Games With 10-Year-Olds

My granddaughter won money in a music composition contest and wanted to spend $4 of it on some artificial fingernails.? I accompanied her to the store; being a proud grandfather, I’d like to reward her for winning the contest.? So after she picked out the nails and we walked to the cashier, I offered to pay half.

I figure this way I am transferring income, showing pride, but not lowering the price of fake nails and not giving her an?incentive to spend more on fancier junky fake nails. This little?strategy seems sensible for a one-shot game; but in a?repeated game I know that she will catch on and spend more next time, expecting a subsidy from me.??I like to transfer income, but I don’t want to subsidize specific purchases. I need to cook up a new strategy for the next similar situation.


Scott

Flip for it. Have her pick out whatever she wants and offer to pay for half if she wins a flip. She might be risk adverse and stay with the low level stuff, or perhaps not. Then you can start her on expected values and payoffs.

Neil (SM)

@Peter M. - Apparently from reading the article she already *did* have enough money to purchase the item herself. Hence the term, "$4 of it" ('it' being the prize money.)
-- whether it be in the form of subsidizing a purchase or simply forking over the money -- is cruel and inevitable harmful to the child is completely ludicrous.

But I agree with the person who posted that as a grandparent it's not your job to instill financial responsibility into the child. Grandparenting is one of those cases where you don't have to be the "bad guy" in the child's eyes -- that's the parents' responsibility. Up to a point, obviously.

Neil (SM)

Meh, accidentally must have erased some of my post. Should have read:

"The idea that a $2 gift -- whether it be in the form of... "

Laura

My parents did this when I bought my first used car in college. Once I found the car and decided to buy it, then they told me that they would pay for half. I have to admit it was a clever strategy on their part, because my choice of car was totally dependent on my budget of $4000. Had I known that they were going to be kind enough to subsidize my purchase, I would have taken advantage and chosen a $6000 to $8000 car (depending on how much they were willing to kick in). This way their gift meant I got a car I had already decided was good enough, yet wasn't left totally broke.

Eric H

Time for an [p(subsidize),(p-1)(not-subsidize)] mixed strategy!

Got an U(0,1) random number generator you can take to the store? Be discrete... the cashier might look at you funny when you bust out your nerdy random number generating toy. Pretend you're doing something socially acceptable... like texting.

kdg

I just get a huge kick out of picturing Daniel picking out fingernails with his granddaughter. She'll tell her kids about how grandpa was not only cool enough to come with her to pick out nails, but then actually helped pay without being asked. Don't worry about the scheme. You have this grandparent thing aced.

June

Eh, you're doing ok. The granddaughter won a contest and was rewarded 3 times over: splurge money, trip with grandfather to spend the money, extra funding from grandfather for her purchase. Best of all, it appears that the granddaughter's purchase was premeditated -- she went into the store knowing what she wanted and a general idea of what it would cost.

So for future trips, stick to that scenario with one change: ask your granddaughter to research the price of what she wants before leaving the house. Find deals/coupons/cheap imitations on the internet, offer to contribute toward the purchase, or suggest that she save more or pick something less expensive -- and then go to the store and make the purchase without discussion.

She'll have fun researching with you (or presenting you with her research), and any haggling can be done at home, over as long a period as you like (i.e. not in the checkout line while people are watching). And you're still free to occasionally surprise her at the store with extra money in case of unexpected price increases or grandfatherly whim.

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Nathan M

I'd say don't tell her what you will match. If regulatory instability is bad for investment, then consider her an investor. An optimal mixed strategy would work best when dealing with purchases such as fingernails - a clearly defined one (% matching) would work best with a savings account. This way, you always get to be the prudent grandfather, and also occasionally get to be the loving benefactor.
max(Smiles) s.t. min(SPOILING)

Coco Palm Sugar

I like the idea of matching the savings when you deposit the money to the bank instead.

My parents did this to me when I was young. Later I realized I could make more by "recycling" my deposits - I'd withdraw some money from my bank, a few days later I would tell them I have some more money to put in. They were surprised how much money I was saving every week. Ahh, the wonders of bankbook-less banking.

It was good until it lasted. I'll do it when I got my own kids, but I know what to watch out for.

It taught me the importance of savings. And how to be smart with money. :)

rayinkorea

Erica's description of the children's "allowance", 50% real allowance and 50% hyper-controlling parent, sounds like a great way to instill cynicism into a child. Here, we're giving you this money... but we're going to pretend like we're really giving you twice as much. Children learn how to handle money through real experience handling money. This system, while perhaps well-meaning, only emphasizes the child's dependency and the adult's hypocrisy.

erica

Laura, your parents are brilliant. I am going to remember that one for my kid's first cars.

martin

Tell me what your utility function looks like (what do you want to maximize) and i will suggest a propper incentive structure.

Chris

It's her winning and her money. Her preferences are not the same as yours. I do not think it would work if you try to impose your own utility curve on her. It is what makes the economy works, everyone maximizing their utility given their budget and price. What you were doing was giving her greater ability to buy the fingernails. It's okay though, if you are making her happy. (After all, it's not about you this time around).

I like Erica's (#4) comment

I have to agree with Erica in response #4, with some additions...

Any income that my children receive, by gift, allowance, or earnings are segregated into 4 distinct envelopes: 1) money for immediate spending, 2) money for gifting, 3) rainy day, and 4) long term savings. We offer guidance as to the distribution, but they are in control. Every envelope must be funded with at least a token amount.

Anything that our children want, such as candy, video games, toys, trinkets, etc is paid from envelope #1. They are free to buy whatever they want with this money. We impose no limitations, except for dangerous items. Also, we offer guidance to help them weigh the choices they have or may have.

All gifts are paid by envelope #2. If they are invited to their friends' b-day parties, then my children pick out the gift and pay for it from #2. Holiday gifts are paid from this envelope, with the same criteria. Charitable donations also have the same criteria. We offer guidance to the future gifting obligations.

#3 pays for anything that is unexpected. We have veto power over all of these purchases. When this money is used, we use it as a teaching opportunity to better evaluate their needs and wants, in comparison to their purchases from envelope #1 and #2. It has been used once so far; for an unexpected gift. It is never used for toys, candy, trinkets or junk.

#4 is, literally, a college, home buying, and car buying fund, for at least 10-15 years in the future. When the time comes, and it will, they will want to use this money for purposes 1, 2 or 3. Again, we will use #4 as a teaching opportunity, because at a later point they will want a home, car, college, a wedding, etc. At that point, hopefully, they will see the benefits that they have accumulated through saving and not indulging their every whim.

Our children are young, and I am not sure if this whole plan will work out. We've kept the same strategy since they became aware of the value of money.

We provide clothing, food, transportation, housing, education, medical, vacation, and, of course, entertainment, but actual cash is a separate issue.

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YODA

@MjB

Actually, your correction of Alan Dambrov's logic is incorrect by your logic.

You say that if feelings of love and self worth that Daniel experienced "far exceeded the cost" ($2), then he made a rational purchasing decision and picked up a little consumer surplus on the way.

In actuality, if we are to go the stricter economics you suggest, the decision is once again irrational since he's 'leaving money on the table'. If he has found an investment opportunity that purchase far more than what $2 is worth, it would be irrational by any economic approach to purchase the minumum available.

The fact is, the author is acting perfectly rational. To assume that $2 is the only expenditure removes all context from the original premise.
An investment game-theory strategy between opponents with different motivations and pay-offs has several win-win possibilities.
To analyze this from a purely economic point of view, you need to calculate the author's investment using a time/money conversation rate for both labour (given the maturity difference, there is a responsibility of care-taking and an overwhelming control over the experiment and it's variables) and also for the tiime/money conversion rate of the author's leisure units (the creation of the artificial experiment adds one extra dimension/axis to the supply-demand calcuation since the 'creation and execution' of the game itself is an investment in eomtional payoff/leisure time conversion which on a flat portion of a demand curve would be inelastic and thus it's rational equivalent (at all levels say up to $10-20 at which point the investment numbers may shift completely, not the least of which is from the author/game-creator's new emotional payoffs/penalties, particular at a multiple of the cost of the original gift rather than at a fraction of it. .
As such, there is no irrationality to the behaviour as even the economic principle of rational and irrational consumer behavior is normally applied to groups rather than individuals - and with indiduals it would cancel out of the model due to there being multiple 'actors' in a 'game' scenario.
Maybe I read too much into the title but that's where I figured the author was going with it.

The question itself becomes another 'game' with the reader. In order to recommend a step #2 in an alternate-move scenario with shifting (and perhaps even gradually increasing level of investment), one must have insight into the final gambit of the 'game-maker' as that must already be known in order for step 1 to have happened.

In a step-ladder equation where step 1 is presented and payoffs are implied (We assumed the child liked the first result and understands a 'game' has begun and that she has the ability to 'act' (be active) on the game by making bids.), we have a presumed payoff for the author (teaching investment and morals, enjoying the game, conversion of game to future leisure units --- and creation of side-games), the answer for step 2 can be mathematically determined using a reverse regression (i.e. assume step 2 is the final step, write in the future steps and 'force' an EV) or you can alternatively use a probabilistic estimate based on trials and split-guesstimates (which reduces the limit to 7 per 100).
Since the outliers would cancel using option b, you get a similar result but they won't match unless it's repeated hundreds of times (unrealistic in this scenario, and too simple for a penny-stock investment model).
Therefore, a coin-flip won't work. You would need at least a factor of 10 for a randomization to remain a challenge, otherwise the game itself 'stalls' and an artificial plateau is reached.
(Also a 10 factor keeps it manageable for a child to participate with in a real-world scenario). A few people in the thread have suggested this.
The second and perhaps more effective way is to use one additional (higher!) level of axis. While at first it seems overcomplicated, in fact what it does is to cancel out the artifice of the 'step 2' feedback into the system.
The 4th dimensional axis will give you a regressed answer on your third 'game creator' axis, then you use that function to spell out your standard X and Y variables.
The $2 number turns out is exactly right, and the payoffs were rights, BUT the 'presentation' of the payoffs was wrong and it corrupted the experiment.
It would happen the same way in any psychological test that wasn't conducted under a double-blind standard. The observer bias has been introduced. The difference here is that we have enough information about the figure in this context to measure it rather than calculate as a leftover.

No decision was allowed by the actor - In round 2, the game ITSELF must change.

It becomes a simple skinner box otherwise. The only trade can be between present and future (with interest) or between states of being.
If the game is to encourage a 'respect for savings behavior' as an investment in security or whether the game is designed to teach 'investment decisions', the result is the same in terms of mathematical 'pay-off' for the game creator as they will both result in 'motivated', 'attempted', or 'measurable' behavioral change.
IF the child does not seek to out-think the game, it is NOT the desired result. Regardless of implied payoffs, the interpretation of the author's 'game' can only be to stimulate knowlege.

Next time, you should try and convince the child (with fair payoffs and expected odds) to invest some of the money back with you rather than you investing further.

Step 3 is your next investment.

Solved.

Next.

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Bobbie

Nice thought to give her half. There is learning there for her indeed, especially rewarding her for trying her best. Whether she won or not is really irrelevant.
Another option in conjunction with this would be to teach her to;

'Spend a little' so she can enjoy the spending exercise and have an appreciation of her 'wealth'.
'Save a little' so she can learn independence when in future she has a buying need and
'Give a little away' so she can learn that the real joy of life 'giving' to those who have little or nothing.
Now imagine if we all did that! Bobbie