06.17Teaching Children About Money…
“Prepare not a path for your chidren. Prepare your children for a path.”
Dr Agon Fly
The Bike…
Here’s an example of how one man prepared his child for a path and passed on a Legacy.
Mr. and Mrs. Smith started a “bank” for their only son when he was born. They used whole life insurance and funded it in anticipation of the boy’s future needs.
When Junior was 11 years old, he came to Dad very excited about a bike he had seen advertised. (I remember that feeling. For me it was a Schwinn with a chrome headlight prominently displayed in a store window.)
“Dad” he said, “there’s this really cool bike at the ABC Bike Store, and Dad, if I had this bike, it’d be the coolest bike on the street and I really want it Dad.”
“How much does this bike cost, Junior?” Dad asked.
“Welllllll…ummmm…I think it’s kinda ‘spensive, Dad” Junior replied and he handed Dad the newspaper ad.
“Nine hundred dollars is a lot of money for a bike, Junior,” said Dad with a bit of surprise in his voice.
Then, after a long pause, Dad said, “I think it’s time for you to learn about money, Junior. When you were born, your Mom and I started a “bank” for you. We still own the “bank,” but the money in it is there to help you learn about Money for Life. It’s time for your first lesson.”
Dad explained to Junior that he could borrow the money for the bike from his “bank,” and that Junior would have to repay the money borrowed. Then he taught Junior the basics of interest and payments in the life insurance policy.
When Junior objected that he didn’t have any way to make the payments, Dad reminded him that he received an allowance to buy his lunches, to buy birthday gifts, go to the movies and so on. He could decide to use that money differently if he really wanted the bike more than those other things. Dad also offered to pay Junior extra money if he agreed to do some chores on a regular schedule. Junior would have enough income to pay back his “bank” at the rate of $33.00 per month - including interest - in just less than three years and still have some money left over for other things.
The bargain was struck, and Junior got the coolest bike on the street. When the other kids saw the bike they were amazed and wanted one just like it.
“How much did your Dad pay for it?” they wanted to know.
“Dad didn’t buy it for me” Junior replied, “I borrowed the money from my own ‘bank’ and bought it myself for over nine hundred dollars.”
Imagine how Junior felt. His bike made him feel proud. His “bank” enhanced his self-esteem. You know which of those is truly important. The bike will rust. Self-esteem turns into gold: not just financial gold but moral, ethical and relationship gold as well. Junior went on to finance his first car at 16 and repay himself. He then used the “bank” to fund a large part of his college costs and repay himself. He’ll soon be buying a new car…and financing it himself…while the money in his “bank” is growing tax-free. In addition, Junior always recovered both the principal and interest in his “bank” that he – or his dad - would otherwise have paid to a commercial lender.
Think about how much tax-free money Junior will control in another 50 years and the kind of financial kick-start his children and grandchildren will have because he learned about Money for Life when he bought the bike at age 11.
“What is important for kids to learn is that no matter how much money they have, earn, win, or inherit, they need to know how to spend it, how to save it, and how to give it to others in need.” Barbara Coloroso
That is legacy.
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July 4th, 2008 at 6:53 am