Shortly after John Lanza’s first daughter was born, he and his wife decided that they wanted their children to be smart with money. With a background in animation, entertainment, and education, he set out to make learning about money fun.
To do this, he created the Money Mammals, which teaches sharing, saving, and spending smarts to children through videos, products, and resources. To help parents put these lessons into practice, he wrote The Art of Allowance: A Short, Practical Guide to Raising Money-Smart, Money-Empowered Kids.
Today, John joins the podcast to talk about his unique journey into childhood financial education, how he fills a much-needed educational niche for parents and kids alike, and how he’s working to teach children about the value of money in a world where so many people barely even touch cash.
In this podcast interview, you’ll learn:
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[00:00:45] Andrew: Welcome back to another action-packed episode of Your Wealth & Beyond. Today I am super excited to introduce all of you listeners to John Lanza. John is the creator of the Money Mammals Financial Literacy Program. He’s also the author of the Art of Allowance and over the last almost 15 years he has created a program to help empower and for you as parents to teach your kids from toddler to teenager the value of money, helping them to be smart about money, and understanding how spending and saving can work so that they are a step ahead when they hit their adult years. And without further ado, my episode with John Lanza on empowering your kids to be smart with their money. So, John, welcome to the show.
[00:01:35] John: Andrew, thanks for having me on.
[00:01:37] Andrew: As we look at your background before we jump in and talk about some of the great things that you’ve done since 2005, walk us through how you got to this point and where your passion came for helping to teach children and high school kids the value of money.
[00:01:53] John: Well, it all started like a lot of these programs that are for kids, we had kids. So, we have a 15 and 13-year-old daughters. I have a sense of what life is like for you. So, when the 15-year-old was six months old, my wife and I knew we wanted to raise her to be money smart. We just knew that was something that we wanted for our kids. At the time it was a kid. It would become two kids and what was interesting was that both of us came from pretty frugal parents. My dad was a banker. Her dad was a New York City cop and both the dads and moms were pretty frugal, but we were both different money personalities. My wife was more of a saver. I was more of a spender. I become a reformed spender. That and I owe a lot of that to her and we wanted to figure out, it seemed a little too random like why was I the way I was and why was she the way she was. She was the aunt who would buy savings bonds for her nieces and nephews.
That’s back when people actually did that. That’s what she would do. That’s how money smart she was. She bought her first car in cash. For me, I’m buying my first computer straight on a credit card. A $2,000 machine cost me $3,000 in the end, making a lot of really brilliant money moves right from the start. So, in any case, what we wanted to do is we figured we should probably try to be intentional about this with our kids and my background was I was a camp counselor and I worked in entertainment and animation. I did work in both entertainment and education, and it was just kind of really obvious to me that we should make this fun. Let’s take something like learning about money that’s pretty dull on its face and make it fun and that really was the reason we created The Money Mammals and The Money Mammals sing about sharing and saving and spending smart. Their mantra is, “We’ll share and save and spend smart too,” and the whole idea is to get kids excited about something other than spending.
[00:03:51] John: Because there’s plenty of shows and plenty of material that they see on TV or on the net or wherever it might be that’s telling them how wonderful it is to buy things and we wanted to take that approach but make it, “Hey, look at how wonderful it can be to actually save money and to share money than when you spend to spend smart.” So, that’s kind of where we came from in creating The Money Mammals program.
[00:04:15] Andrew: So, you came from your parents were kind of that frugal background but do they spend time when you were growing up, teaching you the value of money or was it more of just watching them through experience and there was nobody sitting you down explaining to you the value of the dollar today and working for the ability to save to maybe donate and then to spend?
[00:04:36] John: There was like an open conversation about it which is what we’re trying to do with our kids and what we try to talk to other parents about doing with their kids. So, a lot of it was like you said, it was just kind of observing and it was good to see the frugal behavior, but there was a lot of conversation around it. And so, that’s the reason that we wanted to be more intentional with our kids as we wanted to make sure that they understood that we want to raise them, we wanted to put effort into raising them to be smart about it. And the other thing about this idea is we kind of quickly realize that this wasn’t just something we wanted to teach our kids. We realize that, “Oh, there’s not really anything out here to make this fun for kids,” and there’s a whole heck of a lot of parents that want some help with this. That’s kind of what made this something that we wanted to pursue beyond just teaching our own kids.
[00:05:24] Andrew: Yeah. I mean, I think it’s so incredible that to this day they don’t teach anything in grade school, or even in most high schools in regards to saving, balancing a checkbook, and helping them with investments. One program junior achievement that we’re a part of here in Arizona, they do a wonderful job in trying to teach that value but it’s just amazing that still to this day, the schools don’t offer that in those type of program. So, I think that the value that you guys are bringing which we’ll get into on all the different things that you created, I think it’s so important because we just – it’s the same thing for us. We really saw our parents trying to value that money but nobody sat us down and explained to us how it all works and uncovered it and then that becomes in a sense ignorance leads to maybe making bad decisions.
[00:06:12] John: Well, Andrew, you uncovered exactly one of those things that’s shocking, which is that of all the things that would be helpful to be taught in school, I think back to high school and certainly I had some really great classes and I had a terrific biology professor, had some really nice history classes, but one of the most effective classes I ever took was typing because I’ve been typing my entire life and I use it every single day. I think to myself, “Why do we not have a financial literacy class?” and it’s crazy that we don’t. There are a few states that do require but require it. Certainly, here in California, there’s nothing that’s required and it’s shocking, honestly. It really is, and it’s also it’s a reason why you just can’t count on the schools to do this and that’s the reason why we spend most of our time really focusing on trying to connect with the parents. Because like our Money Mammals program, we’ll get kids excited about it.
But I wrote this book, The Art of Allowance, and the reason I wrote it is because I realized, well, the excitement is good but the parents need to have a plan to move these money learning concepts from abstract to real. And what I mean by that is the allowance is the vehicle for that because kids have to have money in order to really learn how to use it. Otherwise, these are kind of fun things to learn about sharing and saving and spending smart, but they’re very abstract for a young kid until they actually start exchanging money and that it becomes very clear when they’re using cold hard cash.
[00:07:48] Andrew: Right. And I think that you brought up earlier, some of the battles that we face, obviously, the commercialism with the Disney shows and just now with YouTube and that constant they’re always on whether it be watching TV or the iPad. So, that battle of what they keep pushing and we dealt with it too growing up but it just wasn’t 24/7. But then I think the other is this cashless society like we grew up with I remember to this day. This may age me a little bit but I remember going to the – it was back in Cleveland called Revco. Now, they’re probably bought by Walgreens, but they used to bring out that when you had the credit card, they bring out the book to see if the credit card was valid. They have this little book that they’d scan through. Very rarely did we use it so it was either checks or it was cash. These kids today, our kids are 15-year-old, my 13-year-old, they don’t touch cash much anymore. It’s gift cards right. It’s one-stop click-shopping on Amazon. So, how can we work towards having the value of money when they don’t even actually touch the money anymore?
[00:08:46] John: Well, I think that is the point of setting up an allowance young because you want to set an allowance when they’re five that requires them to use cash. They’re going to move and it’s important for them to learn how to use digital money, definitely. That’s going to be the medium that they’re going to use when they get to be teenagers, but before that, you want them to be using cash. You want to do your allowance in cash. We did allowance from 5 to 10 with cash. That’s what they used because then they realize that’s the medium of exchange. And then when they move to a digital allowance, they understand that better. That digital side is even more of an abstraction. It’s very easy to get lost in the idea of, well, I mean, like I told you when I first got my credit card, I used to buy a computer. If you haven’t been taught, you don’t realize it. It really does feel like magic money and that’s the reason you want to use cash right out of the gate so that they have some experience understanding here’s how this money works, I get change, I can save it, I can watch accumulate it from saving it over time. And then when they move to digital allowance, they have that analog like that’s in their brain. They understand that, okay, this is just like cash but now it’s just a different medium that I’m using but you do definitely want to start with cash.
[00:10:00] Andrew: And so, when you look at the allowance, a lot of parents will tie it to the chores you’re going to do. You’re going to help set the table. You would help clean the table. You’re going to clean your room, things that they should be doing as part of the family anyway to have that roof over their head and the food that we feed him, but is that the right move to tie the actual monetary value to the chore that they do, tying the allowance to it?
[00:10:21] John: Well, I don’t recommend that you tie allowance to chores and here’s the reason. I understand why people set it up like that. A lot of times they feel like, well, if they aren’t working for the money then they’re just getting this handout. It is a handout until you realize allowance does have a purpose. You need to be intentional about it and tell your kids that you’re being intentional about it. So, the purpose of an allowance is to teach your kids to get smart with money, to learn some key skills so some of those skills are the key skills are really distinguishing between needs and wants, making smart money choices, and setting and saving for goals. And you want to tell your kids this is why they’re getting an allowance. And chores teach a different lesson, a valuable lesson but a different lesson that is you have to work hard to earn your money. You could teach them that lesson but you teach them that lesson with chores that you wouldn’t require them to do for just being a part of the family.
So, everybody has different chores that are the requirements, but, for example, required for living in your house. Ours are emptying the dishwasher, making beds, in our case making your own lunch. There are a few things that they have to do. We don’t pay them for those chores, but if there are extra things so washing the car, for example. If they want to make some money, they can wash the cars because I would normally be there, do it myself, or I would go to a carwash. So, that’s something you can pay them for and then they learn that lesson. Again, chores teach a different lesson than allowance. Once people understand and parents really get it, once they understand, “Oh I see. Okay. So, an allowance does have a purpose,” it’s not a handout. It is a handout if you don’t have a purpose, but the why behind doing an allowance is to teach your kids to get smart with money and you need to be intentional with them. Even the five-year-old. You can even start money conversations as young as two or three because you’re just introducing them to an ongoing conversation that you’re going to have with them about money. And some people will say, “Two or three years old? Are you kidding me?”
[00:12:19] John: Well, what I mean is it’s just like the idea that we read it to our kids from a very young age because we know that those are the building blocks for later literacy, reading and writing. Same thing here with money. So, they’re not going to understand that a dime is worth more than a penny but they’re going to start to get the language of money. So, when you go to a store with a say a three-year-old, you can give them a dollar. Don’t give them an allowance but you give them a dollar, and they just exchange the money for some little thing that they might want. They get some change back. They’re not going to count it. They’re not going to know how to count it but they’re getting exposed to the money language that they’re going to be using as they get older and start to get an allowance, and then become older teenagers, and start to have more responsibility with their money.
[00:13:02] Andrew: And so, you started the company back in what was it, ‘05, right before the recession?
[00:13:06] John: Yeah.
[00:13:07] Andrew: And so, part of that was because you had a child at that point and you just had this passion that you wanted to help teach them, but then you saw the need for it, that there wasn’t anything out there that could do this and so did you just change industries at that time or what were you doing prior to ’05?
[00:13:22] John: Well, that’s funny because I was working at a media company and I came up with this idea and I talked to – I had a friend that worked there who we would toss around ideas all the time and he was like the guy that would find the reason why you should not pursue an idea because, “All right. It sounds great but it’s already being done.” So, I told him about this idea. It’s all about The Money Mammals idea and he went back like it was like a week or two. It’s driving him nuts. Finally, he came in and he said he’s like, “John, you have to do this like I can’t find a reason why you can’t do this because it made sense and there’s nothing out there,” and that was really – we all have kind of friends like that, that we bounce ideas off of but when he was flummoxed and couldn’t find a reason to not pursue this, that’s where I said, “Okay. Well, this is what we’re doing.”
And it wasn’t a new industry in the sense that I came from production. I knew how to produce entertainment and I had friends that could help me really build the educational element. I wrote the script, I had fantastic people I work with before to help direct the program. I brought in amazing puppeteers. So, that part of it was after the easy part. The harder part was deciding, “Okay. Well, we’re going to start a business out of this,” but really it was when my friend came to me and when he couldn’t find a reason not to do it, we pretty much just had to do it.
[00:14:39] Andrew: As an entrepreneur myself, having built two companies, it is still daunting. You lead a company. We’ve got a nice position. You get the consistent paycheck. You just had a kid. Was that something that both you and your wife jump headfirst into building this company in 2005, or was it a more gradual of let’s build this thing and then fully jump ship and 100% on board?
[00:14:59] John: Yeah. It was more gradual like they will tell you any entrepreneur to the extent that you can, you don’t want to jump in full if you can kind of test things out and so no, we started out, created the DVD, and then once we came up with this program where we realize we can license the program to credit unions, we realize, okay, this is a sustainable business because the credit unions can use this as a way to really reach out and bring in new members, provide value to their existing members, communicate with parents, communicate with kids and fulfill their own missions. As credit unions, part of their mission is to reach out and provide financial literacy for their members and their communities. We’re starting to work with community banks so we really focus on these socially conscious institutions that are focused on their communities and it just fits with what we’re trying to do with our ethos and you had said we started in 2005 and then we went through the great recession and that was one of those kinds of eye-opening moments where you realize this is even more important now.
Because I think the big eye-opener with the great recession is you realize now as a parent that your kids are really going to be on their own, and I think it’s part of the reason why our parents didn’t have as many conversations. Sure. Yeah. Money conversations were more taboo back then but there is a sense back in say the 70s and beyond that, that you would have some kind of protection whether it’s a pension or something like that or you are much more protected. Now, it is all up to you. You have to make sure you have that, all these kinds of that safety net is just kind of going away. And so, that’s why this is more important than ever. It’s more important for us as parents to have these conversations with our kids because if you don’t have the conversation or you don’t start this program then they’re going to be learning about money typically through the media or through other folks who may want to instill different values in your kids.
[00:17:02] John: So, it’s really something that parents we really want to do this with our kids. We make sure that we are instilling our money values onto them or just our general values so they can use money in a more effective way to kind of do whatever it might be, whether it’s charitable giving as a focus, being smart about their saving, and then obviously, mindful spending. That’s something we want to do as parents is really talk to our kids about that.
[00:17:26] Andrew: So, walk us through a little bit of the program. I know it’s obviously evolved over that time. I mean, if a Gen Z happens to be listening to this, which I doubt they are. They’re going to be like, “What’s a DVD?” And let’s walk through the program because for me, obviously, selfishly, with my daughter but we work with hundreds of clients on the financial planning side. Some are still in their building years and their kids are young, we got a lot of clients that are getting close to retirement and they got grandkids so really interested to hear how the program works and how it can fit in not just on the credit union side, but, John, I think there’s a great opportunity here for financial planning firms like ours to build this in and to help our clients get smart with money for themselves but then bring it down and educated in a program for the kids. So, let’s walk through that, what it would look like.
[00:18:11] John: Yeah. I love to do that. So, what I like to do is we’ll start with kind of what it looks like with your young say five or six-year-old and then how you kind of graduate and the program grows as they become teenagers. So, when you start your allowance for say your five-year-old, you’re going to give them $1 per week per age of the child. So, it’s $5 a week for a five-year-old, $6 a week for a six-year-old. And then you set up the three jars so you have the shared jar, which is for charitable giving, the save jar which is for longer-term items, and then you have the spend smart jar. The reason we put that, it’s just a word smart, but it’s more than that. The reason you put smart on there is you want to make sure that they’re being mindful when they are using their money, particularly when they’re spending the money. So, they have those three jars and then at allowance time, so you set a time for that with whatever that might be, on a weekly basis. You give them $5 and then they’re going to break that money out. Now, we broke it out because we were kind of lazy. We just gave them $5.
Some people might want to do kind of an 80-10-10, 80%, 10%, 10% so like 10% in to share, 10% of the same and 80% into the spend smart. We were a little lazy so we just did it by dollars so it effectively turns into like a 60-20-20 split. So, we would take $1 and put that into the save jar. This is like teaching your kids to pay themselves first. That’s what the idea there. So, that’s the first thing they do. Second, take the next dollar and put into the shared jar. We want to teach them that charitable giving is something that we think is important so they start to accumulate money in the save and the shared jars. And then they have those three additional dollars, which are their discretionary dollars. They can put them anywhere but most of the time they’ll go into the spend smart jar and then that’s the money that they’re going to use if they want to buy something. So, now when you go to the store and there’s something little they want to buy, they have to use their money. They bring their money and you know what, they’re going to run to the store. At some point, they’re going to want something let’s say it’s a scooter or some kind of toy.
[00:20:13] Andrew: It’s going to be more than they have. That’s where you say, “Okay. Let’s put that on the save jars. Let’s put a picture of it. Let’s figure out how long it’s going to take you to save so you want to set. It’s called a SMART goal. You’re probably familiar with the acronym of SMART goals. So, the acronym is specific, measurable, attainable, relevant and time base. So, you want all that visualized on their jars so you put the specific goal, picture of it, you put it measurable how long it’s going to take, you make it attainable. So, for a five-year-old, you don’t want to be saving for something that’s going to take six months. So, if it’s going to be something that’s going to be longer than you say, “Well, that might be for the holidays or something,” but you’re looking for something that’s going to be smaller then it’s going to take them say three to eight weeks. Then you want something that’s relevant, it’s going to be relevant because they want it. And then time base you’re going to tell them when you put the goal in there, how long it’s going to take them. That’s really where they start to now learn how to save for a goal. That gets you rolling.
And the one thing that you’re going to run into is the first one or two trips to the store when they want something, your kid may not be happy about that but I’m telling you if you just stick to your guns, it doesn’t take them long to figure out, “Okay. Dad or mom is not going to give in. So, the only way I’m going to get what I want is I have to start saving my money.” That’s how you start with your five-year-old and then you kind of increase it to six, seven, eight, nine, and we can talk about teenagers after that.
[00:21:36] Andrew: And I think that’s powerful because it helps to also start raising so many values that the dollar but then the fact that a lot of these kids are spoiled in today’s world, and it’s not so much that we need to spoil them. It’s just that it’s very easy to. So, when they don’t actually have a value of the product that they bought or the toy that they received then they just think they can always get that as in always here. I want that, I need it, I have it and then that creates, obviously, as time goes on, that creates some very, very bad traits that would lead to your teenage years and then your adult years. So, I think that’s really smart and, listeners, it’s that cash having them touch it, feel it, and then even a five-year-old. So, you’re saying a five-year-old will grasp this and be able to then understand the value of it and be able to know that they can afford that and then they’re not going to have a meltdown. Is that what you’re guaranteeing that there’s no meltdown in the store. Because if so, I’m in.
[00:22:33] John: No. I am definitely not guaranteeing you that there is going to be a meltdown. But the key is to just get through the meltdown because our kids have their meltdowns and then once they realize that they’re not giving in, the meltdowns are going to go away. You just you have to be strong. It’s not easy because like you said, we can certainly get whatever they want, but what you’re doing is now you are empowering them and it is going to be difficult in the beginning but it really turns pretty quickly then they become empowered and then they start. Now, money is part of their vernacular. They really start thinking about things in a practical way which is going to serve them really well when they move out into the real world.
[00:23:19] Andrew: Can I ask you a question just between us? So, I have a 45-year-old wife. Will this work for her? Because just between you and I, this will work for her? We could talk offline on that but…
[00:23:30] John: I have to think about that one, Andrew.
[00:23:35] Andrew: Okay. So, before The Art of the Allowance which talks about what the preschoolers and I assume even the K through maybe 3 or 4, what’s Joe the Monkey? So, that was created in a series of books that was done to help maybe influence these younger children the value of money?
[00:23:52] John: Yes. So, we started with the video. That’s the Money Mammals. So, Joe, the Monkey is the main guy and he’s got his friends, Piggs the Bank, Clara J. Camel, and his sister Marmoset. They’re part of a band, which is also called The Money Mammals and they sing and dance and talk about money. In the video, they go through the difficulty of wanting stuff, but having to save for their friend’s birthday party and then I’ve written three kids books and, in those books, we tie into those three kinds of key things to share and save and spend smart. So, the first book is about saving for a goal, second book is about learning to share, and then the third book is about spending smart. Joe and his friends learn about what happens with collectibles and when everybody is wanting to buy stuff, which is something that every kid is going to run into. They’re going to have friends that were going to be collecting, whatever it might be, whether it’s Legos, whether it’s other types of toys. At some point, they’re going to look around and be like, “Why is everybody collecting this stuff?” in that particular book.
This one works out happily ever after. It doesn’t always work like that, but all of Joe’s friends realize that the stuff it’s literally called stuff that they’re collecting is just junk. We’re talking about kind of bigger themes. One of the big themes that I really were trying to get across with my kids, I want parents to get across with their kids is that there’s never going to be a purchase that’s going to give you more than that dopamine hit that you get over the course of say a few days after. Immediately it goes away, and the sooner you learn that, the better off you’re going to be. And as a reformed spender, I know how that feels but, you know, for example, my weakness is technology. I’ll think to myself, “I really like to have that phone.” Now, after 50 years of being alive, I realize that I will only get something because it’s something that I really, I wouldn’t say that I need say a phone, but something that I truly do want, not for just – I know that it’s going to become part of my baseline within a very short period of time. And that’s a really important thing for kids to learn is that these things that they’re getting only provide a very short-term kind of happiness benefit.
[00:25:57] Andrew: Right and that’s kind of like that’s a foreshadowing to what we’re seeing now in the mainstream with the life-changing magic of tidying up. Marie Kondo with her book that’s been around forever, but now the new Netflix craze of everyone, adults going in and saying, “You know what, I don’t need this. It doesn’t make me happy. I’m going to release it.” And that’s something that if you could teach that in an earlier age, which is what your program does then maybe they won’t have to go through that metamorphism of, “Hey, I don’t need all this stuff,” and feel that empowerment of not being burdened by things.
[00:26:31] John: Yeah. I read Kondo’s book. I did the KonMari Method. I even thanked my clothes, however crazy that might seem, and there is something very empowering in that and I’m glad the kids see it. We instituted a long time ago. This is pretty Marie Kondo the idea that when they get presents for their birthday, it was a kind of one-to-one exchange. So, if they got 10 presents, they had to give away 10 items and we did that really from a practical standpoint because we only have a certain amount of room and we knew we were going to get pretty inundated pretty quickly. And any parent knows how incredibly fast stuff just builds up and so those kinds of strategies you want to bring in and use with your kids. And sometimes parents will think, “Oh, that just seems you’ve taken all the fun out of it,” like you’re not taking the fun out of it because you’re actually injecting more fun into it because they’re going to get these new toys. They’re going to have stuff that they don’t want. You’re now teaching them to bring them to say goodwill and someone else will be able to use those toys.
So, actually, it’s a really positive experience and it gets in their head that what you want is to just get in their head these ideas of thinking about needs and wants, making money choices, saving for goals, this idea that when I get something that’s coming in, I need to at least be thinking about kind of taking something else out because we can all get very inundated with stuff. We’ve all seen the show. Well, we have all seen the show, but if you’ve seen the show, you can see the amount of stuff that people accumulate and it’s a very kind of positive experience that you can have with your kids.
[00:28:07] Andrew: Yeah. I just read in the times that the good wills and the donation stores they’re just over full right now. They’ve never been in the past.
[00:28:14] John: I saw that too.
[00:28:16] Andrew: It’s good I guess there. So, let’s move on then to this. We talk middle school and high school. Now, the little adults they’re able to think for themselves and with that comes both good and bad. They’re trying to maybe keep their appearances up, keep with the Joneses where you are in LA meet here in Scottsdale. It’s a constant battle there. So, what can we do? Talk us through what jumpstart looks like and what we can do to help raise teenagers that understand the value of what things are worth.
[00:28:46] John: Yeah. So, once they get to be tweens and teens, that’s when you can transition to we call it the breakthrough allowance and the breakthrough allowance is going to be more responsibility for them. So, now they are going to be so our kids are now responsible for their own communication. The additional money that were charged for their phones, they pay for that. They’re responsible for all their own clothes, they’re responsible for gifts for their friends, and they’re responsible for food that they buy at school or if they’re out with their friends. So, consequently, they will get more money for that but now they have more responsibility. On our site at TheArtOfAllowance.com, if you go to the resources, we have a Google sheet that you can download. You can very easily create, use the sheet to create your monthly allowance. You’re going to pay them now on a monthly basis so that it feels like getting a paycheck so they start to understand, “Oh, I get something.” They’re going to feel flushed with cash at the beginning of the month.
Guess what happens when they first get it? A lot of times they’ll blow through that cash and then they’re halfway through the month. Again, just like having to deal with a tantrum when you first started when they’re five, you can’t bail them out. They just have to learn that lesson and really it takes a month, maybe two months, and they learn that lesson and they start to budget their money more appropriately. Now, one of the things that happen is they’re going to get more money. Now, parents will shudder sometimes when they hear this money. That’s why I try to provide the context of the responsibility. But, for example, our 13-year-old gets $100 a month. Now, we’re fortunate to be able to give her that. So, I understand that that’s the case, but if you actually step back and think about the things that we’re talking about here. So, the clothes, the food, all that, almost guaranteed you’re spending more than that amount of money. Then if that’s the case, if it’s coming out of your pocket for each of those items and they don’t have their own allowance, it’s then it’s your money that they’re spending and they’re much more into spending your money than they are into spending their own money. Once you give them that money then it’s their responsibilities, they get much smarter about it.
[00:30:51] Andrew: Wait. So, the listeners, let’s make sure we understand this. So, ultimately, your kids are still doing their chores to be a conscious member of the house. That’s part of the deal but what you’re saying is they hit their 12, 13, 14, you’re actually when you say more money, you’re going to be giving them whether it’s once a month or twice a month, they’re going to be getting a paycheck and then they’re going to have the responsibility of what that money is going to be used for, and they’re not going to come to you now if they’re going to the mall with their friends on a Saturday and they’re not going to say, “Hey, dad, I need $50,” because they had that $100 or maybe they saved the month before. Maybe they have $200 and that’s the money that they’re going to use that cash in hand.
[00:31:28] John: Yeah. That’s exactly right. You got it right there, Andrew.
[00:31:31] Andrew: In this case, you’re giving them cash. You’re not putting it on a debit card. You really want to teach them in that case, even a 14-year-old, you want to hand them over five 20s?
[00:31:39] John: No. I’m glad you brought that up. So, we transition to a card and then the particular card, it’s a debit card. This particular card and there are a few of them that are out there allow you to split it into share and save and spend and that’s great. So, they’re used to that. I will say because now it’s digital, it’s very easy for them to lose track of, for example, the share money. They’re not paying attention to that. And this is the case even with cash like that share jar or the share bucket in their digital account, you’ll want to kind of look at that and say you’ve accumulated like $25 or whatever it might be. You may want to then go to donors, choose online or if there’s some kind of drive going out the school that have them use that share money so that you’re being intentional about using the charitable, doing those charitable donations. We definitely use a debit card and really, it’s a great experience. We’re able to track what they’re spending on and I will say different kids are different. So, in our two kids, one’s more of a spender, one’s more of a saver.
And the one that’s more of a spender, it’s not like she is going to be asking us from time to time. She’s like, “Oh, do you think you can cover this?” like she’s constantly negotiating with us on, “Well, you know, I’m going out but you’re also going out for dinner, so maybe you should cover this?” So, we have some interesting conversations and you know what, that’s great. Having those conversations is terrific and different parents are going to deal with them differently, but most importantly, if for example, the spender were if we’re in a situation where she was asking us for money all the time, money would be flying out of our pockets. It’s so much better that she has a specific set amount of money that she has to kind of manage because she’s learning these skills that she’s going to need when she goes out on her own.
[00:33:30] Andrew: What’s interesting is we work with a lot of couples and one of the areas of issues with relationships is money. As you know, and what I’ve seen is some clients and it wasn’t me presenting this to them. They’ve done it on their own where they basically let’s say they’re both earning income, they’ve got their fixed cost to keep the house together. They’ve got certain items that may be bearable, but what then happens is they each get their own paycheck. Husband’s not going to ask wife or partner’s not going to ask partner what they did with their let’s say $2,500. So, what this does is that same premise there, it gives them the onus of that responsibility of that money and husband’s not going to care that wife went and got her nails done three times as long as she didn’t go over budget and she’s not going to be pissed that you went and did golfing. It’s interesting that was the last year or two started seeing more and more of that so it’s definitely a way to keep relationships happier and no better way I guess to start than when they’re in their teenage years.
[00:34:25] John: Yeah. It’s interesting that you bring up the relationship side because we were very fortunate, my wife and I see pretty eye-to-eye on the money side, so that’s good. But one of the things that is an issue for parents here and it was an issue for me too because I know I’ve made a lot of terrible decisions when it comes to money, but what you have to do is embrace that. So, a lot of times parents will use that that will be the reason they don’t want to teach their kids. In fact, you want to have to be, “I’m not a money genius. How am I going to be able to teach my kid?” You don’t have to be that. What you have to be is a guide for your kid and you want to start this conversation and it’s perfectly fine to share with them the mistakes that you’ve made because that’s going to soften their mistakes. The reason you’re doing this is so that they make mistakes themselves in a low stakes environment. But don’t let any of your own money shame keep you from having this conversation because like I said before, if you’re not having this conversation then they’re going to be learning money values somewhere else. And again, that entity may not even be a person.
So, you really want to start this conversation and use it as an opportunity to kind of reflect and understand your own potential issues and use that as a way of teaching your kids. It really does work. It’s one of the things I see with parents sometimes is that’s their reluctance and I just say just embrace it. Embrace it. It’s okay. Get started talking to your kids because you’re going to open up these conversations and frankly, I’ve learned as much as my kids have learned, if not more in the process of trying to raise them to be money smart.
[00:36:03] Andrew: And what’s your thoughts on helping the children or the teenagers understand about investing, whether it be buying ETFs or individual stocks? What we’ve done with my daughter, she works for me in the summertime, so I’ve helped her a set up a Roth IRA and then we went in and taught her a little bit about what investing is. So, how does your program try to fit that and beyond the saving and being thrifty, the investing side so they become smarter in that aspect?
[00:36:30] John: Yeah. And I’m definitely not an investment advisor, but I will tell you what we’ve done with our kids. Once they do start, I’ll tell you, they do work for us, but they haven’t done official work where they can open up a Roth IRA. That’s a terrific idea, but what we do is we’ve been using my daughter’s first investment was she invested in Adidas. I’m only saying that because she was a soccer player and she just wants to buy some shares so she bought three shares and we just did that in our account just to get her started. And what’s great about having done that was it opened up a number of conversations. One, it shot up and so she wanted to sell and I said, “Well, if you sell, you not only have to pay the commission but you’re going to have to pay the short-term capital gains on it. So, if you wait a year, which is a risk, you can pay long-term capital gains,” and she, in turn, held onto it. But we never would’ve had that conversation if we hadn’t done this, right? Then we have since used a program and I get nothing out of this program, but we use it. It’s called Stockpile where you can buy fractional shares, so the kids have invested in some other stocks.
And then what we’re looking for now is the next step is to set up some investment accounts that are tied to mutual funds because that’s going to primarily where we are is index funds, and so that’s going to be kind of the next step so that they start to realize just try to do this. We want them to be saving on a continuous basis because that’s one of the most powerful things that they can learn is to start to see how that interest will compound over time if they start to make consistent investments in an account.
[00:38:01] Andrew: And I think that’s very smart with her first stock that she purchased with something that was meaningful to her. Same thing we did with my daughter, Winter, when she purchased her first shares. We said, “Hey, let’s talk about companies,” and what was meaningful to her at that time not as much today but American Girl, and American Girl is owned – the subsidiary is owned by Mattel. So, that was something where she then was able to see it and watch it both go up and down over the course of the last four or five years and I’m able to have those conversations with her as she didn’t really understand, “How did I lose money?” And so, explaining to her at that age of risk brings reward, but not getting into the detail of, hey, they missed earnings and they had this and that but just explained to her that you have this company they’re trying to perform, they’re trying to have profits, but they also at some point may have a little lag in that so that was interesting. And listeners, I highly recommend if you have kids or grandkids, try to get them starting to invest even if it’s low amounts, even using these fractional shares or ETFs, it’s such a great way to get them exposed to it so that it becomes commonplace for them.
[00:39:07] John: Yeah. One of the things I wish because this is what I was looking for, I wish there were. I’m throwing it out there because I’m hoping someone will develop it but we need a UGMA, Uniform Gift to Minors Act account that you can set up as an account for your kid that transfers over to them when they’re at 18. Is that right?
[00:39:26] Andrew: Yep. That is correct.
[00:39:27] John: They need something where you can do that and you can invest a smaller amount so like a starting amount that’s smaller and I haven’t been able to find that. That’s what we’ve been looking for because otherwise, we kind of just that have this set up within our own account or like you did, you could set up the Roth IRA. If they’ve actually started to make enough money. One thing I’ve heard on that side that I think is a good idea is you could also match that money which is a great way to kind of just incentivize them to put that money away into the Roth IRA.
[00:39:54] Andrew: Yep. And also, if they’re going to give to a charity, matching them dollar-for-dollar of what they give to whom, and then that gives a little bit more powerful incentive for them. So, question for you on college is getting so expensive and what does your program do or how do we instill that into the kids of how much it cost and trying to value the cost of that and how mom and dad are going afford it and maybe pushing them to think outside the box, maybe go to a different school, or try to get a scholarship. How does your program try to take that value in the cost of higher education?
[00:40:28] John: Yeah. We don’t talk necessarily specifically about colleges in the program, but with just anecdotally with our kids, they know exactly how much money they have in their 529 accounts. So, it was college savings program and we’ve been taking them to colleges on and we do a fair amount of travel. When we travel whether it’s internationally or nationally, we take them to colleges. We talk about the cost of the colleges that we go to. So, they see the contrast. So, here’s the state school. Here’s, you know, for example we were in Raleigh North Carolina so we stopped at NC State and we stopped at Duke and said there are positives and negatives for both, but Duke is more than double the cost just to give you an example even if you can even get in but they are very cognizant of the cost of college because we’ve talked to them. It’s like you really do not want to be riding on that student debt. So, they are very aware of how much money they have in their 529s and they pay attention to how much school is going to cost them.
It’d be interesting now though because now 15-year-old’s really now she’s a sophomore so next year she’ll be full borne into the college search and that’s where the pressure cooker is going to happen with the friends because you don’t know what kind of conversations those parents are having with their kids or what kind of financial situation they have and people get crazy about colleges. It will be interesting to see how the conversation turns, but I think the best thing you can do is just make sure the kids understand how much the colleges are and start that conversation from an early age, so they have some perspective before they hit the crazy. It’s kind of like setting up this allowance when they’re younger because once they become tweens and teens, you’ve seen this Andrew, it feels like it’s overnight that you’re their advisor and all of a sudden, you’re not anymore. Their friends are influencing everything and it’s going to be a similar type thing. So, we’ve been the ones driving the college conversation and slowly but surely that conversation turns over to her and her friends.
[00:42:32] Andrew: So, I thought with, you know, I have our receptionist who’s called the Director of First Impressions. I thought that was a unique title, but I think you take the cake. Chief Mammal of Snigglezoo Entertainment. So, fantastic name. I just had to throw it out there. So, Snigglezoo, is that just your holding company then, Snigglezoo Entertainment?
[00:42:48] John: Yeah. That’s just the name. We want to come up with kind of a silly name for the company. My brother wrote the songs for the Money Mammal Show. I hired him because I knew that one of the pieces of advice that one of my first bosses gave me in the entertainment world was be prepared to love something that you’re creating for at least a decade, and I thought I didn’t want to have kind of syrupy sweet songs. I wanted to have fun songs. I knew if he wrote the songs, they’d be a lot of fun. So, he’s an investor in the company as well. The Snigglezoo is just the name that has some ties to our youth and it just sounded silly and funny and so that was the reason for Snigglezoo.
[00:43:28] Andrew: I love it. Yeah. I think it’s great. I know you partnered with these credit unions which I think is fantastic. I’m in let’s say Florida and I want to get to this, start teaching my kids the financial literacy. What do I do? The Art of the Allowance, is that where I go first and that has everything in that program? Or is there something different that your partners with the credit union to get to help parents and grandparents?
[00:43:53] John: Yeah. Well, if you go to TheArtOfAllowance.com, you can find all the resources and the material from the book. We are consolidating this with TheMoneyMammals.com but if you want to find out our credit union partners, if you go to TheMoneyMammals.com you can find those partners. So, if you want to set up a savings account and you’re in an area where we have one of those partners, that’s probably the easiest way to do it, but obviously, you can get these materials at TheArtOfAllowance.com and start working with your kids right away.
[00:44:23] Andrew: And is there any apps that you recommend to help in this endeavor?
[00:44:27] John: We don’t have any particular, I mean, there are different types of apps you can use so Current has a card for debit cards. FamZoo has a card. There’s another one called Greenlight. This is all for kind of digital allowance down the road and each of them has kind of a good. They’re all good. You just have to take a look and see which one will work for you, but there’s plenty of good apps out there that will help you set up an allowance for your teen and tween once they’re ready to kind of take on a digital allowance.
[00:44:55] Andrew: Yeah. The little graphic that you have on there regarding compounded interest I think is great and listeners should be able to download that. It will be in the show notes which is going through the effects of $1,000, compounded at 7%. Clearly, we at Bayntree we’re not guaranteeing that 7% return. If you can find that, perfect, but just going through and letting kids understand the value of what 1,000 today could be worth in 30, 35 years and a lot of that is when they get in the mindset of starting to invest in their 401(k) and start to put money away each and every paycheck. It is that longer-term approach that usually makes a successful investor. So, I think that tying that into it is very important to let them see visually what that would look like over the course of their lifetime.
[00:45:39] John: Yeah. We put that. We had that printed out and posted in our house too and I love that graphic and I hope your listeners will print it out and post it for their kids to see. It’s definitely something. It’s not a bad thing to have on the table when you’re doing your allowance handout.
[00:45:54] Andrew: And one of the I’m sure the burning questions my listeners have is [inaudible] I’ll show, what was the computer that you bought for $2,000 back how many years ago was that? I mean, I wonder what the memory of that thing was.
[00:46:06] John: Yeah. Talk about dating myself. So, it was a Gateway 2000. It was a 486 chip and that was flying back then because I had a graphics card because I wanted to use CorelDRAW because I was doing kind of – the reason I wanted to buy it as I was doing graphic design on the side. I mean, this is like so poorly thought out. So, rather than just start designing, I had to have this $2,000 computer to start designing. It was just complete silliness but, yeah, that was the machine that I got. Yeah.
[00:46:36] Andrew: And you threw it on a credit card on that point, right? So, then ultimately, you’re probably paying 50% interest on that as well.
[00:46:41] John: It was ridiculous. I paid close to another thousand dollars but I did learn. I never knowingly paid any interest on my credit card. Every once in a while, you miss payment and you have to go but it does work. You can call those credit card companies particularly now and they will help you out if you just forgot to pay or whatever it might be, but I learned my lesson. I learned it the hard way. It worked.
[00:47:04] Andrew: So, listeners, we went through a lot of things high level, John. I think that the key component here is to start early, be open, and have a program, have a structure to teach whether they’re three years old or 14, have a system in place. So, as we end today, is there anything that you want to make sure that the listeners take home before we end the show?
[00:47:24] John: No. I think you hit on it. You just really want to be intentional. You want to be the one who’s teaching your kids the value of money, get started with that allowance, and know that your allowance has a purpose and that purpose is to teach your kids to get comfortable with and become eventually not just money smart, but hopefully, money empowered.
[00:47:43] Andrew: That’s great and, John, actually from today I’m going to take away the breakthrough allowance for my 13-year-old. I think that’s just a fantastic idea and I will keep you updated on the progress of that but I think just empowering them and being more of a partner with their money goes such a long way more so than what they will hear from me trying to teach her why that one-click on Amazon is not a good thing.
[00:48:08] John: I think that’s terrific. I wish you success with it and then please let me know how it goes.
[00:48:12] Andrew: Awesome. Well, hey, this has been great. We really appreciate the time, John. And, listeners, stay tuned later this month for another episode of Your Wealth & Beyond. Happy planning, everybody.
Thank you for joining me for today’s episode of Your Wealth & Beyond. To get access to all the resources mentioned during today’s podcast, please visit Bayntree.com/Podcast, and be sure to tune in later this month for another episode of Your Wealth & Beyond.