1.2 trillion in student loan debt, second only to mortgage debt in the US.

One in three students is delinquent.

One in five is in default.

It's a huge problem, and the reason that this is concerning for all of us as a global economy is this:

Dun & Bradstreet found that people spend 12 to 18 percent more when using credit cards over cash.

They have yet to do a study how much more we'll spend with a MagicBand or a phone, but I can imagine it would be 15 to 20% or 18 to 25%, and all you need to do is read the headlines in the newspapers and magazines across the world today.

Places like The Guardian, The Washington Post, Fortune, Forbes these are the headlines we're seeing:

'New consumer debt reaching a seven-year high' in the UK,

'Consumer debt hitting an all-time high' in the US, 'Choking on credit card debt',

'The credit card debt crisis: the next economic domino'.

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It's what happens when people overspend and get in over their head with money.

Unfortunately, The Money Charity says that in the UK right now, one person every five minutes and three seconds is either declared insolvent or bankrupt.

To put this into perspective, since I started speaking today, two people in this country have declared bankruptcy.

In the UK, Demos.org says that Americans aged 25 to 34 have the second highest rate of bankruptcy. 25-year-olds.

Everyone's question should be, 'Why? Why is this happening?', and in my simplistic view, it is this: because the money they're spending isn't real - it's an abstraction.

So to stem this tide with the next generation, we have to bring them up to understand that they are living in a world where they have to make very real money decisions, in a world money is largely an illusion but has very, very real consequences.

Because I want your children and mine to be super successful financially,

consider any of the following:

If you are going to spend money on children, give them a set amount of money and let them spend it.

Let them tangibly feel the money go through their hands.

Let them succeed or fail with minor consequences so that later in life, when they're making the major decisions, they understand there are major consequences that go along.

For older kids, it's this: set a budgeted amount for school clothes, supplies and what-have-you, give them that amount, and when they are done spending it, it's done.

And here's the key; they get to spend it with your subtle guidance, your subtle mentorship, your subtle supervision, and whether you call it an allowance, you call it commission for chores or you call it a weekly stipend, every single child, from the age of five on up, needs to be given some tangible amount of money on a weekly basis so that they understand how to function in a cashless society someday.

Better to teach the young the habit of saving when they have a little bit of money to save than try to teach savings when they have no money because they're in over their head.

I met an American named José.

He was a 20-year-old student at an American university.

He was the child of two Cuban-born parents.

At the age of 15, his parents told him, 'José, we will give you food, we will give you shelter and we will give you $50 a month, but the rest is up to you.'

I asked him, 'What was that like?'

He said, 'Clothing, toiletries, school supplies, entertainment, gas - it was all on me.

I resented my parents for a year.

But you know what?

I realised it was the single best thing they could have ever done for me.'

When I met José at 20, he was on a full-ride scholarship at the university he attended.

He had $20,000 saved in a savings account from working part-time in high school, and this kid exuded financial prowess and unmistakable leadership potential.

At the heart of my message today is this: it does not take a $10,000 board game and it doesn't take cutting kids off financially to make a difference.

The first step is, honestly, quite easy.

It's about educating the next generation to make decisions in a world where money is largely an illusion but has very, very real consequences, and the reason it's so important for all of us, as a global society, to do this is this next generation coming up will inherit the global economy that we are handing to them, and we will precariously place it on their shoulders.

We owe it to them to set them up for financial success.


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