Teaching the value of money to kids … dad seeks advice

Great! Now I have one more thing to worry about. In addition to teaching my kid about social media, cyber-bullying, artificial intelligence and a bunch of other stuff I don’t fully understand, I also have to teach her about light switches.

My parents had it easy. They had a simple rule: if the light was on, turn it off. I’ve recently learned that rule is no longer necessary. Thanks to the LED light — a technological breakthrough that is much, much more important than, say, TikTok — my kid can leave the bathroom light on all day if she wants.

Do the math. A single LED uses about 10 watts per hour. It doesn’t heat up the room and it lasts the same amount of time whether it’s on or off. Let’s suppose for some reason — diabolical science experiments, applying makeup, it doesn’t matter — she turns on 10 such lights in the morning and leaves them on while she’s at school for 10 hours. Her careless ways use up 1 kilowatt hour of electricity costing me about … 10 cents.

Is it worth sending her back to turn off lights, all the while spouting the usual dad-cliches about how money doesn’t grow on trees, how hard I work to provide nice things for the family and so forth?

For my parents the answer was clearly, yes. Leaving 10 incandescent bulbs on for 10 hours would have cost Mom and Dad at least $1. And remember for my parents $1 was a lot bigger deal than it is to me. In their day $1 could have purchased four cups of coffee. For my daughter, 10 cents buys about 1/60th of a cup of that frothy mess she wants me to get her on the way to school.

See my problem? It’s obviously silly to make a fuss about lights, and I don’t want her to think my rules are silly. Maybe she’d never figure that out but in a world with Google and ChatGPT she’s likely to stumble across the same kind of website that I stumbled on when I found out about all this. Also, I try to minimize the number of lies I tell my kid. When I tell her lights are important, I’m lying.

On the other hand, the light switch thing matters for two other very important reasons.

First, kids really do need to understand we don’t pluck money from trees, that it comes from the hard work we do because we care about the family. If I don’t want to replay my dad’s “turn-out-the-lights” rant, I need to figure out some other way to make that point. Fortunately, there are other opportunities — that $6 beverage is an obvious target — but kids need to understand the centrality of work and the idea of economic trade-offs.

The other thing about the light switch is even more important: I want her to understand just how much economic progress has been made since her grandparents were going through the agony of raising me. This is hard. She’s a kid. She doesn’t understand all the facts and figures her economist dad likes to spout off in front of a classroom. But let me remind you. Between 1984 and today, inflation-adjusted median family income rose by about 33%.

And as remarkable as that is, it seriously understates the actual progress. For one thing, families are smaller now than 40 years ago — average household size has decreased by about 10%. That means more money is being shared by fewer people. One of the reasons my daughter sometimes gets her $6 frothy beverage is because I don’t have to buy one for a minivan full of siblings.

Another thing — and this is what I really want her to appreciate — is that she has the opportunity to spend all that extra money on things that simply weren’t available before. In my day, if I wanted to listen to my generation’s Taylor Swift (don’t ask), I had to wait for the FM radio station to play the song or buy one of those new-fangled “compact discs.” My kid has access to millions of songs available through our streaming service for the price of one of those CDs. (Oh, and the cheap PC she uses to stream music is capable of solving a complex system of differential equations that required a million-dollar mainframe in her grandparent’s day.)

So, if you have any parenting advice, please share. Just don’t tell me that my kid is growing up in tougher times than her grandparents. That’s just not true. We are on average richer and have access to much better things than ever before. We just need to teach our kids to appreciate those material blessings and use them to lead meaningful lives. It’s a challenge but a good challenge.

Michael L. Davis is an economist at the Cox School of Business, SMU Dallas.

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