Teaching kids about money is Fun !

I just finished a two hour session with my kids [ 5 yr old & 12 yr old ] - I was teaching kids about money. In fact it was a fun experience & the kids seemed to learn more than I did.

It all started with a simple game called "Cash Flow for Kids". I've been posting about my endeavors to teach my kids about money, how it works, hot to make money, manage money and most of all have money work for you.

Tonight [ Wednesday Oct. 7, 2009 ] at 5 pm I cracked open the game for the first time and started playing. It was me, the wife and the two kids. I quickly read over the rules and off we went.

The first life lesson from the Game

The first lesson my daughter learned from the game is that "life is not fair".Oh, she was happy and excited when she heard that she was receiving a salary of $1,000 dollars - "man that's a lot of money!" she blurted out in glee. But the shocker was when she learned that she had bills and expenses to pay as well. Every time she is paid she gets $1,000 dollars and then has to pay $700 dollars in expenses [ mortgage, electricity, etc...] She didn't like that.

"What, that's more than half my money! That only leaves me with only $300 dollars - that's not fair!?"

I explained to her that, that is life. "Don't forget, the minute you get paid in the real world, your uncle Sam taxes money away from you in government taxes. Then comes the bills and expenses - that is just how life really is." After a few minutes of hysteria and explaining the concept of the game - we started playing.

Second life lesson of Game - small adds up to a lot over time.

After a few turns my daughter learned her second life lesson - my wife was taking her turn, and she picked a card that gave her the opportunity to buy an investment. The investment would cost her $600 dollars but it would give her a recurring income of $10. Now I was the bank and my 5 yr olds helper so I simply watched the game and observed much of what was going on. My daughter quickly blurted out to her mom: " don't buy that investment it cost too much and you get only a little bit of money!" My wife was quickly taking the advice of my daughter so I explained to my was that it was her choice if she wanted the investment or not, but that every time she was paid her salary, she would also get an extra $10 dollars. My wife thought about it and then said " sure why not, it's not real money."

I was surprised, that after all the reading my daughter and I have done and talked about - that she would so quickly turn down passive income. The funny thing is that the moment she notice that every time her mom got paid she received an extra $10 dollars - she changed her mind quickly about small investments. She realized that even though her initial investment was big $600, her long term returns added up over a long time would be great even if it was only $10 dollars at a time.

Yes it's just a game, but you can learn a lot from a game

Now yes, the game is for kids and it doesn't factor in stock market crashes, business failures and the reality of life’s "up & down's". But it does teach you a lot, the moment my daughter realized that she could make extra money by spending cash [ money on hand ] to purchase an investment that created a long term income - she couldn't stop buying. None of them could, even the 5 yr old who had very little knowledge of what he was doing. All he knew was that the green cards meant he could make more money if he agreed to buy them.

It's funny how the mind works, when it's a game, paper money, it is not that hard to step out and invest. But once your in the real world, some how paper money has more value, fear of loss attached to it and a completely different sense comes over you.

The reason we fail in life is because we put so much pressure on ourselves and we allow fear of loss to take over logical thinking. But in the game - hey there is no real threat of loss, so we just act. During the game my wife said that we could do this because it was a game - but that in real life you need money to make money.

It's a lie: Need money to make money

When real estate was booming in 2005 & 2006 I learned a little bit about contracts, real estate and let's say - the art of a deal. I went out on a limb and placed a contract on a residential lot with no money for down or to purchase the lot. My wife thought I had gone mad. She was frantic with fear, concern, she just kept asking me "how are you going to pay for it, we have no money..." Swallowing my fear, I found a buyer that would take over the contract and at the end of the sale I ended up with $10,000 cash in my pocket. I did this two times in a span of 60 days - with no money, I made $20,000 dollars. Ofcourse now my wife wasn't asking me "how are you going to do this?" But now she wanted to know when I was going to do my next deal.

Then came the real estate bust and the credit crisis of banks - but I only mention this because I want to show you and remind my wife that "You don't need money to make money" - what you need is knowledge, opportunity and action.