Where does money come from?

I asked my two youngest children (10 and 12) this question over dinner last night. My 10 year old son's reply, "from the printing press" and my daughter nodded agreement. She asked how and where they print it. I clarified the question.

"How do you get money?"

Again my son answers with a logical response, "I get it from you."

"Yes, but if you needed or wanted money and I didn't give it to you, how would you get it?"

"I would have to get a job or sell something."

Now we are getting somewhere.

"Do I have to get a job?"

I explained that there are several ways to earn money. One is getting a job working for someone else. Another way is to start a business like mowing lawns or babysitting where you charge customers for your service or you make something that you can sell at a profit( I am saving "profit" for another night). My 12 year old daughter makes scarves so we used that as an example. And finally, I tell them if you save some of the money you make it can earn money for you in the form of interest or dividends. I decided to skip capital appreciation for the time being. We were already wading in pretty deep.

"What age do you have to get a job?" asked my son.

Dad responds, "Age fourteen is the minimum age."

"Do I have to get a job then?" asks my daughter.

I can see this isn't going to be easy breaking them of the habit of living on easy street.
We back tracked from the job discussion to allowance. Maybe I could show them how saving part of their allowance every week would add up over time and produce additional income. It seemed like a good idea when I started.

I went to my office to retrieve my computer and started on a mini spreadsheet. My daughter gets $1 for each year of her age, so $12 per week. In return she is supposed to do 3 chores per day, 1 weekly chore and 1 monthly chore (we'll get to that discussion another day). So I used the example of saving half of her allowance every month with a compound rate of return of 7% (probably too generous in the current environment). It didn't take long to figure out that saving $24 a month wasn't going to make anybody rich. She didn't find it even remotely interesting. I backed up again. What if you started with the $2,000 you already have in savings and then added the allowance and half of any gifts ($150/year) and babysitting ($75/year) money added periodically? Then what would you have?

Well, after two years of saving the money had earned about $350. My daughter said, "I could almost buy a new computer with that."

Ouch. She missed the point entirely. I said, "Don't take the money out and spend it. The point of saving is that you are saving for your freedom. Financial and personal freedom." She gave me a blank stare. I explain that having money provides you with freedom in every way. You don't have to work in a boring job or with people who frustrate you, unless you want to (but who would). You can be absolutely independent. Of course, independence is the value that I value the most. I think my 21 year old has the same value system but I am not so sure the other two value independence in the same way. Maybe they are just too young.

I decide that I have overloaded them for the night. They are losing interest. I am going to have to come at this from another angle.

Thirty minutes later while standing at the sink my son walked over to bring me his plate. He looked at me and said, "When I grow up I am going to be a millionaire." So maybe some of it did sink in.