Money Earned the Kid-Fashioned Way


Note: Surprise: my computer still resides at the repair shop...

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While stopped at a red light in front of a financial services office the other day, I discussed the meaning of the various numbers posted to their front window with my eight-year old son.

"The Dow Jones Industrial Average closing refers to the day's total of the stock value of thirty large and widely-held companies. The Standard and Poor's 500 or S&P 500 Index is a better measurement of how equities performed on that day of trading--since the sample size and diversity of companies is greater," I instructed.

"YAWN," I hear from the youngster in the backseat.

Let's go Dad you are losing him, I think to myself.

"Wow did you see the .72% near the bottom of the list? If you give those financial experts $100 for 12 months, at the end of the year they will earn some additional money as profit for themselves, give you your $100 bill back plus a whopping seventy-two cents!"

As we discussed this depressing concept further, and how the rate of return has fallen for the most part over the last thirty years, it allowed me to talk about the importance of saving; since our country has become a nation of spenders--with little emphasis placed on building for the long-term.

To add a practical exercise to this economics discussion, we agreed on a challenge.

During the next day's mundane family errands, we would both look for unclaimed coins scattered in the parking lot or wherever, and see how much we could collect in our three stops.

How would our one-day return stack-up against the financial whizzes?

On Saturday, one motivated third-grader carefully checked the parking lots, the vending machines, the coin-operated toy dispensers, and the area around the cash registers, at Super Wal-Mart, a hardware store, and a small grocery store. At the end of our travels, I had found some change, but he had found more.

We pooled our money and counted. Our take for the day: $1.11.

After returning home, we rested comfortably knowing that even if we only find $1.11 total for each month during a 12 month period, the little guy would earn $13.32 for the year--stomping the financial firm's return on his $100 with an earned interest rate of %13.36 versus the advertised paltry .72%.*

The only negative associated with this practice is the need to wash your hands frequently. Money is a very dirty thing.

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*Note: I realize it is a little more complicated than this description with taxes, minimum investment rules, and other factors--I was just trying to keep it simple.

8 comments:

fayezie said...

awesome.

you've motivated me to find a new way to make a little pocket change.

Christopher said...

Maybe he'll figure out a way to short sell his younger sibling.

Slamdunk said...

Faye: Ha, I''l have to think of a new scheme when the twins are old enough to compete with big brother over found quarters.

Christopher: Hmm, maybe that will be an advanced lesson for later in capitalism.

Natalie said...

Simple is helpful, especially to someone without the natural money savvy that you've exhibited about the stocks!

Next time we run errands, I'll pack the hand sanitizer and let me toddler go nuts...as long as he's holding my hand. He's prone to "distraction exploring."

angelcel said...

I just looked up 'third grade' to see what age we're talking about. Wow understanding the stock exchange is a pretty advanced concept for such a young lad. You've obviously got a little smartie there. I bet he enjoyed finding all that 'free' money too! :)

angelcel said...

I just looked up 'third grade' to see what age we're talking about. Wow understanding the stock exchange is a pretty advanced concept for such a young lad. You've obviously got a little smartie there. I bet he enjoyed finding all that 'free' money too! :)

copswife said...

What an awesome lesson! So many people think of coins as throwaway but if we keep our change and also add to it found change, it can add up to a lot! I had just resolved yesterday to start a coin jar.

fayezie said...

speaking of "stock talk", last fall when everything "went down", during one of our morning commutes my son who was only 3.5 years old at the time perked up and said, "mama, what is wall street?"

I explained that it was where people bought and sold shares of a company, and for an analogy, I explained a pizza cut into x-number of slices and everyone goes and buys a slice, and then later you can go back and buy another slice from the others, or sell yours...