Several years back I had an opportunity for one of those great teachable moments with my daughters. You know, when you can talk about a particular principle using a real life example, without sounding too preachy. I hope they will not only hear what I am saying but actually listen and understand.
I believe the original discussion at the time was about setting up a checking account for my youngest daughter. However, we ended up talking about my favorite subject, personal finance!
My long-term intention has been to introduce my children to the use of money and personal finance education so they will have a great foundation when they are on their own. Regardless of what they do for work in life, they will need to pay attention to things like checking and savings accounts, budgeting, paying their bills on time, and the smart use of credit.
The first step was setting up a savings account, something we put in place years ago. Setting up a checking account was the second step in my grand strategy to teach them the fundamentals about the use of money. The third step was a debit card, and the fourth was the use of a credit card. The logic was just like them growing up: learn how to crawl, walk, jog, and then finally run. So I invented a game to see if they could think of all the ways a person could purchase or “acquire” something. I was pleasantly surprised.
We created a game to determine how you can buy stuff
We created a game where we wrote down methods one can use on scraps of paper. These were all the different ways we could think of that you could buy something. So the easy answer to how we can buy something is the use of cash, check, debit, or credit cards. My daughters were initially stumped, and then I gave them a couple of hints: how about a gift card? That started the creative thinking and I was shocked with what they came up with as payment methods. There is hope for the youth today- dagnabbit! ☺
The young people of today think of nothing but themselves. They have no reverence for parents or old age. They are impatient of all restraint… As for the girls, they are forward, immodest and unladylike in speech, behavior and dress. – Peter the Hermit, AD 1274
It was a fun experience: we got super-creative to come up with ideas, and we essentially “gamified” a personal finance topic. This was the most enthused I have seen them talking about money. I was surprised with the answers from my 16 year old. She came up with at least a dozen ways to buy something.
I had one of those proud parent experiences. My daughters have actually listened and understood the discussions we have had over the years.
We discovered 26 ways to purchase or acquire some stuff
Take a look at how things have developed over the ages. We will break them into the past, present, and the future.
The Good Ol’ Days (4 methods)
- Barter: I will trade you my goat for one growing season of your vegetables
- Cash or coin: Here is money that I have saved that I can use to pay for the item (my favorite)
- Store credit: The general store lets you charge on an account that must be paid at a negotiated time
- Personal IOU: I will pay you back based on an agreement. (I would rather owe it to you than cheat you out of it – right?)
Never spend your money before you have it – Thomas Jefferson
The Present Day (22 methods)
- Old-school and manual
- A personal check: Need to have money in the bank (if you don’t see NFS below)
- Trade: barter some good or service
- Free: They simply give it to you. It can happen! Example: Freecycle
- Electronic in nature
- Non-Sufficient Funds (NSF) credit line: Great for people who write bad checks
- Debit card: Works like a check but nearly instantaneous removes your hard earned money
- Credit card: Bank or institution issued that allows you to buy on credit to pay back later
- Charge card: A charge against your account with the business. An example: Macy’s card.
- Automatic withdrawals: You have the automatic removal of money from a savings or checking account
- Wire transfers: Needs to be transferred from an account with actual money in it
- Loans: Car, home, student, payday, “X” days same as cash, and other
- Line of Credit: You have an agreement, typically with a bank, to borrow money for any purpose with no collateral
- Mortgage: You have tied your house up as collateral
- HELOC: The ability to draw on funds when needed but you have tied your house up as collateral
- Layaway: Buy something at a store and make payments until is paid. Then you get to own it!
- Gift Cards: purchased by yourself or someone else
- Points/Miles: Earned through credit card or customer loyalty programs
- PayPal: Linked to an account or credit card
- Apple Pay: Great for iOS and Apple users, bad for Android
- Google Wallet: For those unfortunate people without iPhones
- Coupons: It is possible to get free items with coupons and no purchase necessary
- Store Loss leader: Example, free eggs with a minimum $10 purchase
- Bitcoin : Who knows where this will go?
- The Future?
- Embedded chip in our body: Heck, our cat has one – why wouldn’t we? How many movies have you seen where people have chips in their bodies so they could be tracked?
- Retina or finger print scan: Our eyes or fingerprint is scanned and the purchase is deducted automatically from our bank account.
- DNA scan: Who knows?
We have invented a lot of ways to pay for stuff
I started the post by talking about the great teaching moment I had with my daughters. It really made me come up with additional methods that one can use to purchase something. Notice I did not say steal? I was looking for only ways where the transaction was agreed on by both parties. Essentially every method entered into a contract or agreement.
Take a conscious look at advertisements you are faced with on a daily basis. What is the message they are trying to send to you? Do you notice that the actual cost of the items
is downplayed as not a concern? The focus seems to be on buying things on credit. They talk about their products in terms of savings instead of cost. Who wouldn’t want to “save” instead of truly “pay” for their items?
I was surprised how many ways we can pay for things. So were my daughters. This was an easy way to steer the personal finance discussion toward the topic about the use of credit. I want them to be aware of its advantages and disadvantages. It certainly was something I used in my early days that perhaps was not the best path toward my financial independence. I am hopeful they will learn from my mistakes and new examples.