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Christmas is a busy and stressful time for everyone. Expenses add up. Toys, wrapping paper, bows, name tags, food, gas, I could go on. If you are like me, and you take a long break from formal school during December to balance that, you know that it is prime time for other other lessons.
I have already talked about how we don’t lie about Santa. We also use this time to talk about the need for budgets, and the power to see taxes as a gift to our society.
This year we are giving our kids a present that lasts a lifetime. We are going to give our kids some toys they can’t play with. They can’t even open them. And we are going to place them in a spot where they can see them each and every day. Then every so often, we will look up their value and chart its progress.
Surprisingly frugal, surprisingly valuable
These toys are just going to be Hot Wheels cars, but what we are hoping to teach our kids will be much more valuable than the $1 we spend on each car. You see we are wanting to teach them the value of investments, of self-control, and of delayed gratification.
Hot Wheels are a popular collector’s item with a rich community and lots to learn. Certain cars called “Treasure Hunts” are loaded into each box of cars that are rare, and, when left in the packaging, are worth a pretty penny. (But we are not expecting to find Treasure Hunt cars for each of our children so we will use some that are not.)
We have already done this with Connor, in hopes to teach him self-control and delayed gratification. He started off with 10 Hot Wheels. After a very frustrating tangle with some toddlers, his current Hot Wheel collection is down to 2. Since it was technically my fault that my toddlers got to his cars, I feel I must replace them.
Why teach delayed gratification and self-control?
Self-control and delayed gratification have both been strongly linked to later life success in almost every measurable metric.
Luckily for parents, we definitely have the ability to encourage our children to develope self-control. According to this article from Psychology Today, children learn self-control when they have the opportunity to practice with responsive parents who set empathetic limits. It also points out that when children are not dealt with empathetically, their negative emotions (like anxiety) slow down the process.
There is plenty of other evidence that links self-control in childhood to success as an adult.
This quick article talks about 2 different studies that both support self-control as a predictor of academic and general success. The first study showed a correlation between stronger self-control and higher test scores, grades, more time spent studying, and even fewer absences. The second study found correlations between self-control and financial success, physical and mental health, and even drug use or criminal convictions later in life.
According to this article from Psychcentral, a study published in Frontiers In Psychology, delaying gratification was the 4th predictor of future financial success after education, location, and gender. This study was designed and used machine learning to analyze the results of other studies to actually rank the order of common predictors of financial success.
This article, published in the Journal of Pediatrics, shows a strong correlation between delayed gratification and body mass index (BMI) later in life. For each minute a preschooler could delay gratification showed a .2 point reduction in BMI as an adult.
A study conducted on Taiwanese 7th graders showed that academic success was a much better predictor of academic success over a long period of time which IQ only accurately predicted success over a short term.
These studies are only a short sampling of the scientific literature that is out there. I didn’t even talk about the famous “Marshmallow Test” that started this line of scientific pursuit.
What does this have to do with investing?
Collecting Hot Wheels is probably not going to make you into a millionaire. But it will teach your kids to wait for things to acquire value which is the definition of investing. This is also a great time to teach your kids some investing lingo.
Asset -- Something that is valuable. This is the car.
Capital -- the initial investment, usually money but can be labor. The capital for your Hot Wheel Collection will be the $1 you pay for the car.
Appreciation -- The increase in the value of an asset over time. This is calculated by Worth of the car on the collector’s market - $1 you paid. The opposite is Depreciation, and that is when a value loses value.
Return on Investment (ROI) -- Simply put (and maybe a bit oversimplified), ROI is a measurement of how well your asset is appreciating. It is calculated by (worth - capital paid)/capital paid. So if you own a car worth $5, and you paid $2 it would be (5-2)/2=1.5*100=150% Sorry to spoil it for you, but real world, stock market, real estate, almost no investment is going to have that kind of ROI. But for the purposes of teaching our kids to have self-control and understand how investments work.
I have included a few worksheets to use in your homeschool to teach your kids how investing works. Sign up for my email list below to get access. I have included a glossary cheat sheet of the terms defined above and a small graph to plot your collection's worth.
Teaching our kids this mindset isn’t going to happen overnight. Their brains must be fully mature before they can practice self-control like an adult. So don’t expect a 4-year-old to be able to show self-control for long periods or when faced with an especially tempting treat. But we can do little things, like start a Hot Wheels collection, to help them along and to give them an opportunity to practice, make sure they know some important terms, and show them how value changes first hand.