My son has a side-gig shoveling snow.
Side-gig money is his to spend in any way he wants (and he wants a jumbo Baby Yoda).
His surplus money goes into a bag. “Money in the bag” is real to him.
Other forms, less so.
My son’s outlook is very common and, if not addressed, will cost him a lot of wealth (directly) and time (indirectly).
Last Tuesday, he had a cunning plan to help me “get rich” – the scheme was a simple one. Sell everything I own and realize all the gains.
I left the fact that I don’t truly own anything for another lesson.
Instead, I started by pointing out that there are a lot of rich folks in town who don’t have time to ski with their kids.
Time, son. I want you to remember time.
His scheme gave me the opportunity to teach him three things about money:
1/. We’re not going to sell the rental property…
Income, from rent, is a useful type of money – I used the example that the property he wanted to sell covers the cost of his food.
Cash flow buys strawberries.
2/. Selling costs money…
When you sell you need to pay taxes on the gain.
Taxation was taught to him from a young age. Whenever I eat something off his plate, “I’m taxing you.”
If you don’t sell then you can pay taxes later. Pay later is better.
He was on-board so far.
- Cash flow is food
- Pay later is better
3/. What are we going to do with the money if we sell?
When you sell, you need to figure out what to do with the money.
The rental property is a great asset and I have no ideas for something better.
I lost him here. I think he wanted to see a _really_ big bag of money.
Opportunity cost and alternative use of funds… fairly advanced for a kid, or anyone for that matter.
- Cash Flow
- Deferred Taxes
- Opportunity Cost
- Alternative Investments
Good enough is good enough.
Once you get that bag of money working for you…
Let it ride.