Finance lessons at your place
Glass jars, lemonade and invoices can help set up your kids with invaluable financial smarts, writes Susan Edmunds.
It’s never too early to start if you want your kids to grow up financially savvy. We asked experts for ways that parents can start teaching their kids about money.
Set goals
Julian Wilson, programme manager of ASB’s Get Wise, a youth financial literacy programme delivered in schools, said parents should help their kids set savings goals that were ageappropriate and achievable.
‘‘Help your child research prices for simple items or activities to show there’s a variance in cost – a bus trip or a visit to the movies versus something free like a trip to the park.’’
Tom Hartmann, personal finance editor at the Commission for Financial Capability, said studies had shown that teaching kids to delay gratification would help them avoid impulse buys in future.
‘‘Setting up savings goals and working towards them together can help, as long as they’re not too far off to discourage. Celebrate the anticipation as you count down, too.’’
Talk about your cards
With so much spending done electronically, it can be hard for kids to get a sense of money changing hands.
Wilson suggests explaining what’s happening when you swipe a card.
‘‘The next time you pay for something with an eftpos or credit card ask your child where he/she thinks the money is kept and where it comes from.
‘‘Take the opportunity to explain how it works, then test them the next time you use your card at the shops. While it helps children understand it isn’t a ‘magic’ card it also provides an opportunity to teach the importance of keeping your card details safe.’’
Use physical money
Despite our reliance on digital spending, Wilson and Hartmann say there’s still benefit in withdrawing some cash for kids to get their hands on.
Wilson suggests sitting together and counting out notes or coins individually when kids have saved money, identifying the size and colour of each.
Hartmann agreed: ‘‘Coins are still gold. By starting purposefully with coins, our little ones get a tangible experience of cash.’’
He said brains processed cash differently to digital currencies. ‘‘It’s important for kids to learn that when we hand it over for sweets it’s gone when the goodies have been eaten. When we buy something lasting instead, like Lego, that ‘wealth’ sticks around.’’
Hartmann suggested parents keep pocket money amounts low but pay interest, compounding each month, to demonstrate how it could grow.
Share your shopping list
Even your weekly grocery shop can be an opportunity to impart a few lessons.
Wilson suggested families work through the list with kids and ask them to help decide which were ‘‘needs’’ and which ‘‘wants’’.
‘‘Mark each item with an [N] or a [W] then put them in charge of the list when going around the supermarket and discuss why each item is in its category,’’ Wilson says.
If they are a bit older, you could put them in charge of a calculator to keep a running total of what you’ve spent as you cruise around the aisles. Online shopping is an easy way to keep a running total.
Use jars
Wilson suggests parents set kids up with saving, spending and sharing jars.
Each time they get money, they should divide it between the three.
Hartmann said clear jars were sometimes better than piggy banks because kids could see what they had. ‘‘With more than one jar, they can give their money different jobs todo... Besides the traditional spending, saving and giving jars, add an entrepreneurial, long-term ‘growing’ fund, and there’ll always be money for jam.’’
This can also be done with bank accounts – there are a number of apps that allow kids to watch their balances growing.
Have a whanau goal
Wilson suggests the family work together towards a financial goal. ‘‘This could be saving for a puppy, an iPad or contributing towards an overseas event or trip. Track the family’s progress on a chart on the fridge, making sure everyone is excited about the goal and that it’s achievable.’’
Effort and reward
Spark your kids entrepreneurial spirit by giving them the chance to make money themselves.
Wilson says: ‘‘Use resources from around the family home to help your child plan a small business to keep them busy and even make some money. This could take the form of selling lemonade or something from the garden such as flowers or citrus fruit.’’
Hartmann suggests parents ask for invoices from their kids. ‘‘Towards the tween and teen years, there may come a time when pocket money is no longer enough. To avoid frustration, transition your kids to paid work by identifying voluntary jobs around the house that they can do to earn more. Have them bill you once a week and many money lessons will come with it.’’