Thursday, April 28, 2016

Teach Kids To Think In Absolute Dollars, Not Relative


Today’s fantastic family finance article is:

Relative Money Amounts


When you’re thinking about money in absolute dollars, you might have a conversation like this:

Me: “Hey, can I have $20?”

You: “What? Are you crazy? That’s a lot of money!”

When you’re thinking about money in relative dollars, you might have a conversation like this:

Me: “For just 4% more, I’ll throw in this super fancy case for your phone!”

You: “Yeah, sure. Why not? That’s a small fraction of the $500 I’m already forking over!”

See what just happened there? The same $20 magically became less valuable in your head. Jedi mind trick. Salespeople play it all the time.

Teach your kids to resist the relative money mind trick. Teach them to ask: “Would I consider this a lot of money if someone simply walked up out of the blue and asked me for it?”

Teach your kids $20 is $20. Period.


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