Incentives and Motivation
How $7 per day becomes $250 per annum, forever
My Kids & Money series is helpful background for this piece, specifically, the section on Creating Happy Savers.
Happy Savers explains the game we’ve been playing since the kids started asking about money.
$1 per birth year each Monday.
$10 per week, for a 10-year-old.
Kids can save on top.
Bank of Dad pays 10% APR.
We started them from 2015 to 2017, depending on when they showed an interest. Once they figured out I was offering 10% APR, they would top up their accounts with money earned. We’re now at a stage where even our youngest has more than $10,000 saved.
As our oldest is coming up to 18, I’ll need to decide if I’m going to continue the game into college. She managed to secure herself a scholarship and expects to graduate with most of her college fund intact. How we manage that capital is a decision for the future.
Knowing a risk-free 10% ARP will, eventually, eat me alive… I’m inclined to shift her to real-world assets and market rates of return.
Your Money, Your Choice
Ten grand rolling up with the Bank of Dad makes them “kid rich.” They’re earning ~$20 a week via investment earnings. This is on top of their base allowance of $1 per birth year.
One of my rules for the allowance account is they can’t withdraw “allowance” for daily consumption. Instead, they have total control over the earned income they have deposited (plus associated earnings). It’s like the “allowance” part of the account is their retirement fund and their “earned income” is their taxable investment account.
We call this your money, your choice.
This framing is setting up a downstream discussion where I might want to make the point, “If you want to do that then you should earn the money to make that happen.”
Unearned Income and Motivation
They are well aware that they receive $20 a week for “doing nothing.” Similar to adults, who have unearned income, this impacts motivation.
Just like the rest of us, they are far more careful with their earned money than they are with someone else’s (ie mine).
When they were little I got an exceptional deal on yard work ($5 per compost bag filled). Over time, as their investment earnings rose, they became less interested. I didn’t make a big deal about it. The lesson about compounding was worth it. My wife (who did the leaves this past fall) was less thrilled.
They still love shoveling snow, which helps.
Hiring A Social Media Director
Six months ago, I hired our youngest as my Social Media Director. She edits my YouTube channel and makes $20 per video.
Being allowance-game savvy, my kids convert any weekly amount to its annual equivalent, then multiply by 10%.
At the time, my son told his younger sister…
Do you know how much money that is?
After a year, you get $100 annually, for doing nothing.
My son’s was working to close “the gap” on his older sister for years, but it’s hard to catch up (when you prefer gaming to yard work).
Running the numbers on his younger sister’s new job, he realized not only was his older sister pulling away… his younger sister was going to bridge up to him.1
It took several months but he asked me if I had a job for him.
I told him I had the house under control but would think about it. In the meantime, I recommended he get his babysitting certificate and placing flyers in the neighbors’ mailboxes for yard work. I told him there is a ton of work around, he just needed to get after it.
The Pitch
After a week, or so, I told him I didn’t have a big job but I did have an area where I needed a little help. He could be my House Manager and the position would pay $50 per week.
Knowing the way his mind works…
$50 per week.
50 weeks
$2,500 per year
$250 of earnings every year thereafter…
He jumped at the offer before I had a chance to outline the role.
The spec is simple:
Do whatever I ask, whenever I ask it.
Compost, recycling, trash, mail… all the little things in the house.
One house project each weekend.
Capped at 4 hours of work.
He sets the schedule.
We choose the project together.
I help as needed.
Continues with his cleaning chores.
We have the house split into sectors that we each do weekly (mine is toilets). The idea is specialization leads to efficiency, and everyone should do something.2
Dad’s Lost His Mind
This has worked better than I imagined. The entire family thinks I’m nuts for paying him so much.
For $7 a day, I’m living with a teenage boy who’s eager to take proactive action.
When we get used to saying “yes,” it spills over to everything.
As for his younger sister, she’s been working to improve her video production skills. Through no action by us, she’s learning techniques she sees in her favorite videos. She will spend 4-8 hours producing one of my videos.
His oldest sister (winning above) has figured out that her highest return activity is training to swim fast. In the summer, she’s doing ~20 hours per week split between pool time and strength work. The 200 Fly is her main event.
Helping people discover areas where they like to work hard is a fun part of parenting. I need to remember that I don’t get to choose the “what.” The important part is building the association from consistent effort and improvement/satisfaction.
Time Management
With my kids, I don’t get involved in managing weekend time. It seems like a needless stress on our relationship.
Our youngest has arrived at a weekend schedule where she has a rest day and a work day.
On her rest day she swims in the morning then does nothing (literally) for the rest of the day.
On her work day, she makes a bulleted list and ticks boxes all day long.
Our other two kids are more traditional in approach, they hit their minimums, sometimes starting late on Sunday.
It’s Not About Chores or Money
There’s a lot in this piece:
Negotiation,
Knowing exactly what you want,
Incentivizing work,
Framing, and
Patience with letting people come back to you.
My household approach is relevant to what we see on far grander scales. At the micro level, the techniques I use on my kids, I apply to myself. Applied psychology works, even when we are doing it to ourselves.
We don’t compare account balances between kids, and rarely check totals. My son was working this out in his head.
My son becoming a baker is downstream of letting a young boy bake a carrot cake (unsupervised) when his mother was out of town.
The carrot cake story. He didn’t know how to assemble the food processor to grate the carrots. I was riding in the basement and asked him to bring all the parts down. We assembled the Cuisinart together. He went upstairs to bake and I went back to my ride (hoping a trip to the ER wasn’t in my future).
By the time my ride was over, the kitchen was clean and we had a cake. As a chef, he’s gone from strength to strength due to the confidence inspired from one episode.
He has internalized a belief that he can figure it out. Collectively, we can do a better job of building this can-do trait in kids. It runs counter to the safety-ism we see in the school system, and elsewhere.
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Everyone knowing how to clean is downstream of my decision to fire all the staff, which was a major inconvenience, but the right thing to do.
Oh boy! I see a few ideas here that we can definitely borrow to upgrade our own game at home. I also think the fact that “dad went crazy” is actually a good sign for everyone, it’s a reminder to pay attention, stay engaged & keep building.
The investmen game is working wonders for us too. My 8 year old gets paid for a work at my clinic (shredding) and calculating family's weekly expenses. Our investment strategy is that she gets whatever the index performs :)
In the beginning, she was not keen when I told her that she may lose money in investing via dad's bank, but so far, she earned over 10% :)
It is interesting how they learn opportunity cost so fast.