I Gave My Kids a Wad of Cash and Set Them a Challenge

I created a new WhatsApp group for me and my three kids.

Would you like to take part in a challenge?

I’ll give you £1,000 and you have to use it to make more money.

“Sure,” replied №1 son.

“I like this idea,” №2 son texted back.

“Are you being serious?” Asked №3 son.

The Format

At no cost to you, the Challenge will run for one year.

You can use the seed money to buy stocks and shares, buy and sell goods, or start a sideline — I’ll leave it up to you and your imaginations.

I’ll send you £1,000. The challenge is to use it to make more money. You can invest it, buy and sell, stick it under your mattress — whatever.

After one year, you get to keep half of any profits you make.

You must factor in all costs. So if you put it in a deposit account with a bank that earns 1%, you will make £10, but that won’t cover inflation, so you need to do better than that to make a profit.

Rules

Post what you do with your £1k on this WhatsApp group — every buy, sell, profit and loss.

You can buy and sell or invest in anything you like.

All costs have to be accounted for, trading platform costs, eBay fees, etc., have to come off the £1k and not from your pocket.

You win by keeping half the profits you make.

If you lose money, I lose. You will not be liable for any losses. At the very least, you will learn from it. So it is a win/win for you.

“What if I invest in something and I lose 5%, do we share the loss?” queried №1 son.

“See Rule 5.” Geez!

“If I buy and sell a car, do I have to factor in tax, insurance and fuel?” №3 son asked.

“All costs must be covered from the £1k. You will only share half the true profits, you have no liability from taking on this challenge.”

What on earth am I doing?

In the last year of my career, my work put me on a two-day pre-retirement course. The major takeaway was to start saving for your retirement as early as you can. Which, to be honest, would have been more useful if I had been told that when I began my career.

Shiela, a financial advisor, ran the course. Sheila was there to provide a comprehensive overview of what we could expect from our retirement and enlighten us about the financial products available from them. One product was life insurance.

“For only £26.95 per month, members can get £120,000 life insurance,” Shiela explained.

Sitting to my left was Gary. His ears perked up at the mention of the payout. He pulled out his notepad and pen and did some arithmetic on the paper. I peered over his shoulder, trying to make sense of his calculations. Then, without warning, his hand shot up.

“Excuse me. Can I ask a question about the figures you gave?” Asked Gary.

“Certainly, what do you want to know?

“The payout is £120k, is that right?

“Yes, that’s correct.”

“Yet we only pay a small amount of money every month.”

“Yes, that’s correct.”

“I was wondering…”

“Yes.”

“What’s the catch?”

Everyone in the lecture theatre turned around to look at Gary.

“The catch?” Said the nice lady.

“Yes, what’s the catch? Over thirty years I’d only be paying £26.95 per month, which works out at under £10,000. What’s the catch?”

Sheila furrowed her brow and tried to figure out what PC Gorman was getting at. All eyes were on him. Then it clicked, I understood.

“Gary, the catch is, to get your hands on the £120k… you need to die!”

I made a lot of mistakes with my money. I put it down to naivety — perhaps not as bad as Gary, but expensive mistakes nonetheless. I didn’t want my kids to make the same mistakes as me, especially not to have the same fiscal comprehension as Gary.

The theory behind it

I was safe with my money. I paid as much as I could into my pension, I invested in savings schemes, and I squirrelled money into a deposit account for a rainy day. I paid off my mortgage as soon as I could, and that allowed me to stick some more away in a jar for a holiday we planned.

Did it give me a decent pension? — yes. Did it give me a cushion for emergencies? — again, yes. Was it a wise thing to do? — Meh!

I’d listened to average Joes all my life and followed their hands-off approach to their financial future. Don’t feel sorry for me, I only need a nice bottle of wine and a book to make me happy, and I have a comfy armchair to sit on when I read it. I am super thankful to have a pension and savings. But, with what I know now, I would have done things a helluva lot different.

So, I’m educating my children. I’m giving them the freedom to experiment and learn. Imagine I gave you £1m with the same conditions, you wouldn’t stick in in the bank and walk away with nothing, would you?

Perhaps you’d stick it all in Bitcoin? Use it as deposits on rental properties? Maybe you’d take a gamble on red at the casino — a 50/50 chance of walking away with £500,000 for yourself? The possibilities are endless.

I wanted to instil in my children the freedom to think differently about their future finances and not get stuck with a closed mindset. When one posts on the group chat, the others will see it, and my hope is it will spur them all to action.

Research shows this is one of the best ways to learn. We forget lone experiences; we remember shared experiences.

I want them to be productive, and that means a change in their thinking. They need to think of what Elon Musk would do, not their dad. Be adventurous, boys.

The competitors

№1 son, №2 son, and №3 son — easy names to remember. They aren’t really kids anymore.

№1 son is 26; he’s an engineer. He spends all his money. He graduated with his Masters in Mechanical Engineering, and despite working part-time, he left university with the usual hefty student debt.

He was confident he’d get a high-paying job as soon as he put himself on the market, so he took a year out and went to work a season as a ski instructor in Japan and fell in love with the country, the slopes, and a girl.

An Australian girl. They toured the East together, and when he made it home, he pined for her so much, it was only a few weeks before he jetted off to Oz to be with her again.

Because of his working visa problems, he took two years to get a temporary graduate job in engineering. He’s happy now, and he’s happy to blow his paychecks on rental accommodation and tools. He still has his student debt and no savings.

№2 son is 25 and smart. He got a first-class honours degree in Business and Entrepreneurship. He left university with almost all his student loans sitting untouched in a savings account. He’s frugal, as frugal as a gnat’s backside.

He joined a start-up company. He wanted to learn how to take a small company and make it big. It was a game-changing company, a disrupter. It was going to revolutionise an entire market — the next unicorn, perhaps? He accepted low pay for the promise of future rewards: share options and other bonuses.

Then the coronavirus came along and scuppered the business. Its software serviced the travel industry, and the travel industry got locked down. Just like us, it wasn’t going anywhere. The company paced the room for as long as it could, but to shave costs, it had to let people go, and №2 son was out the door. His savings took a hit before he could get another job.

№3 son is 20 and a student in the final year of his Marketing degree. He’s got an entrepreneurial streak in him. He has worked cleaning dishes, caddying, stacked shelves, and spent a summer working for Camp America. He plans on starting a gardening business when he gets his last dissertation out of the way. He’s already bought the van.

The youngest fella wheels and deals. He’s bought and sold all manner of stuff to make a bit of extra cash: cameras, toys, even a sports car. He drove it for a couple of months one summer, then sold it for a tidy profit.

He’s interested in stocks and shares, he has his own trading account and researches and invests in companies through the Freetrade app. He’s done okay.

He recently started a video podcast and got №2 son involved. They are now posting videos to YouTube every Sunday — their biggest fan has two thumbs and a keyboard.

Who do you think will turn their £1k into a small fortune?

This is what is going through their heads already.

“What if I buy wood, make something and sell it, Do I have to consider the cost of the tools or just the material?” Asked №1 son.

“Just the material if you already have the tools.”

“What if I pay for an online course and then get a pay rise, is that a return on investment?”

“Online course no, because we couldn’t say the raise was all down to the course, and you wouldn’t give me half of it, would you?”

№3 son hasn’t stopped smiling, “I could buy a car and flip it. Maybe I’ll buy gran’s car. She doesn’t use it anymore. I nip down and see her…” and he was out the door.

“But the challenge doesn’t start until next week,” I shouted after him, but he had gone.

№2 son is still deliberating. He lives 30 miles away, but I can hear his cogs whirring away from here.

I’ve called it the ‘April Fool £1k Challenge’

I’m looking forward to seeing what they do with the money. I’m sure it will be interesting. I expect they will hit me with a few surprises.

The point is to get them thinking. Get them out of their safety zone. I’m hoping they will learn from it. That would make the exercise worthwhile. They might come up with a few learning points for me. I’ll keep you updated if there is anything interesting comes of it. I’m sure there will be plenty of ‘Takeaways’ as it unfolds.

I’ll do an update post in a year when it’s over. I’m sure they will keep each other on their toes. And there will be a big surprise at the end — I didn’t call it The April Fool Challenge for nothing