Lazy Man and Money

My Kids’ Roth IRAs

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Two years ago, my kids got a Roth IRA to jump-start their retirement savings. It was a little aggressive for a 5 and 6-year old, but I wanted to start them early. By starting now, they’ve got the most valuable thing on their side – time.

It can be difficult to get a kid a Roth IRA. On one hand, you have the IRS with the annoying rule that the kids have to have earned income to put into an IRA. On the other hand, you have pesky labor laws that limit the work a kid can do. It’s a shame that my baby modeling idea never took off. I also don’t see people lining up to purchase their wonderful Pokemon art creations.

Kid Roth IRAs with a Side Hustle

So how do they earn this money to comply with the IRS demands for funding a Roth IRA? I pay them to help with my dog sitting business on Rover.com. In non-COVID years, I can make around $15,000 a year, which is a nice side hustle while I’m freelancing from home and writing this blog.

Kids Roth IRA

I’ve been dog sitting for five and a half years now, so the kids have grown up with a couple of extra dogs around. They’ve become naturally curious about feeding dogs and they love to play fetch with them. We’ve taught them how to pick up the dog droppings, but that’s not something they like. Some of their peers do the chore for allowance. However, for the family dog sitting business, it’s a core aspect of the job.

Feeding dogs, playing with dogs, keeping the water bowl filled, and picking up after the dogs is most of the dog sitting job. These are all things that my kids can do. Occasionally I have to give them medicine, but that’s about the only thing that I need to do 100% myself. The IRS should have no issue with me subcontracting out some of the work to them. In fact, I did some math on what a professional pooper scooper company costs, and it seems like it could be a couple of thousand dollars a year for the number of dogs we have and how often they’d have to come. My kids aren’t professionals, but the service doesn’t fill the water bowls or play with the dogs, so I think it averages out.

[This article has been refreshed for 2021.]

Kid Roth IRAs: Powerful Stuff

Contributing to a Roth IRA at this age is very, very powerful. Money grows quite a bit nearly 60 years of compounding until they reach ages 65 and 66.

Before we get to my kids’ Roth IRA numbers, here’s a helpful CNBC look at kids and Roth IRAs in general. Who wouldn’t want 3.4 million in one of their accounts?



My kids won’t have 3.4 million any time soon. If they were to earn 7% interest over that long period of time, a single dollar would be nearly $58. So $1000 in a Roth IRA would be worth $58,000. Of course, at 3.5% inflation over that time, you’d need $7,878 to have the buying power of $1,000 today.

When you crunch those numbers, it gives them a real post-inflation gain of 7x their money. Theoretically, if they could earn the $6000 Roth IRA limit, they’d set themselves up with $42,000 in retirement. Of course, that would be an extreme amount of dog care and that wouldn’t be reasonable.

In addition to the Roth IRA, we pay them some real spending money. They saved up for a Nintendo Switch before the pandemic. That was really good timing, because they were hard to find last year.

I settled on paying the younger one $400 and the older $600. In the next year, the younger got $600 and the older got $750. Since he’s a year longer, it works out to be fair as he’ll have an extra year at the end. This year, I’ll go to $750 and $1000 for each. The dog sitting business is going well with everyone traveling now that they are vaccinated.

Here’s how my 8-year-old’s Roth IRA grew to $1891.99:

Kid Roth IRA

Here’s how my 7-year-old’s Roth IRA grew to $1368.73:

Kid Roth IRA

The 8-year-old would have an inflation-adjusted amount of $13,443.70 in his nest egg at age 65. My 7-year-old would have to settle for “only” $10,066.02. I haven’t contributed to their accounts yet this year since dog sitting income got started late with COVID. These projections will go up once that happens.

Investing in My Kids’ Roth IRA

I normally believe in investing in only index funds for them. However, they always have some money left over. With VTI trading at $222, I buy a couple of shares with $600 and have over $150 leftover. I can buy some other index funds but sometimes I look for some satellite stocks. The theory is that you have core holdings and then little satellite holdings to explore. That’s why it’s also called “Core” and “Explore.”

Core – I’ve decided that the core of their portfolio should be the Vanguard Total Stock Market ETF (symbol VTI). Last year, I bought as much I could and then used the rest of the money (less than $160) to explore. This year I did the same. One child got the high-dividend ETF, symbol HDV, that I’ve been touting lately.

Explore – Last year, I explored with Exxon and Ford stocks. I liked that they paid high dividends. I had an idea that I could show how reinvesting the dividends grows. It all sounded good until COVID happened. Ford eliminated its dividend completely. This year, I explored by buying more Exxon (dollar-cost averaging) while it was still paying a big dividend. I also explored by buying all three cruise lines (Carnival, Royal Caribbean, and Norwegian) with at least a share of each. It turns out that those stocks all performed well. Ford’s stock is up nearly 100% as they look to an electric car future. The cruise lines are up 100% as it seems like cruises will be possible soon. Even Exxon has benefitted from rising oil prices.

I don’t have a plan on how to invest their money this year, beyond buying VTI as a core holding. Perhaps we’ll put money into VEU and VWO which focus more on international investing. It might also be time to sell the satellite stocks and put the money into these more traditional indexes.

Because the account is with Fidelity, the no-cost commissions make it easy to diversify by buying a share here and there.

The Future of My Kids’ Roth IRA

In the next few years, I’m hoping they can participate in some of my blogging work. (The older has helped a little bit with my MoneyTime Review. Perhaps later this year or next year, I’ll introduce a bi-weekly kids article. I’ll interview them and get their perspective on what money-related thoughts they have. I’ll then explore how we are parenting their use of money. This is just a seed of an idea. I need to think a little more about how this would work. Of course, I’d pay them for their time and insight, which would be earned income.

After that maybe they can do babysitting or lifeguard work. There will be more opportunities for them to earn money as they get older. While all this is nice, their core “job” now is to get good grades in school.

Doubling the Kids’ Money with Robinhood

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This is going to be another short article today. I am still swamped with dog sitting business. I love that so many people are getting vaccinated and traveling. I also love that almost everyone decided to get a dog in the last year and a half. The only downside is that I’m constantly doing meet and greets, and booking appointments. I had two meet and greets yesterday and during one, I had an emergency last-minute request from someone who needed to travel for work, but their dog regular sitter was on vacation.

After more than a year of very few dogs to sit it is an overwhelming, but a welcome change.

In any case, I didn’t intend to write about dog sitting today. We can save that for the May financial update that should come out early next week. Instead, I want to talk about investing your kids’ money.

I started an investment account with Robinhood when the kids were 2-3 year old. In July that will be exactly 5 years ago. It’s a perfect time to look back and see how that decision went.

I don’t like to invest other people’s money. There’s just too much risk if it doesn’t work out. Fortunately, a 2 and 3 year old weren’t going to feel too much one way or the other.

I could waste a lot of words to build suspence before giving you the results, but I wasted that opportunity in the article’s title. Here’s how they’ve done:

Robinhood

For full disclosure, the results include a little free stock from Robinhood from referring friends (and website visitors). If you sign up here, you’ll help make a couple of kids very happy as they’ll get some free stock… and you will too.

No worries if you don’t sign up, because they are already very happy with the growth of their money. They are starting to figure out how money works, but grasped the idea that twice as much money is better a while back.

I should be open and say that there’s no guarantees that you’ll double your money when you invest via the Robinhood brokerage. The brokerage doesn’t make your money double, the investment choices do. The rule of 72 would indicate that they’ve made 14.5% interest per year. My kids have been lucky with that great bull market and I expect things will slow down in the future.

They’ve been mostly in the US total market (via Vanguard’s VTI ETF), but sometimes I buy some fun stuff for them like a gaming conference company or a little Dogecoin. That’s the advantage of having free trades with Robinhood. Five years ago, brokerages offering free trades were rare, but they are more common now.

The other thing I should note is that Robinhood doesn’t have custodial accounts for kids. I had to put the account in my name and I’ll have to pay taxes on it when it’s sold and distributed to the kids. Hopefully, since they are long-term capital gains, they won’t be so bad. Since having separate accounts was difficult, I simply added the same money from each kid whenever I do a cash deposit. This way they’ll each own 50% of the account.

Teach Your Kids Everything with Pokemon

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Teach Kids PokemonToday, in celebration of Pokemon’s 25th anniversery, I’m going to give you some of the ways I teach my kids with Pokemon. This bonus Saturday edition of Lazy Man and Money has a lot less personal finance than my usual articles. If you don’t have kids or if Pokemon isn’t your thing, it may be best to come back on Monday for the regularly-scheduled personal finance programming.

If you haven’t already left, Pokemon can be a money topic.

  • Highest Grossing Media Franchise – Did you know that the highest-grossing media franchise has a mouse as its mascot? Did you know that the mouse’s name is Pikachu? It’s true*. In Walt Disney’s famous words, “I hope we never lose sight of one thing – that it was all started by a mouse.”
  • Teaching Kids about Money with Pokemon

    • – I’ll cover this in a little detail with much of it focusing on Pokemon Go.

  • Pokemon as a Side Hustle – There are numerous Etsy creators and YouTube stars turning Pokemon into a career. One artist makes some great money creating her art with Pokemon cards. There are even Pokemon Scholarships available for the top kid Pokemon card players.

My Brief History of Pokemon

I was 23 years old when Pokemon became popular in 1999. At that time, I was more interested in day-trading tech stocks than a silly kids’ show. As for video games, I only played Madden, NHL, and maybe Mario Cart. Nineteen years later, my 4 and 5-year-olds became obsessed with the adventures of a young boy and his Pikachu. My 5-year-old found it on Netflix after some older kids were talking about it at summer camp.

I thought Pokemon was about the cards and card game, like Magic the Gathering. That lead me to ask:

As you can tell, I didn’t know a thing about the world of Pokemon. It’s the cards, video games, television show. I found the anime confusing because it doesn’t always in any particular order like season 1, episode 1. I later found out that it does have an order, but you have to know the names of the seasons. You also have to know where to slot in the movies.

But me and the kids started off watching Indigo League together. I “watched” a lot of television with the kids while writing or doing other work. I am able to keep a little focus and ask some questions at the end about the lessons learned. It soon became obvious that the show was more interesting than most kid shows.

Once it was clear that my kids loved everything about Pokemon, I started to look into how I could use to teach them almost anything. I have to admit that some of it came about by accident.

Before I dig into some of the many things I’ve my kids with Pokemon, I have to get the standard disclaimers out. I’m not a teacher. I’m not a Pokemon expert. I’m a boring parent who mostly asks his kids questions to get them thinking.

Teaching Kids to Read with Pokemon

One tip that I learned early on is to always put on the closed captions with kid shows. I had this set up automatically on Netflix. There are studies that show that closed captioning can help kids read (Source 1, Source 2). My sample size of 2 kids is small, but I feel like it helped and common sense may tell it you can’t hurt. Even as a kid I remember following the bouncing ball in reading cartoons.

Just 10 days after my Tweet (and probably 50 episodes of Indigo League) we had this exchange on the way to camp in the car:

So we went to the library.

There they had the Pokemon Essential Handbook. (Note: This is the newest version, the actual book was older with fewer Pokemon.)

The Pokemon Essential Handbook is the most important Pokemon book. It’s an encyclopedia of 800+ Pokemon. My 5-year-old stayed up all night for a couple of nights reading and memorizing every page. He would start kindergarten in a couple of months with an understanding of how an encyclopedia worked. When I was in kindergarten, I had an understanding of how to scribble with a crayon.

Before I returned it to the library, I bought it. It was the best $10 I’ve ever spent. We’re actually on our second copy, that’s how much use it has gotten.

By the way, if you go to the library to get Pokemon books, go to the non-fiction section:

It turns out that the stories revolving around Pokemon count as fiction, but the fact that a company created the characters of Pokemon is non-fiction. That was news to me. So yes, Pokemon isn’t just about teaching kids.

My 4-year old wasn’t as much of an early reader. Every child is different and math was more his thing. That doesn’t mean that we couldn’t use Pokemon for reading though. In fact, but the time he was 5 and a half like my other son was, he knew how to read many Pokemon. He may have been associating the pictures with a memory of the show, but I still count it.

When I found the Pokemon Fusion website, I knew I struck gold once again. The website combines two Pokemon names and pictures to make up a new Pokemon. It’s very silly. Kids love making new combinations of Pokemon, laughing at the funny pictures and names. Since there are tons of combinations, they have to focus on reading the names, words they never would have seen before. No, a Chartoise isn’t going to be on a future spelling bee, but a kid that can sound out that can tackle most words in the English language.

To round out this section, I’ll add that the video games have some limited reading. I haven’t played any of the classic games, just Pokemon Go, so I’m only going off of what little I’ve seen.

Finally, there are Pokemon books for every reading level:

  • Pokemon Little Golden Books – I grew up with Little Golden Books and now you can get Pokemon ones. This is good for pre-school and pre-kindergarten.
  • Pokemon Phonics Reading Program – These are geared towards kindergarten and first grade level. I haven’t read them, but they seem more for teaching beginning reading rather than telling a story.
  • Pokemon Junior Books – This series of books are good for most kids in the 1st to 2nd grade.
  • Pokemon Chapter Books – These are good for most kids in the 2nd to 4th grade. Second graders may have more success if they have seen the shows that each book is based off.

There’s a school of thought that this learning isn’t valuable. When are you going to use Pokemon in real life anyway? I don’t believe in that school of thought. If it gets your kid to read, there’s tremendous value in that. I’d much rather have my kid develop the skill so he can apply it in other areas.

When I was a kid, I read about Greek mythology. I haven’t used that much in real life.

Teaching Kids Math with Pokemon

After a couple of months, my wife got Pokemon Go on her phone so the kids can play it. I remember laughing at everyone going crazy about it in 2016 – bunch of buffoons. Well, now that I knew what Pokemon was, I became one of those buffoons, a couple years after everyone else:

(Sadly, no one wanted to be my friend.)

My wife didn’t really play Pokemon Go much, but I got hooked. My kids would mostly watch me play. In hindsight it was a poor experience because they could barely see the phone at the height I carry it at. Nonetheless, the kids were young enough that the novelty and interaction of catching actual Pokemon was amazing.

My kids were still in kindergarten and pre-kindergarten. At this age, place value is a big thing. Numbers in the hundreds and thousands are still new and unusual. It was a big deal to catch a Nidoking in the wild with a CP over 1000. The kids would also start to learn place value in order to the millions to track the experience points I was getting while leveling up.

The kids learn early on how many Charmander candies they need to reach 25 to get a Charmeleon. For a kindergartener and a first grader that’s difficult math, but math that they love to do. They were quickly adding the 100 more candies for Charizard. We were able to work through the math of 125 candies total. You get 3 candies for catching a Charmander and one if you send it back to the professor. So I was able to introduce them to division, using 125 divided by 3 to get ~40 Charmanders to catch.

Because we don’t know if you are going to send back all the Charmanders to the professor or just some, we developed a skill called estimating. It’s helpful to know that it is between 30 or 40 Charmanders, even if it isn’t exact.

We’ve used the game to learn about distance. Specifically, since the game is in kilometers it gives the kids an introduction to the metric system. You can earn a candy (with most Pokemon) by walking for 5km. It keeps track in decimals (tens place only). I had a task (which would give me a special Pokemon) where I had to walk my Eevee 10km to evolve it into an Umbreon. We were soon doing double-digit subtraction of how far we walked to the 10.0km that we needed. Admittedly, they aren’t learning formal regrouping (or borrowing as it was called when I was in school), but they usually get the right answer after as much practice as we’ve had.

My 8-year-old is in the 2nd grade now and hasn’t been formally taught decimals yet. He’ll be “introduced” to them next year. My 7-year-old will have to wait a while for the school to catch up. Of course, I’m not suggesting that Pokemon Go can replace formal teaching, but I think my kids have built a foundation.

We also talk a lot about probability. Pokemon have “Internal Values” (IV) of Attack, Defense, and Hit Points. Each of these can be 0 to 15. A Pokemon’s IV is an average of all these. A Perfect IV Pokemon is 100% (or “hundo” in Pokemon Go slang). These have a 1 in 3375 (15x15x15) chance of happening in the wild (i.e. just anywhere in the real world). If you get a Pokemon from completing a task or winning a raid, the lowest any number can be 10. Thus you have a 1 in 216 chance (6x6x6) of a hundo Pokemon. Finally, you can make a lucky trade (something that happens rarely) where a Pokemon’s lowest number is 12. The odds of a lucky pokemon being a hundo is one in 64 (4 x 4 x 4).

I know they don’t get all the probability math at this stage, but I think they get a feel for the concept.

Teaching Kids Science and History with Pokemon

It may not be obvious, but there is a ton of work that goes into the design of each Pokemon. Each one is the work of dozens of people… and many prospective Pokemon never make it past the initial development phase.

Thus it shouldn’t surprise you to find out that each Pokemon has a very specific name origin to match with its type and its history. For example, Charmander is a fire salamander. There is a mythical salamander that is known as a fire spirit capable of surviving in extreme heat or flames.

There’s a great YouTube Channel that gives an overview of every Pokemon’s history. Sometimes they have to make educated guesses as the history isn’t always clear, but I learned so much… and I know my kids did too. Here’s their 30-minute video on just the fire type Pokemon:



There are 16 types of Pokemon, so you could literally spend 8 hours learning about all kinds of animals and the historical context that led to their designs. I recommend spreading it over a month. I also recommend watching it with your kids. Adults will learn a lot too. This list has all the types of Pokemon.

This YouTuber, Gnoggin, also created his own Pokemon region based in the Seattle, WA area. It’s inspired my kids to create some Pokemon for our Rhode Island/New England region. They have a ton of schoolwork and other activities, but hopefully this summer we’ll go over the history of our area and start fleshing out our own region in more detail. I expect there will be a lot of water types that thrive in saltwater, considering that we are the Ocean State.

Teaching the Science of Making Pokemon Real

It turns out that my oldest kid isn’t the first person who pondered this question. There are many discussions on the internet. There’s even a presentation by a high school student:



Teaching Kids Art with Pokemon

Kids love drawing at an early age and the Pokemon characters are iconically cute.

There are a number of books that teach kids how to draw Pokemon, but this Deluxe Edition from Scholastic is the best. It has all of the most popular, unlike some other books that are missing many of people’s favorites.

Teaching Kids Language and Quick Thinking with Pokemon

The latest season of the Pokemon Anime came out in Japan (as they always do). It looked like it was going to be a while before Netflix bought the rights for the English translation and distribution. I found the Japanese episodes online (with English captions) and the kids loved seeing the original versions.

At the end of the episode, they play a game called Pokemon Shiritori. Shiritori is a game where one person starts with a word in a class, such as animals. The next person takes the last letter and names an animal that starts with that letter and it continues. So one game could go, “pig, giraffe, elephant, turkey, yak.” The game ends when someone says an animal that ends in “n” such as chameleon (the loser) or when someone can start with the letter “m” (the winner). Of course, in Pokemon Shiritori the category is simply Pokemon names.

The reason why the “n” is the loser is that there are no words that start with that character in Japanese. The reason why “m” is the winner because the next person can say “Mew” a particularly powerful Pokemon. (I didn’t make up the game, it was simply the designer’s choice.)

Kids have to really think quickly and think about the spelling of Pokemon to avoid the trap letters at the end. It’s particularly great because you can play it in a car or on a rainy day. You don’t need anything, except a few people and your memory. We played the animal version at our kid’s birthday party because not all kids know all Pokemon.

Recently, Froakie was introduced in Pokemon Go. He’s iconic in the anime. We spent a day coming up with things like, “What do you call a Froakie with no money?” “Brokie Froakie.” “What do you call a Froakie who makes you laugh?” “Jokey Froakie.” There are many more Froakies than you would think like Karaoke Froakie, Hokey Pokey Froakie, Okey Dokey Froakie. You can try this with other Pokemon, but I haven’t found any as good as Froakie. Let me know in the comments if you can come up with a good Pokemon to work with.

Teaching Empathy with Pokemon

In the episode, The Joy Of Water Pokémon, Nurse Joy had a great quote. It might be my favorite in all the series:

In the world of battling Pokemon, it’s easy to get judgmental. Some Pokemon are simply better battlers. Over time, the creators have worked to give many Pokemon other characteristics and talent.

Not to get political, but I noticed more than a few times our new president, Joe Biden, had repeated a version of this on the campaign trail. He’s been saying a quote from Thomas Jefferson for a while now:

“My mom said, ‘Remember, nobody is better than you but you’re better than nobody.’ Everyone’s equal.”

This is something I’ve made a note to repeat my own kids.

Learning Motivation, Grit, and Empowerment with Pokemon

I wasn’t joking when I said that my kids got completely absorbed by the anime. It took a little over a year, but they watched over the 1,000 episodes in about 13 months. (Please don’t do the math… it’s not great.) Each season has around 50 episodes, many more than the 22 that we typically have in American shows. That means you hear the theme songs a lot.

Fortunately, the themes are perhaps the most motivational songs ever created. Each of them brings you through 10-year-old Ash Ketchum’s hero’s journey of just trying to make a friend to often literally saving the world. I used to think that Rocky theme and music had no equal, but I was wrong. Have a listen:



Below, I started off summarizing the main theme of each, um, theme. However, the themes are short enough to give you the main lyrics. Note: you probably don’t want to read all this unless you are already familiar with the themes.

  • Best the very best (like no one ever was). Our courage will help us defend the world and along the way, I’ll teach you and you’ll teach me.
  • Find the courage and the skill to be “Number 1” (the best)
  • “each time you try, gonna get just a little better, each step you climb is one more step up the ladder [to become a Pokemon master].”
  • “My whole life has led to this Time to test my skills And I know I just can’t miss Gotta show the world!”
  • “No time to question my moves, I’ll stick to the path that I choose, Me and my friends are gonna do it right… I’ve got a chance to win I’m on my way to victory I can be a champion if I just believe… ’cause all I got to do is believe in me… And I believe…”
  • “A kid from Pallet Town with a brand new world to see, Don’t know what’s ahead, but it won’t get the best of me, There’s so much to learn and battles to be won, I’ve advanced so far and still there’s always more to come… Give me just one chance… And the future will decide… If there’s a hero buried deep inside… I wanna be a hero!”
  • “Every Trainer has a choice, To listen to that voice inside, I know the battle may be long, Winners may have come and gone, I will carry on!”… “We will rise to meet the challenge every time!”… “Will be the best this world’s ever seen”
  • “I’m unbeatable, Looking down this endless highway, Nothing but my friends beside me, We’ll never give in, We’ll never rest…”
  • “It’s a battle win or lose, It’s the friends you make, It’s the road you choose, You got the right stuff, So make your mind up, Find the courage inside of you, If you’re strong, you’ll survive, And you’ll keep your dream alive”… Be the best you can be, And find your destiny, It’s the master plan, The power’s in your hands!”… “You’ve got the strength to win it, So stay in it, If you’re smart you can take it all”
  • “It’s all about the challenges, … As you fight for survival, Nothing can stop you,”… “You gotta play smart, you gotta move faster”… “We can change the world”
  • “On a road, far from home, you don’t have to feel alone. Brave and strong, together we will be. It’s our destiny! We will be heroes, We can change the world if we try! I go where you go, Forever friends, you and I!
  • “Sometimes it’s hard to know, Which way you’re supposed to go. But deep inside, you know you’re strong. If you follow your heart, you can’t be wrong. Stand up! For what is right. Be brave! And if we come, together as one… We will win the battle!”
  • “It’s about you, It’s about me, It’s about hope, It’s about dreams. It’s about friends that work together, To claim their destiny. It’s about reaching for the sky, Having the courage, And willing to try. It’s about never giving up, So hold your head up, And we will carry on,”
  • “It’s always hard, When the journey begins. Hard to find your way, Hard to make new friends. But there’s nothing you can’t do,’Cause you’ve got the power inside of you! It’s not always black and white, But your heart always knows what’s right. It’s not about win or lose, it’s the path you choose.”
  • “A new adventure, another day, One more challenge that comes our way, It’s up to me and you, We know what we’ve got to do, We are together now, friends forever now, Whatever comes our way, we won’t run away, Standing tall, One for all, It’s our destiny.”
  • “Ready for battle, brave and bold I know we’re gonna make it We will find a way”… “We belong together It’s always you and me”
  • “You’re just a kid on a quest, To be the best of the best, Someday you’re destined for power and glory, You know you’re up to the test, All the power is at your command, Face your fears and show you’re a hero, The future of the world is in your hand
  • “I stand tall ’cause I know I’m a winner, Knock me down, I’ll just get up again, You’ve met your match, yeah, I’m no beginner”
  • “I can feel every day, I’m a little bit stronger, I only wish each day was longer”
  • “We’ve been preparing, Sharing, Training, Studying A to Z, Bonding, Battling, Laughing, Gettin’ crazy, you and me, ‘Cause it’s coming soon, When we all meet our destiny”
  • “Rise if you’re prepared for the challenge, Rise if you’re a champion at heart, Take my hand, we’ll train as one, And triumph together, Nothing’s gonna stand in our way, Stronger and stronger we’ll, Rise to the challenge of, Life
  • “We’ll be together and we’re gonna do it our way, We’ll discover we believe in each other, On adventures with my friends like every day”

That was a lot of copying and pasting from 20 songs, but you can see that the main themes are courage, friendship, never giving up and overcoming challenges, the journey of self-improvement, and being the best you can be.

The faults of Teaching kids with Pokemon

Pokemon isn’t like Sesame Street or Daniel Tiger, designed from the ground up to be educational. There are real-life problems, the characters have real-life flaws, and the writers in hindsight may want to change up some episodes. Sometimes the Japanese culture doesn’t necessarily align with American culture. Yes, unfortunately, you are going to have to be a parent and exercise some of those parenting skills.

To start, Pokemon didn’t become the top media-grossing franchise giving away its content for free. There’s a lot of consumerism and the whole game started with the concept of “Gotta Catch ‘Em All.” If you aren’t careful, you’ll end up buying cards, video games, DVDs, stuffed animals, etc. This kind of thing can happen with Minecraft, Roblox, or just about anything that kids are into.

The anime itself isn’t without problems. There are a couple of banned episodes. In one Ash went in blackface in an innocent attempt to assimilate and be accepted by a group of monkey-type Pokemon. I like to think that in Japan, it doesn’t have the negative racial and historical context that it has here. (I hope that’s true and it was just innocent.) Earlier in the series another Pokemon, Jynx, had characteristics of a racial stereotype. They changed that character making her purple.

Finally, as in many Japanese anime, the female characters tend to wear provocative clothing – really short skirts and shorts. One of the characters, Brock, goes to extremes in harassing women, especially nurses and police officers. It’s cringe-worthy stuff, but there’s always another character to give him a poison jab or ear-twist to show that the behavior isn’t acceptable. Even this character has some good qualities as he’s a great chef and an aspiring Pokemon doctor. In a lot of ways, he gives big brother or fatherly advice to Ash.

Final Thoughts about Teaching Kids with Pokemon

Believe it or not, I’ve barely scratched the surface of what can be taught with Pokemon. Many shows have a lesson. The card games have real strategies. I didn’t dig into the type advantage of Pokemon (water-type Pokemon are good against fire types but bad against grass types). Pokemon Snap is coming out in a couple of months… a reboot of an old Pokemon game that has the promise of teaching photography to kids.

I didn’t get to the story to explain how my favorite Pokemon, Magikarp was introduced as an MLM scam. I didn’t get to cover how its evolution from the weakest Pokemon into one of the strongest is due to the Chinese mythology of a lesson based on perseverance and hard work.

At nearly 4500 words, this is one of my longest articles. (Though counting the song lyric section would be clearly cheating.) Pokemon has no natural end to the story, so there’s no possible way to tie a bow and end this article. It keeps going, because there are many companies (Gamefreak, Nintendo, The Pokemon Company, Niantic, Pokemon Center), with billions and billions of dollars invested, constantly creating around Pokemon.

Have you used Pokemon to teach your kids anything? Let me know in the comments.

* While Pikachu is officially considered a “Mouse Pokemon” and an electric rodent, the designer actually designed him after a squirrel.

How To Teach Kids About the Stock Market?

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I’m going to go with a quick post today. I’ve been working on the last update of 2020, but this question came up and gave me some pause. We’ll push that update to Wednesday.

For the last five years, I have been investing our kids’ money. They were ages 2 and 3 when I started. It was enough money from grandparents and such to get started, but also not any money that they’d miss. That’s a great thing about investing money when the kids are so young… they don’t need the money.

Now they are 7 and 8 and thanks to investment gains have a nice portfolio. They also don’t know about this money as it was all managed behind the scenes by me. They know about savings accounts and are super proud to be hundredaires. They don’t know that they are multi-thousandaires.

It occurred to me that they are old enough to keep some money in their savings and perhaps save for things they want. They seem to have nearly everything, but when you are an 8-year-old having 21 stuffed Pokemon is better than 20. They might also notice if I keep sweeping money out of their savings into the Robinhood account where I invest their money. This led me to ask my wife about how much we should keep around in savings. This led to her saying, “Why don’t you tell them what you are doing?”

It all makes perfect, but now I’m left with the puzzle of explaining the stock market and index funds to a 7 and 8-year-old. I think I can walk them through it, but hopefully, I can find a good video on YouTube. Of course, if you are reading this, please make use of the comments to let me know if you’ve found yourself in a similar situation.

I’m hoping it goes well and they can see how much free money they’ve made. I’m afraid that they’ll want to take it all out and spend it on Pokemon cards. It will be tempting for them I’m sure. At least at this time, they still have enough Christmas presents that they haven’t even opened up yet.

Do you have young kids at home? Do you sweep some of their savings into a brokerage account? If so, how much money to keep in savings and how do explain what you are doing, so they realize that is going to be very helpful down the line?

The Financially Independent Baby

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invest baby money
Look at all this money!
Thanks to a tip from Joe at Retire by 40, I learned that Bill Ackman recently wrote about an interesting idea. I joke that Bill Ackman is my best friend because I met him once. Maybe Bill Ackman is a reader of this blog, because his idea is suspiciously close to something I wrote about several years ago.

Here’s is Bill Ackman’s idea:

“There are a number of potential solutions to this [wealth inequality] problem. Among them, the government could establish and fund investment accounts for every child born in America. The funds could be invested in zero-cost equity index funds, be prohibited from withdrawal until retirement, and could compound tax free for 65 years. At historical rates of equity returns of 8% per annum, a $6,750 at birth retirement account – which would cost $26 billion annually based on the average number of children born in the U.S. each year – would provide retirement assets of more than $1 million at age 65.”

To bring you up to speed, but the wealth inequity problem that Ackman writes about it is the fact that many, many Americans do not own stock on equities of US companies. The ones who do own stock, presumably all the readers here, have seen their wealth grow greatly. Those that have not owned stock have not enjoyed compounding wealth. They gotten left behind with stagnant wages, rising health care costs, and other systemic problems.

Mr. Ackman’s idea is simply to have Uncle Sam ensure that every new, tiny American human will be included in America’s corporate financial success.

A one-time investment of $6,750 to (somewhat likely) solve America’s financial retirement crisis?

Count me in. That’s why I wrote about this article five years ago. My projection was that we’d need only $6,622, but I like that Bill decided to round up to a more even number. (I’m leaving the projected growth rates in place, even though they may be aggressive in 2020.)

It’s very hard to get the government to act on an idea that is so big. Millions would complain that it would raise the national debt which is already sky-high. Millions more would say that it lacks fairness as they didn’t get a million dollars at retirement. These criticisms are fair and worth discussing. I think there are solutions to these complaints, but that’s an article for another day. For now let’s agree that the government isn’t going to just approve Ackman’s idea overnight and save every baby’s retirement.

In other words, we are going to have to try to do this ourselves…

… And because I like to go to extremes, rather than trying to solve retirement, why not solve all of a baby’s biggest life milestones.

The Financially Independent Baby

I had a crazy idea yesterday in 2015. Let’s imagine that a blessed baby was born today. For lack of a better name, we’ll call him Baby Gronk.

The parents of Gronk aren’t what you’d call traditionally rich. They live a frugal lifestyle and have saved up some money over time. What they lack in excess money, they make up in wisdom… wisdom of personal finance and compound interest.

These parents decide that they are going to use that personal finance wisdom to spoil Gronk by covering some of his major life expenses on the day he is born. (While I believe that little Gronk should learn to “financially fly on his own”, we’ll leave those personal decisions to the reader.)

The question is, “How much should they put aside to cover all the expenses with life’s major milestones?”

Gronk’s parents proceeded to make a bunch of assumptions, many of which will turn out to be wrong. That’s the nature of predicting the future. Their plan is to use the information they have at their disposal to make the best possible estimates and adjust as time marches forward.

They also realize that if their calculation is a little off, Gronk will pitch in the difference. They aren’t going to let a quest for perfection stop them from a great attempt.

First Car (Age 16)

Gronk’s parents have set up a budget of $6,000 for his first car at age 16. Using the rule of 72, they realize that their money may reasonably double when Gronk turns 8 (a growth of ~8.5%). They also realize that it may double again when he’s 16.

Working backwards from their budget, they decide to put aside $1,500 hoping that it turns to $3,000 (age 8) and $6,000 (age 16).

College (Age 18)

Gronk’s parents decide to make this calculation easy and limit this expense to tuition. Yes, there are going

The big question is whether Gronk’s parents want to fund in-state public college or private college. The price difference between the two is huge. Public in-state tuition is ~$9K while private is ~$31K. Multiply that out by four years and it is either ~$36K or ~$124K.

Since the calculations are so different, Gronk’s parents decide to do the math separately.

Age 18 is very close to the age 16 exercise with the first car above. However, it’s just different enough that Gronk’s parents decide to break out a calculator instead of using the rule of 72. They use the “y to the x” key to calculate compound interest. They specifically type in “1.085”, “y to the x”, then “18” to arrive at 4.34… a key number we’ll use. The 1.085 comes from projecting a 8.5% growth on the current investment (the “1”).

Why pick 8.5%? Your guess on the growth of the market is as good as mine. In 2020, I would adjust this lower. I originally went with 8.5% because it was reasonable enough (near Ackman’s 8% assumption) and it was a convenient number coming from the car example above. Now that you know how to do the calculation, feel free to substitute your own growth assumption.

This tells us that every dollar we invest will yield 4.34 dollars… giving our assumptions and uncertainties in the market. We can mentally check this using the above example of doubling, and doubling again. Double a dollar once and you get two. Double it again and you get four. In this case we have a little more time (two years) so it’s a little more than four, 4.34.

Now that we think we can grow one dollar to $4.34 in 18 years, we just need to divide our total expenses…

… for public in-state college, we’d need to roughly put aside $8,300 ($36,000/$4.34).
… for private college, we’d need to roughly put aside $28,571 ($124,000/$4.34).

What’s interesting to me is that this almost comes out to exactly one year of tuition. In fact, if we used an expected return of 8% it comes out to exactly one year of tuition.

It’s impossible to say whether Baby Gronk’s parents should plan for public or private school. Perhaps they could plan public school, because they are already going far above and beyond what most parents would ever do. It’s not too much to ask Baby Gronk to bridge the gap to private college with financial aid if that’s a decision they make down the line.

Wedding (Age 25)

The average cost of a wedding varies greatly. Since Gronk is just a baby, the parents use this to estimate $30,000, a nice round number.

They use the same math as in the previous example and realize that at 8.5% growth a dollar is worth $7.69 in 25 years. This means that they need to put aside $3,900 at birth to pay for the wedding.

(We’ll ignore outdated traditions of the bride’s side of the family paying for it. Additionally, we’ll presume Gronk’s parents want to pay for the whole wedding instead of half. Or we can keep the traditions and calculate the wedding expenses for Gronkette.)

Down Payment for First Home (Age 25)

Who buys a home the same year they are married? I’m not sure and neither are Gronk’s parents. Sometimes people buy homes before they get married and sometimes they get married before they buy homes.

Since we have the same age and the same interest rate, we have the same growth of a dollar – $7.69.

Gronk’s parents decide to put in the 20% down-payment and not buy the house outright. (They’ve already spoiled him more than enough as it is.)

They think a starter home should cost around $200,000. This depends greatly on where they live and what they agree is a starter home. The parents may have to adjust this to their area of the country. The parents budget $40,000 which is 20% down on that $200,000 home.

Anticipating a dollar grows to $7.69, they realize that need to only invest $5,200 to cover the $40,000 down payment.

Retirement (Age 70)

Up to this point, many would say that Gronk’s parents are ridiculous. They don’t care. Instead, they say, “In for a penny, in for a pound!”

They estimate that Gronk will want to retire at age 70. That’s where the trend is nowadays with improved health care. They start with the rule of 4%. This rule of thumb suggests that one can withdraw 4% of his/her investments to live for 30 years. (This is an over-simplified version for the sake of this exercise.)

They realize that they need to get him 2 million dollars at age 70 so that he can withdraw $80,000 a year (4% of $2M) to live off of.

Getting Baby Gronk 2 million dollars sounds absurd, but Gronk’s parents realize that time is on their side. At 8.5% growth, a single dollar grows to $302 in 70 years.

Let’s pause for a minute. In a previous version of this article, I didn’t calculate the inflation and just added it at the end as an apology. That’s simply not good enough with projecting things 70 years in the future. Inflation is huge over that time.

How big is inflation? Typically it is around 3% a year. That means a dollar growing at 8.5% a year really only has only 5.5% more buying power. So if you do 5.5% over 70 years, $1 can have the buying power as $42.43, not $302.

They divide $2,000,000 by $302 $42.43 and realize that they need to put aside $6,622 $47,136 at his birth to cover his entire retirement. That’s far more than most people have around. However, Gronk’s parents could choose to fund a retirement of only $40,000 instead of $80,000. They could also spread it over a few years.

Final Thoughts

Smart readers should be screaming “Shenanigans!!!” I didn’t factor inflation in any of the examples above. You got me. I also didn’t factor in taxes. These are very significant. Gronk’s parents might end up having to put twice as much in. Or they may have settle with the idea that they are only covering 2/3rd of all Baby Gronk’s major life expenses. My guess is that they’ll sleep well enough at night if it is the latter.

The idea of this exercise was never about complete accuracy. It’s impossible to accurately plan out a person’s expenses at birth. Instead, it was about illustrating how the idea of applying compound interest at birth could work.

Let’s add up all the expenses:

Car – $1,500
Public College – $8,300
Wedding – $3,900
First Home – $5,200
Retirement – $47,136
———————–
Total – $66,036

If Gronk’s parents were able to put aside around $66,000 at Gronk’s birth, he’d have most of life’s major milestones covered. To be clear $66,000 is a lot of money. However, for a lifetime of near financial freedom it isn’t as much as you might think.

This article was originally published Nov 23, 2015 at 12:15 PM