Fledgling Economy

I give my kids play money for doing chores... and they love it! A new currency was recently born in my home and, though it has no real-world value, it is sought after and tightly held. We now operate in a new micro-economy based on (wait for it)... "Covey-Bucks".

A few years ago we started handing out allowance (in US Dollars) as a vehicle; to encourage saving, to teach about making wise purchasing decisions, to manipulate the children into cleaning their rooms, and so we can say "That's what you get allowance for!" when they beg for everything shiny at Wal-Mart.

My kids (now 7, 9, and 9) are learning well and have demonstrated skill in managing their own money. I thought it was time to move beyond the simple save-and-buy model into a broader lesson in basic economics.

Covey-Bucks come in three denominations (1, 5, & 10) and only have value in our home. They are awarded for chores, favors, good grades, and they can be used to purchase goods and services from other family members. Our simple home economy empowers my kids to be sellers, traders, price negotiators, and even employers. It is a free market economy where prices set themselves and anyone can succeed or fail.

Imagine, not having to nag your daughter to clean her room because she pays her little brother a negotiated wage to do it for her... until she runs out of money, at which point the tables may turn.

My title is "Banker" though my role is that of the Treasury. I'll be feeding this economy with a fresh supply of cash and watching Covey-Bucks devalue as the market becomes flush with an oversupply of bills. Perhaps, serving the role of Government, I will need to stabilize the new currency, protecting it from runaway inflation, by imposing a monthly flat tax... or charging fines for bad behavior to reel back in Government over-expenditures.

The rules of our new micro-economy are simple enough:

1. Covey-Bucks only have value in our home. Though they can be cashed in for US Dollars (exchange rate TBD based on market valuation) prior to family vacations.
2. It is a free market economy but is heavily regulated. There are no complex financial instruments like Collateralized Debt Obligations (CDO's) allowed, such dealings are a threat to economic health.
3. The Bank does not loan any money. Don't even ask.
4. There will be no bail-outs. Crying changes nothing.

After a brief introduction to the new economy, my kids were excited about the opportunities of a free market. I believe this will be a valuable lesson in economic concepts, market forces, and the ideals that shaped America into the power it is today.

Apparently, however, they already have an understanding of how money moves in America... within 20 minutes of receiving their "seed money" (40 Covey-Bucks each) the three were conspiring to sue each other.