Rebecca’s rules
Think it’s impossible getting kids to save money? In the second of our series on financial literacy, one mum tells Tracy Watkins she may have found the answer.
When Rebecca and Russell West’s daughter Megan bought her first car, it was a huge day for the 18-year-old. But there was one thing she didn’t have to worry about – racking up debt.
Megan paid for the $8000 car in cash, money that came out of her own savings. Like her three siblings, Megan worked after-school jobs, and has always put money aside.
Oldest daughter Errilyn recently returned home to Blenheim from a big trip to London where she saw her favourite band, and – like Megan – did it without credit cards or debt.
And youngest daughter Bethany is on track to have enough savings to pay her way through three years of tertiary study without needing a student loan.
Rebecca West says her four children were told from an early age that the only way they would get the things they wanted in life was to earn their own money and save hard.
‘‘We told them Mum and Dad would not have the money to help them out when they were older with expenses like cars, or tertiary study. They would say ‘our friend got this, or that’ and we would say ‘well we can’t afford that’. So if you want more than your $5 a month pocket money, you’re going to have to find a part-time job.’’
Once they did, Rebecca would sit them down and talk them through splitting their earnings into three accounts. There would be long-term savings, which they couldn’t touch till they left school; money for medium-term goals – like holidays – and a splurge account, which could be used for whatever they wanted, but on the understanding that the longer they didn’t touch it the more they would have to splurge down the track.
But they were also expected to use some of those earnings to cover ‘‘living costs’’ – such as a small fuel allowance to their parents for driving them to and from their after-school jobs.
The goal was to teach them that there are basic living costs that have to come out of your pay regardless of how much you earn, says Rebecca.
But it was also about teaching them to respect money.
Rebecca and Russell say they wanted their children to see money as a resource to be used consciously, and to save, hopefully to give them a better start to their adult life than if they had just been left free to work it out themselves and spend money on whatever they felt like.
That mindset would just cause them financial trouble as adults.
In Ethan’s case, the after-school job provided another spinoff – he was offered an apprenticeship by his employer.
Once the oldest children entered fulltime work,
Rebecca helped them calculate their living costs over the course of a year.
That allowed them to see how much to set aside in each week’s pay cheque, so they would have enough not just to cover all their expenses, but money left over for savings – including a separate emergency fund for when ‘‘life’’ happens.
Rebecca says her attitude to savings probably stems from her own childhood, and her parents’ advice to ‘‘never get a credit card’’, which stuck in her mind.
She and Russell have largely followed that advice; their only debt is their mortgage, as they no longer have a credit card and use a debit card instead.
They also have enough savings so that if one of them lost their job they could probably make do on one wage for up to nine months – ‘‘though that’s
just the basics,’’ says Rebecca.
Even if they were both unemployed, they could probably get through three months.
But it wasn’t always like that. For most of their married life they had been living payday to payday, Rebecca says.
Then she and Russell stumbled on a podcast by American financial guru Dave Ramsey and started following his principles.
Rebecca says it has meant that for the first time they are ‘‘both on the same page’’ financially and they have a much clearer idea of what they can and can’t afford.
‘‘I use the yearly allocation I do with the kids; sometimes I have to move amounts around . . . but because we’ve got very basic summarised spreadsheets we can make decisions about what we can spend.’’
That includes having a budget ‘‘for just having fun’’, which means they can go out for lunch or coffee without feeling guilty.
‘‘We had a birthday celebration recently and we shouted the kids a trip down the Sounds and lunch because we knew we had money put aside for that.’’