Wednesday, December 1, 2021

Getting money lessons from a candy bowl

There were a lot of “wrong decisions” in my house this Halloween, and it wasn’t about eating too much candy.

On the contrary, this is how the children in my area reacted to my annual efforts to turn All Saints’ Eve into a lesson on money.

Each year it is a fun evening filled with conversations with children about money, value, risk, profit and loss; Every year I change and refine the exercises to keep them interesting.

The risk of children was ultimately my reward, as I donated less money this year than last, which was surprising as the crowd was smaller in 2020 affected by COVID-19. This more conservative group actually took more of my money home, and that’s the point of the lessons.

Children in the third grade and older had four options when they stayed at my house last Sunday:

Sweets: Three funny candies for a total of 40 cents.

Cash: envelopes from 25 cents to 5 dollars. Half of the 50 envelopes contained a minimum, but the total prize pool was only almost $ 60, which is an average prize of just under $ 1.20.

Ice Cream: Gift Certificate at Dribbles – Awesome store that can be easily reached by foot or bike for $ 1 or Wilbur Wheel, a signature big round ice cream sandwich that costs about $ 1.35 including tax.

Lottery: 50 envelopes, where the jackpots were $ 20 and $ 10, and the losers got nothing. The $ 30 prize pool averaged 60 cents per envelope and hence the expected income per game.

Each envelope includes an explanation of choices and odds; I ask the kids not to watch until they get home, but I hope they consider their choice – and how it might turn out differently – when the excitement of the rustle of candy is over.

The highlight this year was that the losing lottery tickets included a note stating that the ticket could be redeemed for $ 1 if the child brought it back and exchanged holiday greetings between Thanksgiving and Christmas.

If young people know the value of the dollar, they will come back in droves because 42 children have played the lottery. Someone won $ 20, but $ 10 was not claimed (which means the lottery was worth $ 20 to me).

Cash players didn’t feel much better; seven children chose this option, and while one took home the top prize of $ 5, the rest received a quarter.

Not being able to have follow-up discussions here is a shame, because the kids experienced what they are likely to see as adults: the average gain on cash envelopes was just over 90 cents, which looks great when you consider that every child was an “Investing” 40 cents worth of chocolates.

In reality, however, most of the cashiers suffered a loss, turning 40 cents of candy into quarter money. The jackpot winner skewed the average.

Only one kid went for ice cream this year, which was actually the best deal based on the cost of an ice cream sandwich. It was a guaranteed win that was worth three times as much as candy.

Lotteries, of course, are widely considered to be the epitome of bad financial decisions, without provoking my arguments, but I can’t say that I wouldn’t chase big money if I were offered this choice as a child.

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Moreover, this lottery had another lesson, which suggests that the choices these children made were not so bad. In the end, the candy was worth 40 cents, but the average payout per lottery envelope was higher.

No, the kids didn’t think about the “expected value” per person, nor the true balance of risk and reward – although the breeders either lost the lottery last year or just wanted to make sure they really got something from every home they visited. – but it is clear that they learn these concepts at an early age, and the sooner they are taught the better.

There is ample evidence that Americans have problems ranging from poor saving rates to bad spending habits, and that problems are especially prevalent among young people who have never learned these lessons in school and who are not ready to lead their financial lives, which often leads to to the mistakes they pay in their 30s.

Financial life is a series of decisions and trade-offs with consequences. We exchange money for goods, services, time, ease / convenience and much more; money gives us options.

This is what the kids learned on Halloween. They were “paid” to show up and then had to decide how best to use their capital.

Regardless of their costume, these little monsters, unicorns and superheroes realized that one choice was to try to win big, another was not to lose, and the third was to maximize purchasing power.

This is the same thing consumers face on a daily basis when making spending choices, and investors face when deciding whether to pursue smaller and safer benefits and how to balance this with the pursuit of greater rewards but with greater potential risk.

I hope the kids and their parents discuss “cash or candy” and that moms and dads tell them what they will do, but also link the situation to other transactions they make and what kids see in places like the grocery store. …

Children today don’t see their parents balancing on checkbooks, paying bills, or putting money in the bank. They see expenses without knowing where they come from and what it takes to earn them.

The situation is getting worse as society becomes more cashless because children think credit cards – or apps on the phone – pay for everything, not understanding how bills are actually paid.

My Halloween experiment won’t change that, but I believe that every lesson we give future generations on how to handle money will pay dividends, literally and figuratively, in the future.

Now I’ll wait to see if any of these lottery losers earn their second chance during the holidays. I have low expectations but high expectations; in my experience, this is the best way to teach kids to understand money.

Nation World News Desk
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