Bets and bonds are tools for handling different epistemic states and levels of trust. Which makes them a great fit for negotiating with small children!

A few weeks ago Anna (4y) wanted to play with some packing material. It looked very messy to me, I didn't expect she would clean it up, and I didn't want to fight with her about cleaning it up. I considered saying no, but after thinking about how things like this are handled in the real world I had an idea. If you want to do a hazardous activity, and we think you might go bankrupt and not clean up, we make you post a bond. This money is held in escrow to fund the cleanup if you disappear. I explained how this worked, and she went and got a dollar:

Then:

When she was done playing, she cleaned it up without complaint and got her dollar back. If she hadn't cleaned it up, I would have, and kept the dollar.

Some situations are more complicated, and call for bets. I wanted to go to a park, but Lily (6y) didn't want to go to that park because the last time we had been there there'd been lots of bees. I remembered that had been a summer with unusually many bees, and it no longer being that summer or, in fact, summer at all, I was not worried. Since I was so confident, I offered my $1 to her $0.10 that we would not run into bees at the park. This seemed fair to her, and when there were no bees she was happy to pay up.

Over time, they've learned that my being willing to bet, especially at large odds, is pretty informative, and often all I need to do is offer. Lily was having a rough morning, crying by herself about a project not working out. I suggested some things that might be fun to do together, and she rejected them angrily. I told her that often when people are feeling that way, going outside can help a lot, and when she didn't seem to believe me I offered to bet. Once she heard the 10:1 odds I was offering her I think she just started expecting that I was right, and she decided we should go ride bikes. (She didn't actually cheer up when we got outside: she cheered up as soon as she made this decision.)

I do think there is some risk with this approach that the child will have a bad time just to get the money, or say they are having a bad time and they are actually not, but this isn't something we've run into. Another risk, if we were to wager large amounts, would be that the child would end up less happy than if I hadn't interacted with them at all. I handle this by making sure not to offer a bet I think they would regret losing, and while this is not a courtesy I expect people to make later in life, I think it's appropriate at their ages.

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I have done both things with my boys. 

My kids like sleeping in the living room - but often don't clean up in the morning. I used a bond for that and it worked. In a family conference, we later decided on a ban to not sleep in the living room for a week if it is not cleaned up but that was not my preferred way. 

I also often require a bond if the kids want to borrow money or something but e.g. have open dues. 

I bet with them quite often and they bet among themselves - including nonequal odds. I win more often than not and they learned from that. I once did lose 50 EUR at 10:1 odds to my oldest son because I was very confident about one of our house rules but it turned out my wife had changed it shortly before. With the smaller boys, I require that they do the bet in front of an arbiter and I may limit the amount they bet.

We also play Bluff, Yahtzee, and other board games with dice and I guess that also helps with an understanding of probability. 

Kind of related to that: A fun game is "random walks": Talk a walk and at every corner throw a die and continue into the randomly chosen direction. Repeat as desired. Can lead to interesting places especially in parks.

This is an awesome idea! i really love your parenting posts and I'm not even close to that stage in life, you're doing something very much right :)

p.s - Somewhat related, when i was little i used to offer my mom bets all the time, but she was already used to losing bets with my older brothers so she never took any of them (i still find myself wanting to offer her bets sometimes, but she doesn't see bets the same way rationalists do).

Curated.

This is my second "jefftk parenting post" that I've curated. Last time, I cited some reasons this seemed relevant:

I think there is actually something fairly important about the topic of raising kids, which is relevant to more common LessWrong themes. First, there is a sense in which raising a family is one of the core things humanity is about. Many LW folk don't seem to have kids, and part of me is worried that all our philosophy and strategy is sort of missing something important if we don't have a background sense of "what raising kids is like" subtly informing our judgments.

There is also a sense in which this post is about "how to raise an agent", which I think ties pretty directly into core LW themes. I felt like reading the article fit into my overall worldview that includes robust agents and rationality and learning to think independently. (I think this effect was weaker than the previous “why artists study anatomy” curation, but similar in type)

This time, I'm much more explicitly excited about how the second point ties into core LessWrong themes. I'm interested in both how coordination schemes work when children interact with them, and the prospect of teaching good habits on how to think probabilistically.

wow this is so cute

Interesting discussion on the repost on FB by Kaj.

I think this is an awesome parenting strategy, especially with the "posting bond" idea :) One question I have about the "bee bet" is whether you'd shared your explanation for why there wouldn't be any bees with her before you offered to bet?

The only real concern I'd have about betting is if it became a way to circumvent having to actually teach them about the world. Bets make the most sense to me when they're either fun for their own sake, or to add stakes to a dispute that we've already tried hard to resolve through argument and study.

whether you'd shared your explanation for why there wouldn't be any bees with her before you offered to bet?

I had. When she still didn't believe me I offered the bet.

When they grow older this will be required even - as they learn to negotiate the exact terms and conditions. 

I have tried something similar but not with money (I find my kids aren't very motivated by money - not sure why). In our case the losing party usually has to formally acknowledge the victor with some silly phrase - "Dad is an amazing human / genius" or "Mark is a pro and I'm a noob". This doesn't allow for different odds (maybe I could tailor different phrases to achieve this?) although I will sometimes offer it without them being held to anything if I am sufficiently confident.

I do think there is some risk with this approach that the child will have a bad time just to get the money

I was worried about this too but similarly haven't actually experienced it - I don't think my kids have the willpower / concentration to keep this up for long enough!

When my oldest son got 14 I gave him the opportunity to invest 1000 EUR any way he wanted. Invest, not spend, i.e. selecting any kind of investment opportunity with some more or less variable payoff. After at most a year he would then get five times the earnings paid out (5x to increase signal and motivation). I was expecting that he would select some common financial instruments like stocks or bonds or plain savings account but I was open to any halfway reasonable other option. So far he has not made use of the option and I am unsure why. I think he is waiting for the best possible opportunity. 

In the meantime, his brother got 14. He researched and after observing some stocks selected S&P 500 and Nasdaq 100 and I added both to my depot at the end of October 2019. Already at the end of December 2019, after frequent monitoring, he chose to take his win of ~60x5=300 EUR - much more than I expected. I decided to keep them in my depot until I got my losses back. You know what happened. 

This didn't exactly go as I expected though not exactly worse. It has led to quite a few interesting discussions and I intend to offer the same to their younger brothers when they get 14. 

I've made sure my child has a 'budget' they can spend – and some portion on anything (that's not egregiously dangerous or inappropriate). That seems to have quickly demonstrated the value of money to them.

But I like betting with any kind of payouts too – and you can approximate 'odds' by agreeing to 'lopsided' payouts, e.g. 'you have to give me a hug if you lose; I'll take you to the Zoo if you win'.

So you...sold insurance to your daughter? That's kind of awesome. She's going to be a savvy consumer of financial instruments.

As I said in my original comment here, I'm not a parent, so I didn't get a chance to try this. But now I work at a kindergarten, and was reminded of this post by the review process, so I can actually try it! Expect another review after I do :)

Hmm... I haven't yet found an opportunity to try this. It's partially forgetting to try, but also I find it's much harder when I can't use money (Taking money from your own children and children at the kindergarten you work at is very different, and the latter seems wrong while the former is fine). It basically forces me to price the bet as a barter, and there's a reason why we use currency instead of barter, it's more efficient and there's often no barter both parties are interested in.

Loser has to sing a song or do a dance?

Hmm, maybe, yeah. I'll try to find an opportunity.

I wish I'd had this idea when my kids were young. I had a lot of trouble interesting them in money, as they rightly pointed out that they knew I would see to their needs. I think it would have helped them understand about the value of money as well as whatever else we were addressing. They would have been motivated by the opportunity to demonstrate that they were right. [In their mid-late 20's, they are both much smarter about money than I ever was or will be; not sure exactly how that happened]. 

This does remind me, though, of how useful data and actuarial principles can be for dealing with rationally inclined children. A close family friend died unexpectedly of an aneurysm at age 44. My budding Rationalist daughter was 7 at the time, and already filled with existential dread. Less than a year later, a 37-year-old teacher's aide at her elementary school died in the same way. She was afraid to let me sleep. She was sure I wasn't going to wake up because this thing that kept happening around her was certain to happen to me. So I found some data and helped her calculate the chance that I, too, was going to succumb to an aneurysm. She could see how tiny the number was, and that soothed her.  Aside from this daughter, we were not a very math-oriented family, but that was clearly the way to help her come to terms with what looked like a terrible trend but wasn't. 

This is an excellent post. I have been doing bets with my 4y old daughter already as well (and I am following your projects for a quite some time already)!

I've appreciated your parenting posts, thank you for sharing. Curious if you can share any resources you've found helpful for raising kids? Anything helps, as you seem to be creative in this department.

Aren't you afraid that this might backfire in some way? They seem to be rather trusting of your bets, so later on they might become too trusting when it comes to betting larger amounts of money. They might be tricked into taking on a bet that's too much in favor of the opposite side, because they learned from you that they could trust willingness to bet, even though that might not translate to other people.

I'm confused which lesson you think they might be erroneously learning from me? When I offer them bets they do usually lose.

Well, to strengthen Wilco's point: With teaching kids, there are always a lot of failure modes. Example: They might not understand the reason they are losing the bet, not make the causal connection, learn to guess the teacher's password, not calibrate correctly on it, learn to spot the intention instead of the method, or whatever else might go wrong. As a culture, we have not much practice applying betting in practice and much less teaching it to kids. So I think the skepticism is reasonable.

That said, I think almost all of these can be fixed by varying the bets and the context in which they occur, talking about it, and repeating when they grow older, i.e., not assuming they got it the first time around. 

When you have more than one kid, repeating happens naturally as they grow older, which causes the younger ones to learn many things much earlier than their older ones. And the older ones can learn things much more deeply from multiple repetitions. 

EDITED to improve spelling.

Honestly... parenting goals!

This is adorable.

I've been making bets with my just-turned-5yo for about a year now to put a stop to arguments. I wholeheartedly endorse using bonds as well, and I intend to do so, though I wouldn't have thought of it on my own (having never really been exposed to the concept before). Thanks for that!

What other financial tools can we adapt in this way?

Yes! Bets – and even just 'modeling' owning-up to being wrong – are wonderful tools, especially for children (as they haven't learned that most people avoid them).

This 'area' came up (in my mind) most recently in a disagreement about something my child was taught in school. We didn't bet tho and the outcome turned out to neither fully support either 'side' – but that's a good opportunity too for learning about disagreement and updating on new evidence.

I haven't yet spotted an opportunity for using 'bonds' but now I'll look for them even more vigorously!

I do think there is some risk with this approach that the child will have a bad time just to get the money, or say they are having a bad time and they are actually not, but this isn't something we've run into.

I've run into this – in 'pre-bet' circumstances – but it seemed easy enough to 'strategically dissuade' by expressing skepticism of their sentiments; that's resulted in honest confessions the few times it's come up.

I like this a lot. Most of life's decisions are about managing risk, and the bond strategy both teaches the kid and gives some peace of mind to the parent. There's nothing inherently about wagering, either. Harm only happens when wagering habitually against bad odds; the younger they learn how to calculate their advantage, the better.

I am curious about how you introduced money to your kids? Do you have some "framework" for that? I did a small research and didn't end up with any really novel ideas (I am happy to share my findings and conclusions, but it's a fairly small page in roam).

Basically, what I want to do with my daughter:

  • give her an opportunity to earn money by doing age-appropriate jobs (helping me to clean the kitchen), but not for things that she's expected to do for "reasonable reasons", such as cleaning her toys in common areas, rather lower allowance (but some)
  • make it clear that she can make more by doing more elaborate stuff (for which she might have to learn a few things first - happy to help), encourage her to come up with new ideas by herself (entrepreneurship!)
  • introduce saving mechanism, e.g. giving her interest for money she's gonna put into my pocket
  • she can make more by betting and bonds as per your posts
  • she can do what she wants with her money (as long as it's safe, but can't really think about anything I would consider "forbidden"), let her do mistakes

I checked the marginal revolution repost and saw a few things that could go wrong...

Any other ideas?

I think my kids got at least a basic idea of money by the time they were ~4, from watching adults in their lives pay for things or talk about it. We also started them on allowance, $1/wk, on their 4th birthdays.

I agree that paying them to do things that they're supposed to do anyway is not a good plan.

Lily, at 6y, has been interested in finding other ways of earning money. She's tried selling homemade jewelry online, without much success (https://www.lilywise.com/jewelry). I've paid her a bit to help me work on the house, spackling holes and things, but I don't usually have things I need doing that the kids can do.

I asked Lily, and she said "you should start by getting some money and then putting it on the table and then you can tell them all about the money and have them repeat what you just said and I think that should work pretty good. Also take a piece of paper and put a marker on the table too, so that you can show them some things that you can do with money, like how you add money." This sounds to me like it might be a bit too talky? Mostly I've focused on trying to give them experience with it, in safe ways.

It sounds like Lily was kind of explaining how she would teach her own friends how money worked. And sounds like a good way to go about it!

Thanks, that's helpful.

Also, kudos for Lily to know active listening and being awesome.

Super awesome that your parenting style actually gives your children agency! Not that I'm a parent, but not belittling or not respecting that children can make informed, rational decisions is something we as a society do all the time and we need to strive to do better:)

Thanks! More in this direction: Growing Independence

I'm curious how you've taught them to value money such that this works?

They understand that they can buy things with money, and they have lots of things they want to buy. I don't think I did any explicit teaching here?