Do we need to re-invent piggy banks for changing times?

One of our lead articles in our January Seed Sampler… 2010>>>2020 New Challenges- New Possibilities- discussed challenges facing this new millennial generation.  One of the very real possibilities facing millennials is that many of them could be among the first that won’t achieve the lifestyles they were raised with.  We believe this provides an opportunity for parents to create new ways their children to better stewards of whatever resources they earn as Penny discussed in her article, “Millennial imaginings of ways to live more for less.”

J.Paul Fridenmaker sent us this fascinating description of how he is working with his kids to help them become better stewards in changing times.  What is your response to this new challenges and this response?

J.Paul writes, “As a foundation, we use the concepts presented in the book “Rich Dad Poor Dad” by Robert Kiyosaki (www.richdad.com).  In this Robert talks about the idea of creating passive income producing assets which cover your ongoing expenses so that you can work at what you love (rather than being forced to find any job that produces enough to cover your ongoing expenses).  Those passive income assets are things like investment (stocks and bonds), real estate, and intellectual property.

To that end, Robert suggests a balance sheet that has the following categories:

·         Earned income

·         Passive income

·         Assets (which produce income…so this cannot include assets like your private residence or other non income producing assets)

·         Liabilities

When the kids turn 7 or 8 years old, Julie and I start them off with $120 in an asset fund and we pay them 10% annually on that money.  They can add money to their asset, however that original $120 is ‘untouchable’ for any spending.  We also have the rule that $2 per month be saved into the untouchable asset, so by the end of the first year the untouchable asset has grown to $144 and is producing $14.40 annually in passive income.  We pay them their passive income monthly (in addition to allowance or other earnings). 

For example, my 13 year old TJ has an asset of $500.  The untouchable part has grown to $200 and he has $300 available for spending.  But his motivation is to leave the $300 in place because he’s collecting $4.17 in passive income each month.  He’s also earning $4 month in allowance (for basic chores) and has the opportunity to earn another $4 per hour for special jobs as negotiated with Julie or me.   He’s also to the age where he can work for his papa (my dad who is a professional painting contractor) where he can make an additional $8-10 per hour.

In the expenses column we list the regular monthly items that he spends money on.  At this point it only reflects the giving.  We encourage each child to set a giving goal and let them choose anywhere they want to give it.

About every 60 days I have an asset meeting with each child.  In that meeting we make sure all of the numbers are correct for both their earned income and passive income.  We talk about any savings goals they have, any spending wishes they have, where to give their money, etc.  We thank God together for their asset and I pray a blessing of wisdom, enjoyment and generosity over them as they manage their asset.  They also have free reign at any time to ask me and Julie about how we handle finances and any part of our income(s) and business dealings.  At the end of the meeting I print out their updated asset page and they keep that in a special folder for notes and updates for the next meeting.

It has worked well.  If too much time goes by between analyses they get pretty irritated with me!  They love to see it grow and test out typing larger amounts so they see how much passive income they could be earning.  We just started 7 year Jacob’s asset this week J  It was precious to see the smile on his face now they he gets to join his bros and sis in managing his own asset.  It’s scary how quickly he understood!”

J. Paul Fridenmaker

What do you think about this idea of re-inventing piggy banks for changing times?

 What are your ideas of how to prepare your kids for possibly tougher times? 

CHECK OUT THIS VIDEO ON HOW TO RE-INVENT PIGGY BANKS