Scarcity vs. The Money Tree

By Alec Lindenauer, Chief Allowance Officer

What’s the point of this whole allowance thing anyway? Whether you use one piggy bank slot, or the four celebrated here (spend, save, invest & donate), there’s an overriding lesson we’re trying to teach our kids about money. What’s the thread that goes through it all? 

In a word, it’s scarcity.

Investopedia.com defines scarcity as a basic economic problem – the gap between limited resources and unlimited wants. 

I define it as me trying to teach my daughters that I don’t have a money tree to make every item on their wishlist magically appear. When they were little, that’s exactly what they thought. All they knew was, “I want.” And when they learned the magic inside my wallet could turn their wants into reality, boy were they hooked.

In the years since, I’ve been working to unwind their separation from reality. To bring them back down to earth, I needed them to know money is not an unlimited resource. That goes for everyone, no matter their economic reality.

So how am I moving them from believing in a magic money tree to understanding that money is actually limited? By continuously having them choose and prioritize in the same way we parents do. 

Each time I’m paid, I direct my income to where it needs to go … whether to savings, checking, retirement accounts, investments, etc. And when I’m contemplating any sort of meaningful purchase, I consciously weigh the pros of that purchase against the cons of spending the necessary funds. In some capacity or another, we all do the same thing. 

When I introduced allowance to my girls when they were in kindergarten and third grade, I set up a simplified version of the same process for them. Frankly, I wasn’t sure how long it would take them to get it. I figured at least a few months. 

It took one allowance day. One new allowance day, in which they were forced to wrestle with how much money was to be allocated between their four slots: Spend, Save, Donate and Invest. 

As soon as they were in charge of some money of their own, they stopped asking for bills from the money tree. And managing that money responsibly became important to them almost instantly. As soon as they knew their income would be reliable, but limited, their attitudes shifted. Scarcity became real, and every allowance day was a means to reinforce that lesson.

Starting at that young age, every time they went to buy something, that scarcity struggle was reinforced. On an elementary level, even now they weigh the pros and cons of their purchase. Even years later, that lesson of scarcity continues, and the money tree is long forgotten.

Maybe I'll wish for one for my birthday ...

Teach centsibly,

Alec
COR Chief Allowance Officer