Ep2. From Coupons to Allowance

 

Financial Education with Our Child: From Coupons to Allowance

Jimin's coupon story began on a spring day in front of a stationery store. That day, Jimin's eyes sparkled at the sight of beautiful diary stickers.

"Mom, can you buy me those stickers?" Jimin asked in a sweet voice.

"Jimin, we bought you a doll last time. Not this time," I replied.

Jimin thought for a moment, then suddenly her eyes lit up. "Then how about I make you coupons? I'll do the dishes five times. Will you buy me the stickers then?"

After a moment's consideration, I agreed. This was the first time Jimin used coupons as a form of currency.

As time passed, Jimin wanted more and more things. Dolls, snacks, game consoles... Each time, Jimin created new coupons. At first, it was household chores like doing dishes and cleaning her room, but gradually it changed to easier tasks like "hug ten times" or "say 'I love you' twenty times". Moreover, Jimin often didn't properly fulfill the tasks written on the coupons.

One day, I sighed looking at the coupons covering our refrigerator. Jimin approached and asked,

"Mom, can I buy a new game console with my coupons?"

I looked at Jimin and said, "Jimin, shall we sit down and talk?"

As Jimin sat in the chair, I continued, "What do you think happens when you make too many coupons?"

Jimin thought for a moment and answered, "Um... You and Dad can do more things for me!"

"You might think so, but that's not actually the case. When there are too many coupons, the value of each coupon decreases. In economics, this is called 'inflation'."

Jimin's eyes widened. "Inflation? What's that?"

"Inflation is when the value of money or goods decreases. For example, if a snack that cost 1000 won last year now costs 1200 won, that's because of inflation. It's the same with your coupons. Remember? At first, you could buy stickers with five dish-washing coupons, but now how many do you need?"

Jimin thought for a moment and replied, "Um... Now I need to do the dishes ten times to buy stickers."

"That's right. Why do you think that happened?"

"Because I made too many coupons?"

"Exactly. Because you keep creating new coupons, we've started to value each coupon less. This is similar to a country printing too much money, causing the value of that money to decrease."

"Oh, I see..."

"And there's another problem. You often didn't properly do the tasks written on the coupons. Remember?"

Jimin lowered her head, looking ashamed. "Yes..."

"For example, when you used a dish-washing coupon, sometimes the dishes still had grease on them. When you used a room-cleaning coupon, you just pushed toys under the bed. Even the 'hug' coupon sometimes ended with just a quick hug."

"I'm sorry, Mom..."

"It's okay, Jimin. But when this happens, the value of your coupons decreases even more. Because the quality of the service we receive from your coupons is lower. It's like if the quality of goods you can buy with a country's money keeps getting worse. Eventually, the value of that country's money also decreases."

"So what should I do?"

I thought for a moment and said, "How about we do this? Let's keep only the coupons for tasks you can do really well, and get rid of the rest. And for the remaining coupons, you do your very best. That way, the value of your coupons will increase."

Jimin nodded. "Okay. I'll keep only the dish-washing and room-cleaning coupons. And I'll do them really well!"

"Good. And let's think of these coupons as really special now. Because you're working hard to make them."

The next day, Jimin worked really hard doing the dishes. The dishes sparkled, and her room was neatly cleaned.

"Wow, Jimin! You did a great job," I said happily.

Jimin asked proudly, "What can I buy with my coupons now?"

I smiled and answered, "Now we want your coupons, and you're providing high-quality service. The supply and demand have matched perfectly."

My husband added, "Jimin, it's right that you receive a reward for your hard work. Let's decide the value of your coupons together. Then you can buy what you want with that value."

Jimin's eyes sparkled. "Wow, really?"

"Yes," I replied. "And from now on, instead of this coupon system, how about you receive an allowance for doing certain household chores?"

And so, Jimin started receiving an allowance, marking the beginning of her proper financial education.

Historical Cases of Hyperinflation

There have been historical cases where excessive issuance of currency led to severe inflation. One of the most famous cases is the hyperinflation in Germany's Weimar Republic in the 1920s.

After World War I, Germany had to pay enormous war reparations. According to the Treaty of Versailles, Germany had to pay 132 billion gold marks (about 31 billion dollars at the time), which was about 260% of Germany's GDP at the time.

The German government continuously printed money to pay this massive reparation, resulting in a rapid devaluation of the mark. This was similar to Jimin continuously creating new coupons.

In January 1919, 1 dollar was equivalent to 8.9 marks. By January 1923, it had risen to 7,260 marks per dollar, and by November of the same year, the situation had worsened to 4.2 trillion marks per dollar. This indicates a complete collapse of the currency's value.

The inflation during this period was beyond imagination. Prices rose every hour, and workers rushed to buy bread as soon as they received their wages. This was because the value of money could drop significantly within hours, to the point where a day's wages might not be enough to buy even a single loaf of bread.

The effects of hyperinflation were seen across society:

• People used money as fuel for heating because its value had fallen below that of the paper it was printed on.
• There are stories of children making paper airplanes out of banknotes.
• Restaurants made menu prices erasable so they could update prices frequently.
• People spent their wages immediately after receiving them, and the concept of saving disappeared completely.

This hyperinflation collapsed the German economy and caused social chaos. Many middle-class families fell into poverty overnight, which later contributed to the Nazi Party's rise to power.

While the German case is extreme, it provides an important historical lesson on the importance of currency stability. Like Jimin's coupon story, the amount of currency (or coupons) issued and its value are closely related, and properly managing this is the foundation of a healthy economy.

References

1. Fergusson, A. (1975). When money dies: The nightmare of the Weimar collapse. London: William Kimber.
2. Bresciani-Turroni, C. (1937). The economics of inflation: A study of currency depreciation in post-war Germany. London: Allen & Unwin.
3. Balderston, T. (2002). Economics and politics in the Weimar Republic. Cambridge: Cambridge University Press.
4. Feldman, G. D. (1993). The Great Disorder: Politics, Economics, and Society in the German Inflation, 1914-1924. Oxford: Oxford University Press.

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