• Advice

13 ways to teach your kids about money

Clear piggy bank

1. The key is see-through

Younger kids love piggy banks – the fun of filling a cute little pink farm animal with coins is a great first way to get them excited about saving money. The problem with the traditional opaque piggy, however, is that the ever-present temptation to open it up to see how much is there. A solution is to use a clear piggy, jar, or container so they can actually see the growth. Yesterday they only had one two-dollar coins, today they have three! You can encourage excitement around the increase and instill a life-long love of saving.

2. You’re being watched

Studies have shown that children have formed many of their life-long money attitudes and habits by the age of seven. This bears remembering if money is always a problem at home, a source of excessive arguing or complaining for example. It’s importance for positive messaging to be getting through to the kids, with talk and action going hand-in-hand, with genuine financial responsibility being communicated.

3. Demonstrate practically that things cost money

Don’t just tell kids that it costs x to buy y, you need to show them as well. Guide them to take some coins or notes from their money jar and bring it with them to the shops, before getting them to physically hand over the cast at the checkout. This is the best way for them to see that it costs to get stuff (their precious savings jar gains!).

4. Teach about the loss of other alternatives when one alternative is chosen (opportunity cost)

Tell them, ‘if you buy this nintendo switch game, then you can’t have that pair of Nikes’. It’s important for children around the 6-13 age range to learn that they can’t have everything, and to weigh up their priorities and make difficult decisions. Learning to think ahead about possible outcomes is an important aspect of teaching kids how to manage money.

5. Pay ‘wages’, not pocket money

Don’t just give your children money for nothing, an allowance for breathing. Teach them about the realities of a working life early by making ‘commission payments’ according to the prescribed chores that they complete. There’s no reason for you to still be the only one putting the bins out, cleaning their rooms, and stacking the dishwasher! This is important to instill a work ethic with the understanding that money should be earned. Parenting is the highest calling if you consider that you have the power to spare a child from laziness or a sense of entitlement.

6. Avoid the temptation to spontaneously spoil

Kids are experts at putting the pressure on at just the wrong time while shopping. Normally when you’re tired and stressed out, with lots of other people around, they’ll start appealing to your generosity, or tugging at your heart strings, ‘oh please Mum, can I have it please!’, or ‘Dad, can I have it, Mum said I could!’ Don’t give in and shell out your own cash, but tell them they can use their own pocket-money (hard-earned of course) to make the purchase. Also, encourage them to sleep on their decision, so they’re 100% sure about it – a useful tip to help teach the value of money.

7. Teach them to master their money

Don’t just teach your kids to make money, but also to give money. If there’s a worthy cause or charity they’ve noticed on TV, encourage them to help those less fortunate than themselves. This will nurture a sense of mastery of their own money, that they don’t just live to earn, but also to make a difference in the lives of others.

8. Teach your teens to be happy with what they’ve got

Social media has become a big source of a false perception in your children that they are perpetually one of life’s ‘have-nots’. As they witness the outrageous lifestyles and disposable incomes of the children of wealthy American celebrities and Russian oil tycoons on Instagram, your kids will inevitably start the comparison game. Instilling a sense of contentment with what they’ve got will stand them in good stead to be good stewards of far greater as they mature in their earning ability.

9. Graduate them from piggy to account

Older children will be ready to have their own bank account when you’ve used some of the above principles to build a degree of financial literacy into their lives. As they move into this adult practice, they can get deft at bank money management to prepare them for when they’re earning a wage.

10. Start them saving for after school

Whatever they want to do after school, uni, polytech, apprenticeship or full-time work, getting them to start saving toward this now will teach your children long-term saving skills. Teaching your kids to self-fund their own tertiary education as much as possible will help them to avoid crippling student loan debt later in life.

11. Teach them to budget

Your kids have phones crammed full of apps, so why not ‘require’ that they also spend time with you learning to use a budgeting app (there are many good free budgeting apps available).

12. Explain how interest works

Your teen isn’t far from joining the workforce as Kiwisavers (encourage them to not opt out, but to participate at a savings level they are happy with), so sit down and use a kiwisaver calculator to show the difference in their final superannuation figures depending on their level of savings and aggressiveness of fund selection. It’s bound to be an eyeopener for them, the power of compound interest is a magical thing, and time is very much on their side!

13. Teach entrepreneurship

Get your kids off their devices and away from screens by encouraging them to hunt for work opportunities, especially during their school and university holidays. If they are reluctant to get a supermarket or Maccas job, then look to arrange casual short term work opportunities with business people you know. It doesn’t just have to be the schools that queue up work experience opportunities for your kids.

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