Even though I peddled papers as a young kid, I didn’t learn how to manage money until — well, um, truth be told, my wife does that for us.
I was well into my 30s before I knew what a stock split was. I was in my 40s before I learned how to calculate the present value of money. Dividend yield? Hit me just a few years ago. Dry powder? That’s the cash you have on hand to invest, like the money in your piggy bank.
I had to learn these concepts to cover the Carlyle Group, the local private-equity giant. I usually touch base at least once a week with its spokesman, Christopher W. Ullman.
During one recent discussion, we got on the subject of financial intelligence and how most people need it.
Ullman remembers sitting at the dining room table as a kid at his parents’ Long Island home, helping his father balance his checking account. The ritual included watching his dad write the $25 monthly check to Covenant House, the youth-based charity that was a family favorite.
Ullman, 52, is trying to pass on the same ethic of financial responsibility to his three children.
“Parents’ actions make deep impressions,” he said.
About 13 years ago, Ullman was married with a newborn child when he spied a paragraph in the Wall Street Journal about teaching kids to save.
“I randomly read this article that says if you want to teach your kids to be prudent with money, here’s one way to do it. The bell went off. Ding. Ding. Ding.”
The system he read about fit with his idea of integrating it into the everyday lives of his children, so that they would remember: “You can’t do it just once,” he said. “You have to do it over and over and over again. It has to be ingrained.”
The Ullmans call it the Three Jars System.
They didn’t invent it. In fact, the Wall Street Journal wrote a piece last month about the three jars. You can Google it.
Every Saturday morning, after pancakes, Dad announces, “Time for allowance.” The three kids and their father gather on a floor upstairs in their Northern Virginia home with nine (clean) peanut butter jars — variously labeled “Church,” “Savings” and “Fun” — arrayed in a semicircle.
The three children, Alydia, 13, Justus, 12, and Aria Noel, 9, gather on the carpeted floor.
His wife, Kris, leaves the allowance disbursement to him, and he peels from his thick stack of $1 bills (he gets $100 in ones from a bank every few months), handing one to each child for every year of their age. So Aria Noel, who is 9, gets $9. That money is divided equally among her three jars: $3 to “Savings,”
$3 to “Fun” and $3 to “Church.” Justus gets $12, so he puts $4 in each jar. Alydia is 13, so she deposits $4.35 in triplicate.
“I get excited on Saturday mornings because I get my money,” Aria Noel said.
Every week, the family marches off to church services, with the “Church” jars in hand. Each child can decide whether to give to the church’s poor box or to one of two collections each Sunday at 9 a.m. Mass.
“They definitely prefer second collections that are related to aid versus fixing the church’s infrastructure,” Ullman said. “Helping a family or things that are human-aid-related are bigger draws than ‘Let’s put a new air conditioner in.’ ”
That isn’t all of it. When each child hit age 3 (I am not kidding), Ullman opened a savings account for them. Every month thereafter, they went to the bank.
“I would take each of them and hoist them onto the bank counter and whisper in their ear, ‘Hello. My name is Alydia Ullman. I would like to make a deposit (which came out as ‘a posit’) to my savings account,” Ullman said.
“You are teaching them to conduct business. You want to get out of the textbook and into reality. They have to deal with people, introduce themselves, not grunt.”
The Ullmans aren’t ridiculous. If a kid wants an ice cream cone, Mom and Dad will buy them one. But toys, hats, souvenirs and the like come out of the “Fun” jar, as do capital investments.
When Justus bought a $517.37 mountain bike (they kept the receipt), he had to feel the pain of paying, so he dug into his “Fun” jar and pulled out $130, or about 25 percent of the cost. Dad put the rest on his credit card.
“I feel very responsible and adultlike when I am able to pay for things like my bike,” Justus said.
The “Fun” jar doesn’t always lead to fun. Take the family excursion to Hersheypark in Pennsylvania a few years back. Ullman calls the experience “the lesson that will last a lifetime.” Tooling around the theme park, Justus zeroed in on a lightsaber that he had to have. Price: $20.
Dad advised against it but didn’t insist.
“We try not to dictate with the fun jar. We are trying to teach them to conduct business, to have skin in the game, accountability, consequences and the joy of earned success.”
Justus ignored the advice and bought the lightsaber. Within an hour, the handle was broken, the light didn’t work, the toy was in the trash and Justus was in tears.
When Dad spelled out exactly how many weeks Justus had to save to buy the toy, “he cried even more.”
Dad has also taught the kids about earned interest. Once they understood, they shopped for the highest bank certificate of deposit, finding a 2 percent interest rate from Ally Bank.
Then, there is what I call the annual “Tough Love Dinner.”
“They like to eat out, and we thought it’s about time they started paying,” Ullman said of his children.
Four years ago, the family trotted off in the minivan, money jars in hand, to Paradiso Ristorante in Springfield. As soon as Mom, Dad and the three kids sat down, Alydia turned to her mother.
“What are you having for dinner,” she asked. “Are you having wine? Any salad? Are you going to get dessert?”
“What do you care?” asked Mom.
“I’m paying for it,” Alydia responded.
When the check arrived, the kids pulled out their cash. Just before the bill was paid, a discussion broke out about whether every kid should contribute equally to the bill.
The two younger siblings, advised by Dad, pushed for a pro rata payment based on age, while Alydia — the oldest, with the most potential exposure to the bill — argued for an equal third from each.
“They got into this debate without knowing they were debating a progressive tax versus a flat tax,” Ullman said.
In the end, Alydia paid the greatest share. She can afford it. The industrious kid is the richest of the three and bolsters her allowance with income from babysitting and making jewelry.
“Alydia is moneybags,” said her proud dad. “She hardly ever spends her fun money. She is sitting on some serious dry powder.”