Educating your kids about money
How parents can best help their kids learn about money is a topical subject at the moment.
You don’t have to look far to see evidence of what can go wrong when people start out in life without understanding the basics.
Even before they are out of their teens, young people have offers of credit thrust at them, from student loans to credit cards. These can be really tempting — until the debt gets out of control and they start their working lives owing more money than they can handle. Here are a few things to think about if you want to help your kids get ahead.
Pocket money. How you manage this is up to you — some parents like to pay for chores while others think that chores should be done as part of household responsibilities. However you structure it, do give kids some money that they have control over. You can then encourage them to save some, spend some, donate some — and maybe even invest some.
Kiwisaver (or other investments). Kiwisaver used to be popular with parents when there was a $1000 kickstart but the reasons for signing your kids up are a little less compelling now. But if you’re looking for a long-term savings option, it’s not a bad idea. Money can be withdrawn for a first home eventually. Kiwisaver also allows you to talk to your kids about how markets move and why. Another option, if you don’t want money locked in as it is in Kiwisaver, is to invest in a managed fund or ETF.
Savings accounts. It’s a good idea for kids to have some money in savings for when they want to buy something big. Don’t let them use a savings account to hold large sums of money that aren’t meant to be touched for years, though. Generally the interest rates on offer are so low that they won’t even keep ahead of inflation.
Talk about your own money. Don’t make it a taboo subject — talk to your kids about the decisions you’re making and why. Explain what the household budget can stretch to and what it can’t. Don’t let personal finance become a topic that your children feel uncomfortable discussing.