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Let’s unpack common mindsets about earning and spending money, practical systems to help your kids understand the power of compound interest through routine activities, and what lessons can be helpful to emerge the big ideas around what Einstein refers to as “The 8th Wonder of the World.”

Resources

• You’re A Badass At Making Money [Book]
• Wheat and Chessboard Problem
• Penny a Day Problem Based Math Lesson
• Dig into the Invested Teacher SUBSCRIBE, RATE AND REVIEW GIVEAWAY 
• Download our Wealth Building Blueprint
• The Invested Teacher Wealth Building Booklist

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FULL TRANSCRIPT

Kyle Pearce:

Welcome to the Making Math Moments That Matter Podcast. I’m Kyle Pearce.

Jon Orr:

And I’m John Orr. We’re from makingmathmoments.com, and together.

Kyle Pearce:

With you, the community of math moment makers worldwide who want to build and deliver problem-based math lessons that spark curiosity.

Jon Orr:

Fuel sense making.

Kyle Pearce:

And ignite your teacher moves. Welcome, Math Moment Makers everywhere to this next episode of the podcast.

Jon Orr:

It’s a special one.

Kyle Pearce:

Yes, it is absolutely special. It’s actually going to be cross posted, meaning we’ve actually taken this episode from another podcast. It’s a brand new podcast, not specifically about math education, but math is always involved in it. It’s a new podcast with our colleague and friend, Matt Biggley. He’s a former history teacher and guidance counselor who used to work at one of the schools I worked at, and he’s my investing partner.

And actually, John has done some investments with us as well. He’s now a realtor in Windsor Essex County. And we’re going to be sharing an episode that we thought was perfect for the Math Moment Maker community because it’s all about teaching kids and students about financial literacy, money, and how they can use it as a tool for good in their own lives.

Jon Orr:

We’re excited. If you have not yet heard the podcast or listened to our newest podcast, it’s called Invested Teacher, which is a podcast aimed at helping all teachers, nurses, people who-

Kyle Pearce:

Doctors, scientists.

Jon Orr:

Yeah, just pretty much anyone. We call these people like us, these cold and handcuffed kind of people who have built careers and have pensions, and we help educate people on how they can build their wealth. How we’ve built our wealth over the course of the number of years, what are the lessons, what are the tips, what are the strategies that we can do that. What are the mindsets, we can do that with you. We talk about that on that episode. It’s running live. We are also running it as a weekly podcast, just like we’re running this one. Don’t worry, we’re not stopping this podcast. We’re just running two at the same time. Those episodes air on Wednesdays.

If you have not yet subscribed to the Invested Teacher Podcast, you can go to wherever you subscribed to this one and search Invested Teacher. It’s there, and just hit subscribe and you can go back and listen to some of the early episodes we’ve had. We are just getting underway here in the new year on that one. But we are going to continue to roll out new episodes weekly there. That’s the Invested Teacher Podcast. Kyle’s right. In this episode we’re sharing with you right now is perfect for you, because it’s about how do we help our students think financially about their own money, but also how do we help our own children think about their money, and how their relationship with money exists.

We think it’s perfect for you and also perfect if you want to continue your learning on your financial wealth building. Join us over at Invested Teacher as well. Let’s get right to it, Kyle. Here we go.

Kyle Pearce:

Here it is.

Jon Orr:

In this episode we are excited because we’re going to talk all things financial literacy, financial education, not just for ourselves, but for our own children, for students in schools. We want to dive in here. Especially, I am super interested in hearing your opinions, gentlemen. And also the community’s opinions on how do you talk money. How do you talk financial future with your own kids, or with kids in general? What kind of education can we help them with? What are some of the mindsets that we can help our own children with, thinking about our own financial paths and our own hangups? What can we do?

What are some of the practical things we can do, thinking about allowance versus paying maybe in a different format? How do we help kids understand the value of money and things cost money? I know that those are some big questions I want to talk about here, guys. Let’s get into it. Let’s go. Let’s go.

Kyle Pearce:

I love it. I love it. One big thing that makes this really challenging is that I think most adults struggle with the idea of money. Even if you’ve got a budget under control, we’ve talked about budgeting, we’ve talked about all these things, maybe things are working well for you. But you’re wondering, “How do I actually teach young children?” Whether it be your own kids or if you’re teachers, we either were or are in this case, how do we help communicate that to students that we work with as well?

This one’s a really tough one. And I want to dig right into this thing, because money for kids is actually pretty abstract. When they’re young especially, they just sort of think you just have stuff. And every now and again they experience the transaction when you go to a store, but they’re not really equating what does that money really mean? Where did it come from? Did they just dig it up in the backyard? Where is this stuff? Ultimately, even some adults, I’ve only now started thinking about when I’m buying something, I try to think about how much work did I have to do in order to obtain that money. Oftentimes you just look in your bank account and you’ve been working and all of those things, and you just ride with it. And you just roll with things.

But now I’m starting to look at things and go, “I had to actually give up X number of hours of my life in order to make that particular purchase.” And when you start thinking of money that way, things get a little bit interesting. How about you there, Matt? Where’s your head at when you’re thinking about money, when you’re thinking about your two daughters and the students that you’ve worked with, what comes to mind for you?

Matt Biggley:

Yeah, this is such an interesting topic. You guys are math teachers. I know you’re going to share some really fun tactical things, and I’m such a big mindset person, and it’s exactly what you just said about kids and money. Money is actually neutral. Money has no meaning, good or bad. Yet as adults or even as children, we’re teaching our children to apply meaning to it. And this topic is just so deeply uncomfortable for so many people. We have such strong, moral judgments about money and about wealth. And so I go back and reflect as I think about my own kids. And listen, admittedly, I’m looking to you guys today for some ideas on maybe how to practically do this. Because as we reflect back on how we perceived money as kids, in my own personal experience, I remember being scared of money, of being fearful that there wasn’t enough money. And not really understanding what it meant to have money or to make money or it felt like other people had more money.

And so I grew up, whether it was just through my experience of childhood, of actually really fearing it and not really understanding how to take control of it and not understanding how to make a lot of it. And even as a teacher, it’s so fascinating. I think that as teachers, if I can stereotype the profession, I think by and large we’re pretty fiscally conservative people. And I’ve gone through this change from being a full-time teacher to being a full-time realtor. So from having a salary job to being an entrepreneur, and I’ve just had to undergo this massive mindset shift about how I view money. About how I view the making of money. I’ve gone through this exploration of all of these fears and assumptions and the moralizing that happens around wealth building. And it’s been really fascinating.

And I’ll tell you, it’s been at times an emotional journey because we’re just, you’re revisiting the things that you have believed for so long or been taught or learned. And that’s a deeply personal experience, but one that I think on the other side of it has allowed me to see money in an abundant way, rather than in a way that I fear it. And I think I feel almost freed from the chains of needing to be scared of money. And that’s come in my 40s, that’s come so far into life. So, to bring this back full circle for my own kids, I’m really searching and looking for tactical ways and practical ways to teach them this mindset that I’ve only now just recently learned in the past, I’m going to say 24 months.

Jon Orr:

Matt, I know that you said this was a personal experience and going through that mindset experience for everyone is a personal experience. But what would you say is an example of this abundance switch that you came across, where it helped your mindset change from being fearful of money to thinking about money maybe as a tool or something?

Matt Biggley:

Let’s visit some of the moralizing that we do about money. For some reason it is a common cultural assumption that wealth equals greed. That to make money equals stress. And if we unpack that, say take this common assumption like money can’t buy you happiness. Well then if we unpack that, we say like, “Well, what does make you happy?” And you start to think about those things. Taking my kids on a vacation, getting my wife something that she loves for her birthday, having a nice dinner out or a trip. So then you say, “Well, I guess does money actually help me achieve those things?” And yes. it does. So, then money actually help support my happiness. We’ve just deconstructed this idea that money can’t buy happiness and in fact, money can help support your happiness. And I think there’s myriad examples of when we deconstruct our assumptions about money, where we can move from that scarcity to that abundance mindset.

I’ve talked about one of my favorite books around this topic before, it’s called You Are a Badass at Making Money, and it is a psychological exploration of your own internal thought process and assumptions and mindsets around wealth. And it must be confusing for kids as they look out into culture and what they’re consuming, and really have no way of making sense about wealth or about what that money means or what they’re seeing and viewing, how they achieve that or don’t achieve that. I think it’s even gotten so much more confusing with the TikTok that I’ll catch my kids watching and the YouTube stuff. I don’t think it’s teaching him about money abundance. Maybe it’s about coveting money or about wanting material things without connecting that to this deeper idea of connecting that to your happiness and your experiences and what that can mean. This is heavy guys. This is heavy stuff.

Kyle Pearce:

Oh, totally, totally. Matt, so many things you said there I connected with and going back to this idea that money can’t buy you happiness is like that expression. You hear it all the time and it is true in so many ways. But it is not the whole story is what I just heard you say. Of course, you could have a billion dollars and be the most sad, depressed person in the world. But that’s because you don’t have the other pieces to the puzzle. It’s like if you can figure out what does help you feel happy, what does make you excited to get up in the morning, which is different for everyone. I think that’s the part that’s really hard, is trying to figure out what do you like doing? What do you want to spend your time doing, and how do you living your life, that’s the hard work that has to be done.

But even when you do all of that work, I’m going to argue that when you don’t have any money, it makes it hard for you to be able to do those things. And I heard you say that, so I’ve just sort of restated that piece and I think that’s really important for everyone. And going to this idea of abundance mindset versus scarcity mindset. I’m thinking as an educator and I’m thinking about how we assess students and how we evaluate students in our grade books and things like that. And we’re often talking about asset-based comments, versus deficit-based comments. So what that really means is we want to talk about the things students do know how to do and then what’s the next step to get them to the next level. That’s a great way to look at things, versus saying all the things they can’t do and never referencing the things they can do.

And I agree with that. I think that’s great. I really do. But then when we look at it on the other hand, and you coming most recently out of a guidance position. You were a guidance counselor, Matt. I feel like the messaging that we give to students, whether we say it explicitly or whether it’s just modeled for students and they kind of connect the dots, is almost this scarcity mindset around getting a job or having a career or if you don’t do this, then you won’t get that. Everything is in the negative, which is the opposite of that asset-based thinking. And it just makes me feel or wonder anyway about how many students are coming out of school. And I’ll be honest and say, I don’t know if it was school that did this or I’ve just sort of grown up with this mindset myself. But I know that for me it’s like I wanted that security. I know Matt, you are that guy too, you and John-

Matt Biggley:

For sure.

Kyle Pearce:

… you talked about on one of the earlier episodes your dad being a teacher and you sort of being, “Listen, if I could just do that, then everything’s going to be okay.”

Matt Biggley:

You got it.

Kyle Pearce:

And again, it doesn’t make us wrong. It doesn’t make anyone bad for doing those things, but when you start to think outside of that box, you start to realize that maybe there’s more to life, to this world than maybe we had realized. That it’s not just about securing that job and making sure the paycheck’s coming in. That’s one thing that will help you sleep at night, but then is it helping you to achieve the things that you want in life? Have you thought about the things that you truly want in life, or are you like so many people that look and say, “Well, in 30 years I hope that I’ll get to travel. Or in 10 more years I’ll get a chance to not have to wake up at 5:30 in the morning and roll out of bed and go do whatever it is that I do every day.”

There’s so much here that I think is really important for us to be thinking about as parents of young people. But then if you’re an educator out there and you’re listening to this, we’re working with students each and every day and the things we say, and more importantly, the things we do, students are watching. Our children are watching us whether we say it or not, and that has an implication on what they interpret from the way we lead our own lives.

Jon Orr:

And what I’m hearing, I think both of you saying is that, and especially if we think about what you just said, Kyle, about being a teacher and thinking about security and is I think a lot of us, especially teachers and other kids, other students, and especially teachers who try to help kids think about their futures. I think we set this gold standard that the way to be financially secure in your life is to go get a good job and they’re going to work there for 30 years. And if you pick the right job, you’re going to get this pension, then you don’t have to think about your money ever again and setting yourself up that way. I know I’ve experienced that as my mindset. We talked about it here, but I think as educators, I think we also kind of try to share that mindset with our students, which is not the norm.

I don’t think us being educators is the norm for the rest of our society on how many jobs people usually have in their lifetime, or careers. We’re going to have to fact check this later, but I think maybe Matt being a guidance counselor knows this, but the fact that the average person is going to go through five or four different careers in their lifetime, whereas us educators, especially here in Ontario, I feel like we’ve talked about those golden handcuffs that once we get our job and we teach and we get our pension and we’re working towards that kind of retirement, we have one, we have one career. I know that that’s been my experience and most of the educators I work with, that’s their experience. And it’s like how do we help kids understand that that’s not the norm and that we are going to think about these financial futures?

And I think what I was hearing you guys say is that if we can help students and our own kids understand that that’s not necessarily the norm, but they can use money, and the money they make from these jobs careers as a tool to help them with their happiness and what they want to do with their life, instead of thinking that, “This money is my be all, end all so that I can live my life in the future,” which is I think what my mindset was when we started. But thinking about how can I use it now to build the life that I want? I want to imagine the life that I want to live and how can I earn the money or use the money as a tool to create that for myself?

Kyle Pearce:

I love it. And I think about this and it really boils down to, I read a book recently, it’s on our book list over at investedteacher.com/books. It’s called Becoming Your Own Banker and the author of that book, it’s all about something called the Infinite Banking Process or the Infinite Banking Concept. And it’s something I’ve dug into a lot, a lot. So, definitely something worth looking into. We will have an episode coming up about that in when people are ready for it, I’ll say. But in this book, Nelson Nash says that basically you’re either earning interest on your money, or you’re paying someone else interest, or losing the opportunity to earn interest by giving it to someone else.

Matt Biggley:

Interesting.

Kyle Pearce:

When you really think about that, that’s really what this is all about. And whether it’s career, when you think about your career, I think sometimes we are like, you need to find something that you’re going to love doing every single day. Well, in reality, you know what? I mean, my kids are a perfect example of this with sports. My son didn’t want any sports at first. It was only once he started to learn how to play the sport and when he became better getting skills in that sport that he actually enjoyed it. And I wonder about our messaging for students when they’re going out into the workforce. I don’t know about you, but being an insurance agent doesn’t sound fun.

It doesn’t sound exciting, but I wonder though, if you became really effective at what you did and you start to treat it like a competition, you’ll start to treat it like a bit of a game. It changes your mindset about things. So, once you start getting out there and you are earning this stuff, this money, I want to turn our attention to kind of looking at it and going, okay, it’s a tool. I heard Matt say this. I heard John, you just said it. It’s a tool that really we can either use it as a tool to help us earn more of it, so we can use it as a tool for earning more money by buying assets, things that appreciate, cash flow, those sorts of things. Or we can use it as a tool to help someone else earn money. All right?

So I want people to kind of think about that. There’s really only two things you could do. You could hoard it and you can put it under your mattress, you could bury it in the backyard, but it’s not that helpful. And actually it loses value over time. That thing called inflation is just eating away at the value. So really money, you want to have enough of it so that you can live so that you’re comfortable so that you have a way out of an emergency situation. But for the other money that you are earning or accumulating over time, every single dollar you receive, you essentially have to make a choice. You have to make a choice. “Am I going to spend it on something that’s going to make me more money? Or am I going to spend it on something and help someone else make more money?”

And that is really what we need our students, our children, to better understand. And I think the real thing, the real idea is, “Well, wait a second, how do I earn money?” And there’s this magic thing. The seventh wonder is at the eighth wonder of the world that Einstein called compound interest. And this idea is something that we as adults, few adults actually understand it. Because in the real world it happens slowly over time, so it’s not as obvious, and you have to be very patient for it. But the reality is that if we can take money and we can apply the, doesn’t have to actually be interest, but it’s the theory of compound interest to grow money into more money, we will see a huge, huge benefit in the long run.

Jon Orr:

The fact that you’ve just brought up compound interest is I think when you said the ninth wonder of the world, I think it’s so important. And one of the, I thought it was seven-

Kyle Pearce:

How many wonders are there in the world, by the way?

Jon Orr:

But maybe there’s eight.

Kyle Pearce:

I was like, seven?

Jon Orr:

I don’t know. I don’t know.

Kyle Pearce:

The ninth, I don’t know. But anyway, it’s the extra wonder.

Jon Orr:

And when we think about helping kids understand compound interest, I think as early as possible is a huge win. When we talk about money with our own kids or with students, we talk about budgeting, we talk about savings. And I think if we can help understand compound interest as a way to help build your own wealth and student wealth, that is a huge win for us. And I think we’ve got some practical ways here in this episode. We want to chat about how to help your own kids and students understand the power of compound interest, for sure. But just as an example of one of those powers of compound interest. Kyle, I know that you’ve got a couple lessons that you’ve done with students that are powerful to understanding them.

But even just one example is I remember hearing this story of Warren Buffet, and Warren Buffet being one of the richest people in the world, one of the most successful investors in the world. And I think he was on record of basically saying, or it’s been shown that it’s not the fact that he was a great chooser of companies or a deal maker, even though these are all true. It’s the fact that he’s got so much money now because he started so early in his life on building on the power of compound interest. He’s like 90 years old.

Kyle Pearce:

88 or something now, he’s up there.

Jon Orr:

Right. And he’s still working with the power of compound interest, but because he started so young, it’s had time to build on top of building, on top of building. And people are like, “Wow, how can we be as rich as Warren Buffet?” And some of the answers are, “You just have to live that long. You just have to live that long and build on the power of compound interest.” One of the big ideas I think we want to share is, how can we share the idea and the power of compound interest to our own kids and our own students as early as we can? For example, this brings up the idea of allowance. How do I help my own kids understand the power of compound interest? Is allowance and giving them so much money every week as I got when I was young, is so much money every week as your allowance? Is that helping them understand the power of compound interest? Are we helping them understand that if I’m giving them this number every single week, no that’s linear growth.

How can we structure that to help them understand the power of compound interest? But we’ll go into that in just a sec. Kyle, do you want to chat about some of the examples of compound interest so that we all understand the compound interest as we’ve used them in the classroom?

Kyle Pearce:

Yeah, for sure. Because I was just going to say, we could dive into this and if you are like Jon and I, math teachers, compound interest does come up in the curriculum. And the problem though is when I used to introduce it, I introduced it from a very abstract perspective. Well, our compound interest, we take down the definition of compound interest is an exponential function, and that means that you’re going to raise the base to an exponent, all of these things that actually are interesting to come out eventually after you understand the concept. But the reality is, it’s this idea that you’re going to earn on what you’ve already earned. One of my earliest colleagues and mentors as a math teacher and still a great friend is Dave Bracken. He taught at my first high school, Matt, you might know Dave from Greater Essex when we all taught together there and Dave had shared this example of the wheat and chessboard problem.

We’ll put the link in the show notes for those who have never heard it, but I think it’s back in the 1200s was the first time this story or this idea was referenced. Where basically it was about a king and a gambler. And basically they made a bet of, “Hey, if you just give me, I think it was a grain of wheat, one grain, but you double that grain each day.” And it was on a chess board. There’s a big story behind it, you can read about it. And what Dave did is he actually took this concept and he applied it in a way that would be more meaningful to students. So what he would offer students just verbally was he would say, “Listen,” he’d make up this big story. He would say, “Hey, I talked to your parents last night.”

Maybe pick a student in a class. “I talked to your parent and your parent had said, if you do chores every single day this month, maybe made up, put the dishes away or made your bed, whatever it was, I will give you one of two options.” And you would ask the students and say, “You could have either $10,000 right now, I will give you $10,000. You have to commit to doing the full 30 days, a whole month.” We’ll use a 30 day month. “Full 30 days of doing those chores. Or I will give you the other option. The other option is I will give you one penny on the first day. On the second day I will give you that penny doubled. And on the third day I will then double that amount, which is how many?” And the students would say, “Oh, it’s four pennies.”

Jon Orr:

That doesn’t sound so awesome.

Kyle Pearce:

Yeah, it doesn’t sound great at all. Right away a lot of kids are just saying, “Give me the 10,000 and I’m going to walk.” And dare I actually show you the power. And I think when students see the power of compound interest, those who are hanging out with us on YouTube will have the pleasure of checking this out. But if I take this one penny and I go, “Okay, well I’m going to take that one penny and I’m going to take that penny and I’m going to double it here.” So we see day zero, we’ll say like today, and you get a penny. Matt, I know you’re not a math teacher, so I want to make sure, are you good? You seeing this? You’re like, “Whoa, penny a day.”

Matt Biggley:

Show me the numbers, show me the numbers.

Kyle Pearce:

On day four you get 16 cents. All right, so we’re on day four, 16 cents. We make it to day 10 and you’re like, “I’m at two bucks, two bucks.” Kids are like, “Whoa, this sucks.” Some of the kids who were like, “I think you’re tricking me, sir. I’m going to pick the penny a day doubled.” They’re starting to lose confidence. All right, so Matt, what do you think? If you had to just estimate, and this isn’t to make you feel bad, but most people come so far, they’re nowhere near where it’s going to be.

Jon Orr:

Yeah, give us a number on day 30.

Matt Biggley:

Jeez good God, can we just-

Jon Orr:

It’s got to be more than what? It’s got to be more than what? What do you think? Give me be a low ball. It’s got to be more than?

Matt Biggley:

A 100 bucks.

Jon Orr:

All right. Well, it’s got to be less than how much though, Matt? Give us a guess. Just it’s got to be less than, it could possibly be blank amount of dollars, Matt.

Matt Biggley:

It couldn’t be a 1,000. It couldn’t be a 1,000.

Jon Orr:

All right. It couldn’t be a 1,000. All right.

Kyle Pearce:

Okay, well let’s keep going. Let’s get to day 15. So day 15, we’re at $327.

Matt Biggley:

Ouch.

Kyle Pearce:

All right, on day 16-

Matt Biggley:

Whoa.

Jon Orr:

Double it.

Kyle Pearce:

We’re getting-

Jon Orr:

Double it.

Kyle Pearce:

… close to your 1,000. I’m going to let you adjust from here.

Matt Biggley:

Whoa.

Kyle Pearce:

Oh my gosh, we’re at 2,000, 2,600 on day 18. Go ahead, adjust. And by the way, for those who are listening, this is sort of how John and I run our math classrooms. It’s all about estimation, it’s all about curiosity. It’s all about getting kids to lean in and go like, “Oh my gosh, numbers aren’t that scary. They actually are kind of interesting, especially when there’s a dollar sign in front of them.”

Jon Orr:

Day 19.

Kyle Pearce:

Yeah, go for it. Here I’m going to give you all the way to day 20. Look at day 20.

Matt Biggley:

50,000.

Kyle Pearce:

On day 20.

Matt Biggley:

We’re going to hit a 100,000 at day 30, we’re going to hit a 100,000.

Kyle Pearce:

All right, let’s do it.

Jon Orr:

Oh.

Kyle Pearce:

Okay. So go to 25 and I want everybody to pause their podcast for a second, before I reveal here, and make your estimate. Day 20 we’re at 10,000. What do you think? Day 30 is going to be $10,737,418. And that’s just like, I want you to think about this, guys. That is just what they’re going to get on day 30.

Jon Orr:

Yeah, because [inaudible 00:28:16]-

Kyle Pearce:

Got 5 million, the day before that they got 2.6 million. The day before that they got 1.3 million. We didn’t even add them all together. That was just what I’m going to give you on day 30. So you were already a millionaire on day 26. Because you add up the previous few days and you’re already over a million. And this is the power of compound interest. Now this is also-

Jon Orr:

You’re doubling, that’s a doubling.

Kyle Pearce:

We are doubling. That means that you are making 200% on your investment. So, it’s not a realistic expectation in any market, especially in 30 days. But the problem with compound interest we believe is that Warren Buffett’s 98, it’s like it happens over such a long period of time-

Jon Orr:

But once it get going-

Kyle Pearce:

We as humans are very impatient. And not only that, the longer we stretch something out, the harder it is to recognize a pattern. I want to flip it over to Matt, and I’m wondering where’s your head at after you see this experiment? What are you thinking? What does it tell you about compound interest, and what’s the implications for maybe kids? What does this mean for kids?

Matt Biggley:

Yeah, first of all, I’m trying to find a link to sign up to partner with you guys to get these kind of returns.

Kyle Pearce:

No promises, no promise.

Matt Biggley:

Let’s drop that in the show notes.

Jon Orr:

That’s the math in the real world.

Matt Biggley:

This makes me think about, yeah, how often in school we can maybe teach a concept to students and then that important part of making it real. We’ve got so many students graduating from high school, taking those calculus classes, those functions classes, but maybe not. Listen, I was not a math, I was a history teacher before being a guidance counselor. I’ve learned so much about finances and money post my education. This makes me just go, “Okay, help me relate this to real life. Help me make this really practical.” Because I think so often we teach a concept and then we forget to relate it to what it looks like in life. So we’ve got some numbers that are absolutely mind blowing and really exciting. I’m getting all stirred up here. I’m like, “I want to do that, I want to do that.”

And so I wonder in your classrooms and for your students, how do we then make that real for them in a way that they can really comprehend and appreciate and really get this? Because I think that’s super exciting and I love that you guys talked about putting the dollar figure in front of it, otherwise numbers are just kind of meaningless and you start throwing those dollar figures around it gets my blood flowing. It’s pretty exciting.

Kyle Pearce:

Yeah.

Jon Orr:

Putting the dollar assign in front does help out a lot. I’ve done the activity where if you take a sheet of paper, so this is the exact same pattern, it’s a doubling pattern, but if you take a sheet of paper and you fold it in half, you’ve doubled the thickness of the paper, just a normal sheet of paper, fold it in half, and then another fold in half, you’ve doubled that thickness. And then if you keep folding it in half and you keep doubling the thickness. And if you’ve ever tried folding a standard eight by an 11 sheet of paper, you can probably only fold it maybe six to seven times before it’s too thick. All of a sudden it’s that thick after a sixfold. And if you keep extending that pattern with students, you can basically show that after 30 folds, even after-

Kyle Pearce:

It’ll reach the moon or something.

Jon Orr:

Yeah, 15 folds the paper. If theoretically you could keep doubling the paper size, the paper thickness, it would be to the reach of the moon and then it’s like to the outer edges of the atmosphere, like 50 folds. So just 50 compounding periods it’s doubled. But the dollar amount, I think what you were saying, Matt does kind of hit students a little bit more to their hearts and to their pocketbooks and thinking about their own money, which brings us to thinking about our own kids. And how do we help our kids think about compound interest and bring that into their lives. And I think early on, when you get students who are making regular money, you’ve got teenagers or you’ve got early adults who are thinking about their money, you might want to think about how can you get them involved in building out some investment opportunities.

But thinking about little kids, I know that when I got an allowance, it was just kind of this flat rate you got every day or every week. I got so much dollars I think every week I can’t even remember what it was, but the one way I’m trying to help my dad-

Matt Biggley:

You go, “Dad, this is linear, I need something exponential.”

Jon Orr:

Right. So how I can help my kids think about compound interest is not giving it a linear scale. It’s actually it’s letting them see the power of letting their money compound. So, instead of giving them an allowance, it’s almost like we’ve created together a spreadsheet savings account. Whereas if they put in, whatever dollar amount they put into their spreadsheet savings account, we can see that we’re going to give them, and I think what we set up, I’m going to give them a good interest rate. I’m allowing their money to grow at 12% per year compounded monthly. So my daughter, she gave me all the birthday money she had over the last couple years. She’s like, “Here’s $500, dad put this in my compound interest savings account.” And so we put it in a spreadsheet and we’re just showing that every day her money increases in value by just having it in there. So she can see day by day that that money grows by a small percentage or a small dollar amount.

That’s the key that it grows by a dollar amount. And that on the spreadsheet she can see that she didn’t do anything today other than let her money grow. And it changes because the next day it’s a little bit more and the next day it’s a little bit more and the next day it’s a little bit more. And after the month it’s over she earned 1% on her money if she let it be in there for that full amount. And it grew by just allowing it in there. She’s seeing the power of investing, but also passive income in a way that she’s saying, “Look, as long as I just keep my money in there, I’m earning money without having to go to work.” And I think letting them understand that after that money’s sitting in there for a year, she’s going to earn. It doesn’t seem like a lot when you compare it to maybe what other kids’ allowances are. But she’s really right now excited to have this money grow without her doing anything about it.

So now every time she gets money, she’s like, “Dad, can I put some money into my compound interest savings account?” And then I just take it and we add it to the spreadsheet and I’m going to pay her that. So, it’s like I’m paying her a super cheap allowance, but she’s seeing the power of this compound interest grow.

Kyle Pearce:

And for those who are watching on YouTube, I just saw that put together again in the spreadsheet, your 1% per month because 12% per year. So using numbers that are friendly, this is something we’ve learned in math classes. If you want students to recognize patterns, you need to use numbers that are friendly enough where the pattern is recognizable, right? Where it becomes obvious. If she just takes that 500 bucks and leaves it and doesn’t touch it and doesn’t add anything extra to it and you just let that 12% per year accumulate. Basically over 10 months, so if we get all the way to the, and if it’s 1% per month, this is the cool part about compound interest, the more often you compound it. So taking that 12% instead of waiting all the way to the end of the year to get 12% all at once, if she gets this 12% in 1% chunks every year, it starts to compound on that.

That’s the beauty of this. It’s like the more often you can compound, the better. Now think about this from a debt perspective. Some of us have mortgages or car payments or whatever, guess what, the banks know how this works as well and they know that we’re not great at picking up on these patterns. But they compound it either monthly, sometimes they do it even semi-annually, but it’s very rarely compounded annually, because they know they’ll make more money off of you by compounding the interest more often. So this is something that again, most adults aren’t aware of. So by the end of year one, if she does nothing and we just compound this thing 1% per month, she’ll have 63 bucks.

Matt Biggley:

Extra.

Kyle Pearce:

Of extra money at the end. Now, you can only imagine if we actually change this a little bit and let’s say every month she’s earning an extra, I don’t know, what would it be, Jon? Is she earning a weekly allowance or something for doing chores? Is it 10 bucks a week or something? Or how does that work?

Jon Orr:

That brings us the kind of second piece of a way you can bring this into your kids’ lives. You could give them that linear allowance and then they can put it in there. Everyone is up to your discretion. One thing that my dad did that I always thought was very useful, which helped me I think understand the cost of things. And thinking about how much time that you’re putting in, almost like opportunity cost. Kyle, you mentioned this at the beginning that you’re thinking a lot more about if you buy this thing, how many hours did I have to work for it to get that thing? And I think I want my kids to also experience that. And my dad helped me experience that as well, whereas he didn’t pay me an allowance. He said, “I will match whatever money you go and make and I will match it.”

Which helped me I think understand that I needed to generate my own money and I needed to go and figure out how do I earn money. I searched for ways. I had one of those small paper routes for a while. I would go to people’s door and shovel their driveways because I know that if I earned 10 bucks shoveling a driveway, my dad was also going to pay me 10 bucks for doing that. So, there’s lots of different ways you can encourage your students to think the value of money, but I think when we do that, we help them understand, help me understand that if I wanted to buy that CD at Music World, I knew that paying for the $18 CD, I needed to work two driveways to pay for that. And it was like, was that worth it? I think that part for us is super important in helping our own kids understand the value of money.

I know my girls, they referee soccer in the summertime, which helps kind of pad that account that they can put money into. So my daughter, Olivia had put her money from her birthday money or whatever, but else she also put her referee money into that compound interest savings account. They babysit, they make money babysitting. So, it’s how can they understand that every dollar they make costs them time in their lifetime? And if I spend it here, that means I can’t spend it over here on this. And it also means I’m going to have to spend more time to replenish that dollar amount I spend, which is an opportunity cost. If I spend it here, I’m not spending it over here and I have to work harder to make up that cost. Those are great things that we have to help our students understand the value of money.

Because as I think we all can understand, and all listeners, when your kids are young, they might spend money willy-nilly because they just still don’t understand that there is a cost here to your life. Not only in just this money, because we started this podcast with kids think it’s so abstract. I remember just a small story, one of my younger daughters, I think she dropped a dime on the ground and we were in the store and I was like, “Oh, grab the dime.” She’s like, “It’s just a dime, dad.” And I was like, “Oh my gosh, we have failed you as someone who is valuing the money.” It’s like, “Yeah, it’s a dime. You need to pick that up because it’s value that you are going to lose-“

Kyle Pearce:

Because the compound interest.

Jon Orr:

Oh my gosh, I was so like, “What do you mean it’s just a dime? You do not understand yet the value of money.” And I think we’ve all gone through stories like that where our kids just toss things away and you’re like, “Wait a minute. There was value here that we used.” I think a big idea here is, how do we help our students understand the value of compound interest, but also how do we help them understand that there’s opportunity cost and the value of money.

Kyle Pearce:

I love it. I love it. And for those who were watching, you saw me playing with that spreadsheet and I just assumed, let’s say you were, I don’t know if it was Olivia that you were doing the 12% with or that’s all three daughters. But let’s say they were getting 10 bucks a week and I just rounded it to about a $40 extra a month.

Jon Orr:

Got it.

Kyle Pearce:

And getting the 12% interest. That’s where you get the double whammy. So her account blew up to $1075 in change. When in reality if you do the math on that, it’s like she only earned a little over $400 more. But that account has grown significantly because of it. And it wasn’t just 12%, it was more than 12% because you were compounding monthly. And this is something that’s really, really helpful. Now, I want to roll back for a second to share. Your daughters are a little bit older than my children, so my oldest is 10. Your twins are 12, right?

Jon Orr:

Yeah, my youngest are 12.

Kyle Pearce:

So, they’re a little bit further along this journey. And you’ve been doing this with them, I would say in more recent years. For my kids, I’m going to say with younger kids, you want to make it as concrete as possible. For those who know Jon and I from the math world, we have this passion for helping students to really understand and build this relationship with mathematics, which often starts concretely. Rather than using a spreadsheet with younger children, I might recommend the jar method where kids are seeing the bills going in.

Jon Orr:

Powerful.

Kyle Pearce:

If there’s a lot of change in there, that’s fine too. But we do this process not only to help them with counting, but we have them sort of convert their change into groups of fives and $10 and $20 and I’ll get the bills and it’s a bit of a pain in the butt because I have to have bills on hand. But it’s like, and I’ll let them exchange the change for bills so that they see these bills. It’s great. But then my sort of approach, and I’m not going to recommend this, you will go bankrupt if you do this and I’ll tell you why in a second. But what I do with them is to encourage them from spending. We have a spend jar and we have a save jar and we talk about just because it’s in the spend jar doesn’t mean to deplete it. It just means that’s the money that you can spend from.

And then basically what we do is we pool this money together and each month they count it. So there’s a benefit there. But then the second thing we do is we say, “For every $20 that you have in there, I will give you $1 in interest.” Now even at that, it doesn’t sound like a lot, it’s a dollar. It’s not that much. But actually if you really think of what that is, this 20 to one ratio. So we got an excuse to talk about ratios. We also get to extrapolate and say, “Well, how many dollars per $100 would that be?” So they get to make their pile of five 20s, that’s a $100. And they’re like, “Oh, that’s $5.” “Oh, okay, what’s that as a percent? That’s 5%.” I’m giving my kids 5% per month. Okay, so John, you cheapo, you’re only giving 1% a month.

Jon Orr:

Yeah.

Kyle Pearce:

I’m giving 5% per month. But now my kids are younger, so they have less capital to start with, so their working capital is lower. And so therefore it’s like I need the reward to be higher for them to see the benefit. I want them to see and feel the benefit quickly. Just recently the kids, we had the holidays happen and we celebrate and family gets them gifts oftentimes of money. And we went through and it was like the amount of interest I had to pay to my children, it actually made me start rethinking, maybe it’s time to shift to Jon’s-

Jon Orr:

Hey 5% a month-

Kyle Pearce:

… cheapo vote. But the reality though is my son is like me and he’s a hoarder of money. And my daughter is the opposite. She wants to go and spend things and live her life to the fullest, FOMO, all those things, whatever. But he has more money than her now and he’s two years younger. So when he gets his interest payment, it hurts. Because it’s like not only does he have more money saved than Talia, but his interest payment is higher than hers now too. So, it’s like he is going to run away with it. It’s like a great example of how the rich get richer. It’s not because they’re evil people, it’s because they’re compounding at a higher rate.

Even if all other things are equal, it’s like I have more money to make more money with. And that is such an opportunity for kids to at least understand the inner workings. Not that it’s a realistic scenario. You can’t expect that’s going to happen in the real world, Matt, with doubling your penny every day. It’s not going to happen. But it’s to get the concept of it and how important it is to position yourself in a way that it goes, “Well, wait a second. What has spending all that extra money done for you? It gave you fleeting happiness, right? It gave you a sense of excitement maybe in the moment.” But most of those things, could you even go back and yes, the kids, “What did you spend the money on?” And most of the time they can’t even name it, unless it’s something big and significant. Most of it’s just junk.

The sooner we can make this change and help them to see that there are certain things that aren’t worth spending on. And sometimes there are certain things, going out for dinner is technically a waste of money, but we still do it as a family because we value that time together. So, it’s like helping them to sort of navigate that land, and find that balance that you don’t want to never spend money. You don’t want to become Ebenezer Scrooge, Kyle, that’s me, unfortunately, I’m still learning that lesson. But you do want them to at least have some sort of critical thinking around the money that they’re spending. And when they say yes to spending on something, they’re saying no to something else.

So, if I say yes to buying assets that grow, I am saying no to junk, but I’m saying yes to earning money. If I go the other way around, I say if yes to buying junk, I’m saying no to potentially earning more money. I mean, I could use some of that money to buy the junk if I just spent my interest. That’s not a bad place to be either. There’s lots of lessons that can be learned from engaging in this type of work.

Matt Biggley:

As we wrap this episode of really given me some pause to consider both some super practical ways to introduce some concepts to my kids, that might be the equivalent of the concepts about real estate investing that I’ve gotten excited about. I love the jar method, Kyle, my kids are a little bit younger. I can see that’s so concrete for them. And this power of compound interest, I think is going to be fascinating to them. And I think my big takeaway though is that we want to pair these practical ideas with the right mindset through which to view money and the reasons for making it. I think for us as adults, and as I said, I had this big transformation as an adult myself. I think we need to unpack our assumptions and our beliefs about money and wealth and what that’s meant for us and be really diligent in that.

And I want to suggest a new definition for wealth, because it’s not about just the endless pursuit of more money. I think that’s when we go down maybe a bad path and we hear about the unhappy millionaires or unhappy billionaires. It’s not just about more for the purpose of more. I think that the definition of wealth is perhaps being able to afford the experiences and the things required to fully experience our best, most authentic life. And yes, we all need to start with that practical level of financial security. And that’s why so many of us got into teaching, because it was safe, it was secure, and I think that’s where it starts. But what we’re trying to help people do here is shift from that to wealth building. That’s really our goal. And that’s really I think our mission here. And it’s the wealth building that helps you lead your most authentic life.

And what I mean by that is freedom. It’s the freedom to choose how to spend your days. It’s the freedom of not having to worry about your bank account balance and the bills you have coming in. It’s the freedom of believing that you are potentially leaving some generational wealth to your kids to help them get a start in life maybe that you didn’t have or that you’d like them to have. And so, that’s the way that I want to view wealth. Money is a neutral thing. We are the ones who put meaning and definition on what money means. And I think that culturally we’re seeing it in the wrong way. And so I want to fight to redefine what wealth means, and whatever that freedom is, whatever it looks like to you is totally and completely up to you. I’m not going to make any assumptions or judgments about that, but I know that building wealth can help you achieve and find that freedom.

Jon Orr:

Awesome. Awesome, Matt. I think that’s a great kind of leave behind takeaway message for our listeners. And just to add to that, my takeaway is to help achieve that with our own kids and with the students that we teach. One way that we want to help them achieve that mindset and thinking about their money use and how they view money is, how can we bring in the power of compound interest and also how can we teach students about the opportunity costs of money? We gave some examples, some practical ways we do that with our own kids and the way we do that in the classroom, which I think will help change their views of money and how they’ve viewed money in the past. And I know that I want to change that for my kids so that when they’re older, they’re seeing money the way, and their life the way you’re describing here, Matt, which is amazing. So Kyle, what’s your big takeaway so far here in this episode?

Kyle Pearce:

Yeah, I just love this idea of every decision that you make with money, it’s really just one of two things. It’s either going to help you earn more or it’s going to help someone else earn more. And sometimes, you can’t always spend your money on things that make your own money.

Matt Biggley:

Right.

Kyle Pearce:

There’s decisions, there’s times there’s things that you have to do. But if we’re thinking about those things, it can help us make better choices about how we use this tool we know as money. And that can really, again, coming all the way back to Matt’s mindset piece and sort of this idea of happiness. It can help us structure and frame ourselves and put ourselves in a position where we can maximize that level of happiness or our chances of being happier more often, than if we put ourselves in a position where we’re not considering those things. And you just end up where you end up.

Hopefully this has been helpful for everyone. My friends, if by chance this episode or maybe any other episode has been beneficial to you, we really want to encourage you to hit that subscribe button, hit us with a rating and review and share it with someone. Because guess what? If you’re listening to it, if you find it valuable, there’s got to be someone else out there who will find it valuable too. So do us that huge favor, that’s all we ask from you. And we can’t help but thank all of the people who are reaching out. There are so many people reaching out to each of us through DMs, through text messages, even of people in our lives that have found this podcast and say, “Wow, nice show.” We’re really loving doing it. And all of that support is giving us the fuel to get up early on Sunday morning, just like right now, and to do this work here. Because we’re passionate about it and we want to see more people out there feel comfortable and confident with their investing decisions.

Jon Orr:

Awesome stuff, and you can share out or reach us over at investedteacher on all social media, YouTube, Twitter, Instagram and Facebook, and you can message us, you can reach out to us. Also, you can find all links to any resources, activities, support, ideas that we mentioned here on this episode over at our website and the show notes page at investedteacher.com/episode8. Again, that’s investedteacher.com/episode8.

Matt Biggley:

And we’ve got our Wealth Building blueprint available to share with you over at investedteacher.com/blueprint. That’s where we break down and introduce some of these big ideas on your path to building wealth. All right, invested students, class dismissed. A reminder that this content of this episode is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice.

Kyle Pearce:

All right, my friends, Math Moment Makers, and now I hope some of you would consider yourselves invested students as we like to call the listeners of the Invested Teacher Podcast. We hope you found that helpful, not only for your students that you teach, but maybe you have some children at home or other people in your lives that you want to help along their journey. Keeping in mind, as John had mentioned, we are still full throttle, Making Math Moments all day long, all day strong, but there’s been something that we’ve been doing as well in the background, which is trying to learn more about financial literacy for ourselves, for our families, and for our future generations. And this is something that I think a lot of people might be curious of, maybe they’re scared of, and really the purpose of that podcast is to invite more people to the table.

Just like we want to invite more people to the mathematics table, to the conversation around mathematics, there are so many people that look at investing, finances, budgeting, all of those ideas. They look at it as something that is fearful that only some people can do. “I’m not into budgeting or finances,” is what people say. “Or I’m no good at that.” We want to help more people feel confident and really be just feeling like they have a little bit more control or understanding about their own finances so that you can ensure that your finances in the future are under control. Head on over to Invested Teacher and subscribe there. Rate and review. You don’t know how valuable that would be in order to help us share that message. The Math Moment Maker community has been amazing over the years, helping by sharing with friends, families, other educators.

For this podcast, we’re asking you a small favor to do the same. And guess what? There are more people in your lives that The Invested Teacher Podcast might be a match for. Because they don’t have to be a math teacher to really find value there. They really just have to be people who want to learn a little bit more about investing and getting their financial future under control.

Jon Orr:

If you are looking for those links to investedteacher.com or any of the links we mentioned in this episode, you can head on over to this podcast’s show notes page, which is makemathmoments.com/episode220. Again, that’s makemathmoments.com/episode220, and then you’ll find all the resources, all the necessary links for you to subscribe to the podcast, to get our blueprint for Wealth building and to kind of get hooked up if you are wanting to learn more about becoming an invested student. Head on over to those links there and you’ll get started.

Kyle Pearce:

Awesome, my friends, we are so appreciative of your support and we look forward to our next episode of the Making Math Moments That Matter podcast with you. Until next time, I’m Kyle Pierce.

Jon Orr:

And I’m Jon Orr.

Kyle Pearce:

High fives for us. And high five for you.

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